Question

Please teach each answer and please explain.

Q1.​Which of the following is true of government purchases?

A)​Government purchases are independent of consumption.

B)​Government purchases are independent of the level of real GDP.

C)​Government purchases are independent of the amount saved by households.

D)​Government purchases are independent of investment.

Q2. ​If an economy’s actual GDP exceeds its potential GDP, _____.

A) ​self-correcting forces will shift the SRAS curve to the left

B)​ wages and prices must fall

C) unemployment is likely to be unusually high

D) ​inflation will occur when AD shifts to the left

Q3. ​Passive policy advocates rely on the economy’s natural ability to correct itself in case of unemployment because of:

​A) the belief that active economic policy is likely to be either ineffective or harmful.  

B)​ the conviction that unemployment is relatively harmless.

C) the belief in the law of diminishing returns.

D) ​the desire to await further economic data before intervening.

Q4. ​Which of the following is generally true of nominal wages?

A) ​Nominal wages do not rise during labor shortages.

​B) Nominal wages are more flexible than prices.

C) ​Nominal wages tend to adjust slowly in the downward direction.

​D) Nominal wages are more flexible downward than upward.

Q5. Which of the following statements best explains the effects of transfer payments and taxes on aggregate spending?

A) Transfer payments affect disposable income, but taxes do not.

​B) Transfer payments and taxes affect aggregate spending indirectly by first changing disposable income and thereby changing consumption.

C) ​Transfer payments and taxes affect aggregate spending directly, just as consumption does.

D) ​Changes in the amount of transfer payments and taxes cancel each other and therefore have no influence on any economic variable.

Answer 1

Q1 option b that is govt purchases are independent of level of real GDP.

Govt purchases are the spending of govt on consumption ,investment and transfer payments  

Govt purchases influences GDP as it is major component in determining GDP

So level of real GDP dependent on Govt purchases, consumption, investment, net exports. While government purchases are independent of real GDP

Q2 option A

Self correcting forces will shift SRAS to left.

When AD shifts left then inflation will decrease so option D is wrong

Also price and wages will not fall but rise nd unemployment is less so option b and c are also wrong

Q3 option A

Acc to classicals , economic policies will be ineffective to correct the situation

Q 4 option C

According to Keynesians, inflexible in downward direction. So they gave that unlike classicals nominal wages are inflexible hence wages and prices are sticky in short run.

Q5 option B is correct

Transfer payments and taxes affects disposal income first and then consumption and then investment or aggregate spending.