Question

1.Which of the following would remove the effect of inflation as it measures the value of all national output?

I. Real gross domestic product (GDP)

11. Nominal GDP

(A) I only

(B) II only

(C) Both I and II

(D) Neither I nor II

........................................
2. In a typical recession,
I. potential output exceeds actual output
II. real gross domestic product is rising
(A) I only
(B) II only
(C) Both I and II

(D} Neither I nor II

...............................................

3. Real gross domestic product will rise as result of

(A) decreasing government purchases

(B) increasing taxes

(C) increasing government purchases

(D} Both A and B

...........................

4. In the short run, which of the following could be correct regarding the aggregate supply curve and aggregate demand curve?

I. Quantity demanded is inversely related to the price level. IL Quantity supplied is upward sloping

(A) I only

(B) II only

(C) Both I and II

(D) Neither I nor II

.......................

5. An increase in aggregate demand causes

(A) output to rise and the price level to rise

(B) output to rise and the price level to fall

(C) output to fall and the price level to rise

(D) output co fall and the price level co fall

.........................................................................

6. A decrease in aggregate supply causes

(A) output co fall and the price level co fall

(B) output to rise and the price level to rise

(C) output to rise and the price level to fall

(D) output to fall and the price level to rise

.......................................

7. An decrease in aggregate demand causes

(A) output to rise and the price level to rise

(B) output to rise and the price level to fall

(C) output to fall and the price level to rise

(D) output co fall and the price level co fall

.....

8. An increase in aggregate supply causes

(A) output co fall and the price level co fall

(B) output to rise and the price level to rise

(C) output to rise and the price level to fall

(D) output to fall and the price level to rise

.....................................................................

please explain your answer. Tk

Answer 1

1) (A) I only

Real GDP removes the effect of inflation.

2) (A) I only

Real GDP decreases during recession.

3) (C) increasing government purchases

Increasing taxes reduces demand and output.

4) (C) Both I and II

Aggregate demand is downward sloping whereas Aggregate supply is upward sloping as with increase in price, opportunity to produce more increase as profitability increases.

5) (A) output to rise and the price level to rise

Increase in Aggregate demand pushes prices higher and increases incentives to produce more.

6) (D) output to fall and the price level to rise

7) (D) output co fall and the price level co fall

As demand decreases there is a surplus supply and price decreases as a result.

8) (C) output to rise and the price level to fall

As companies tries to sell more by decreasing prices.