26. Consumption (household sector) spending is the largest component of 27. The

Question

26.  Consumption (household sector) spending is the largest component of

27.  The aggregate demand curve slopes down, because of the inverse relationship between price level and real output (GDP).

28.  What happens to the aggregate supply curve when the government imposes an excise tax on production?

29.  Suppose National Bank has required reserves of $1,000 and actual reserves of $5,000. National Bank' s lending ability is___________.

30.  A decrease in the per unit cost will shift the aggregate supply curve

Aggregate employment Aggregate demand Aggregate supply Aggregate income Aggregate output

Explanation / Answer

Q26

Consumption spending is the largest component of aggregate demand. because aggregate demand consist all spending. Ex consumption spending , investment spending, gov. spending and net income from abroad.

answer B(second) is correct

Q27 Aggregate demand curve slops down because of inverse relation between Price level and real output . Aggregate demand goes down, when price level increase. Purchasing power of monetary wealth also goes down. therefore the given statement is TRUE.

Q28 Aggregate supply curve will shift to the left . because imposition of excise tax will reduces profit margin of producers. they have to shift tax burden to consumers which makes consumption costlier of that good. consumers will spent less.

Answer E(fifth) is correct.

Q30 Decrease in per unit cost will shift supply curve to the right. Reduction in cost leads higher profit so producer produces more.

Answer E(fifth) is correct.

Q29 Lending ability of banks depannds on excess reserves.

Excess Reserves = Actual Reserves - Required Reserves

= 5000 -1000

= $4000

Answer E(fifth) is correct.

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