Question

1. the aggregate supply curve shows the negative relationship between general price and real GDP. True or false

2. Other things equal, as the number of discouraged workers rises in an economy, the gap between potential and actual real GDP will widen. True or False

3. According to the expedenitures approach, gross domestic product represents the sum of consumption spending, government spending, net exports, and net investments. True or False

4. In a business cycle, a peak marks the end of an expansion and the beginning of a recession. True or False

5. GDP is based on the market value of goods and services produced in an economy and not on the value of only final goods and services. True or Fasle

6. If the aggregate supply curve is vertical, then shifts in aggregate demand will not change aggregate output. True or False

7. A change in foreign demand does not affect aggregate demand. True or False

8. The AD curve will shift to the right if:

a. people become pessimistic about the future of the economy

b. there is a decrease in foreign income.

c. the government decreases spending

d. the domestic price level decreases

e. the foreign price level increases

Answer 1

1) False

Explanation: The upward aggregate supply curve depicts positive relationship between price level and real GDP in the short run

2) True

Explanation: With a rise in discouraged workers the gap widens between potential and actual real GDP

3) False

Explanation: GDP (as per expenditure method) = C + I + G + (X-IM); while "Net investment" excludes the depreciation from gross investment

4) True

The five stages are expansion, peak, recession, depression, trough, and recovery

5) False

Explanation: GDP refers to market value of the final products and services produced within the national borders of a country

6) True

When aggregate supply curve is vertical aggregate output will not be affected with shifts in demand change

7) False

Explanation: A change in foreign demand in short rum impacts the aggregate demand.