When potential gdp increases

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True or False

1. If national income increases by S80 million and consumption increases by S20 million, the marginapropensity to consume is 4.

2. When potential GDP increases, short-run aggregate supply also increases, but long-run aggregate supply does not change.

3. The 'quantity theory of money' argues that an increase in the money supply at a rate that is faster than therate of increase in real GDP will lead to a decrease in the price level in the long run.

4. The Reserve Bank of Australia engages in open market purchase of securities when it wants to decreaseinterest rates.

Reference no: EM133359358

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