Question 20(1 point)

An inflationary gap occurs when aggregate expenditures is less than real GDP at full employment, making firms lay off workers due to the seemingly low demand.

Question 20 options:

a.True

b.False

Question 21(1 point)

What is Aggregate Demand?

Question 21 options:

a.Relationship of real GDP and how much buyers desire to purchase at each price level

b.Relationship between price and goods that consumers want to buy

c.It reflects diminishing marginal utility, where you get tired of the same thing

d.Relationship stating that the cheaper a good/service is, the consumer will demand more of it

Question 22(1 point)

Which one of these explains why the Aggregate Demand curve is downward sloping?

Question 22 options:

a.Law of demand, which states that consumers will demand more of what is cheaper

b.The real-balances effect, which states the higher the price level, the less consumption spending

c.The interest-rate effect, which states that lower interest rates discourage investments

d.The real balances effect, which states the higher the price level, the less consumption spending

Question 23(1 point)

There has been an increase in business taxes. How will this affect Aggregate Demand (AD)?

Question 23 options:

a.It will increase Investment, which will increase AD

b.It will increase Investment, which will decrease AD

c.It will decrease Investment, which will decrease AD

d.It will decrease Consumption, which will decrease AD

Question 24(1 point)

There has been an increase in government purchases. How will this affect Aggregate Demand (AD)?

Question 24 options:

a.Increase in Investment, increase AD

b.Increase in Government, increase AD

c.Increase in Net Exports, increase AD

d.Decrease in Government, increase AD

Question 25(1 point)

Aggregate supply is examined through timeframes. If a bakery is at the point where they still have to pay their vendors and workers the agreed contractual amount for supplies and wages but they can adjust their prices of cakes and cookies, what time frame are they in?

Question 25 options:

a.Immediate long-run

b.Immediate short-run

c.Long-run

d.Short-run