#1
Which of the following is a component of aggregate demand?
Government spending
ExplanationGovernment spending contributes to aggregate demand.
#2
What effect would an increase in government spending have on the aggregate demand curve?
Shift the curve rightward
ExplanationGovernment spending increase shifts aggregate demand curve to the right.
#3
What is the relationship between the unemployment rate and the short-run aggregate supply curve?
There is a negative relationship
ExplanationShort-run aggregate supply curve shows a negative relationship with unemployment rate.
#4
What is the concept of the wealth effect in the context of aggregate demand?
The tendency for people to spend more when the value of their assets increases
ExplanationWealth effect refers to increased spending due to asset value rise.
#5
What does the aggregate demand curve show?
The relationship between price level and quantity of goods and services demanded
ExplanationAggregate demand curve depicts the relationship between price level and demanded quantity.
#6
What does the long-run aggregate supply curve represent?
Total output that firms are willing to supply at different price levels in the long run
ExplanationLong-run aggregate supply curve depicts firms' total output at varying price levels over time.
#7
In the AD-AS model, what happens to equilibrium output if there is an increase in aggregate demand?
Equilibrium output increases
ExplanationIncreased aggregate demand leads to higher equilibrium output.
#8
Which of the following factors would cause a shift in the short-run aggregate supply curve?
Changes in technology
ExplanationTechnological changes alter short-run aggregate supply.
#9
Which of the following is NOT a determinant of long-run economic growth?
Government budget deficit
ExplanationGovernment budget deficit is not a determinant of long-run economic growth.
#10
What happens to equilibrium price level and output if aggregate demand and aggregate supply both increase?
Price level and output both increase
ExplanationBoth aggregate demand and supply increases lead to higher price level and output.
#11
According to the Phillips curve, what is the relationship between inflation and unemployment?
There is a positive relationship
ExplanationPhillips curve shows a positive relationship between inflation and unemployment.
#12
What is the concept of the natural rate of unemployment?
The rate of unemployment that exists when the economy is at full employment
ExplanationNatural rate of unemployment is the level at full employment.
#13
What is the impact of an increase in interest rates on investment in the AD-AS model?
Decrease in investment
ExplanationIncreased interest rates lead to reduced investment in the AD-AS model.
#14
What is the primary factor determining the position of the long-run aggregate supply curve?
Technological progress
ExplanationTechnological progress primarily determines the long-run aggregate supply curve's position.
#15
What is the concept of the natural rate of output?
The level of output that occurs when there is no cyclical unemployment
ExplanationNatural rate of output is the level at which there is no cyclical unemployment.
#16
What is the concept of potential output?
The level of output that occurs when there is no cyclical unemployment
ExplanationPotential output is the level at which there is no cyclical unemployment.