Question 1

If the government of Techland reduces tax rates,________.

Accepted Answer

When the government reduces tax rates, businesses and individuals have more disposable income. This often leads to increased consumption and investment, which in turn leads to a higher demand for labor. Therefore, the labor demand curve shifts to the right, resulting in an increase in employment and potentially economic growth.

Question 2

Agriculture is the primary occupation in Agraria,and agricultural products account for two-thirds of Agraria's GDP.How will a sharp fall in the price of agricultural products affect Agraria's economy if the demand for such products is unaffected by changes in their prices?

Accepted Answer

The answer of Agriculture is the primary occupation in Agraria,and...

Question 3

A firm's inventory piled up during a recession.How will its labor demand be affected when its excess inventory gets sold off eventually?

Accepted Answer

The answer of A firm's inventory piled up during a...

Question 4

If a recession hits Potentia,its government can stimulate the economy by ________.

Accepted Answer

Lowering interest rates can encourage businesses to borrow money and invest in expansions, which can then create jobs and increase spending in the economy. This can stimulate growth and pull the country out of a recession. Lowering government expenditure or imposing new taxes can stifle economic activity and make it harder for businesses and individuals to spend or invest. Lowering the money supply can lead to deflation and further economic contraction.

Question 5

Country A specializes in the production of automobiles,and 45 percent of its population works in the automobile manufacturing industry.A sharp increase in the world prices of automobiles led to a boom in the automobile manufacturing industry in Country A.However,the automobile manufacturers overestimated the demand for automobiles.This led to overproduction,which resulted in a large stock of unsold cars.Which of the following is likely to happen in the near future?

Accepted Answer

Overproduction of automobiles will lead to a surplus of inventory, thus reducing the demand for further automobile manufacturing. This could lead to a decrease in automobile manufacturing jobs and an increase in the unemployment rate in Country A. The other options are not likely to happen in the near future given the given scenario.

Question 6

If the central bank of Techland pursues an expansionary monetary policy,________.

Accepted Answer

An expansionary monetary policy involves increasing the money supply and lowering interest rates, which can lead to an increase in demand for goods and services, and consequently an increase in demand for labor. Therefore, the most likely outcome of an expansionary monetary policy in Techland would be an increase in the demand for labor. 
None of the other options mentioned are likely outcomes of an expansionary monetary policy.

Question 7

The economy of Techland is currently operating at full capacity.The country then experiences a sudden boom in economic activity.However,the unemployment rate increases soon after the boom.What is likely to have caused such a phenomenon?

Accepted Answer

The answer of The economy of Techland is currently operating...

Question 8

A firm's ________ when its inventory increases.

Accepted Answer

When a firm's inventory increases, it typically means that demand for its products has decreased. As a result, the firm may choose to reduce production and cut back on labor demand. Therefore, the labor demand curve is likely to shift to the left.

Question 9

If the aggregate price level ________,but nominal wages stay fixed,real wages ________.

Accepted Answer

When the aggregate price level rises but nominal wages stay fixed, real wages fall because the purchasing power of the wages decreases.

Question 10

Country X and Country Y are two neighboring countries that are experiencing a recession.The government of Country X reduced its expenditure during the recession,while Country Y's government increased the supply of money in the economy.Which of the two policies will help the economy recover from the recession?

Accepted Answer

The answer of Country X and Country Y are two...

Question 11

The unemployment rate in Utopia rose to 12 percent when the country was in a recession.How will the labor market in Utopia be affected if an expansionary monetary policy triggers inflation in the economy?

Accepted Answer

The answer of The unemployment rate in Utopia rose to...

Question 12

The discovery of a new oilfield has attracted several new investors to Inventia.How will this affect Inventia's labor demand curve?

Accepted Answer

The answer of The discovery of a new oilfield has...

Question 13

Consumption has fallen substantially in Techland due to pessimism among households.What will be the outcome if a contractionary monetary policy is adopted during this period?

Accepted Answer

The answer of Consumption has fallen substantially in Techland due...

Question 14

Which of the following is likely to lead to a partial recovery of an economy after a recession?

Accepted Answer

A decrease in tax rates can lead to an increase in disposable income and purchasing power, resulting in an increase in consumer spending and businesses investing more, which can boost the economy. However, it also depends on the specific circumstances of the economy, such as the level of government debt and the extent of the recession.

Question 15

The government of Inventia has increased its expenditure following a recession.This is likely to lead to ________.

Accepted Answer

An increase in government expenditure is likely to lead to an increase in the demand for labor as more funds will be put towards public projects, which would require an increase in employment. This would lead to a rise in wages as there is more competition for workers. However, there is no reason to expect a change in interest rates or the price level based on this information alone. Lower real wages would also not be a direct consequence of increased government expenditure.

Question 16

If aggregate investment in an economy falls,which of the following is likely to happen?

Accepted Answer

A decrease in aggregate investment implies that firms are investing less in capital goods and equipment, which can lead to a decline in revenue for those firms. This can be due to decreased productivity and efficiency resulting from a lack of investment. Asset prices are unlikely to rise as a result of decreased investment, and labor demand may be negatively affected if firms are not investing in the expansion of their operations. There is no direct correlation between a decrease in investment and the number of mortgage defaults.

Question 17

Which of the following is a likely consequence of a fall in private investment?

Accepted Answer

A fall in private investment would likely result in lower economic growth and job opportunities, leading to a fall in personal income and subsequently reducing consumption.

Question 18

Agraria is experiencing a recession.How can the government of Agraria use fiscal policy to improve the economic condition of the country?

Accepted Answer

The answer of Agraria is experiencing a recession.How can the...

Question 19

Which of the following is likely to happen when the banking system of a country recuperates after a recession?

Accepted Answer

When the banking system recuperates after a recession, it typically leads to increased lending and investment, which can stimulate economic growth and lead firms to hire more workers.

Question 20

Which of the following is likely to increase household bankruptcies?

Accepted Answer

A decrease in aggregate consumption means that households are spending less money overall. This can lead to a decrease in income for businesses, which can in turn lead to layoffs and higher unemployment rates. When households have less income and higher unemployment, they may struggle to pay their debts and ultimately file for bankruptcy.

Quiz 12: Short-Run Fluctuations