Question

1)At equilibrium expenditure, unplanned changes in inventory:

a-Must be positive

b-Must be zero

c-Must be negative

d-Might be either positive or negative

2)An economy that is above its natural real GDP level means that:

a-Is in an inflationary gap

b-The unemployment rate is less than the natural unemployment rate

c-The labor market is in equilibrium

d-A, and B

3)If government spending is larger than tax collection, we have:

a-Equilibrium

b-Budget deficit

c-Budget surplus

d-Neutral status

4)An expansionary fiscal policy is represented by:

a-An increase in taxes

b-A decrease in government spending

c-An increase in price level

d-A decrease in real output

Answer 1

Question 1

Equilibrium expenditure implies the situation where aggregate expenditure is equal to income.

In such scenario, firms have only planned inventories and no unplanned inventories as there is no mismatch between aggregate expenditure and output.

So,

At equilibrium expenditure, unplanned changes in inventory must be zero.

Hence, the correct answer is the option (b).

Question 2

When actual level of GDP in an economy exceeds the potential level of GDP then in such case price level in an economy increases as capacity constraint keeps supply from matching the increased demand.

So,

An economy that is above its natural real GDP level means that it is in an inflationary gap and the unemployment rate is less than the natural unemployment rate.

Hence, the correct answer is the option (d).

Question 3

When the spending undertaken by a government is greater than the taxes collected by the government then the budget of the government is said to be in deficit.

Hence, the correct answer is the option (b).