Several tough Economics questions: GDP, Aggregate Demand, graphs...?

[tupac]

Taking an ECN test at home, and the questions are similar, but I can't wrap my head around them (i posted this in HW Help as well, since it's long and scary). Plus, i'm not feelings very well (allergies and a small headache), so it's hard to focus. I'd appreciate any help. They're all multiple choice, so that should help. Yes, it's long and scary, but please try to answer them.

Here they are.

1.) An unplanned increase in inventories results from:
a. an increase in planned investment
b. a decrease in planned investment
c. actual investment that is GREATER than planned investment
d. actual investment that is LESS than planned investment

2.) 5 most important variables that determine the level of consumption are:
a. disposable income, wealth, expected future income, price level, interest rate
b. wealth, savings account balances, checking account balances, stock portfolio balances, bond portfolio balances (my professor never mentioned those, so i doubt it's b)
c. government purchases, interest rates, income, taxes, transfers
d. government purchases, savings account balances, wealth, interest rates, portfolio balances

3.) If inflation in the U.S. is higher than inflation in other countries, what will be the effect on net exports (NE) for the U.S.?
a. NE will rise as US exports increase
b. NE will rise as US imports decrease
c. NE will decrease as US exports decrease
d. NE will decrease as US imports decrease

4.) Aggregate Demand Curve: Car exports were hurt in 2009 as a result of the recession. How would this decrease in exports have affected the aggregate demand curve (ADC)?
a. ADC would have shifted to the right
b. ADC would not have shifted, but there would have been a movement up the ADC
c. ADC would not have shifted, but there would have been a movement down the ADC
d. ADC would have shifted to the left

5.) Last week, six Swedish kronor could purchase one US dollar. This week, it takes eight kronor to purchase one US dollar. This change in the value of the dollar will _______ exports from the US to Sweden and ______ US aggregate demand
a. increase; increase
b. decrease; decrease
c. increase; decrease
d. decrease; increase

6.) If stricter immigration laws are imposed and many foreign workers in the US are forced to go back to their home countries,
a. the long-run aggregate supply curve will shift to the right
b. the long-run aggregate supply curve will shift to the left
c. we will more up along the long-run aggregate supply curve
d. we will move down along the long-run aggregate supply curve

7.) If full-employment GDP is = $4.2 trillion, what does the long-run aggregate supply curve look like?
a. it is a horizontal line at 4.2 trillion of GDP
b. it is a vertical line at a level of GDP below 4.2 trillion
c. it is a vertical line at 4.2 trillion of GDP
d. it is a vertical line at a level of GDP above 4.2 trillion

that's only a few. please answer the ones you can, and any advice or proof would be much appreaciated.

Thanks guys,
-Chaos

[breasal]

1.) An unplanned increase in inventories results from:

c. actual investment that is GREATER than planned investment


By definition. If there's an unplanned increase in inventories, it means that planned investment was greater that planned investment. If it was less than planned investment, then there wouldn't be an increase in inventories but rather a decrease that would result in a shortage. Since the change in inventories was unplanned (a) or (b) that concern planned investment do not apply.

2.) 5 most important variables that determine the level of consumption are:
a. disposable income, wealth, expected future income, price level, interest rate

Actually every answer would be correct (imo) since many of the assets mentioned are wealth or generate income etc., but (a) includes all of them, in one way or another.

3) If inflation in the U.S. is higher than inflation in other countries, what will be the effect on net exports (NE) for the U.S.?
c. NE will decrease as US exports decrease

A higher inflation rate results in higher price of domestic goods increases that results in a loss of competitiveness and hence a decrease in exports.

4.) Aggregate Demand Curve: Car exports were hurt in 2009 as a result of the recession. How would this decrease in exports have affected the aggregate demand curve (ADC)?

d. ADC would have shifted to the left

A decline in exports results in a change in demand, not quantity demanded, thus we wouldn't move up or down the demand curve. But decreased exports means that a lower quantity is now demanded and hence the demand curve would shift to the left.

5.) Last week, six Swedish kronor could purchase one US dollar. This week, it takes eight kronor to purchase one US dollar. This change in the value of the dollar will _______ exports from the US to Sweden and ______ US aggregate demand

b. decrease; decrease

The appreciation of the US dollar against the Swedish Kronor (conversely the depreciation of the Swedish Kronor against the US dollar) means that US goods are now more expensive in Sweden. As a result exports to Sweden will decrease and US aggregate demand will decrease as well.

6.) If stricter immigration laws are imposed and many foreign workers in the US are forced to go back to their home countries,

b. the long-run aggregate supply curve will shift to the left


Since there would be a smaller labor force in the US, potential output would fall and the LRAS curve would move to the left.

7.) If full-employment GDP is = $4.2 trillion, what does the long-run aggregate supply curve look like?

c. it is a vertical line at 4.2 trillion of GDP

Since the economy's full-employment GDP is 4.2 trillion, it follows that GDP will be a vertical line at exactly that number. Check any LRAS graph (google it) and it will become immediately obvious.

I hope this helps and good luck. I did my best to answer all your questions correctly.