Question

18. In the long run, if the growth rate is 4%, we would double in approximately (using the rule for doubling)

a. 29 years

b. 40 years

c. 32 years

d. 18 years

20. if the CPI this year was 180 and last year was 150, the rate of inflation is

a. 30%

b. 10%

c. 20%

d. 16.67%

23. if prices rise by 5% and your wage rises by 8%, this means

a. your real wage is 13%

b. inflation is 3%

c. your wage can buy 3% more goods

d. you real wage is -3%

26. an increase in imports will do which?

a. shift short run aggregate supply to the right

b. shift aggregate demand to the left

c. shift aggregate demand to the right

d. shift short run aggregate supply to the left

27. if government purchases increase, in the aggregate demand and supply graph

a. CPI and real GDP both increase

b. CPI decreases and real GDP increases

c. CPI and real GDP both decrease

d. CPI increases and real GDP decreases

28. if aggregate demand and short run aggregate supply intersect to the right of the long run aggregate supply

a.we are below full employment

b. we are in an inflationary gap

c. we are in a recessionary gap

d. we are at the potential level of output

29.The Keynesian economists believed

a. government should not be involved in the economy

b. the economy would self correct quickly to full employment

c. we should focus on the long run

d. the demand side drove the economy

Answer 1

18) Solution: 18 years
Working: Rule of 72 = 72 / Growth rate = 72 / 4% = 18 years
19) Solution: 20%
Working: Rate of inflation = (CPI current year - CPI previous year) / CPI previous year
= 30 / 150 * 100 = 20%
20) Solution: your wage can buy 3% more goods
Working: A rise in prices by 5% and rise in wage by 8% indicates a 3% increase in wages
21) Solution: shift aggregate demand to the left
Explanation: Aggregate demand = C + I + G + X – M; thus an increase in imports causes a decline in aggregate demand and shifts in to the left
As per policy we have to answer first four questions