4. In the short-run, a decrease in the GDP deflator will a) Decrease aggregate quantity supplied b) Have no effec...

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4. In the short-run, a decrease in the GDP deflator will a) Decrease aggregate quantity supplied b) Have no effect on aggrega

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Answer 1

Answer #1

4. Ans - B) It will have no effect on the quantity supplied.

Explanation:

In the short run, quantity supply is less elastic so quantity supplied will not change as GDP deflator falls.

5. Ans - A) Decrease quantity supplied.

Explanation:

As GDP deflator falls, it means nominal GDP falls, which means price falls so it will decrease the quantity supplied because of law of supply.

6. Ans - C) Increase Aggregate quantity demanded.

it will increase the quantity demanded in the market because price fall means rise in quantity demanded due to law of demand.

7. Ans - C) None of the above

It will increase the aggregate quantity demand not aggregate demand in the economy.It is so because fall in GDp deflator means fall in price and any changes in price lead to effect quantity demanded or quantity supplied ( means movement along the curve) not shift.

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Answer 2

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