Question

1. Expansionary monetary policy will lead to which of the following?

a. an increase in interest rates and an increase in the unemployment rate

b. an increase in interest rates and a decrease in the unemployment rate

c. a decrease in interest rates and an increase in the unemployment rate

d. a decrease in interest rates and a decrease in the unemployment rate

2. Which statement is CORRECT?

a. when the economy is in recession and jobs are hard to find, inflation tends to fall

b. employment levels remained stable during the . Great Depression

c. inflation affects only the more advanced countries, whereas less advanced countries face deflation

d. supply and demand cannot . explain why a particular good or service becomes more expensive relative to other goods

Answer 1

1. Ans D

Expansionary monetary policy leads to shift of AS curve rightwards. This will lead to fall in interest rate and increase in output level of the economy. Increase in output will lead to reduction in unemployment and increase in employment.

2. ans. A

Recession means decline in the economic activity due to some adverse demand shock. It leads to fall in inflation. People do not find jobs as there is fall in economic activity. Market is down.