Macroeconomic Equilibrium and Policies Quiz

Test your knowledge on aggregate demand, fiscal & monetary policies, unemployment, and inflation in macroeconomics.

Practice Learn Test

Which of the following is a component of aggregate demand?

Government spending

Imports

Interest rates

Consumer preferences

What happens to the equilibrium level of real GDP if aggregate demand increases?

It decreases

It remains unchanged

It increases

It becomes negative

What is the primary goal of monetary policy?

Stabilizing employment

Stabilizing prices

Increasing government spending

Encouraging international trade

Which of the following is an example of an automatic stabilizer?

Unemployment insurance

Discretionary fiscal policy

Tax cuts

Infrastructure spending

What is the formula for the expenditure approach to calculating GDP?

GDP = C + I + G + (X - M)

GDP = C + I + G

GDP = C + I + G - X

GDP = C + I + G - M

Which of the following is a fiscal policy tool used to combat recession?

Raising taxes

Increasing government spending

Decreasing money supply

Raising interest rates

What does the Phillips curve depict?

The relationship between inflation and unemployment

The relationship between interest rates and inflation

The relationship between exchange rates and trade balance

The relationship between government spending and GDP

What does the term 'crowding out' refer to in economics?

Increase in consumer spending

Decrease in government spending

Decrease in private investment due to increased government borrowing

Increase in exports

What is the role of the central bank in conducting monetary policy?

Setting government spending levels

Controlling the money supply and interest rates

Determining tax rates

Regulating international trade

#10

What is the purpose of an automatic stabilizer in fiscal policy?

To stabilize interest rates

To automatically adjust taxes and transfer payments in response to economic conditions

To control government spending

To regulate the money supply

#11

In a closed economy, if the government increases its spending while keeping taxes constant, what will happen to the equilibrium level of income?

It will increase

It will decrease

It will remain unchanged

It will become negative

#12

According to classical economists, what would happen in the long run if the economy operates below full employment?

Inflation

Deflation

Stagflation

Full employment will be restored through market mechanisms

#13

What is the Laffer curve used to illustrate in economics?

The relationship between taxes and government spending

The relationship between interest rates and investment

The relationship between inflation and unemployment

The relationship between tax rates and tax revenue

#14

What is the significance of the natural rate of unemployment in macroeconomic analysis?

It represents the level of unemployment that prevails when the economy is operating at its full potential output.

It indicates the unemployment rate that is necessary to maintain stable inflation.

It represents the unemployment rate that fluctuates with economic cycles.

It measures the frictional unemployment in the economy.

#15

What is the difference between discretionary and automatic fiscal policy?

Discretionary fiscal policy involves deliberate changes in government spending and taxes by policymakers, while automatic fiscal policy involves automatic stabilizers that adjust spending and taxes based on economic conditions.

Discretionary fiscal policy involves automatic stabilizers that adjust spending and taxes based on economic conditions, while automatic fiscal policy involves deliberate changes in government spending and taxes by policymakers.

Both discretionary and automatic fiscal policy involve deliberate changes in government spending and taxes by policymakers.

Both discretionary and automatic fiscal policy involve automatic stabilizers that adjust spending and taxes based on economic conditions.