1.This year, the aggregate quantity supplied by sellers in the United States is

Question

1.This year, the aggregate quantity supplied by sellers in the United States is $15 trillion worth of goods and services. The aggregate quantity demanded by buyers during the same year is $14.5 trillion worth of goods and services. It
follows that

Select one:

a. at the current price level, there will be unintended reduction of inventories, which will cause real GDP to increase as producers increase orders for new inventory and increase employment.

b. the price level is likely to increase.

c. at the current price level, there will be unintended build-up of inventories, which will cause real GDP to decline as producers reduce orders for new products and reduce employment.

d. the economy is in macroeconomic equilibrium at the current price level.

The graph above shows the aggregate demand and aggregate supply curves prevailing for the economy in a given year, along with potential real GDP for that year. Given the level of aggregate demand, Select one:

a. there would be unanticipated depletion of inventory if potential real GDP were achieved.

b. there will be no cyclical unemployment for the year.

c. the economy is overheated.

d. there will be cyclical unemployment at the equilibrium level of real GDP.

e. the equilibrium level of real GDP will equal potential real GDP.

3.Suppose the graph above shows the current aggregate demand and aggregate supply curves for the economy. Given the current equilibrium level of real GDP, you can conclude that

Select one:

a. real GDP will increase and the price level will fall as a result of declines in nominal wages that are likely to occur during the year.

b. there's cyclical unemployment in the economy.

c. real GDP will decline and the price level will rise as a result of increases in nominal wages that are likely to occur during the year.

d. the economy is likely to remain in equilibrium at the current level of real GDP and current price level during the year.

8. Expansionary fiscal policy involves

a. a decrease in government spending and/or an increase in taxes.

b. only an increase in taxes.

c. an increase in government spending and/or a decrease in taxes.

d. only a decrease in government spending.

9. President Ford persuaded Congress to reduce income taxes in 1975 to

a. increase the trade deficit and the budget deficit.

b. decrease GDP and increase the trade deficit.

c. increase U.S. exports.

d. increase aggregate demand during a recession.

10. The discount rate is

a. the interest rate commercial banks charge investors.

b. the interest rate the Federal Reserve banks charge individuals.

c. the interest rate the Federal Reserve banks charge banks for loans.

d. the interest rate the World Bank charges developing countries.

Explanation / Answer

1)

The correct option is (c). Since, prices don

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