Question 7 According to the classical economists, which of the following stateme

Question

Question 7 According to the classical economists, which of the following statements is true? Question options:

a Financial markets ensure that S will equal I..

b Interest rate flexibility will ensure that planned saving is equal to planned investment.

c There is a direct relationship between the amount individuals plan to save and the interest rate - higher rates cause people to save more and lower rates reduce savings.

d Interest rates determine how much business firms invest - higher interest rates reduce investment and lower rates increase investment.

e All of the above are true.

Question 10

If actual Real GDP is greater than the full employment Real GDP, then the (actual) unemployment rate is

Question options:

greater than the natural unemployment rate and an inflationary gap exists.

less than the natural unemployment rate and a recessionary gap exists.

greater than the natural unemployment rate and a recessionary gap exists.

less than the natural unemployment rate and an inflationary gap exists.

equal to the natural unemployment rate and no gap exists.

Question 10

Explanation / Answer

When actual Real GDP is equal to Real GDP unemployment is equal to natural unemployment and as the gdp is more than real gdp so the actual unemployment is greater than natural. According to Phillips curve as unemployment decreases inflation increases.

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