Macroeconomic Equilibrium and Factors Influencing it Quiz

Achieving stable economic conditions such as low unemployment and stable prices.

Foreign exchange rate affects the exchange of goods and services but is not a direct component of aggregate demand.

Central banks buy or sell government securities in open markets to control the money supply.

Monetary policy involves controlling the money supply and interest rates, while government spending is a tool of fiscal policy.

Autonomous consumption leads to higher overall spending, driving up the equilibrium income.

With a lower MPC, individuals save more and spend less of each additional unit of income, reducing the multiplier effect.

As unemployment decreases, inflation tends to increase, and vice versa, forming a negative relationship.

Higher labor productivity allows firms to produce more output at any given price level, shifting the aggregate supply curve to the right.

More money in circulation leads to increased spending, boosting both output and prices in the short run.

Government borrowing increases demand for loans, raising interest rates and reducing private investment.

Government spending and taxation policies directly influence aggregate demand according to Keynesian theory.

The Classical model emphasizes long-term equilibrium and the neutrality of money in influencing real variables.