#1
Which of the following is a component of aggregate demand?
Government spending
ExplanationGovernment spending contributes to aggregate demand.
#2
Which of the following is a component of aggregate supply?
Business investment
ExplanationBusiness investments contribute to the overall aggregate supply.
#3
What happens to the equilibrium level of real GDP when there is an increase in autonomous consumption?
Equilibrium GDP increases
ExplanationAutonomous consumption drives an increase in equilibrium GDP.
#4
In the AD-AS model, a decrease in aggregate demand will lead to:
An increase in price level and a decrease in real GDP
ExplanationA decrease in AD causes price levels to rise and real GDP to fall.
#5
What is the relationship between the short-run aggregate supply curve and the price level?
It is positively sloped
ExplanationIn the short run, a higher price level leads to increased output.
#6
Which of the following would cause a rightward shift in the aggregate demand curve?
An increase in consumer confidence
ExplanationIncreased consumer confidence boosts overall demand.
#7
Which of the following would cause a movement along the short-run aggregate supply curve?
A decrease in input prices
ExplanationLower input prices spur increased short-run aggregate supply.
#8
In the long run, the economy will tend to:
Return to its potential GDP level
ExplanationEconomy naturally gravitates towards its potential GDP over time.
#9
What is the relationship between inflation and the aggregate demand curve?
There is a direct relationship
ExplanationAs inflation rises, aggregate demand typically increases.
#10
In the long run, changes in the money supply affect:
Only nominal variables
ExplanationMoney supply changes primarily impact nominal variables in the long run.
#11
Which of the following is true regarding the Phillips curve?
It shows a negative relationship between inflation and unemployment in the short run
ExplanationPhillips curve illustrates the short-term tradeoff between inflation and unemployment.
#12
In the long run, changes in aggregate demand affect:
Only prices
ExplanationIn the long run, changes in AD predominantly impact price levels.