Question

1. Published data show that during the previous quarter (3 months) employment has risen that demand-pull inflation is rising. These indicators suggest that the growth of GDP is likely to increase in this or the next quarter.

Indicate     T   F    #

Explanation: [Limit 40 words: 2 marks]

2. A good leading indicator of changes in the rate of inflation during economic cycles is the change in the growth rate of the money supply.

Indicate     T   F    #

Explanation: [Limit 40 words: 2 marks]

3. In Australia the index of consumer sentiment is usually a leading indicator.

Indicate     T   F    #

Explanation: [Limit 40 words: 2 marks]

Answer 1

1) This statement is true because As demand-pull inflation rises it means that AD rises which mean that production capacity also rises and firm hire more people as employment in the economy rises. As both the production capacity and Employment rise in the economy it leads to an increase in real GDP.
2)This statement is true because A good leading indicator of changes in the rate of inflation during economic cycles leads to a change in the growth rate of the money supply. As money supply is the supply of money which was prevailing in the economy. As there are more money supply lower rates of interest in the economy as more money is in the economy. In the case of Nominal GDP money supply increase GDP also increases.but in the case of Real GDP it does not have a clear relationship with the money supply. Real GDP changes to be more influenced by the productivity of economic agents and businesses.
3)This statement is True because Consumer sentiment indicates what consumer is going to do in the future will they are going to spend or save money in the economy. So, It is a major indicator that indicates the behavior of an individual person.