Question

question

If Susan Kalanti deposits $35,000 into her saving account at her Bank of America branch in Houston, TX, and you know that Bank of America can only loan 84% of that amount, then, because of this transaction, the money supply is US economy

Question 7 options:

	increases by $21,8750
	increases by $29,400
	increases by $2,940,000
	decreases by $29,400

Question 8

An economy experiences an economic "expansion" as long as

Question 8 options:

	real GDP is continually increasing and there are no output gaps.
	real GDP is continually increasing, even if there exist a recessionary gap.
	real GDP is continually increasing, but there is no recessionary gap.
	None of the above.

Question 9

Which of the following observations indicates the existence of a recession?

Question 9 options:

	A sharp rise in real GDP.
	Unemployment rate is lower than the natural rate of unemployment.
	All of the above.
	None of the above.

Question 10

For a given country, the real GDP equals 100 billion dollars in year 1 and 105 billion dollars in year 2. If you know that the country's population declined from 10 million people in year 1 to 9 million people in year 2, then

Question 10 options:

	We know that the unemployment rate went down.
	We know that the inflation rate went up.
	We know that the economic growth has a positive value
	There are no enough data to indicate any value or change in value for any of the above variables.

Answer 1

Answer : 7) The answer is option B.

When bank provide loan in the economy then money supply increase. Here bank provided loan 84% or 0.84 of deposit amount. So, money supply will increase by 84% of $35,000 = 0.84 * 35,000 = $29,400. Therefore, option B is correct.

8) The answer is option B.

When expansion occur in the economy then aggregate demand increase which shift the aggregate demand curve to rightward. As a result, the real GDP increase continuously. There is no matter that there exists recessionary gap or inflationary gap. Therefore, option B is correct.

9) The answer is option D.

When the economy is in recession then real GDP is lower than the potential GDP. Hence at recession the employment level is lower than the full employment level. In this situation the unemployment rate is higher than the natural unemployment rate. Therefore, option D is correct.

10) The answer is option A.

When real GDP increase then employment level increase. Here in year 2 real GDP increases and at the same time population level decreases. As in year 2 real GDP increases hence employment level increases which decreases the unemployment rate. Again as in year 2 the population level decreases hence the unemployment rate decreases. Therefore, option A is correct.