#1
What is the role of the Phillips curve in macroeconomic analysis?
To depict the relationship between inflation and unemployment in the short run
ExplanationPhillips curve shows short-run trade-off between inflation and unemployment.
#2
What is the Laffer curve in economics?
A curve depicting the relationship between tax rates and government revenue
ExplanationLaffer curve shows the relationship between tax rates and government revenue.
#3
What is the difference between demand-pull inflation and cost-push inflation?
Demand-pull inflation occurs when prices are pushed up by an increase in demand, while cost-push inflation occurs when prices rise due to increases in production costs
ExplanationDemand-pull inflation is driven by increased demand, cost-push by rising production costs.
#4
What is the concept of the money multiplier in the banking system?
The ratio of the change in the money supply to the change in the monetary base
ExplanationMoney multiplier is the ratio of change in money supply to the change in the monetary base.
#5
In the context of the AD-AS model, what does a leftward shift in the Aggregate Demand curve suggest about the economy?
A decrease in overall economic output and employment
ExplanationLeftward shift in AD indicates decreased economic output and employment.
#6
What is Aggregate Demand (AD) in macroeconomics?
The total quantity of goods and services demanded by households, businesses, and the government in an economy at a given overall price level and in a given period
ExplanationAD represents total demand for goods and services in an economy.
#7
What does the Aggregate Supply (AS) curve represent in the long run?
The relationship between the overall price level and the quantity of goods and services that firms are willing to supply when all input prices are flexible
ExplanationAS in the long run depicts the supply of goods and services when all input prices can adjust.
#8
What is the multiplier effect in macroeconomics?
The process by which an initial change in spending leads to a series of increased expenditures in the economy
ExplanationMultiplier effect magnifies the impact of initial spending changes.
#9
What is the primary tool used by central banks to control the money supply in an economy?
Open market operations
ExplanationCentral banks use open market operations for money supply control.
#10
What is the concept of the natural rate of unemployment in macroeconomics?
The unemployment rate that prevails in the economy when it is at full employment
ExplanationNatural rate of unemployment is the rate at full employment.
#11
What is the formula for calculating the GDP (Gross Domestic Product) using the income approach?
GDP = Wages + Rent + Interest + Profits
ExplanationGDP via income approach sums up all factor incomes.
#12
In the context of macroeconomics, what does the term 'stagflation' refer to?
A situation where the overall price level is rising, but the economy is experiencing high unemployment
ExplanationStagflation combines inflation with high unemployment.
#13
In the AD-AS model, what could cause a leftward shift in the Aggregate Demand curve?
A decrease in consumer confidence
ExplanationLeftward shift in AD suggests decreased overall demand.
#14
What is the difference between frictional and structural unemployment?
Frictional unemployment is temporary and occurs when individuals are between jobs, while structural unemployment is long-term and arises from a mismatch between skills and available jobs
ExplanationFrictional is short-term, structural is long-term unemployment due to skills mismatch.
#15
What is the role of automatic stabilizers in fiscal policy?
To automatically adjust tax and spending levels in response to changes in the economy
ExplanationAutomatic stabilizers adjust fiscal policy automatically based on economic changes.