1 Identify the correct statement 2 Assume that for a given y

1. Identify the correct statement.

2. Assume that for a given year, the nominal interest rate is 9 percent while inflation rises to 11 percent indicating a 4 percent higher rate than anticipated. Which group of people is made better off by the inflation?

3. A change in the price level in an economy will be depicted by a movement along the AE curve and not by a leftward or rightward movement of the curve.
A True
B False

4.Foreign aid usually consists of funds loaned at high interest rates.
A. True
B. False

5. According to Gresham\'s Law:

6. Identify the correct statement.

Since the U.S. is organized as a market economy, the government sector does not play any role in economic activity.
A. True
B. False

8. Foreign aid that flows from one country to another is called multilateral aid.

A. True
B. False

9.GDP per capita is one way to measure an economy\'s growth. China and India began to progress when they allowed private ownership, around ____. Since then, there has been steady, strong growth in these economies.

E. 2000

10. A by-product of the acceptance of the Keynesian school was the wide approval and practice of activist government fiscal policy around the world.

A. True
B. False

11. Critics of the Federal Reserve maintain that, to correct the credibility problem of monetary policy, the Fed should:

ignore public opinion and establish more discretionary power over monetary policy.

11. Spending on goods and services by all levels of government in the U.S. combined is smaller than investment spending but larger than consumption.

A. True
B.False

12. If an increase in the price of good X causes the demand curve for product Y to shift to the right, then X and Y are most likely to be which of the following?

13.According to classical economics:

14.Compared to First World countries, developing countries would have _____.

15. A major drawback of the Keynesian approach to macroeconomic equilibrium is the assumption that the supply of goods and services in the economy always adjusts to aggregate expenditures

A. True
B. False

16. A change in the interest rate does not affect the quantity of money supplied. This means that:

17 Hyperinflation in developing countries is typically the result of:

low interest rates

18. At potential real GDP:

19. If the resources within a nation are not being fully or efficiently utilized, it means:

20. Corruption reduces growth most directly because governments invest in projects with low productivity.

A. True
B. Faslse

20. All of the following would cause exports to decline, except:

21. The _____ tend to have a smaller public sector relative to the total economy.

22. According to the expenditures approach, gross domestic product represents the sum of consumption spending, government spending, net exports, and net investment.

False

23. A leading indicator:

24 A price index is a measure of the average level of prices in an economy.

True
False

25. After the year 2000, the FOMC changed some of its operating procedures. In particular, it stopped setting:

explicit ranges for money growth targets.

Solution

Answer 1 - Aggregate demand and aggregate supply determines price level and real output in the economy. Only AD or AS cannot determine price level and real output in the economy. AD is a negatively sloped curve. While AS is a positively sloped curve.

Statement D is correct.

Answer 2 - Nominal interest rate is 9 percent in the current year and inflation is 11 percent. Inflation is 4 percent higher rate than anticipated. A borrower is get benefited from inflation who borrows on fixed interest rate. Inflation decreases the value to money. The amount of money will be able to buy fewer goods and services if inflation is there. Interest rate is a return on money. The borrower gets loan when money has more purchasing power. Thus the borrower is get benefited from inflation.

Option B is correct.

Answer 3 - A change in price level will be depicted by shift in the aggregate expenditure curve (AE). If price falls then AE curve will shift to the right and vice versa.

The given statement is false.  

Answer 4 - Foreign aid usually consists of funds loaned at lower interest rate. Foreign aid comes in form of grant or subsidized loan. It may be in form of technical assistance, good and services which help for economic development.

The given statement is False.

Answer 5 - Gresham\'s law states that bad money will drive out good money from circulation in the economy. In other words it can be said that money with high intrinsic value will be drive out from circulation. The money with low intrinsic value will remain in circulation. Money with relatively low intrinsic value will be used for transactions.

Option E (Last) is the correct answer.