What are the two basic principles of aggregation?
What will be an ideal response?
The two principles are the following:1. Although the composition of demand and supply in the various markets may be terribly important for some purposes (such as how income is distributed and the diets people enjoy), it may be of little consequence for the economy-wide issues of growth, inflation, and unemployment—the issues that concern macroeconomists.2. During economic fluctuations, markets tend to move up or down together.
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An individual's demand curve for a good is derived by
a. varying the income level and observing the resulting total utility derived from both goods. b. varying the price of one good and observing the resulting quantities of the other good. c. shifting the budget line to the left and calculating the loss in total utility. d. varying the price of one good and observing the resulting quantities demanded of that good.
Assume that the central bank purchases government securities in the open market. If the nation has low mobility international capital markets and a flexible exchange rate system, what happens to the GDP Price Index and current international transactions in the context of the Three-Sector-Model?
a. The GDP Price Index rises, and current international transactions becomes more positive (or less negative). b. The GDP Price Index rises, and current international transactions becomes more negative (or less positive). c. The GDP Price Index and current international transactions remain the same. d. The GDP Price Index rises, and current international transactions remain the same. e. There is not enough information to determine what happens to these two macroeconomic variables.