#1
Which of the following best describes the aggregate supply curve?
It shows the relationship between the quantity of goods and services supplied and the price level.
ExplanationDescribes the relationship between supply quantity and price level.
#2
What is the primary determinant of aggregate demand?
Total spending
ExplanationTotal spending determines aggregate demand.
#3
Which of the following is a component of aggregate demand?
All of the above
ExplanationAll listed options are components of aggregate demand.
#4
Which of the following is a characteristic of the long-run aggregate supply curve?
It is vertical at the potential GDP level.
ExplanationVertical at potential GDP level.
#5
What is the relationship between inflation and aggregate demand?
There is an inverse relationship; as aggregate demand increases, inflation increases.
ExplanationInverse relationship between demand and inflation.
#6
What is the relationship between the short-run aggregate supply curve and the price level?
It slopes upward due to increasing input costs.
ExplanationUpward slope due to input cost rise.
#7
What is the relationship between the short-run and long-run aggregate supply curves?
They intersect at the equilibrium output level.
ExplanationIntersection at equilibrium output.
#8
What happens to equilibrium output and price level in the short run when aggregate demand increases?
Output increases, and the price level increases.
ExplanationOutput and price level rise with demand increase.
#9
What is the concept of the multiplier effect in macroeconomics?
It describes the process by which an initial change in spending leads to a larger change in aggregate demand and output.
ExplanationInitial spending change leads to larger demand and output change.
#10
Which of the following would cause a rightward shift of the aggregate supply curve?
An improvement in technology
ExplanationTechnological improvement shifts supply rightward.
#11
Which of the following best describes a negative supply shock?
It causes the aggregate supply curve to shift leftward.
ExplanationLeftward shift due to negative supply shock.
#12
In the AS-AD model, what happens to equilibrium output and price level in the long run when aggregate demand increases?
Output remains unchanged, but the price level increases.
ExplanationOutput steady, price level increases in the long run.
#13
What is the crowding-out effect in economics?
It refers to the decrease in investment caused by an increase in government borrowing.
ExplanationDecrease in investment due to government borrowing increase.
#14
What is the meaning of the term 'stagflation'?
A situation of high inflation and high unemployment occurring simultaneously.
ExplanationHigh inflation and unemployment simultaneously.
#15
What is the concept of the liquidity trap in monetary policy?
It refers to a situation where interest rates are so low that monetary policy becomes ineffective.
ExplanationLow rates render monetary policy ineffective.