Question

1. Which of the following does NOT lead to an increase in potential GDP?

Select one:

a. aggregate expenditures increase

b. new machinery and equipment are installed

c. labor force grows

d. technological change takes place

2. All of the following are likely results of a negative demand shock EXCEPT

Select one:

a. the IS curve shifts to the left.

b. lower inflation.

c. the Phillips curve shifts to the left.

d. a negative output gap.

3. If the Fed wants to reduce the value of the dollar, it will

Select one:

a. sell foreign assets and also sell dollars.

b. sell dollars and buy foreign assets.

c. sell foreign assets and buy dollars.

d. buy foreign assets and also buy dollars

Answer 1

1) Option "a" is correct i.e aggregate expenditures increase

potential GDP occurs at a constant inflation rate i.e national income does not rise w more inflation

2) Option "c" is correct i.e the Phillips curve shifts to the left

As aggregate demand curve does not affect the Phillip curve

3) Option "b" is correct i.e sell dollars and buy foreign assets.

value of dollar decrease as if exports is more this means we have to pay dollars this decrease the value of the dollar , even when we buy foreign assets we have to pay dollars

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