Question

1. The crowing out effect of government spending will be less pronounced if

Select one:

a. consumption spending is more sensitive to changes in the interest rate

b. government borrows mostly in the international financial markets

c. none of the answers is correct

d. equilibrium GDP is further below potential GDP

2. Monetary policy response to the Coronavirus crisis in Australia can be expected to

Select one:

a. prevent, among other things, large increase in unemployment

b. slow down aggregate demand growth

c. all answers are correct

d. cause, ceteris paribus, Australian dollar to appreciate

3. Jenny is a cook at a restaurant and her hourly wage is $200. For her husband’s birthday, she cooks an elaborate meal at home that takes her 5 hours to complete. As a result, the country’s GDP

Select one:

a. remains the same

b. decreases by $1000

c. increases by $1000

d. might increase or decrease, depending on her income tax rate

4. To stimulate the economy Australian government buys more of the Australian made submarines. How will this affect the aggregate demand curve?

Select one:

a. This will shift the aggregate demand curve to the right.

b. This will move the economy down along a stationary aggregate demand curve.

c. This will move the economy up along a stationary short run aggregate supply curve.

d. This will move the economy up along a stationary aggregate demand curve.

Answer 1

1) option c)

Crowding out effect occurs, when due to fiscal Expansion, interest rate rises, & so Investment falls,

Thus full effect of Expansionary fiscal policy is not realized

So a) false, if C responses more to i, then crowding out effect is more pronounced

So all options are wrong

2) option a)

Monetray expansion should be undertaken to Decrease Unemployment rates

3) option a)

Home activities arent part of GDO calculation

4) option a)

G rises , AD shifts right