Question

TRUE OR FALSE?

1. Measuring A Country’s Economic Performance using the National Income Accounts with three measures – Income, Expenditure, Output.
2. Nominal GDP = GDP measured in current year’s prices = Real GDP * Price level.
3. The Government affects the circular flow of Income & Expenditure because it levies taxes on HH and Firms. Also makes Transfer Payments to them under various social welfare schemes such as the State Pension.
4. Fiscal policy can be distinguished from monetary policy, in that fiscal policy deals with taxation and government spending and is often administered by an executive under laws of a legislature, whereas monetary policy is often administered by a central bank.
5. Contractionary fiscal policy involves government spending exceeding tax revenue by more than it has tended to, and is usually undertaken during recessions.

Answer 1

1 - True.

The national income of the country can be measured with three methods , namely income , exoenditure and output.

2 - True

Nominal GDP is the real GDP at the current year prices.

3 - True

The HH and firms pay taxes to the government. In return the government pays the transfer income.

4 - True

The fiscal policy is related to government spending and taxation and monetary policy is associated with money supply controlled by central bank.

5 - False

The contractionary policy is associated with the closing of inflationary gap and not the recessionary gap.