Which one of the following is an example of discretionary fiscal policy used to correct an inflationary gap? A) an increase in government expenditures approved by Congress B) decrease in the money supply by the Federal Reserve C) a tax increase passed into law by Congress D) an agreement among major banks to lower interest […]
Which of the following statements correctly describes perfectly competitive market equilibrium? A) There is always excess supply or excess demand when the market is in equilibrium. B) Multiple equilibriums are possible for a given set of demand and supply curves. C) Government intervention is necessary for the market to reach equilibrium. D) Any deviation from […]
Which characteristic of economic growth is responsible for the large differences in GDP per capita across countries? What will be an ideal response? ANSWER Economic growth is exponential in nature and this in one of the major reasons for the large differences in GDP per capita across countries. When an economy grows exponentially, new […]
Explain how fiscal policy can correct a contractionary ga What will be an ideal response? ANSWER A contractionary gap can be closed by an increase in aggregate demand. By increasing government spending or reducing taxes, aggregate demand increases, thereby raising the level of real GDP.
Explain how the following will affect the supply curve of coffee. a) A fall in the wages paid to coffee workers b) An increase in the availability of high-yielding coffee plants c) A decrease in the quantity of land under coffee cultivation What will be an ideal response? ANSWER a) A fall in wages […]
How does the concept of catch-up growth explain the diminishing income gap between the developing economies and developed economies? What will be an ideal response? ANSWER Catch-up growth refers to the process whereby relatively poorer nations increase their incomes by taking advantage of knowledge and technologies already invented in other, technologically more advanced countries. […]
According to the above table, the value of the MPC is A) 0.1. B) 0.7. C) 0.5. D) 0.9. ANSWER D
The equilibrium quantity in a perfectly competitive market is determined: A) at the point of intersection of the demand curve and the quantity axis. B) at the point of intersection of the demand and supply curves. C) at the point of intersection of the supply curve and the quantity axis. D) at the point of […]
A patent is A) an agreement between a union and management on certain labor issues. B) a bond issued by the government. C) the monopoly right given to a producer/company. D) a bond issued by a state. ANSWER C
Total planned real expenditures measured along the aggregate demand curve are made up of A) consumption spending, factor payments, investment spending, and net export spending. B) consumption spending, income, government spending, and net export spending. C) consumption spending, saving, investment spending, and government spending. D) consumption spending, investment spending, government spending, and net export spending. […]
