Figure 11- expenditre, 2000 dollars) Real GDP, trillions of 2000 dollars) greate

Question

Figure 11- expenditre, 2000 dollars) Real GDP, trillions of 2000 dollars) greater 18) 18) Refer to Figure 11-1. According to the figure above, at what point is aggregate expenditure than GDP? A) J C) L B) K D) none of the above 19) Which of the following assets is most liquid? D) stock 19) A) bond B) savings account C) money 20) Economies where goods and services are traded directy for other goods and services are called 2) economies. B) seigniorage C) direct D) trade A) barter Table 13-2 Assets Liabilities 21) Refer to Table 13-2. Suppose a transaction changes a bank's balance sheet as indicated in the 21) following T-account, and the required reserve ratio is 10 percent. As a result of the transaction, the bank can make a maximum loan of A) so. B) $800 C) $7.200. D) $8,000. 22) The Federal Reserve was established in 1913 to A) stop bank panics by acting as a lender of last resort. B) prevent bad loans by requiring banks to hold reserves. C) stimulate the economy by increasing bank reserves. D) prevent inflation by decreasing the money supply.

Explanation / Answer

Question 18

The aggregate expenditure curve and 45-degree line are intersecting each other at point K.

At the point that lies on AE curve before the intersection of AE curve and 45-degree line, aggregate expenditure is greater than the GDP.

At the point that lies on AE curve after the intersection of AE curve and 45-degree line, aggregate expenditure is smaller than the GDP.

Point J lies before the intersection point K.

So, at point J, aggregate expenditure is greater than GDP.

The correct answer is the option (A).

Question 19

Most liquid asset is that asset which can directly be used for exchange of goods and services without any intermediate step to be taken.

Money can be used directly for purchase of goods and services.

So, money is the most liquid asset.

The correct answer is the option (C).

Question 20

Trade of goods and services for goods and services is termed as barter trade system.

So, economies where goods and services are traded directly for other goods and services are called barter economies.

The correct answer is the option (A).

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