#1
Which of the following is not a determinant of macroeconomic equilibrium?
Inflation
ExplanationInflation is a result of macroeconomic conditions, not a determinant.
#2
What effect does an increase in the money supply have on interest rates, assuming other factors remain constant?
Interest rates decrease
ExplanationMore money in circulation leads to lower interest rates.
#3
Which of the following is a component of aggregate demand (AD) in macroeconomics?
Net exports
ExplanationNet exports add to total demand for goods and services.
#4
What does the term 'aggregate supply' represent in macroeconomics?
Total quantity of goods and services supplied at various price levels
ExplanationAmount of output produced at different price levels.
#5
In the aggregate expenditure model, what happens when aggregate expenditure exceeds real GDP?
Inventories increase
ExplanationWhen demand exceeds output, inventories rise.
#6
Which of the following policies could be used to close an inflationary gap?
Decreasing government spending
ExplanationReducing government spending reduces aggregate demand.
#7
What is the Phillips curve relationship?
Inverse relationship between unemployment and inflation
ExplanationLower unemployment tends to accompany higher inflation rates.
#8
Which of the following is a fiscal policy tool used to combat recession?
Decreasing government spending
ExplanationCutting government spending increases disposable income.
#9
What is the equation for the expenditure-output (income) model in macroeconomics?
Y = C + I + G + NX
ExplanationTotal output equals consumption, investment, government spending, and net exports.
#10
What is the primary function of the central bank in managing the macroeconomy?
Conducting monetary policy
ExplanationRegulating money supply and interest rates to achieve economic goals.
#11
What is the difference between actual GDP and potential GDP called?
Output gap
ExplanationOutput gap measures the economy's under- or over-utilization.
#12
If the economy is in a recessionary gap, what fiscal policy action would be appropriate?
Increasing government spending
ExplanationBoosting government spending stimulates demand.
#13
According to the loanable funds market model, what happens to interest rates when there is an increase in the demand for loanable funds?
Interest rates increase
ExplanationIncreased demand for funds leads to higher borrowing costs.
#14
What is the relationship between the current account balance and the capital account balance in the balance of payments?
The current account balance affects the capital account balance
ExplanationFluctuations in one account can impact the other.
#15
What does the term 'crowding out' refer to in macroeconomics?
Increase in government spending leading to a decrease in private investment
ExplanationGovernment borrowing competes with private investment.
#16
In the IS-LM model, what does the LM curve represent?
Equilibrium in the money market
ExplanationIntersection of liquidity preference and money supply.