#1
Which of the following best describes aggregate demand?
The total quantity of goods and services demanded in an economy at a given price level and in a given period of time
ExplanationTotal demand for goods and services at a specific price level and time.
#2
Which of the following factors is likely to cause a rightward shift in the aggregate demand curve?
An increase in household wealth
ExplanationIncrease in household wealth shifts aggregate demand curve right.
#3
What is the primary determinant of investment in the Keynesian expenditure model?
Interest rates
ExplanationInterest rates primarily determine investment in Keynesian model.
#4
Which of the following is a determinant of long-run aggregate supply?
Technological advancements
ExplanationTechnological advancements affect long-run aggregate supply.
#5
What does the long-run aggregate supply curve depict?
The relationship between output and potential GDP
ExplanationLong-run aggregate supply curve shows output-potential GDP relationship.
#6
What happens to equilibrium output and price level when aggregate demand decreases and aggregate supply remains constant?
Equilibrium output decreases, and the price level decreases
ExplanationOutput and price level both decrease in equilibrium.
#7
Which of the following factors is likely to cause a leftward shift in the aggregate supply curve?
A decrease in productivity
ExplanationDecrease in productivity shifts the aggregate supply curve left.
#8
What is the primary determinant of consumption in the Keynesian consumption function?
Disposable income
ExplanationDisposable income is the main determinant of consumption.
#9
Which of the following is a characteristic of the short-run aggregate supply curve?
It is upward sloping
ExplanationShort-run aggregate supply curve is upward sloping.
#10
Which of the following best describes the concept of the multiplier effect in economics?
The process by which changes in one economic variable lead to successive changes in other economic variables
ExplanationMultiplier effect: changes in one variable lead to successive changes in others.
#11
What is the main reason behind the upward slope of the short-run aggregate supply curve?
Firms are willing to produce more at higher price levels due to fixed input costs
ExplanationFirms produce more at higher prices due to fixed input costs.
#12
What is the long-run effect of an increase in aggregate demand on output and the price level, assuming aggregate supply remains unchanged?
Output increases, and the price level increases
ExplanationOutput and price level both increase in the long run.
#13
In the context of aggregate supply, what does the term 'sticky wages' refer to?
Wages that are resistant to change, leading to inefficiencies in the labor market
ExplanationWages resistant to change causing labor market inefficiencies.
#14
What is the relationship between the natural rate of unemployment and potential GDP in the long run?
They are unrelated
ExplanationNatural rate of unemployment and potential GDP are unrelated in the long run.
#15
In the context of the Phillips curve, what does a movement along the curve represent?
A trade-off between inflation and unemployment in the short run
ExplanationMovement along the Phillips curve indicates short-run inflation-unemployment trade-off.
#16
In the long run, what happens to the equilibrium price level if aggregate demand increases?
The price level increases
ExplanationIn the long run, increased aggregate demand leads to higher price levels.
#17
What is the implication of a shift from a short-run Phillips curve to a long-run Phillips curve?
There will be no change in unemployment or inflation
ExplanationNo change in unemployment or inflation with shift to long-run Phillips curve.