Explanation​:
On a Keynesian AS curve, supply is perfectly elastic when there are many unused resources in the economy. The curve becomes perfectly inelastic as factors of production become increasingly scarce.

The more excess capacity there is (Point $A$), the more impact expansionary fiscal policy will have on real output.

Choices B and C show increased competition for economic capacity, so expansionary fiscal policy increases real output by a smaller amount.

Choice D shows no excess economic capacity, so expansionary fiscal policy will not increase real output.

Explanation​:
Expansionary fiscal policy can decrease net exports (X-M) as increases in the price level can make exports less competitive, and rising incomes will increase spending on imports.

Choice B is wrong, as fiscal policy has no direct relationship with the money supply.

Choices C and D are wrong, as expansionary fiscal policy stimulates economic activity, increasing the employment and inflation rates.

Explanation​:
While many governments pursue policies such as tariffs to protect their domestic producers from cheap imports, this is not a goal of supply-side policies, but rather of trade protection policies.

Choices A, B, and D are all goals of supply-side policies.

Explanation​:
Short-run equilibrium occurs at the intersection of AD and SRAS. Long-run equilibrium occurs when AD = SRAS = LRAS. Therefore, at point $A$, the economy is in short-run equilibrium only.

Explanation​:
LRAS shifts rightward when there is an increase in the quantity or quality of factors of production (FOPs), improvements in technology, increases in efficiency, or improvements in institutions.

Choices I and II: both will shift LRAS to the right. An increase in immigration increases the quantity of labour, and improvements in technology will increase efficiency in production, improving the quality of FOPs.

Choices III and IV are determinants of SRAS that would lower production costs and thus shift the SRAS curve rightward. Indirect taxes and production costs do not affect the quality or quantity of FOPs, so LRAS is unaffected.

Explanation​:
In the Keynesian model, wages are assumed to be downwardly inflexible: they may rise in times of inflation, but rarely fall in times of recession. For this reason, the economy could get stuck in a recessionary gap if the government does not intervene. This is because production costs will not fall, and so, aggregate supply will not increase.

Choices A, B, and C are all associated with the new classical/monetarist model, which assumes that recessionary gaps are not persistent.

Explanation​:
Closing an inflationary gap requires a decrease in AD, and increasing income tax and reducing the money supply are both contractionary policies, making D the correct answer.

Choices A, B, and C include expansionary policies, which do not close inflationary gaps.

Explanation​:
Changes in taxation and government spending can be directed towards different socioeconomic groups or different branches of industry.

Choice B is wrong because there are many trade-offs in achieving macroeconomic goals. For example, increased economic growth and employment can cause high inflation and/or a current account deficit.

Choice C is wrong as it can take time:

• for governments to recognise that action is required in the first place
• for political bodies to agree on what to do
• for the policy to impact the economy

Choice D is wrong because expansionary fiscal policy will have a greater impact on real output if there is plenty of excess capacity in the economy.

Explanation​:
An increase in the corporate tax rate will decrease AD by decreasing investment in the economy.

Choices B and D redistribute income in a way that should increase consumption, as the marginal propensity to consume for lower-income households tends to be higher.

Choice C is wrong, as increasing government spending directly increases AD.

Explanation​:
The aggregate demand shifts rightward (AD1​ to AD2​) when a component of AD increases. The components of AD are consumption (C), investment (I), government spending (G), and net exports (NX), which are calculated as exports (X) minus (M).

Choice I is incorrect because a future decrease in price levels will incentivise people to reduce consumption.

Choice II is correct because a reduction in interest rates boosts consumption and investment.

Choice III is incorrect because an increase in income taxes reduces disposable income and leads to a fall in consumption.

Choice IV is correct because an increase in income of trading partners increases a country's exports, increasing net exports.

Explanation​:
The goals of a central bank are focused on achieving short-term economic stability. These objectives include achieving low and stable inflation, implementing inflation targeting (choice A), reducing unemployment rates (choice B), and minimizing fluctuations in the business cycle (choice D).

Choice C is the correct answer because it is usually attributed to the goal of the executive branch of government and not the central bank.

Explanation​:
Choice D incorrectly describes speculative demand for money. It suggests that money has inherent value and that people speculate on the appreciation of money itself. However, speculative demand for money occurs when people anticipate a change in interest rates and prefer to hold money over interest-bearing assets.
Choice A describes the transactions motive.
Choice B describes the precautionary motive.
Choice C describes the speculative motive.

Explanation​:
A decrease in aggregate demand will create a recessionary gap and push the economy into recession. This creates cyclical unemployment, which is caused by a decrease in overall aggregate demand, and so businesses decrease their demand for labor.

Choices A, C, and D are also types of unemployment, but they are not caused by a decrease in aggregate demand.

Options A, B, and C are the three dimensions in which poverty is measured using MPI

Explanation​:
A shift of the SRAS curve to the left constitutes a negative supply shock and will push the economy into a period of stagflation, where the economy is experiencing both inflation and recession. As a result, the inflation rate rises and the unemployment rate rises as well.

Choice A would be the result of AD shifting rightward.

Choice B would be the result of AD shifting leftward.

Choice D would be the result of SRAS shifting rightward.

Explanation​:

Leakages involve income earned that is not spent on domestic goods and services. Leakages include: saving, taxes, and import spending.

Export revenue is an injection into the circular flow, not a leakage.

Therefore, choices A, C, and D are incorrect because export revenue is an injection, not a leakage.

Explanation​:
A fall in interest rates will make borrowing cheaper, and so encourage investment expenditure: aggregate demand (AD) will increase in the short-run.

Moreover, investment is the spending on the creation or replacement of capital, so in the long run, the quantity of capital will increase, leading to an increase in long-run aggregate supply (LRAS).

Choices A, C, and D will lead to an increase in AD in the short run, but are unlikely to cause an increase in LRAS in the long run.

Explanation​:
There is often a conflict between achieving economic growth and equity in the distribution of income.

The pursuit of better economic well-being for citizens and increased efficiency of the economic system does not always guarantee an equitable distribution of the benefits.

Choices A and C are also possible conflicts with the goal of high economic growth, while choice B often accompanies high economic growth.

Explanation​:

Explanation‾Explanation​:
The unemployment rate is calculated using the following equation:

Number of unemployed/Size of labor force × 100

500 000/8 million × 100 = 6.25%

Choice B divides the number of unemployed by the working age population, rather than the size of the labor force.

Choice C adds discouraged workers to the number of unemployed.

Choice D adds discouraged workers and divides by population of working age.

Explanation​:
Statement I is incorrect because an increase in interest rates will lead to higher borrowing costs and a higher reward for saving, resulting in decreased investment expenditure and consumption, thus decreasing AD, not SRAS.

Statement II is incorrect because lower consumer confidence will lead to lower consumption expenditure and decreased AD, not SRAS.

Statement III is correct because higher costs of production across the economy will shift the SRAS curve to the left.

Statement IV is correct because an increase in indirect taxes will also raise the costs of production for businesses and thus shift SRAS to the left.

Explanation​:

Choice B

• If the ECB purchases government securities (bonds), it increases the money supply as it pays bondholders.
• If the ECB lowers the reserve requirement, commercial banks have more excess reserves for more loanable funds that increase credit creation and the money supply.
• If the ECB decreases the interest rate that it charges commercial banks (minimum lending rate or discount rate), banks borrow more and can lend more, increasing the money supply.

Choices A, C, and D include actions that decrease the money supply

• selling securities
• raising the reserve requirement
• increasing the minimum lending rate

Explanation​:
Budget deficits are financed through borrowing, which will $\text{‘}$crowd out$\text{’}$ private investment. Increased government borrowing makes loanable funds scarcer, driving up their price (interest rates).

Choices A, B and C are wrong, as sustained budget deficits increase AD and therefore the level of economic activity, resulting in:

• decreased net exports (X-M), which move the country towards a current account deficit
• increased inflation
• decreased unemployment

Explanation​:
Seasonal unemployment is a type or cause of unemployment, not one of the difficulties of measuring unemployment.

Choices A, C, and B are all factors making the measurement of unemployment unreliable.