Which of the following is not a determinant of the long-run level of real gdp?

1. Which of the following is not a determinant of the long-run level of real GDP? a) the price level. b) the amount of capita
7. Which of the following would cause prices and real GDP to rise in the short run? a) an increase in the expected price leve
14. If the stock market crashes, then a) aggregate demand decreases, which the Fed could offset by purchasing bonds. b) aggre
21. An increase in government spending a) increases the interest rate and so investment spending increases b) increases the i
28. Which of the following Fed actions would both decrease the money supply? a) buy bonds and raise the reserve requirement b


(1) (a)

Price level does not determine GDP in long run.

(2) (b)

Expected price level changes only short run aggregate supply but not the long run aggregate supply.

(3) (a)

An increase (decrease) in aggregate demand increases (decreases) both price level and output in short run. But in long run, price level further increases (decreases), restoring output to initial equilibrium level.

(4) (a)

Vertical axis depicts price level and horizontal axis depicts real GDP (output).

(5) (a)

As per most economists, money neutrality holds only in long run.

(6) (b)

Lower price level decreases domestic interest rate. As domestic interest rate falls, people buy more foreign assets, increasing the demand for foreign currency, which appreciates foreign currency and depreciates domestic currency.

NOTE: As per Chegg Answering Policy, 1st 6 questions are answered.

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