Question

If the government wants to increase the economy’s GDP levels, it could     A) decrease government expenditures....

If the government wants to increase the economy’s GDP levels, it could    

A) decrease government expenditures.

B) increase taxes.

C) decrease government expenditures and increase taxes.

D) increase government expenditures.

E) None of the above.

If the government wants to decrease the economy’s GDP levels, it could

A) increase taxes.                                                     B) increase government expenditures.

C) wait for inflationary pressure to come.                 D) decrease government expenditures.

E) None of the above.

Contractionary fiscal policy is designed to   

A) raise the price level only.                                     B) raise national income.

C) reduce real national income.                                 D) reduce the price level.

E) None of the above.

Expansionary fiscal policy is designed to

A) raise the price level only.                         B) reduce real national income.

C) raise the economy’s national income.      D) increase income taxes and the price level.

E) None of the above.

Suppose there are 100 million in the labour force, and 6 million unemployed people. During the next month, 200,000 people lose their jobs and 300,000 find jobs. The new total of employed is ________ and the new unemployment rate is ________.           

A) 94.1 million; 5.9 percent B) 100 million; 6.1 percent

C) 93.9 million; 6.1 percent D) 100.1 million; 5.8 percent E) None of the above.

E) None of the above.

The unemployed and the employed combined represent                  

A) the duration effect.                                   B) the discouraged worker.

C) the total labour force.                               D) all individuals 15 years of age and older.

E) None of the above.

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Homework Answers

Answer #1

If Government wants to increase the economy's GDP levels, it could increase Government expenditure.

Thus, Option D is correct.

If Government wants to Decrease economy's GDP levels, it could Decrease government expenditure.

Thus, option D is correct.

Contractionary Fiscal Policy is designed to reduce the price level.

Thus, Option D is correct.

Expansionary Fiscal Policy is used to raise the economy's National income

Thus, Option C is correct.

Initially, Total Employed People= Labour Force–Unemployed People= 100–6= 94 million

New Total Employed People= 94000000+300000–200000= 94.1 million

New Unemployment Rate= (New Total Unemployed People/Labour Force)×100={( 6000000+200000–300000)/100000000}×100= 5.9%

Option A is correct.

The unemployed and employed combined represent Total labour force.

Thus, Option C is correct.

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