Question

Circle the letter of the choice that best completes the statement or answers the question.

1. The factors that affect the amounts that consumers, businesses, government, and foreigners wish to purchase at

each price level are the

A. real-balances, interest-rate, and foreign purchases effects.

B. determinants of aggregate supply.

C. determinants of aggregate demand.

D. sole determinants of the equilibrium price level and the equilibrium real output.

2. Amid Covid-19 pandemic, the International Monetary Fund (IMF) forecast that Saudi Arabia's GDP will shrink

by 6.8% in 2020 and the impact could be long lasting (Source: Arabian Business, June 26 of 2020).

Based on this information, how many of the following statements are correct:

Statement 1: The IMF is pessimistic on this forecast.

Statement 2: The IMF is optimistic on this forecast.

Statement 3: The IMF may change its forecast after six months.

Statement 4: The IMF forecast is not realistic.

A. One statement

B. Two statements

C. Three statements.

D. Four statements.

E. None of the statements is correct.

3. A good weather increases crop yields and a VAT spike decreases national’s consumption. Holding everything

else constant and, based on aggregate demand and aggregate supply model:

A. aggregate price level will increase

B. aggregate price level will remain unchanged

C. real GDP is undetermined

D. none of the above

4. Which one of the following would not shift the aggregate demand curve?

A. a change in the price level

B. depreciation of domestic currency

C. a decline in the interest rate at each possible price level

D. an increase in personal income tax rates

E. none of the above

5. An economy's aggregate demand curve shifts leftward or rightward by more than changes in initial spending

because of the

A. net export effect.

B. wealth effect.

C. real-balances effect.

D. multiplier effect.

6. Other things equal, an improvement in productivity will

A. shift the aggregate demand curve to the left.

B. shift the aggregate supply curve to the left.

C. shift the aggregate supply curve to the right.

D. increase the price level.

Answer 1

Hi,

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question :

Answer:

1). Answer:

C. determinants of aggregate demand.

Aggregate demand (AD) is the total demand at different price level during a specific time period within the economy. AD is affected by consumption, investment, government spending and net export. When these things/factors ( consumption, investment, government spending and net export) increase then its increase the AD and vice-versa.

2). Answer:

Statement 1: The IMF is pessimistic on this forecast.

Statement 3: The IMF may change its forecast after six months.

The forecast of IMF is based on the effect of COVID-19. We all know that COVID-19 is a global pandemic and its affect badly to the global economy. All the major economic activities have affected badly. People have lost their job at wide level and million of workers facing the problem of pay cut. Its its decrease the GDP, inflation, employment level, productivity, consumer confidence level, investment level etc very badly and situation is worst. But Situation may be improve if problem get solved successfully in coming months.

3). Answer:

D. none of the above

A good weather increases crop yields and a VAT spike decreases national’s consumption. Holding everything else constant then increases crop yields will increase the supply and other side spike VAT will decrease demand so, it will reduce the price level and output level.

4). Answer:

E. none of the above

When price increase demand decrease and vice versa. When domestic currency depreciate the its reduce the purchasing power of domestic currency that shift the AD curve.  A decline in the interest rate at each possible price level, Increases the demand of money that increase consumption and investment and shift AD. . An increase in personal income tax rates will reduce the disposable income that decrease the demand and shift demand curve downward.

5). Answer:

D. multiplier effect.

An economy's aggregate demand curve shifts leftward or rightward by more than changes in initial spending because of the multiplier effect. Multiplier effect is  an effect in which an increase in spending produces an increase in national income and consumption greater than the initial amount spent.

6). Answer:

C. shift the aggregate supply curve to the right.

Other things equal, an improvement in productivity will will increase the aggregate supply and AS curve shift right.

Thank You