Macroeconomic Factors Influencing Aggregate Supply and Demand Quiz

Consumer spending drives overall demand for goods and services in an economy.

Government policies do not directly determine the total supply of goods and services in an economy.

Government spending contributes to the total demand for goods and services in an economy.

Sticky wages are wages that do not adjust quickly to changes in economic conditions, leading to labor market inefficiencies.

The Federal Reserve regulates the money supply to maintain stable prices, full employment, and economic growth.

Open market operations involve buying or selling government securities to control the money supply and interest rates.

The Phillips curve shows the inverse relationship between unemployment and inflation rates.

Technological advancements increase the capacity of an economy to produce goods and services over time.

Potential GDP includes the maximum output an economy can produce when all resources are fully utilized.

An increase in the money supply stimulates spending and investment, thus increasing overall demand.

Keynesian economics posits that in the short run, there's an inverse relationship between unemployment and aggregate demand.

Government spending directly adds to total demand in the economy, boosting aggregate demand.

When total supply exceeds total demand, it results in a recessionary gap, according to Keynesian economics.

A rise in the money supply, with velocity and output unchanged, leads to more money chasing the same amount of goods, resulting in price inflation.

Expansionary fiscal policy aims to increase aggregate demand and stimulate economic activity during a recession.

Technological progress is the primary driver of long-term economic growth in the Solow growth model.

The Laffer curve suggests that at very high tax rates, increasing taxes further may reduce incentives to work or invest, leading to lower tax revenue.