Question

1. The amount of wealth that an individual wishes to hold as money is determined by

Group of answer choices

a. the price level

b. the price level, real income and the interest rate

c. real income and the interest rate

d. real income

e. the price level and real income

2. Which of the following is the best definition of potential output?

Group of answer choices

a. The output level that is produced when there are no short-run unplanned changes in inventory levels

b. The output level that can be produced when resources are used to their maximum potential

c. The output level that can be produced when the unemployment rate is zero

d. The output level that is actually being produced at any given point in time

e. The output level that can be produced when cyclical unemployment is zero

3. Suppose that the inflation rate was 4% in 2018 and 5% in 2019. This would mean that

Group of answer choices

a. the price level rose at a faster rate in 2019 than in 2018

b. all prices in the economy rose at a rate of 5% in 2019

c. the price level rose at a slower rate in 2019 than in 2018

d. the price level fell at a faster rate in 2019 than in 2018

e. more than one of these options is correct

4. There are two kinds of changes in net taxes: 1) net taxes can change if the government changes its tax or transfer payment policies:  2) net taxes change automatically as incomes rise and fall, without any change in policy.  The ____ kind of change sets off the multiplier process, while the ____ kind of change occurs during the multiplier process.

Group of answer choices

a. Second; first

b. Second; second

c. First; second

d. First; first

PLEASE ANSWER ALL 4 MULTIPLE CHOICES LIKE CHEGG ALLOWS, WOULD HATE TO MARK INCOMPLETE

Answer 1

1.b

Money demand is positively related to price level and income, and negatively related to interest rate.

2. b

Potential GDP is the output produced when economy uses all existing resources and available technology.

3. a

Inflation rate is measured as % change in generalized price level. When inflation rate increases, it means price level is increasing at a faster rate than before.

4. a

A discretionary change in tax or transfer payments will increase aggregate demand via multiplier process. But the second type describes built-in automatic stabilization which doesn't set off multiplier process.