Economics 002 - Principles of Economics II » Fall 2020 » AD As Model Quesstions Quiz

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Question #1
_______________________ are economists who generally emphasize the importance of aggregate supply in determining the size of the macroeconomy over the _____________.
A.   Neoclassical economists; long run
B.   Neoclassical economists; short run
C.   Keynesian economists; short run
D.   Keynesian economists; long run
Question #2
In an AD/ASAD/AS diagram, __________________________ could explain a rise in cyclical unemployment?
A.   a shift in AD to the left
B.   a shift to the left in either AS or AD
C.   a shift in AS to the right
D.   a shift in AS to the left
Question #3
_________________ results when an economy experiences high unemployment and high inflation at the same time.
A.   Recession
B.   Stagflation
C.   Deflation
D.   Reflation
Question #4
When prices of outputs in an economy become sufficiently high causing production to exceed potential GDP, the resulting:
A.   lower prices will lead to a lower quantity of demand.
B.   hyper-intense production will be unsustainable in the long run.
C.   downward slope in aggregate supply curve will be short run.
D.   higher wages will encourage workers to produce more at high prices.
Question #5
_______________________ happens when the economy is producing at its potential and unemployment is at the natural rate of unemployment.
A.   Full employment GDP
B.   The foreign price effect
C.   Stagflation
D.   The interest rate effect
Question #6
As the aggregate price level in an economy rises, ____________________.
A.   exports decrease
B.   consumer demand increases
C.   investment increases
D.   interest rates increase
Question #7
Which of the following will have the greatest influence on the slope of the demand curve in a single market model?
A.   higher wages
B.   wealth effects
C.   substitute goods
D.   full employment
Question #8
Aggregate supply curves are ________________________ for low levels of output, and ____________________________ for high levels of output.
A.   relatively steep; remain steep
B.   relatively steep; relatively flat
C.   relatively flat; relatively steep
D.   relatively flat; remain flat
Question #9
Economic production has fallen to less than full potential due to inadequate incentives for firms to produce. The duration of this economic condition will likely be:
A.   unknown
B.   short-term
C.   long-term
D.   indefinite
Question #10
Why is productivity growth considered to be the most important factor in the AD/ASAD/AS model?
A.   it shifts the AD curve in the short-term
B.   it shifts the AS curve in the short-term
C.   it shifts the AS curve in the long-term
D.   it shifts the AD curve in the long-term
Question #11
Melanie decided to save 20% of her annual earnings for 10 years so she would have a down payment for a house. After 5 years, what change in the economy would cause an increase in the purchasing power of the funds she has managed to save?
A.   recession
B.   deflation
C.   depression
D.   stagflation
Question #12
In macroeconomics, _____________________ denotes the relationship between the total quantity of goods and services and the price level for output.
A.   aggregate supply (AS)
B.   potential GDP
C.   macroeconomic equilibrium
D.   aggregate demand (AD)
Question #13
When the economy of a country is operating close to its full capacity:
A.   unemployment is close to zero.
B.   the unemployment rate is less than the natural rate of unemployment.
C.   the unemployment rate is greater than the natural rate of unemployment.
D.   cyclical unemployment is close to zero.
Question #14
The ____________ describes a situation where sufficient credit is available, but the economy experiences a reduction in consumption and investment.
A.   price effect
B.   interest rate effect
C.   inflation rate effect
D.   wealth effect
Question #15
Potential GDP in the U.S. will be unaffected by ____________________.
A.   the amount of capital available
B.   technology
C.   the unemployment rate
D.   government institutions
Question #16
Aggregate supply (AS) denotes the relationship between the __________________ that firms choose to produce and sell and the _________________, holding the price of inputs fixed.
A.   type of goods; input price of raw materials
B.   price of goods; number of employees
C.   total quantity; price level for output
D.   total inputs; types of goods
Question #17
In an AD/AS diagram, an increase in structural unemployment will:
A.   shift AS to the right.
B.   shift AS to the left.
C.   shift AD to the left.
D.   have no effect on AS or AD.

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