If domestic income falls, what must happen to keep the trade balance the same?
a. The real exchange rate must fall.
b. Foreign income must rise.
c. The domestic price level must fall.
d. Domestic income must fall.
Answer: a. The real exchange rate must fall.
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Economic growth in India has averaged about 8.5 percent in recent years and while inflation averaged almost 9 percent. The AS-AD model shows this process as
A) rightward shifts in the short-run aggregate supply curve. B) rightward shifts in the both the aggregate demand and long-run aggregate supply curves. C) movements upward along the aggregate demand curve. D) rightward shifts in the aggregate demand curve and leftward shifts in the short-run aggregate supply curve.
Suppose in 2016, you purchase a house built in 2003. Which of the following would be included in the gross domestic product for 2016?
A) the value of the house in 2016 B) the value of the house in 2016 minus depreciation C) the value of the services of the real estate agent D) the value of the house in 2003
In the process described as Schumpeterian economic growth (involving Schumpeter's ideas about growth),
(a) recessions are the object of countercyclical policy designed to minimize the waste of unemployed labor and other resources. (b) expansions are considered wasteful because of the tendency for inflation to be generated near the cyclical peaks. (c) recessions are considered to be useful cleansing devices for abandoning inefficient uses of economic resources. (d) depressions are considered to be necessary to maintain greater equality of wealth and income over time.