22 Which of the folowing statomentsre om a Suppose l GDP in 200s is 400 and is 4

Question

22 Which of the folowing statomentsre om a Suppose l GDP in 200s is 400 and is 420 in 2006 Tha grown în 2006-20%. If the economy is in the cyclical pwing, the policy mahers should try raising takes Domestic demand s primarty a functon of income 11 a (31 b and c 4) a and c 15) All the statements are comect 4.23 . During an upswing phase, cycical unemployment will... and iriation wn [11 increase; decrease [21 decrease: decrease [3] decrease, increase. 4 increase; increase 4.24. What will happen to the unemployment rate and the inflstion rabe if the SARB deaides increase the interest rate? I11 The unemployment rate wil lecrease and the infiation rate vwllincrease. 12) The unemployment rate will increase and the inflation rate will decrease. 13) Both the unemployment rate and the inflation rate will increase. the unempioyment rate and the inflation rale will decrease. 4.25. The Phillips curve shows that a decrease in aggregate demand will result in.. and [1] a decrease in unemployment rate; a decrease in inflation rate. 121 an increase in unemployment rate; a decrease in inflation rate. 13) an increase in unemployment rate; a decrease in inflation rate. (4] a decrease in unemployment rate; an increase inflation rate.

Explanation / Answer

4.22 Growth rate is 20*100/400 = 5% and not 20%. Also demand is a function of income Y and when there is expansion, taxes can be increased to control the inflationary gap. Select [3]

4.23 When there is an upswing in economic activities, employment is increased and so aggregate demand shifts right. Unemployment falls and inflation rises. Select [3]

4.24 When interest rate is increased, bank reserves are reduced and so is the money supply. AD shifts left raising unemployment and reducing inflation. Select [3]

4.25 Select [2]

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