37) An advantage monetary policy has over fiscal policy is that monetary policy

Question

37) An advantage monetary policy has over fiscal policy is that monetary policy A) can be quickly changed and implemented. B) is coordinated with fiscal policy C) is approved by the president of the United States. D) affects consumption expenditure and investment without impacting international trade. E) has no multiplier effects. 39) If nominal GDP increases by 5% a year and the GDP price index rises by 1 % a year, then the real GDP increases by A) 6% per year B) 3%per year C) 4%per year D) 10% per year E) 2.5% per year 40) Which of the following would cause an increase in labor A) the accumulation of skill and knowledge by workers B) the employment of a new technology C) a decrease in capital per hour D) a decrease in consumption E) Both A and B 41) What impact would an increase in labor productivity have on real GDP? A) No impact B) Cause a decline in real GDP C) Cause an increase in real GDP D) It would cause a decrease in government spending E) It would cause a decrease in consumption 42) Real GDP growth depends on A) Labor productivity growth and quantity of labor increases B) the quantity of labor C) the labor productivity growth D) A declining population E) None of the above 43) What are the actions that the government can take to encourage faster GDP growth? A) Encourage research and development B) Provide incentives C) Improve the quality of education D) All of the above E) There are no actions possible

Explanation / Answer

Ans:

37) Option A

can be quickly changed and implemented

One of the drawbacks of fiscal policy is the time taken for its implementation from the time requirement of fiscal policy action is recognized. However monetary policy can be implemented quickly.

38) Option C

4% per year.

Increase in real GDP = nominal GDP increase - price increase

= 5% - 1%

= 4%

This means GDP has been increased by 5% of which the increase due to price is 1%.Hence the increase in real GDP is 4%

40) Option E

Both A and B

The increase in skills and knowledge of workers and implementation of new technology will increase the labor productivity.

41) Option C

Cause an increase in real GDP.

The increase in labor productivity will increase the real GDP and decreases the price level.

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