Exercises for Test 1
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Exercises for Test 1
1. In each of the following cases, determine how much GDP and each of its components is affected.
(a) Nancy spends $500 to buy her husband Jackie dinner at the finest restaurant in Christchurch; Jackie purchases a two-week trip to Fiji Islands costing him $2,500.
(b) Sarah spends $2,000 on a computer to use in her coffee shop. She got last year’s model on sale for a great price from a local manufacturer.
(c) General Motors builds $300 million worth of cars, but consumers only buy $250 million worth of them.
(d) Olivia buys a new house from the local builder for $0.7 million.
2. Analyse the impact of these events on the price level and total output of an economy in the short term. Please use AD-AS model to discuss your answers with appropriate graphs.
(a) Households and enterprises in the economy are optimistic about the economy in the future.
(b) The global price of crude oil decreases.
(c) An increase in price expectation causes unions to demand higher wages.
To answer this question you can read chapter 24 from e-book from the below link (if link not work, copy it and paste to your browser) or you can search directly from the book:
3. From question 2, if policymakers were to use fiscal policy to actively stabilize the economy, in which direction should they move government spending and taxes? Use AD-AS model to explain your answer with appropriate graphs.
To answer this question you can read chapter 30 from e-book from the below link or you can search directly from the book:
2024-01-15