Homework Answers
Option D
Explanation: In expansionary gap, the real GDP is higher than the potential GDP. This happens resources are over utilized and the unemployment rate is lower than the potential level.
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An expansionary gap is most likely to occur when which of these conditions is true? Select...
Consider an economy with an inflationary gap. The advantage of using a contractionary fiscal policy rather...
Consider an economy with an inflationary gap. The advantage of using a contractionary fiscal policy rather than allowing the economy's natural adjustment mechanism to operate is that O A private sector expenditures increase on their own, the policy will stabilize real GDP. OB. It will shorten what might otherwise be a long recession OC. will reduce the inflationary pressure on prices that would otherwise ocur. OD. It wil dose the output gap. Click to select your answer MacBook Air Assume...
6. (Problem 6) An economy is facing the inflationary gap shown in the accompanying diagram. Aggregate...
6. (Problem 6) An economy is facing the inflationary gap shown in the accompanying diagram. Aggregate price level LRAS SRAS Real GDP Potential —YpY output To eliminate the gap, should the central bank use expansionary or contractionary monetary policy? How will the interest rate, investment spending, consumer spending, real GDP, and the aggregate price level change as monetary policy closes the inflationary gap? The central bank can use contractionary monetary policy. The interest rate will rise, which would encourage a...
What is the spending multiplier if the MPC is 62%? 1.61 .62 2.63 Unlike the neoclassical...
What is the spending multiplier if the MPC is 62%? 1.61 .62 2.63 Unlike the neoclassical approach to the economy, the Keynesian approach focuses on sticky prices and aggregate demand. This focus is advantageous for understanding the reason cyclical unemployment and recessions occur, as these fluctuations take place in the ________ -run. long gap short What is true about the expenditure multiplier? GDP does not change proportionally. GDP changes when the aggregate expenditure changes. A larger change in expenditure causes...
Which of the following statements would be true if the short-run Phillips curve relationship held in...
Which of the following statements would be true if the short-run Phillips curve relationship held in the long run? a. Only monetary policy, not fiscal policy, has any real effects on the economy. b. A central bank can always steer an economy out of recession, simply through creating inflation. c. Expansionary monetary policy can decrease inflation at the expense of unemployment. d. A central bank has no control over unemployment. e. Prices fully adjust in the long run.
If the federal government was required to balance its budget, when would government spending most likely...
If the federal government was required to balance its budget, when would government spending most likely decrease? Select one: a. When employment was rising rapidly for an extended period of time b. When unemployment was declining for an extended period of time c. When the economy was experiencing a strong expansion due to high business confidence d. When the economy was experiencing a demand pulled inflation e. A balance budget amendments ensures that government spending never decrease Suppose that the...
Residential investment includes spending by firms on office buildings. Select one: O True O False The...
Residential investment includes spending by firms on office buildings. Select one: O True O False The GDP deflator is a measure of the Select one: O a. average level of prices of intermediate goods and services in the economy. O b. average level of prices of final goods and services in the economy. O c. total production of the economy unadjusted for inflation. O d.) total production of the economy adjusted for inflation. To examine how the total production of...
1) of the Central Bank of Kuwait puts in place an expansionary monetary policy, its decision...
1) of the Central Bank of Kuwait puts in place an expansionary monetary policy, its decision is based on A) the fact that the economy is at ful employment B) Expectation of excessive inflation in the future C) the fact that the economy is in an expansion D) Unemployment level is high 2) When the interest rate is set at a very low rate A) the opportunity cost of holding money is very low B) the money demand will shift...
can someone explain please Question 5 0/2 pts Which of the following is most likely to...
can someone explain please
Question 5 0/2 pts Which of the following is most likely to cause an increase in the inflation rate? a reduction in the percentage of workers who are in labor unions an increase in competition between firms an increase in the non-labor costs of production an increase in the unemployment rate Rising unemployment tends to put downward pressure on wages and prices. In the figure below, when employment is at the level at point C, the...
5. If data indicate the economy is in recession and members of Congress are working to...
5. If data indicate the economy is in recession and members of Congress are working to pass legislation to encourage economic growth, which of the following has almost certainly occurred? a. Realization of results b. Recognition of change in the economy c. Implementation of policy d. Analysis of policy's effectiveness 6. Which of the following is a significant decline in general economic activity over an extended period that includes declining real income and rising unemployment? a. A business cycle b....
Which one of these events is MOST likely to raise interest rates in the economy? Select...
Which one of these events is MOST likely to raise interest rates in the economy? Select one: a. The Fed buying government bonds through an Open Market Operation b. Prices in the economy falling during an economic depression c. The Fed lowering the Federal Funds Rate d. The Fed raising the Required Reserves Ratio e. National income falling during a recession
Consider an economy with an inflationary gap. The advantage of using a contractionary fiscal policy rather than allowing the economy's natural adjustment mechanism to operate is that O A private sector expenditures increase on their own, the policy will stabilize real GDP. OB. It will shorten what might otherwise be a long recession OC. will reduce the inflationary pressure on prices that would otherwise ocur. OD. It wil dose the output gap. Click to select your answer MacBook Air Assume...
6. (Problem 6) An economy is facing the inflationary gap shown in the accompanying diagram. Aggregate price level LRAS SRAS Real GDP Potential —YpY output To eliminate the gap, should the central bank use expansionary or contractionary monetary policy? How will the interest rate, investment spending, consumer spending, real GDP, and the aggregate price level change as monetary policy closes the inflationary gap? The central bank can use contractionary monetary policy. The interest rate will rise, which would encourage a...
Residential investment includes spending by firms on office buildings. Select one: O True O False The GDP deflator is a measure of the Select one: O a. average level of prices of intermediate goods and services in the economy. O b. average level of prices of final goods and services in the economy. O c. total production of the economy unadjusted for inflation. O d.) total production of the economy adjusted for inflation. To examine how the total production of...
1) of the Central Bank of Kuwait puts in place an expansionary monetary policy, its decision is based on A) the fact that the economy is at ful employment B) Expectation of excessive inflation in the future C) the fact that the economy is in an expansion D) Unemployment level is high 2) When the interest rate is set at a very low rate A) the opportunity cost of holding money is very low B) the money demand will shift...
can someone explain please
Question 5 0/2 pts Which of the following is most likely to cause an increase in the inflation rate? a reduction in the percentage of workers who are in labor unions an increase in competition between firms an increase in the non-labor costs of production an increase in the unemployment rate Rising unemployment tends to put downward pressure on wages and prices. In the figure below, when employment is at the level at point C, the...
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