Question

True/False

1. Full employment exists only when the unemployment rate is 0.
2. GDP is a nominal measurement
3. If price level falls over the given time period, purchasing power has fallen
4. Long-Run Aggregate Supply Curve shows production at the level of potential real GDP
5. The CPI of the base year is 100
6. A change in Quantity Demanded of Real GDP is driven by a change in the price level, ceteris paribus
7. As interest rates rises, both consumption and investment rise so thereby AD rises
8. Net exports is (Imports-Exports)
9. One formula for computing real GDP is: Real GDP=Sum of (Base year prices x Current Year Quantities)
10. Per capita GDP is computed by dividing GDP by the population
11. Long-Run Aggregate Supply curve is upward sloping

Answer 1

1) False

Full employment indicates that the cyclical unemployment is zero

2) False

GDP can be real GDP and nominal GDP

3) If price level falls over the given time period, purchasing power has fallen

A decrease in the price level indicates that the purchasing power of the money has increased

4) True

The long-Run Aggregate Supply Curve indicates the relationship among the price level and quantity of real GDP supplied

5) True

The CPI is computed as current year expenditure by base year expenditure, thus will make CPI of the base year always equal to 100.

6) False

In Real GDP price level is taken for the base year

7) False

Increase in interest rate results to falls in consumption and investment

8) False

Net exports = Exports - imports

9) True

Real GDP = SUM (base year's prices X Current year's quantities)

10) True

GDP per capita = GDP/ Population

11) False

The short-run Aggregate Supply curve is upward sloping; and long-run Aggregate Supply curve is vertical