1. Everything else constant, inflation a) Leads to an increase in a country's exports b) Leads...

1. Everything else constant, inflation

a) Leads to an increase in a country's exports

b) Leads to an increase in a country's imports

c) Leads to an increase in a country's net exports

d) Increases the inventories above the desired level

e) Causes a movement along the aggregate demand curve, while shifting the expenditure line downward

2. Which of the following shifts the investment curve downward?

a) A decrease in disposable income

b) An increase in the value of our domestic currency

c) A decrease in the real interest rate

d) None of the above

3. Which of the followings are true?

a) The expenditure line shows the relationship between the total product and the general price level

b) The expenditure line has the same components as the aggregate demand

c) The expenditure line shows the relationship between the total product and the total spending

d) Disposable income is national income minus net taxes

e) Disposable income is either consumed or saved

f) Marginal propensity to consume shows the change in consumption as a result of a change in disposable income

Solutions

Expert Solution

Answer 1: A is the answer.

Inflation leads to increase in country's export .when there be a inflation in economy, domestic prices goes up and domestic 's currency will depreciates its value. When prices will increase. Foreigners will attract from domestic goods because they are getting at lower rate than their country . So domestic country's export will increse by inflation .

Answer 2: D is the answer . Investment demand curve shift downwards or left due to following reason -

1. Firms are expecting for reduction in their profit .investment curve will shift downward.

2.if level of economics activity go down. Production will decrese which leads to decrese in demand for capital. So investment demand curve shifts downward.

Answer 3: answer is B and F expenditure line has the same component as aggregate demand have. It is the expenditure which will be incurred by all 4 factor of production . And these all 4 factors of production do the expanditure in consumption ,investment,government and net export.

MPC represent the cHnge in consumption to a change in income. MPC decline with increase in income and consumption function will be non linear.

Rahul Sunny answered 1 year ago

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