Use the following to anawer qucstion 3 Aggregate Expenditures Curve per year) 1,

Question

Use the following to anawer qucstion 3 Aggregate Expenditures Curve per year) 1,000 Real GOP (per year) 3. (Figure: Aggregate Expenditures Curve D) Look at the ige piures Curve I. The equilibrium level of real GDP in the aggregs in this figure is A) $800 B) $1,000. C) $1,600. D) $3,200. by $4 4. Ir disposable income increases by SS billion and comsumer spending inecreases A) 20. B) 0.8. C) 1.25. D) 9. 5. Which of the following would be the appropriate response on the part of the government If the economy is currently producing $900 billion GDP while the full-employment is $1000 billion? A) Increase government spending to stimulate the economy B) Decrease government spending to stimulate the economy C) Lower taxes to contract the economy D) Raise tax rates to stimulate the economy Page 2

Explanation / Answer

11. Option A

Economics is the study of how societies utilise scarce resources in order to produce valuable commodities and distribute them among different people.

12. Option C

Opportunity cost is the value of the choice of a best alternative cost while making a decision. A choice needs to be made between several mutually exclusive alternatives and assuming the best choice is made, it is the "cost" incurred by not enjoying the benefit which that would have been had by taking the second best available choice.

13. Option C

14. Option A

Factors of production are used to produce goods and services with few exceptions

15. Option C

Economists divide the factors of production into four categories: land, labor, capital, and entrepreneurship.

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