If the savings rate in an economy is 30%, and the GDP of the economy is $1,000, then the level of investment in the economy will be: A) $330. B) $150. C) $600. D) $300. ANSWER D
How can the long-run equilibrium level of real Gross Domestic Product (GDP) increase without the price level changing? What will be an ideal response? ANSWER Since the long-run aggregate supply curve is vertical, the only way real Gross Domestic Product (GDP) can increase without the price level changing is if aggregate demand increases and […]
Which of the following transactions will be included in the calculation of GDP using the expenditure method? A) The sale of a used car by a consumer B) The payment made to a construction worker C) The purchase of a treasury bond by an investor D) The purchase of a private jet by the CEO […]
What are the three categories of correlation? Illustrate with real life examples. What will be an ideal response? ANSWER Correlation can be divided into three categories. These are: a) Positive correlation that implies that two variables tend to move in the same direction. For example, when income increases, consumption increases. b) Negative correlation that […]
A fiduciary monetary system ultimately rests on A) the value of the assets backing up the system. B) the public’s confidence in the system. C) the difficulty of counterfeiting the currency. D) the value of the metal backing up the system. ANSWER B
The natural rate of unemployment is defined as the rate of unemployment that A) exists only during periods of recession or depression in the economy. B) exists due to welfare and unemployment benefits that reduce potential workers’ incentives to find work. C) prevails in long-run macroeconomic equilibrium, when all workers and employers have fully adjusted […]
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