Question

1. Suppose that as a result of the government policy we expect a permanent decrease in the flow of migrant workers into the United States. As a result, we can expect

Select one:

a. a right-ward shift in the short-run aggregate supply curve

b. a right-ward shift in the aggregate demand curve

c. a left-ward shift in the long-run aggregate supply curve

d. this will not have any effect on the US economy in the short or long run

2. The wealth effect that occurs when the price level rises causes the

Select one:

a. real value of household wealth to fall.

b. nominal value of household wealth to rise.

c. real value of household wealth to rise.

d. nominal value of household wealth to fall.

3. We can expect an increase in the value (appreciation) of the Australian dollar relative to Indian rupiah when

Select one:

a. domestic interest rates decrease in Australia but not in other countries.

b. Indian economy is going into an expansion and Australia’s exports to India are large

c. Interest rates increase in India

d. all answers are correct

4. Suppose Australian dollar decreases in value relative to other currencies. One would expect to the following in the Australian economy

Select one:

a. none of the answers is correct

b. growth rate of GDP to decrease.

c. increase imports.

d. decrease in exports.

Answer 1

1)

Answer: (c)

There will be a fall in the availability of labour force in the US economy. Therefore there will be a leftward shift in the long run aggregate supply curve. Long run aggregate supply curve is affected by the the change in technology and change in availability of inputs.

2)

Answer: (a)

Hindi is the rise in the price level, the purchasing power of money declines. Therefore real value of wealth will decline.

3)

Answer: (b)

When import of India will rise, the Indian rupees will become weak.

Further the dollar of Australia will appreciate.