Question

1.

The Federal Reserve expands the money supply by 5 percent, which of the following statements are correct? Check all that apply.

1. The Federal Reserve should have sold the government securities.

2. Aggregate demand will shift to the right.

3. The interest rate will decrease.

4. The interest rate will increase.

2.

1. Mary has been out of the paid workforce in order to raise her children. Now she decides to do paid work and is looking for a job. Before she finds a job, which of the following is the correct statement?

   1. The number of unemployed increases and the labour force is unaffected

   2. The number of unemployed increases, and the labour force decreases

   3. The number of unemployed is unaffected, and the labour force increases

   4. The number of unemployed increases, and the labour force increases

3.

Fill up the blanks by typing in your answer. Do not type in the quotation mark "".

Applying the aggregate demand/aggregate supply model, describe the impact of the following event on GDP and prices in the short run:

Given the importance of gas in providing energy to production, the 2008 Western Australian gas crisis resulting from a pipeline explosion at Varanus Island will have an impact that:

Blank 1 (type in "AD" or "AS") will shift to the Blank 2 (type in "right" or "left").

Output will Blank 3 (type in "increase" or "decrease") and price will

Blank 4 (type in "increase" or "decrease").

4.

One of the functions of money comes from the use of money to transfer purchasing power to the future. This is called:

1. measure of liquidity

2. store of value

3. medium of exchange

4. unit of account

5.

Fill up the blanks by typing in your answer. Do not type in the quotation mark "".

Applying the aggregate demand/aggregate supply model, and assuming there is a small amount of cyclical unemployment, describe the impact on GDP and prices of each of the following events:

A reduction in benefit payments

Blank 1 (type in "AD" or "AS") will shift to the Blank 2 (type in "right" or "left"). Output will Blank 3 (type in "increase" or "decrease") and price will Blank 4 (type in "increase" or "decrease").

6.

Fill up the blanks by typing in your answer. Do not type in the quotation mark "".

Applying the aggregate demand/aggregate supply model, describe the impact of the following event on GDP and prices in the short run:

a fall in the level of consumer confidence due to Covid-19 crisis.

Blank 1 (type in "AD" or "AS") will shift to the Blank 2 (type in "right" or "left").

Output will Blank 3 (type in "increase" or "decrease") and price will

Blank 4 (type in "increase" or "decrease").

Answer 1

1 - OPTION B,C

AGGREGATE DEMAND WILL SHIFT TO RIGHT

INTEREST RATES WILL INCREASE

Selling of securities is a part of contractionary policy and will decrease the money supply. Interest rates rise when money supply decreases. Hence other options are wrong.

2 - Option D

Number of unemployed increase , labor force increases

Since she was out of the workforce , she will not be counted as unemployed neither in the labor force. But noe as she is ready to work , until she finds the job , she will be a part of labor force but will be called unemployed.

3 - AS

LEFT

DECREASE

INCREASE

4 - Option B

Store of value

Money facilitates the storage because of which the person has the future purchasing power and the money can be used for that. The given statement exemplifies this function of money

5 - AD

LEFT

DECREASE

DECREASE

6 - AD

LEFT

DECREASE

DECREASE