PLEASE ANSWER ALL AS TRUE/FALSE 1) Technological change allows the economy to pr
ID: 1224574 • Letter: P
Question
PLEASE ANSWER ALL AS TRUE/FALSE
1) Technological change allows the economy to produce more output with the same amount of capital
and labor.
2) An increase in disposable income will shift the aggregate demand curve to the right.
3) The short-run aggregate supply curve is vertical.
4) Higher interest rates increase both consumption and investment spending.
5) Liquid is the money not easily convertible on short notice.
6) The property of money that prices are quoted in terms of money is unit of account.
7) Net worth are uses of the funds of a bank, including loans and reserves.
8) Savings function is the relationship between the level of income and the level of savings.
9) The Fed's ultimate goal is to maximize GDP and minimize the inflation rate, but to do so it focuses on
intermediate targets such as the growth of the money supply.
10) The most common tools of monetary policy are the reserve requirement, the discount rate, and open
market operations.
Explanation / Answer
1) True as technological advancement increases the production of goods using same factors of production.
2) True because increase in disposable income increases the consumption of goods and services in the economy and this will shift the aggregate demand curve to the right.
3) False because in short-run aggregate supply curve is upward sloping showing increase in price increases the quantity supplied.
4) False because higher interest rates force consumers to save more as a result consumption decreases and higher interest rate make loan expensive so investment spending also decreases.
5) False because an asset is said to be liquid when it can easily be converted into cash on short notice.
6) True
7) True because Net worth is the excess of bank assets over its liabilities.
8) True as savings function shows the relationship between the level of income and the level of savings.
9) True.
10) False. Only open market operation is the most common tool of monetary policy of the FED.
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