#1
Which of the following represents the equilibrium condition in a macroeconomic model?
AD = AS
ExplanationAggregate demand equals aggregate supply.
#2
Which of the following is NOT a component of aggregate demand?
Wages
ExplanationWages are a factor in production, not directly in aggregate demand.
#3
What does the Phillips curve illustrate in macroeconomics?
The relationship between unemployment and inflation
ExplanationInverse relationship between unemployment and inflation.
#4
What is the effect of a decrease in the money supply on the AD-AS model in the short run?
Shifts the AD curve leftward
ExplanationReduced money supply constrains spending, shifting AD to the left.
#5
What would cause a rightward shift in the aggregate demand curve?
Increase in consumer confidence
ExplanationGreater consumer confidence leads to increased spending, shifting AD to the right.
#6
In the long run, the aggregate supply curve is primarily affected by changes in which of the following factors?
Technology and productivity
ExplanationTechnological advancements and improvements in productivity influence long-run AS.
#7
If the economy is operating below full employment equilibrium, what is likely to happen to prices in the long run?
Prices will increase
ExplanationAs demand increases to meet supply, prices rise towards equilibrium.
#8
What effect does an increase in government spending have on the AD-AS model in the short run?
Shifts the AD curve rightward
ExplanationIncreased government spending boosts demand, shifting AD to the right.
#9
Which of the following is a determinant of long-run economic growth?
Technological progress
ExplanationAdvancements in technology drive sustained economic growth in the long run.
#10
In the AD-AS model, what is likely to cause stagflation?
A rightward shift in the AD curve and a leftward shift in the AS curve
ExplanationCombination of increased demand and decreased supply leads to stagflation.
#11
Which of the following is a characteristic of the Keynesian view of long-run aggregate supply?
It is vertical
ExplanationKeynesian LRAS is horizontal due to wage and price stickiness.
#12
What is likely to happen to the equilibrium price level and real GDP if aggregate demand exceeds aggregate supply in the short run?
Price level increases, real GDP increases
ExplanationExcess demand leads to inflation and increased output.
#13
If there is a decrease in labor productivity in an economy, what would be the impact on the short-run aggregate supply curve?
A leftward shift
ExplanationLower labor productivity leads to decreased output, shifting SRAS to the left.
#14
Which of the following would result in stagflation?
An increase in aggregate demand and a decrease in aggregate supply
ExplanationCombination of increased demand and decreased supply leads to stagflation.
#15
In the AD-AS model, what is the effect of a decrease in the price level in the short run?
Causes a movement along the AD curve
ExplanationDecrease in price level leads to higher real wealth, shifting along the AD curve.
#16
In the long run, what is the impact of an increase in government spending on the price level and real GDP?
Price level increases, real GDP increases
ExplanationIncreased government spending fuels demand, leading to inflation and higher output in the long run.
#17
What is the impact of an increase in the price level in the long run according to the classical theory of economics?
No impact on output
ExplanationIn the long run, prices adjust and output remains unaffected.
#18
Which of the following factors is most likely to shift the long-run aggregate supply (LRAS) curve to the right?
Increase in investment in education and training
ExplanationInvestment in education and training enhances workforce skills, shifting LRAS rightward.
#19
In the long run, what is the impact of an increase in the money supply on the price level and real GDP according to the classical theory of economics?
Price level increases, real GDP increases
ExplanationIncreased money supply fuels inflation and boosts output in the long run.
#20
Which of the following scenarios is likely to result in a leftward shift of the short-run aggregate supply curve?
An increase in business taxes
ExplanationHigher business taxes increase production costs, shifting SRAS to the left.