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Consider the following diagram

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ANSWER TRUE/FAULT;QUESTION 3: Consider the following diagram which depicts an increase in exports, ceteris paribus. Lines AE;and ae are aggregate expenditure schedules for an open, governed economy. Identify the true statements;and then record the correct combination from the possibilities listed below the list of statements.;1.;2.;3.;4.;5.;6.;7.;8.;9.;10.;11.;12.;13.;14.;15.;The increase in exports is measured by the distance fe.;The change in real GDP is given by the distance fd.;The increase in exports leads to a rise in GDP equal to the distance qQ.;The increase in exports leads to a fall in the multiplier.;The multiplier for this economy is given by the ratio 1/MPS+MPT+MPM.;The multiplier can be measured by the distance bd divided by the distance;fe.;The rise in real GDP associated with the increase in exports leads to a rise;in the level of imports.;The increase in exports leads to a fall in consumption spending equal to the;distance ed.;The increase in exports leads to a rise in the actual level of inventories;above that planned at the initial equilibrium.;The slope of the ae line is given by the MPC.;The increase in exports leads to a higher level of consumption at the new;equilibrium.;Assuming a constant marginal propensity to tax, the increase in exports;leads to a higher level of income tax receipts at the new equilibrium.;The increase in exports leads to a rise in the general price level for this;economy.;The increase in exports results in an increase in employment for this;economy.;The increase in exports results in a decrease in the level of actual;inventories below that planned at the initial equilibrium.;QUESTION 6: Consider the following statements and decide which are true. Record the correct combination;from the possibilities listed below the list of statements.;The diagram alongside depicts a shift of the;aggregate demand curve (AgD curve) along the;horizontal section of the AS. Assume that the;shift has been caused by an increase in;autonomous imports (say through a change in;import prices of consumer goods, ceteris;paribus). Decide which of the following;statements are true. In making that decision;you should concentrate on the changes that;might occur in moving from the predisturbance equilibrium to the post-disturbance;equilibrium.;1.;2.;3.;4.;5.;6.;7.;8.;9.;10.;11.;12.;13.;14.;15.;There will be a rise in interest rates.;The shift in AgD results in a decrease in real GDP and in disposable income.;The shift in AgD results in a fall in unemployment benfits.;The shift in AgD results in a fall in the governments income tax receipts.;Cyclical unemployment will have risen as a result of the shift in AgD.;The level of imports will rise as a result of the shift in AgD because of the change in;GDP.;The level of exports will rise as a result of the shift in AgD.;The rate of inflation will fall as a result of the shift in AgD.;There will be a decrease in the money supply, as people need less money to buy;goods.;In the absence of other information, we can say that the shift of AgD will not change;the level of structural unemployment.;There will be a fall in the level of net exports as a result of the shift of AgD.;Since the AS curve is horizontal over the relevant range, the quantity of real GDP;supplied will stay the same.;The amount that the government raises in consumption taxes, like GST, will fall.;There will be more aggregate demand at each and every general price level.;The shift of AgD represents the multiplied change in real GDP associated with a;reduction in spending brought on by the rise in imports.;QUESTION 7;The graph alongside depicts a situation where;there has been an increase in the price of oil, an;important business input. Assume that the changes;described are short-run changes. Decide which of;the following statements are true. In making that;decision you should concentrate on the changes;that might occur in moving from the predisturbance equilibrium to the post-disturbance;equilibrium.;1.;2.;3.;4.;5.;6.;7.;8.;9.;10.;11.;12.;13.;14.;15.;The level of real GDP will fall as a consequence of the oil price rise.;The real wealth of consumers will fall and consumption spending will decline as a;result of a rise in the general price level.;Ignoring the impact of prices on net exports, at the new equilibrium imports will be;lower because of the decline in real GDP.;The price level will fall as a consequence of the shift of the aggregate supply curve.;Ignoring the impact of prices on net exports, at the new equilibrium exports will be;lower because of the decline in real GDP.;Oil price rises will be associated with a higher general price level at each level of real;GDP.;We cannot tell how the investment demand curve will react without knowing how;rising oil prices impact on expectations.;Stagflation will result since both employment and inflation will rise.;The oil price rise would result in demand-pull inflation.;At the new equilibrium, investment will be higher as a consequence of a fall in;interest rates.;The increase in oil prices will result in both cyclical unemployment and inflation.;There is nothing in this model which suggests that rising oil prices will impact on the;supply of money.;The oil price rise would result in a reduction of aggregate demand at each price level.;There is nothing in this model which suggests that rising oil prices will impact on the;level of government spending.;The increase in oil prices will result in a lower level of real GDP and a lower level of;income taxation for the government.;QUESTION 8: Consider the following statements and decide which are true. Record the correct combination from;the possibilities listed below the list of statements.;1.;The money supply includes currency held by the banks and the government.;2.;4.;If the demand for money curve is drawn as a vertical line on a graph, it implies that;the level of real GDP has no impact on the demand for money.;When the interest rate rises, the quantity of money demanded for asset purposes;falls.;Currency in the hands of the banks makes up the largest component of M3.;5.;Decreases in real GDP shift the demand from money curve to the left.;6.;The asset demand for money comes about because people want to hold money;rather than bonds when the prices of bonds are expected to rise.;A single bank in a banking system can create deposits that are a multiple of its;excess reserves.;The money multiplier is the reciprocal of the excess reserve ratio.;3.;7.;8.;9.;10.;11.;12.;13.;14.;15.;When banks create deposits using the money multiplier, at the current interest rate;there are always enough borrowers to absorb the increase in supply.;The creation of money usually adds to aggregate demand during an upswing and;exacerbates problems associated with boom conditions.;Expansionary monetary policy can take the form of higher interest rates which shifts;the aggregate demand curve to the right.;Open market operations are used by the Reserve Bank of Australia (RBA) to;maintain the target rate of interest.;Easy monetary policy could be achieved by the RBA maintaining a low interest rate;through open market purchases of government securities.;Tight monetary policy is needed in a recession because it results in higher interest;rates and hence higher savings. Savings are needed by the unemployed, especially;those earning lower incomes.;Contractionary monetary policy pushes interest rates down and as a consequence;investment spending is reduced.

 

Paper#22517 | Written in 18-Jul-2015

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