74. Which of the following would NOT cause an increase in long-run aggregate sup

Question

74. Which of the following would NOT cause an increase in long-run aggregate supply? a. Technological improvements b. Discovery of natural resources c. Investment in capital d. Increase in the exchange rate 75. What would happen if households drastically cut spending due to poor economic reports, o things constant? a. Aggregate demand would decline b. A negative output gap would occur c. Unemployment would decrease d. All of the above e. A and B above 76. Countercyclical policy are actions designed to a. Reduce the deficit during expansions b. Maintain high employment, stable prices, and economic growth c. Increase exports during recessions d. Any governmental action directed at ensuring political stability 77. If unemployment is above the natural rate, a correct mix of monetary and fiscal policy may be to a. Decrease the money supply and increase tax rates b. Decrease government spending and increase interest rates c. Increase the money supply and increase government spending d. Raise the discount rate and lower tax rates 78. How successful have policymaker's been at maintaining low inflation and low unemployment since WWI1? a. Very successful b. The economy has experienced low inflation since 1960 c. Unemployment has been relatively low since 1974 d. Recessions have continued to occur despite fiscal and monetary policy actions 79. The time it takes for an action taken by policymakers to impact the economy is an a. Inside lag b. Interest lag c. Outset lag d. Outside lag

Explanation / Answer

74. Increase in the exchange rate causes an increase in long-run aggregate supply. Because increase in the exchange rate have impact on aggregate demand.

75. If households drastically cut spending due to poor economic reports,other things constant then, Aggregate demand would decline and negative output gap would occur. Because by decrease in consumption spending , aggregate demand decreases , output declines and unemployment increases. So, there is actual output is less than the potential output, therefore negative output gap would occur.

76. Countercylical policy are actions designed to any governmental action directed at ensuring political stability.

77. If unemployment is above the natural rate , a correct mix of monetary and fiscal policy may be to increase in the money supply and increase government spending.Because when unemployment is above the natural rate then, GDP is below its potential level , falling wages and falling prices are there. Therefore, correct mix of policies is increase in mony supply and government spending.

78. Policymaker's been at maintaining low inflation and low unemployment since WWII have successful because unemployment has been relatively low since 1974.

79. The time it for an action taken by policymakers to impact the economy is an Inside lag.

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