Question

1.Which of the following is true about aggregate demand?

It is the sum of the demand for all goods and services produced in an economy.

It includes demand from households, firms, governments, and foreign markets.

In equilibrium, it is simply real GDP.

All of the above.

2.Which of the following statements is correct?    
Monetary policy takes a long time to be implemented.     
The Fed usually foresees macroeconomic problems.     
Monetary policy, once implemented, is immediately effective.       
Monetary policy decisions can be made very quickly.

5.We cannot say an expectation is rational if ________?
not all the information is used to form the expectation.    
the expectation is different from what the Fed expects.      
only some people have this expectation.      
the expectation ends up to be wrong.

3.Which of the following is correct about money velocity?        
It can be calculated using the amount of money supply and real GDP.    
It increases when the price level increases.      
It is about how often people use cash and how quickly people spend the money they earn.      
It is the number of times the money supply is spent to obtain goods and services that make up GDP during a particular time period.

4.This graph shows an AD/AS analysis with labels hidden.

If the economy starts at A and there is a fall in aggregate demand, the economy moves

back to A in the long run.

to D in the long run.

to C in the long run.

to B in the long run.

Answer 1

[As HOMEWORKLIB’s policy and guideline, the first-four MCQs are answered below:]

1.

Answer: 3^rd option

Equilibrium is the equality of aggregate demand (AD) and aggregate supply (AS), where it indicates real GDP.

Other two options are not correct – in the first option, intermediate goods should not be included in “all goods”; and in the second option, the demand of second-hand goods should not be included.

2.

Answer: 1^st option

This is the policy of government regarding the money supply in the market. Objective of this policy is to regulate the supply of money in the market by controlling interest rates, purchasing or selling bonds, etc. Its effect is very slow, because the influence is indirect.

5.

Answer: 1^st option

This is the logical way of thinking. Logic may not be fruitful if all the information is not considered. In such case, the expectation is not rational.

3.

Answer: 4^th option

Velocity or average number of times each unit of money is used for transactions during a period. Therefore, it indicates a number during a period of GDP.