prashantsahni

When potential real GDP is less than actual real GDP, the economy is most likely experiencing:

A) recession.

B) underemployment.

C) inflation.

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The economy is in an inflationary phase if actual real GDP is greater than potential real GDP. When actual real GDP equals potential real GDP, the economy is said to be at full employment. The economy is in a recessionary phase if real GDP is less than potential GDP.

prashantsahni

Which of the following is most likely to cause an increase in aggregate demand?

A) Relative appreciation in the country’s currency.

B) An increase in the general price level.

C) High capacity utilization rates.

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As capacity utilization rates increase to high levels (typically 80% to 85%), business investment in plant and equipment increases, shifting the AD curve to the right. A change in the price level represents a movement along the demand curve, not a shift in it. Appreciation of the country’s currency increases the cost of exports and reduces the cost of imports, which shifts the aggregate demand curve to the left (net exports decrease).

prashantsahni

Sources of long-run economic growth most likely include increases in:

A) labor supply, physical capital, and technology.

B) human capital, money supply, and natural resources.

C) government spending, labor supply, and physical capital.

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Sources of sustainable long-run economic growth (increases in long-run aggregate supply) include increases in the labor force, human capital (the education and skill level of the labor force), the stock of physical capital, the supply of natural resources, and the level of technology. Increases in the money supply or government spending increase aggregate demand but do not increase long-run aggregate supply.

prashantsahni

An economist wanting to determine the sources of an increase in a country’s GDP using the production function approach would most likely investigate:

A) growth in productivity, the labor force, and the capital stock.

B) shifts in the aggregate supply curve.

C) increases in industrial production.

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The production function approach relates a country’s economic output to its inputs of capital and labor and its levels of productivity.

prashantsahni

Growth in total factor productivity is best described as driven by growth in:

A) technology.

B) capital.

C) labor.

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Total factor productivity represents the productivity that cannot be directly accounted for by increases in either capital or labor, and is generally considered to be driven by changes in technology.

terpsichorefan

thanks for sharing