Explain how an economy can experience long-run economic growth and deflation at the same time. What will be an ideal response? ANSWER If aggregate demand remains relatively constant during the growth periods, than as the LRAS supply curve shifts right, the new equilibrium point of AD and the LRAS curve will be lower, indicating […]
The export of wheat will be included in the calculation of GDP using the ________ method. A) income B) expenditure C) investment D) production ANSWER B
The natural rate of unemployment includes A) frictional and cyclical unemployment. B) frictional unemployment and structural unemployment. C) only cyclical unemployment. D) only unemployment due to layoffs and corporate downsizing. ANSWER B
If the savings rate in an economy is 30%, and the level of investment in the economy is $400, the GDP of the economy must be: A) $1,900.25. B) $1,111.22. C) $1,333.33. D) $1,750.50. ANSWER C
In the short run, if the price level rises, then the overall economy can temporarily produce beyond its nominal capacity. One reason for this is that A) existing capital equipment can be used more intensively. B) the unemployment rate usually rises dramatically along with the price level. C) workers can be switched from counted to […]
Samia makes $8,000 a month. Samia spends $2,500 on rent and related household expenses, $500 on food, $200 on clothes, $500 on entertainment and $600 on transportation. She always keeps $200 for things like the car breaking down. $3,500 is invested in the stock market. Which of the following statements is TRUE? A) The transactions […]
Refer to the figure above. What is the equilibrium quantity of credit when the credit demand curve is CD1 and the credit supply curve is CS1? A) $50 B) $20 C) $40 D) $30 ANSWER D
When private expenditures decrease as a result of increased government spending, this is known as A) the multiplier effect. B) the stabilizer effect. C) government deficit spending. D) the crowding out effect. ANSWER D
Long-run equilibrium will occur at the price level at which A) the aggregate demand and long-run aggregate supply curves intersect. B) the short-run aggregate supply and long-run aggregate supply curves intersect. C) the long-run aggregate demand and short-run aggregate supply curves intersect. D) the aggregate demand and short-run aggregate supply curves intersect. ANSWER A
According to the text, the probability of an unemployed person finding a job doubles when A) his unemployment benefits expire. B) the economy enters a recessionary phase. C) his unemployment benefits are extended. D) he is threatened with arrest. ANSWER A
