Question : Economic growth can be measured by:
Option 1: Changes in real GDP
Option 2: Changes in nominal GDP
Option 3: Changes in aggregate demand
Option 4: Changes in aggregate supply
Correct Answer: Changes in real GDP
Solution : The correct answer is (a) changes in real GDP (Gross Domestic Product).
Real GDP is a measure of the total value of goods and services produced within an economy over a specific period, adjusted for inflation or changes in the overall price level. It represents the output of an economy and is commonly used as an indicator of economic growth.
When real GDP increases over time, it suggests that the economy is producing more goods and services, indicating economic expansion and growth. Conversely, when real GDP decreases, it indicates a contraction or decline in economic activity.
Question : Demand-pull inflation occurs when:
Option 1: Aggregate demand exceeds aggregate supply
Option 2: Aggregate supply exceeds aggregate demand
Option 3: There is a decrease in aggregate demand
Option 4: There is a decrease in the aggregate supply
Question : If aggregate supply exceeds aggregate demand, it is likely to result in:
Option 1: Recessionary gap
Option 2: Inflationary gap
Option 3: Equilibrium output
Option 4: Economic growth
Option 3: Wages and input costs increase
Option 4: The government increases taxes
Question : The aggregate supply curve shows the relationship between:
Option 1: Price level and aggregate demand
Option 2: Price level and real GDP
Option 3: Interest rate and investment expenditure
Option 4: Inflation and unemployment
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