#1
What is macroeconomic equilibrium?
The point where aggregate demand equals aggregate supply
ExplanationEquilibrium is achieved when the total demand for goods and services matches the total supply in the economy.
#2
Which of the following would likely cause a shift in aggregate demand?
A decrease in government spending
ExplanationA reduction in government expenditures can lead to a decrease in overall demand for goods and services, shifting the aggregate demand curve leftward.
#3
What is the Phillips curve relationship?
Inverse relationship between unemployment and inflation
ExplanationThe Phillips curve illustrates an inverse relationship between inflation and unemployment; as one decreases, the other tends to increase.
#4
What is the difference between demand-pull and cost-push inflation?
Demand-pull is caused by excessive demand while cost-push is caused by rising production costs
ExplanationDemand-pull inflation arises from increased demand outstripping supply, while cost-push inflation results from increased production costs pushing prices higher.
#5
What is the long-run Phillips curve?
A horizontal line
ExplanationIn the long run, the Phillips curve is typically depicted as a horizontal line, indicating that there is no permanent trade-off between inflation and unemployment.
#6
What is the Fisher effect?
A theory that higher inflation leads to higher nominal interest rates
ExplanationThe Fisher effect posits that an increase in inflation should result in a corresponding increase in nominal interest rates to maintain real interest rates.
#7
What is the impact of an increase in the money supply on inflation, according to monetarist economists?
An increase in inflation
ExplanationMonetarist economists assert that an expansion in the money supply tends to lead to higher inflation in the economy.