#1
Which of the following is a component of Aggregate Demand (AD) in an economy?
Government spending
ExplanationGovernment spending is a key component of Aggregate Demand (AD), representing the total demand for goods and services in an economy.
#2
What does the Aggregate Supply (AS) curve represent in macroeconomics?
The total amount of goods and services firms are willing to produce at different price levels
ExplanationThe Aggregate Supply (AS) curve depicts the quantity of goods and services that firms are willing to produce at various price levels in an economy.
#3
Which of the following is a component of Aggregate Supply (AS) in an economy?
Labor force participation rate
ExplanationThe labor force participation rate is a factor related to the labor market and is not a direct component of Aggregate Supply (AS).
#4
What is the main factor driving consumption expenditure in an economy?
Disposable income
ExplanationDisposable income, representing the amount of money available after taxes, is a key factor driving consumption expenditure in an economy.
#5
Which of the following would NOT cause a shift in the Aggregate Demand (AD) curve?
Changes in the price level
ExplanationChanges in the price level do not cause a shift in the Aggregate Demand (AD) curve; shifts result from factors affecting consumption, investment, government spending, and net exports.
#6
What effect does an increase in taxes typically have on Aggregate Demand (AD)?
Decreases AD
ExplanationAn increase in taxes typically leads to a decrease in disposable income, reducing consumer spending and overall Aggregate Demand (AD).
#7
What is the relationship between inflation and Aggregate Demand (AD)?
As inflation increases, AD decreases
ExplanationAs inflation rises, purchasing power decreases, causing a decline in consumer spending and a subsequent decrease in Aggregate Demand (AD).
#8
Which of the following is an example of a supply shock that affects Aggregate Supply (AS)?
A natural disaster
ExplanationA natural disaster, such as a hurricane or earthquake, can disrupt production and supply chains, causing a negative impact on Aggregate Supply (AS).
#9
What is the term for the situation where the economy is producing at its maximum potential output?
Full employment equilibrium
ExplanationFull employment equilibrium occurs when the economy operates at its highest potential output, minimizing unemployment.
#10
Which of the following factors would cause a leftward shift in the Short-Run Aggregate Supply (SRAS) curve?
An increase in government regulation
ExplanationAn increase in government regulation can impede production efficiency, causing a leftward shift in the Short-Run Aggregate Supply (SRAS) curve.
#11
Which of the following is NOT a determinant of Aggregate Demand (AD)?
Resource availability
ExplanationResource availability is not a determinant of Aggregate Demand (AD); key determinants include consumer spending, investment, government spending, and net exports.
#12
In the long run, what happens to Aggregate Supply (AS) if there is an increase in productivity?
AS increases
ExplanationIn the long run, an increase in productivity leads to an expansion of Aggregate Supply (AS) as firms can produce more goods and services.
#13
What is the formula for calculating Gross Domestic Product (GDP) using the expenditure approach?
GDP = Consumption + Investment + Government Spending + Exports - Imports
ExplanationThe GDP formula using the expenditure approach sums up consumption, investment, government spending, and net exports to measure the total economic output.
#14
What is the role of the central bank in managing Aggregate Demand (AD)?
To control the money supply and interest rates
ExplanationThe central bank manages Aggregate Demand (AD) by controlling the money supply and interest rates to influence borrowing, spending, and investment.
#15
In the AD-AS model, what is the long-run effect of an increase in government spending on the price level?
Price level increases in the long run
ExplanationIn the long run, an increase in government spending tends to raise the price level as the economy adjusts to higher demand and production costs.