Econ 002 - Principles of Macroeconomics » Winter 2021 » Module 6 Quiz

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Question #1
How does an economist depict cyclical unemployment on an aggregate demand-aggregate supply (AD-AS) diagram?
A.   By depicting how much the AD curve has moved past potential or full employment.
B.   By depicting the duration of the recession on the diagram.
C.   Showing how close the economy is to potential or full employment level of GDP.
Question #2
As interest rates rise, the effect on aggregate demand is to
A.   increase consumer borrowing and saving.
B.   reduce consumer borrowing and consumption spending.
C.   increase firm borrowing and investment spending.
Question #3
Aggregate Demand (AD) is defined as C + I + G + (X-M). I refers to ________.
A.   interest rates
B.   industry
C.   investment spending
Question #4
A decrease in aggregate demand (AD) can cause
A.   an expansion in the economy.
B.   a recession in the economy.
C.   a decrease in cyclical unemployment.
Question #5
Aggregate supply curves, for high levels of output, are ________ and ________ for low levels of output.
A.   relatively flat; remain flat
B.   relatively steep; remain steep
C.   relatively steep; relatively flat
Question #6
The economic model of aggregate demand curve and aggregate supply curve helps explain the
A.   expansion and contractions in individual markets.
B.   shifts in real GDP and the price level.
C.   three goals of economic policy which are economic growth, high inflation, and full employment.
Question #7
What accurately describes the AD-AS model?
A.   Price level is shown on the vertical axis and real GDP is shown on the horizontal axis.
B.   Aggregate demand is show on the vertical axis and aggregate supply is shown on the horizontal axis.
C.   Real GDP is shown on the vertical axis and the price level is shown on the horizontal axis.
Question #8
Events that can cause a shift in the aggregate demand might include
A.   loss of consumer confidence.
B.   production inputs.
C.   technological innovation.
Question #9
Which of the following descriptions reflects the AD-AS model most accurately?
A.   Real GDP is shown on the vertical axis and the price level is shown on the horizontal axis.
B.   Aggregate supply is shown on the horizontal axis and aggregate demand is show on the vertical axis.
C.   Real GDP is shown on the horizontal axis and price level is shown on the vertical axis.
Question #10
If the government saw that consumer confidence was low, what step can it take to shift the AD to the right?
A.   Government can decrease its spending.
B.   Congress can pass tax cuts.
C.   The Federal Reserve can increase interest rates.
Question #11
Which component of aggregate demand would initially be affected by a change in exchange rates?
A.   government spending
B.   consumption
C.   net exports
Question #12
If equilibrium occurs in the flat range of the AS curve, then the:
A.   economy is producing at its potential GDP.
B.   price level is not stable.
C.   economy is experiencing unemployment.
Question #13
In the AS-AD model depicting economic growth, the vertical line that represents potential GDP will
A.   gradually shift to the left in the long run.
B.   shift to the right in the long run AD curve.
C.   gradually shift to the right in the long run.
Question #14
The term "full employment GDP" is synonymous with which of the following?
A.   potential GDP
B.   macroeconomic equilibrium
C.   aggregate GDP
Question #15
What term is used to describe the maximum quantity that an economy can produce, in the context of its existing inputs, market and legal institutions?
A.   GDP deflator
B.   aggregate supply
C.   potential GDP
Question #16
In the AS-AD model, cyclical unemployment occurs when
A.   aggregate supply increases.
B.   the economy is not at a short run equilibrium in the AS-AD model.
C.   actual GDP falls below potential real GDP in the equilibrium of the AD and short-run AS curves.
Question #17
An AD/AS model that shows the equilibrium in a flat section of the aggregate supply curve suggests
A.   the economy is in recession.
B.   potential GDP is being met.
C.   potential GDP is being exceeded.
Question #18
If the aggregate supply increases, the ________.
A.   price level in an economy falls
B.   price level in an economy rises
C.   real GDP decreases
Question #19
If real GDP is less than potential GDP then
A.   the unemployment rate is high and price levels are stable.
B.   he unemployment rate is at the natural rate and price levels are lowering
C.   the unemployment rate is low and prices levels are rising.

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