#1
Which component is not a part of Aggregate Expenditure?
Stock Market Investments
ExplanationAggregate Expenditure comprises consumption, investment, government spending, and net exports.
#2
The concept of 'fiscal policy' primarily involves which of the following?
Government's use of taxation and spending to influence the economy
ExplanationFiscal policy entails government actions to manage economic activity through taxes and spending.
#3
Which of the following best describes the term 'aggregate supply'?
The total product output produced by firms within the economy
ExplanationAggregate supply refers to the total quantity of goods and services firms are willing to produce.
#4
What does the Marginal Propensity to Consume (MPC) indicate?
The proportion of income spent
ExplanationMPC represents the fraction of additional income spent on consumption.
#5
In the Keynesian cross model, what condition represents equilibrium in the goods market?
Aggregate expenditure equals aggregate supply
ExplanationEquilibrium occurs when planned spending equals the output produced.
#6
Which of the following would shift the Aggregate Demand curve to the right?
An increase in government spending
ExplanationHigher government spending boosts demand for goods and services.
#7
What role does investment play in the Aggregate Expenditure model?
It is inversely related to the interest rate
ExplanationInvestment declines as interest rates rise, influencing total spending.
#8
How does an increase in net exports affect the Aggregate Demand curve?
Shifts it to the right
ExplanationHigher net exports raise total demand for goods and services.
#9
In macroeconomics, autonomous expenditure is best described as
Spending that does not depend on the level of income
ExplanationAutonomous spending occurs regardless of changes in income.
#10
The multiplier effect in macroeconomics refers to the phenomenon where
an initial change in spending leads to a larger change in national income.
ExplanationIncreased spending triggers a chain reaction of higher income and further spending.
#11
What is the significance of the equilibrium level of income in the context of the Aggregate Expenditure model?
It is the income level where aggregate expenditure equals aggregate output
ExplanationAt equilibrium, total planned spending matches the economy's total output.
#12
In the context of macroeconomics, what does the term 'liquidity trap' refer to?
A situation where interest rates are low and monetary policy becomes ineffective
ExplanationIn a liquidity trap, injecting more money into the economy fails to stimulate demand due to very low interest rates.
#13
What is the economic principle behind the 'crowding-out effect'?
Increased government borrowing leads to higher interest rates and reduced private investment
ExplanationGovernment borrowing absorbs funds, raising interest rates and reducing private investment.
#14
In macroeconomic terms, the natural rate of unemployment is composed of
Frictional and structural unemployment
ExplanationThe natural rate of unemployment comprises frictional and structural components.
#15
What does the term 'fiscal multiplier' refer to?
The ratio of a change in national income to the change in government spending that causes it
ExplanationThe fiscal multiplier measures how much national income changes in response to government spending.