1.A person(s) is out of work due to a downturn in economic activity, and spendin
ID: 1212743 • Letter: 1
Question
1.A person(s) is out of work due to a downturn in economic activity, and spending by households has shifted the aggregate demand curve to the left; causing both the average price level and real GDP to decrease. This is known to cause which type of unemployment in the economy?
2.If the equilibrium price of a product was $4 and the actual price charged in the market was $2, you would expect
3.The classical school of thought holds that a market economy will tend to operate at full employment if
4.Suppose an economy were experiencing a high rate of unemployment, an appropriate corrective measure by the government would be to:
5.interest rates in the US move above rates in Britain. As a result
6.To increase the money supply; central bank of the US can?
7.An initial deposit of $10,000 at a ratio of 10% from currency in circulation, will lead to a maximum change in the composition of the money supply by_____________.
Explanation / Answer
1. A person(s) is out of work due to a downturn in economic activity, and spending by households has shifted the aggregate demand curve to the left; causing both the average price level and real GDP to decrease.
This type of unemployment is called cyclical unemployment that originates due to slowdown in economic activity.
2. If the equilibrium price of a product was $4 and the actual price charged in the market was $2, you would expect a shortage since the price of $2 act as a price ceiling so that demand is more than supply at this price.
3. The classical school of thought holds that a market economy will tend to operate at full employment if wages and prices are flexible to adjust.
4.Suppose an economy were experiencing a high rate of unemployment, an appropriate corrective measure by the government would be to increase its spending and adopt an expansionary fiscal policy. This will stimulate demand and increase economic activity, forcing firms to hire more labor, thereby reducing unemployment
5.interest rates in the US move above rates in Britain. As a result, huge capital inflows from Britain to US occurs depreciating the Pound and appreciating the Dollar
6.To increase the money supply; central bank of the US can purchase government securities in open market and can reduce the discount rate. both will release US dollars in the market
7. Money supply M1, consists of Currency in circulation and deposits. At a ratio of deposits to currency being 10%, an initial deposit of $10,000 implies that the currency in circulation is $100,000 so that he maximum change in the composition of the money supply by $10,000
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