Question

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 21) 21) "Demand-pull inflation" refers to A) any inflation that is originally caused by a rightward shift of the AD curve but is maintained at a constant level by monetary validation. B) only the inflation that results from an expansionary monetary policy. C) any inflation that is originally caused by a rightward shift of the AD curve but is accelerating due to monetary validation. D) the inflation that results from a decrease in net exports. E) the inflation that results from any inflationary gap caused by a rightward shift of the AD curve. 22) 22) "Cost-push inflation" refers to A) the increase in the price level that occurs when the excess demand for inputs pushes up input costs. B) the increase in the price level that occurs when there is excess supply of factors of production. C) inflation arising from a shortage of labour. D) any increase in the price level that results from an upward shift of the AD curve. E) inflation arising from a leftward shift of the AS curve that is not the result of excess demand for factors of production. TANSWER. Write the word or phrase that best completes each statement or answers the question. 23) 23) Extremely high inflation is called PLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 24) 4) Transfer payments are excluded from the calculation of GDP because A) it is difficult to assess the market value of a transfer payment. B) they do not represent the purchase of a good or a service. C) they do not generate additional income in the economy. D) they are small enough to ignore when computing the national accounts. E) ey are nut counted as income by any economic agent.

Answer 1

1) Solution: the inflation that results from any inflationary gap caused by a rightward shift of the AD curve.

Explanation: Demand-pull inflation occurs when prices increases because the aggregate demand in an economy is greater than the aggregate supply.

　

2) Solution: increase in the price level that occurs when the excess demand for inputs pushes up input costs

Explanation: Cost-push inflation occurs when prices pushed up due to increases in wages, raw materials, indirect taxes and other input factors (labor, capital, land or entrepreneurship).

　

3) Solution: hyperinflation

Explanation: Hyperinflation means a very high inflation

4) Solution: they do not represent the purchase of a good or a service

Explanation: Transfer payments are excluded in GDP because it only allocates the money to achieve social ends.

　

25) Solution: rose by 5 percent

Explanation: Real National Income = Nominal national income - Inflation = 10% - 5 % = 5%

　

26) When a government changes its fiscal policy it is

Solution: changing the government spending and/or tax to change national income

Explanation: In the fiscal policy the government adjusts its tax rates and spending levels to influence a country's economy.

　

27) Solution: Expansionary

Explanation: Expansionary fiscal policy is increased tax benefits or government spending

　

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