B321 MA04 Economic growth Recap

AD curve shift to right to show potential economic growth

• True

• False

Answer explanation

AD curve shifts to the right to show actual economic growth.

To boost economic growth the government is most likely to

• a)     Increase interest rates

• b)     Increase taxation rates

• c)     Provide incentives to invest

• d)     Provide incentives to save

Answer explanation

real GDP = C + I + G + (X-M)

An outward shift in the PPF depicts

• Potential Economic Growth

• Actual Economic Growth

• Economic Contraction

• A recession

An outward shift in the PPC corresponds to _____ of the long-run aggregate supply curve.

• a leftward shift

• a rightward shift

• constant value

• an indeterminate shift

Answer explanation

Which of the following is the reason for an actual economic growth to occur?

• Quality of education improved

• Better technology used

• Household's income level increase

• Discovery of new resources

Answer explanation

Actual economic growth is when AD shifts right (demand sided). Increase income will increase consumption.

Which of the following policies is a supply-sided policy and can be used for economic growth

• Increased government spending

• Increased education and training for workers

• Increased exports

• Decreased rates of interest

Answer explanation

Increase in the quality and quantity of FOP will increase LRAS (supply side).

What is the economic growth rate in year 2?

• 5%

• 10%

• 11%

• 20%

Answer explanation

change in GDP = [(220-200)/200] x 100 = (20/200) x 100 = 10%

A recession is

• negative real GDP over 2 successive quarters

• negative real GDP for 1 quarter

• a reduction general price level over two successive quarters

• a reduction in investment over a whole year

An inward shift in the PPF depicts

• Actual Economic Growth

• Economic Contraction

• Potential Economic Growth

• A recession