Question

1.How does an economist know if the economy is experiencing an inflationary gap?

The equilibrium level of GDP is less than potential GDP.

The equilibrium level of GDP is equal to potential GDP.

The equilibrium level of GDP is greater than potential GDP.

2.Consider national income, which statement is accurate about the function of export and imports in it?

Exports and imports are horizontal lines, with imports being positive as it relates to real GDP.

Exports and imports are vertical lines with imports being negative as it relates to real GDP.

Exports and imports are horizontal lines with imports being negative as it relates to real GDP.

3.Quantitative easing can be described as a means of

improving credit conditions for government agencies to encourage them to maintain income maintenance programs.

encouraging consumption among private households.

improving credit conditions for private firms and encouraging them to commit to capital expansion projects.

Answer 1

a) "C"

If the economy is experiencing an inflationary gap then at that point the economy will be operating at the point above the potential output, that means there is an inflation in the market.

b) "C"

Exports and imports are vertical lines and import has a negative effect in the GDP of the nation and the Exports will have a positive effect.

c) "C"

Quantitative easing is more about increasing the money supply and a zero bound interest rate, that is to encourage them to commit to capital expansion projects and increase the investment in the market.