1)At equilibrium expenditure,
1)At equilibrium expenditure, unplanned changes ininventory:
a-Must be positive
b-Must be zero
c-Must be negative
d-Might be either positive or negative
2)An economy that is above its natural real GDP level meansthat:
a-Is in an inflationary gap
b-The unemployment rate is less than the natural unemploymentrate
c-The labor market is in equilibrium
d-A, and B
3)If government spending is larger than tax collection, wehave:
a-Equilibrium
b-Budget deficit
c-Budget surplus
d-Neutral status
4)An expansionary fiscal policy is represented by:
a-An increase in taxes
b-A decrease in government spending
c-An increase in price level
d-A decrease in real output
Answer:
Question 1
Equilibrium expenditure implies thesituation where aggregate expenditure is equal to income.
In such scenario, firms have onlyplanned inventories and no unplanned inventories as there is nomismatch between aggregate expenditure and output.
So,
At equilibrium expenditure,unplanned changes in inventory must be zero.
Hence, the correct answer isthe option (b).
Question 2
When actual level of GDP in aneconomy exceeds the potential level of GDP then in such case pricelevel in an economy increases as capacity constraint keeps supplyfrom matching the increased demand.
So,
An economy that is above its naturalreal GDP level means that it is in an inflationary gap and theunemployment rate is less than the natural unemployment rate.
Hence, the correct answer isthe option (d).
Question 3
When the spending undertaken by agovernment is greater than the taxes collected by the governmentthen the budget of the government is said to be in deficit.
Hence, the correct answer isthe option (b).
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