Macroeconomic Equilibrium and Supply Shocks Quiz

Test your knowledge on macroeconomic equilibrium, supply shocks, AS-AD model, Phillips Curve & policy responses in this comprehensive quiz.

Practice Learn Test

Which of the following best describes macroeconomic equilibrium?

When the economy is producing at maximum potential output

When aggregate demand equals aggregate supply

When inflation is low and unemployment is high

When the government spending exceeds tax revenue

What is a supply shock in macroeconomics?

An unexpected increase in aggregate demand

An unexpected change in the quantity of money in circulation

An unexpected event that changes the supply of goods and services

An unexpected change in government fiscal policy

What is the impact of a negative supply shock on the economy?

Decrease in output and decrease in prices

Increase in output and increase in prices

Decrease in output and increase in prices

Increase in output and decrease in prices

Which of the following is an example of a negative supply shock?

Discovery of a new technology that increases productivity

Increase in oil prices due to political instability

Government implementing tax cuts to stimulate spending

Central bank decreasing interest rates to boost investment

In the AS-AD model, what does the Aggregate Supply curve represent?

The relationship between the price level and the quantity of goods and services demanded

The relationship between the price level and the quantity of goods and services supplied

The relationship between investment and saving in the economy

The relationship between the exchange rate and net exports

During a positive supply shock, what happens to the equilibrium price level and output in the short run?

Price level decreases, output increases

Price level increases, output decreases

Price level increases, output increases

Price level decreases, output decreases

What is the primary determinant of long-run economic growth according to classical macroeconomic theory?

Government spending

Aggregate demand

Aggregate supply

Technological progress

How do policymakers typically respond to supply shocks?

By adjusting monetary or fiscal policy to stabilize the economy

By ignoring the shocks and letting the market self-correct

By implementing price controls to prevent inflation

By reducing government intervention in the economy

Which of the following is an example of a positive supply shock?

Global pandemic causing disruptions in supply chains

A breakthrough in renewable energy technology reducing production costs

Government imposing tariffs on imported goods

Natural disaster destroying infrastructure and reducing productivity

#10

What is the long-run effect of a supply shock in the economy?

Permanent changes in the price level, but no change in output

No change in the price level, but permanent changes in output

Permanent changes in both the price level and output

Temporary changes in both the price level and output

#11

Which of the following is an assumption of the AS-AD model?

Prices and wages are always flexible and adjust quickly

Consumers and producers have perfect information about the economy

Fiscal policy is always more effective than monetary policy

Market supply and demand curves are perfectly inelastic

#12

What effect does a positive demand shock typically have on inflation and output?

Increases inflation, increases output

Increases inflation, decreases output

Decreases inflation, increases output

Decreases inflation, decreases output