24Long-run macroeconomic policies concentrate on: minimizing fluctuations around

Question

24Long-run macroeconomic policies concentrate on:

minimizing fluctuations around potential GDP.

maximizing fluctuations around potential GDP.

incentives for increasing productivity and the potential output of the economy.

none of the above.

25For the U.S. economy, the largest expenditure category is:

government expenditures.

net export expenditures.

personal consumption expenditures.

investment expenditures.

26If marginal propensity to save equals 0.50, then the marginal propensity to consume is:

1.25.

0.50.

0.70.

1.00.

27The nominal interest rate is 7 percent and the expected inflation rate is 4 percent. The real interest rate is:

10 percent.

-2 percent.

3 percent.

4 percent.

minimizing fluctuations around potential GDP.

maximizing fluctuations around potential GDP.

incentives for increasing productivity and the potential output of the economy.

none of the above.

Explanation / Answer

24: correct option : C

Explanation: In long term when economy is fully utilizing its productive capacity, further increases in output are attainable only if the capacity is expanded

25. Correct option: C
Explanation: personal consumption spendings contributes to 69 percent of the U.S. economy.

26. Correct option: C

Explanation: marginal propensity to save + marginal propensity to consume = 1
.50 + MPC = 1
MPC = 1 - .50 = .50

27.correct option: C

Explanation: nominal interest rate - inflation rate = real intrest rate.

Real interest rate = 7% - 4% = 3%

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