Economics Homework - Multiple choice questions:

Question 1: If the economy is operating in the far left of the Keynesian area of the aggregate supply curve, The Central Bank of that country is likely to:

Select one:

a. Increase interest rates to suppress aggregate demand and shift the aggregate demand curve to the left

b. Decrease interest rates to suppress aggregate demand and shift the aggregate demand curve to the left

c. Increase interest rates to stimulate aggregate demand and shift the aggregate demand curve to the left

d. Decrease interest rates to stimulate aggregate demand and shift the aggregate demand curve to the right

Question 2: Suppose the government increases the tax on gasoline/petrol in order to raise revenue. Since raising the gasoline tax would increase the price of gasoline/petrol; the government must be assuming that the:

Select one:

a. demand for gasoline/petrol is price elastic

b. demand for gasoline/petrol is price inelastic

c. demand for gasoline/petrol is price unit elastic

d. tax on gasoline/petrol will not effect the consumption of gasoline/petrol

Question 3: If the real Gross Domestic Product (GDP) in Possibeland during 2020 was reported to be AUD $2.7 trillion, and nominal GDP was reported to be $3.3 trillion, the price deflator index for 2020 in Possibleland was:

Select one:

a. 122

b. 119

c. 1.22%

d. 1.22

Question 4:

Price Level AS PI- PO B P2 AD" AD' AD" GDP1 GDPO Real GDP (billions) Refer again to Exhibit 3 above. If the economy was operating at the line where it is potentially able to (GDP0) and then continues to operate along the steep part of the curve moving from point B to point A; which of the following could the economy be experiencing: Select one: O a. Cost pull inflation. O b. Demand pull inflation. O c. Cost push inflation. O d. No inflationary pressures at all