Question

Q - 1 Which of the following statements is correct about real GDP?

a- Real GDP is not affected by the amount of final goods and services that are newly produced.

b- Real GDP is affected by the price levels used to calculate real GDP.

c- Changes in real GDP is affected by the price levels used to calculate real GDP.

d- Nominal GDP is not affected by the amount of final goods and services that are newly produced

Q - 2 When consumers are more optimistic about future economic conditions, what happens to aggregate demand?

		A- Aggregate demand stays the same.
		B -The effect is uncertain as it depends on other factors.
		C - Aggregate demand decreases.
	D-	Aggregate demand increases

Q -3 If businesses and consumers become pessimistic, the Federal Reserve can attempt to reduce the impact on the price level and real GDP by

A-		decreasing the money supply, which raises interest rates.
B-		increasing the money supply, which raises interest rates.
C-		decreasing the money supply, which lowers interest rates.
D-		increasing the money supply, which lowers interest rates.

Answer 1

1) The correct statement is "B" Real Gdp is affected by the price level used to calculate real GDP. If there is less difference between the price level used to calculate real GDP and current price level real GDP will be higher, but if the difference is large the real GDP will be lower.

2) The correct answer is "D" When consumer are more optimistic about future demand the investment in the economy increases and that increases the demand and they spend more.

3) The correct answer is "D" the fed will increase the money supply which will lower the interest rates and induce more investment in the economy increasing demand and bringing the economy back to the optimum level.