Question

9. Suppose that current short run equilibrium GDP is at $181B but potential (long run) GDP is $179B. What is the size and type of the economic gap?

a. Recessionary Gap of -$2B

b. Inflationary Gap of -$2B

c. Recessionary Gap of +$2B

d. Inflationary Gap of +$2B. _____

10. Which of the following statements about financial institutions in the US is true?

a. Credit Unions can limit their membership.

b. The number of Savings & Loans has been increasing in the last ten years.

c. Commercial banks are non-profit organizations.

d. The top 3 US commercial banks are not among the largest world banks. _____

11. Given the following information about a nation’s economy, calculate equilibrium income / output (AE). C = 500 + 0.75Yd, T = 40, I = 500, G = 250, X = IM =75

a. $1,220

b. $1,220

c. $1,270

d. $4,880

e. None of the above

Answer 1

Ques 9 ) d. Inflationary Gap of -$2B.

Since current short run equilibrium GDP (Y) is of $181B > potential (long run) GDP (YF )of $179B. So there is an inflationary gap.

YF – Y = $179B - $181B = -$2B.

Ques 10 ) Option a. Credit Unions can limit their membership is correct. The law gives power to Credit unions to limit membership and thus they single out a given community or groups.

Option b is also wrong as The number of Savings rose till 2012 where it peaked to 12% in the us but then fell to 6.45 in 2013. After that the pattern is not consistent. It keeps increasing and decreasing. Option c is wrong as commercial banks are profit organisations. Option D is incorrect as top 3 commercial Banks in USA being JP Morgan Chase, Bank of America and the Citi Group are all part of largest world banks.