Question

In: Economics

Which of the following would tend to have a contractionary impact on the level of macroeconomic...

Which of the following would tend to have a contractionary impact on the level of macroeconomic activity?

a) decrease in taxes

b) a rise in the interest rate

c) an increase in government spending

d) an increase in business spending

e) an increase in the money supply

59. In which of the following cases would all of the policies be beneficial to an economy in a recession?

a) increase the money supply; decrease taxes; decrease government spending.

b) increase the money supply; increase government spending; lower taxes.

c) decrease the money supply; decrease government spending; decrease taxes.

d) increase the money supply; increase government spending; increase taxes.

60. The labor force participation rate is the number of people:

a) employed divided by the labor force.

b) employed divided by the population aged 16 years and older.

c) employed and unemployed, divided by the labor force.

d) employed and unemployed, divided by the population aged 16 years and older.

61. The _______ is the rate of increase of all prices except _______.

a) real rate of inflation; energy and food

b) core rate of inflation; energy and food

c) nominal rate of inflation; labor

d) core rate of inflation; interest rates

62. Real GDP is measured in _______ prices; nominal GDP is measured in _______ prices.

a) current; base-year

b) base-year; current

c) current; inflation adjusted

d) base-year; inflation adjusted

Solutions

Expert Solution

58) Decrease in taxes, increase in government spending, increase in business spending and increase in the money supply will have an expansionary impact in the economy as these actions will increase the level of economic activities. Whereas a rise in the interest rate will reduce investment in the economy and reduces aggregate demand. Hence the answer is option (b).

59) During recession the economy needs an expansionary monetary and fiscal policy. Thus increasing the money supply; increasing government spending; and lower taxes will benefit economy at times of recession. Hence the answer is option (b).

Rahul Sunny answered 1 year ago

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