The volume of imports is positively related to real national production and income. What are two reasons for this relationship?
What will be an ideal response?
POSSIBLE RESPONSE: The relationship can be represented as M = M(Y), where M = Volume of imports and Y = Real national production and income. This positive relationship seems to have two explanations. One is that imports are often used as inputs into the production of the goods and services that constitute domestic product. As real production increases, the need for (demand for) imported inputs increases. The other explanation is that an increase in real national income results in an increase in real national expenditure, and that imports respond to real expenditure. The more the country spends on all goods and services, the more inclination there will be to spend part of the increase on buying more imported products.
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Based on the figure below. Starting from long-run equilibrium at point C, an increase in government spending that increases aggregate demand from AD to AD1 will lead to a short-run equilibrium at point ________ creating _____gap. 
A. D; an expansionary B. B; no output C. B; expansionary D. A; a recessionary
Which of the following statements is likely to be true according to Okun's Law?
A) The unemployment rate remains constant when the growth rate of real GDP is 0%. B) The unemployment rate remains constant when the growth rate of real GDP is 3%. C) The unemployment rate increases when the growth rate of real GDP is above 3%. D) The unemployment rate declines when the growth rate of real GDP is below 3%.
Outline the various actions the government sector could take to promote growth
What will be an ideal response?
An economy suffering from high inflation despite low economic growth and high unemployment is experiencing:
A. stagflation. B. an economic boom. C. an economic downturn. D. hyperinflation.