2) how is it possible for the economy to have a deflationary gap a) equilbrium i
ID: 1095152 • Letter: 2
Question
2) how is it possible for the economy to have a deflationary gap
a) equilbrium is at the GDP level below full employment b)equilbrium is at a GDP level equal to full employment c) equilibrium is at GDP level about full employment d) gdp is rising at full employment
3) In comparison to the oversimplied formula for the multiplier, the real-world multiplier is
a)lower b)almost equal to it c) higher if taxes are included
6) if businesses spend an additonal 150 billion for investment projects in 2001, what will be the impact on national income (y) if the multiplier is 2
a) y will increase by 150 billion b) y will increase by 300 billion c) y will increase by 350 billion
10) which of the following would be associated with an inflationary gap
a)interest rates to low b) business expectations pessimistic c) price leve to low d) stock market crash
11) as the multiplier process works through time, the size of the multiplier effects becomes
a) smaller b)constant c) explosive
13) if savings exceeds investments, then the level of gdp must
a) remain constant b)decrease c) rise about potential GDP
14) the quilbrium level of GDP is the level at which
a) aggregate demand exceeds output b) aggregate demands equals output c)aggregate demand is less than output
15) self correcting mechansim reveals that
a) nominal wages will fall if there is inflationary gap b)nominal wages will increase if there is recessionary gap c) in the long run economy will be in equilibrium at potential GDP
16) the multiplier principle is built on the premise that oen persons spending is another person
a)debt b) obligation c)income
Explanation / Answer
2 A Equilibrium is at a GDP level below full employment.
3 A a)lower
6 B. Y will increase by $300 billion.
10 c Price level too low
11 A smaller
13 b) decrease
14 b) aggregate demands equals output
15 a) nominal wages will fall if there is inflationary gap
16 c) income
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