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MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 21) 21) Demand-pull i

2) Suppose that the nominal natonal income in e cntry inc dby 30 p duning the year, when indlation was 5 peecent Theeone the

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1) Solution: the inflation that results from any inflationary gap caused by a rightward shift of the AD curve.

Explanation: Demand-pull inflation occurs when prices increases because the aggregate demand in an economy is greater than the aggregate supply.

 

2) Solution: increase in the price level that occurs when the excess demand for inputs pushes up input costs

Explanation: Cost-push inflation occurs when prices pushed up due to increases in wages, raw materials, indirect taxes and other input factors (labor, capital, land or entrepreneurship).

 

3) Solution: hyperinflation

Explanation: Hyperinflation means a very high inflation

4) Solution: they do not represent the purchase of a good or a service

Explanation: Transfer payments are excluded in GDP because it only allocates the money to achieve social ends.

 

25) Solution: rose by 5 percent

Explanation: Real National Income = Nominal national income - Inflation = 10% - 5 % = 5%

 

26) When a government changes its fiscal policy it is

Solution: changing the government spending and/or tax to change national income

Explanation: In the fiscal policy the government adjusts its tax rates and spending levels to influence a country's economy.

 

27) Solution: Expansionary

Explanation: Expansionary fiscal policy is increased tax benefits or government spending

 

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