Question

7. Which of the following explains an decrease in real GDP and a decrease in the price level? A. All of the choices are correct B. an increase in Aggregate Supply C. None of the choices is correct D. a decrease in Aggregate Supply E. an increase in Aggregate Demand

10. How would a dramatic decrease in the value of the stock market shift the AD curve? What effect would this shift have on the equilibrium GDP and the price level? A. AD and SRAS would increase. GDP would increase but the price level could go either way. B. AD and SRAS would increase. GDP would increase and so would the price level C. AD would decrease and so would GDP and the price level D. None of the choices is correct E. AD would increase and so would GDP and the price level

21. When the Federal Reserve lowers the discount rate, this indicates they are pursuing ___________ A. illegal monetary policy. B. contractionary monetary policy C. restrictive monetary policy. D. expansionary monetary policy. E. contractionary fiscal policy.

22. What steps can the Federal Reserve take to increase the money supply? A.The Federal Reserve can increase reserve requirements for banks B. The Federal Reserve can reduce personal income tax rates to encourage households to spend more money. C. The Federal Reserve and raise the discount D. The Federal Reserve can buy US Treasury securities E. The Federal Reserve can require all banks to close by 4:00 pm on weekdays and remain closed on weekends

25. If the exchange was 120 Japanese Yen = 1 US dollar yesterday and today it is 105 Japanese = 1 US dollar, then A. US goods just became cheaper for the Japanese. B. All trade between the U.S. and Japan will stop until the exchange rate goes back to what it was yesterday. C. None of the choices is correct D. Japanese goods just became cheaper for the US E. US goods just became more expensive for the Japanese

Answer 1

Answer 7. B. an increase in aggregate supply

reason- When aggregate supply curve shifts to the right , there is a Decrease in price level and increase in real GDP.

Answer 10.C. AD would decrease and so would GDP and the price level

reason- When stock market decreases, AD curve shifts to the left, given the AS curve , Real GDP and price level will fall.

Answer 21. Expansionary monetary policy

reason- Lowering rates leads ro increased investment and consumption which will expand the economy.

Answer 22.  D. The Federal Reserve can buy US Treasury securities

reason- Open market purchase of securities will lead to rise in money supply as people will get money in return for the securities.

Answer 25.A. US goods just became cheaper for the Japanese

reason- When the exchange rate falls from 120 yen to 105 yen per dollar, it is now less costly for Japanese people to buy US goods.

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