Question

1) The slope of the Aggregate Demand curve shows that as the price level increases ____________________.

Select the correct answer below:

a) spending on consumption, investment, government purchases, and net exports decreases

b) spending on consumption, investment, government purchases, and net exports increases

c) spending on consumption, investment, government purchases, and net exports is unchanged

d) none of the above

2) Which of the following are appropriate policy responses?

Select all that apply:

a) increasing government spending during recessionary gaps

b) decreasing government spending during recessionary gaps

c) increasing government spending during inflationary gaps

d) decreasing government spending during inflationary gaps

3) Milk cannot be used as money because...

Select the correct answer below:

a) it does not have a way to preserve its value for later use

b) it cannot be an intermediary between the buyer and the seller

c) it cannot be a unit of account, or be a ruler by which we measure values

d) cannot be an acceptable method of payment for buyers and sellers

4) An example of barter is:

Select the correct answer below:

a) when John fixes his neighbor's closet in exchange for getting his old drill

b) when Eva watches Lisa's kids on Fridays and Lisa watches Eva's kids on Saturdays

c) when Jeremy does housework in exchange for rent at his parents' house

d) all of the above

5) Stagflation is a period characterized by...

Select the correct answer below:

a) high inflation and high unemployment

b) high inflation and low unemployment

c) low inflation and high unemployment

d) low inflation and low unemployment

Answer 1

Question 1

Option A

As the price level increases the GDP decreases as a result consumption, investment,government expenditure and it's net exports decreases .

Question 2

Option A

Increase in government expenditure is made to shift the real GDP to the potencial GDP . Through government expediture it can be achieved .

Option D

The goverment expediture decreases during inflation gaps which results in decrease in aggregate demand and ultimately decrease in inflation gap .

Question 3

Option D

It is not necessary that the value of every item can be determined on the value of milk . Thus it cannot be accepted as method of payment .

Question 4

Option D

Barter system is exchange of goods and services without use of any medium of exchange thus all the examples are said to be up to the defination.

Question 5

Option A

Stagflation is a period with high inflation and high unemployment and slow economic growth thus the best option that fits is option A .