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In the AD-AS model, the aggregate supply curve is upward sloping because…
a.
it illustrates the total real output supplied at each price level.
a. it illustrates the total real output supplied at each price level.
b.
as the price level decreases, total production increases.
b. as the price level decreases, total production increases.
c.
as the price level increases, total production decreases.
c. as the price level increases, total production decreases.
d.
as the price of a good increase, quantity supplied increases.
Contractionary demand management policies tend to …
a.
increase both inflation and the level of unemployment.
a. increase both inflation and the level of unemployment.
b.
decrease the real GDP and the price level.
b. decrease the real GDP and the price level.
c.
decrease real GDP and increase the price level.
c. decrease real GDP and increase the price level.
d.
increase the price level and decrease real output.
The monetary transmission mechanism …
a.
explains how the central bank transmits messages to the other banks.
a. explains how the central bank transmits messages to the other banks.
b.
describes how the Monetary Policy Committee announces its decisions.
b. describes how the Monetary Policy Committee announces its decisions.
c.
explains how developments in the economy affect the monetary sector, especially the banks.
c. explains how developments in the economy affect the monetary sector, especially the banks.
d.
explains how banks create money.
d. explains how banks create money.
e.
describes the ways in which changes in the monetary sector are transmitted to the rest of the economy.
Expansionary demand management policy measures tend to …
a.
increase the real GDP, but reduce inflation.
a. increase the real GDP, but reduce inflation.
b.
increase both inflation and the level of unemployment.
b. increase both inflation and the level of unemployment.
c.
increase the production cost, which will decrease total production.
c. increase the production cost, which will decrease total production.
d.
increase both the real GDP and inflation.
Which of the following events should occur for the AD curve to shift to the right?
a.
The minister of finance reduces the tax rate.
a. The minister of finance reduces the tax rate.
b.
The future price level is expected to fall.
b. The future price level is expected to fall.
c.
The increase in general prices due to increases in the price of petrol.
c. The increase in general prices due to increases in the price of petrol.
d.
The future interest rate is expected to fall.
When the AS curve is very steep, a decrease in AD will lead to…
a.
an upward movement along the AS curve.
a. an upward movement along the AS curve.
b.
higher price level and a higher level of income.
b. higher price level and a higher level of income.
c.
a fall in the price level and little or no decrease in output and income level.
c. a fall in the price level and little or no decrease in output and income level.
d.
a fall in the price level and no change in output and income.
What is the reason for the downward slope of the AD curve?
a.
As the price level increases, aggregate output and income increase.
a. As the price level increases, aggregate output and income increase.
b.
As the price level decreases, the central bank will reduce the interest rate leading to increase in investment and therefore aggregate demand and output also increase.
b. As the price level decreases, the central bank will reduce the interest rate leading to increase in investment and therefore aggregate demand and output also increase.
c.
Decrease in government spending and increase in tax.
c. Decrease in government spending and increase in tax.
d.
An increase in autonomous consumption.
If the given market demand and supply function are given as qd = 80-3p and qs = 9p-4
1. Explain why an investor would want to invest in financial assets as opposed to investing in real assets
1. Explain the benefits of investing in financial assets?
