Answer to Question #348436 in Macroeconomics for GIGIG

Question

1. Okun's law states that:

a) if the real GDP increases by 2.5%, the unemployment rate decreases by 0.75%;

b) if the unemployment rate increases by 2.5%, the inflation rate will decrease;

c) if the unemployment rate increases by 2.5%, the economic growth will be negative;

d) if the inflation rate increases by 2.5%, the supply of goods decreases by 2.75%.

2. In an IS-LM model the propensity of consumption is c=0.75, the tax rate is t= 0.2, b=1000, k=0.3 and h=500. Identify the correct relation, where 𝜶𝑮 represents the multiplier of government expenditures on the goods and services market, while ΓBP and ΓMP are the multipliers of budgetary and monetary policy respectively for the IS-LM model:

a) ΓMP>ΓBP> αG;

b) ΓMP>αG >ΓBP;

c) αG >ΓBP> ΓMP; .

d) αG > ΓMP> ΓBP.

3. The changes in inventories represent:

a) a leading indicator of business cycles;

b) a lagging indicator of business cycles

c) a coincident indicator of business cycles;

d) none of the above.

Answer 1

1. C

2. A

3. C