The following is true: A) NX =

Question 1

GDP is sum total of expenditure onfinal good and services within an economy during a year.

Y is sum total of factor incomegenerated in the economy during a year.

The sum total of expenditure onfinal goods and services with in an economy during a year is equalto sum total of factor income generated in the economy during ayear.

So,

GDP = Y

Hence, the correct answer isthe option (D).

Question 2

An economy generally goes intorecession due to lack of demand.

An increase in aggregate demand caneliminate the recession.

Increase in spending leads toincrease in aggregate demand and thereby can eliminate therecession.

So,

The US will remain in recessionuntil spending substantially increases.

Hence, the correct answer isthe option (A).

Question 3

Fiscal policy is related to changein government spending and tax policy.

An increase in government spendingand a decrease in taxes is referred to as expansionary fiscalpolicy.

Hence, the correct answer isthe option (D).

Question 4

Keynes stated that, in theshort-run, price and wages are sticky.

In short-run, the equilibrium realGDP can be less than the potential real GDP.

In short-run, if equilibrium realGDP is less than the poptential real GDP then, in that case,government can intervene and can bring the economy to fullemployment by increasing its spending.

Hence, the correct answer isthe option (D).

Question 5

‘The two main factors that induceinvestment are as follows –

1. Interest rate or cost ofborrowing.

2. Returns to be earned on investedfuds or marginal efficiency capital.

Hence, the correct answer isthe option (A).