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.   investment spending
C.   industry
Question #4
A decrease in aggregate demand (AD) can cause
A.   a recession in the economy.
B.   an expansion 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 steep; relatively flat
B.   relatively flat; remain flat
C.   relatively steep; remain steep
Question #6
The economic model of aggregate demand curve and aggregate supply curve helps explain the
A.   shifts in real GDP and the price level.
B.   expansion and contractions in individual markets.
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.   Aggregate demand is show on the vertical axis and aggregate supply is shown on the horizontal axis.
B.   Price level is shown on the vertical axis and real GDP 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.   production inputs.
B.   technological innovation.
C.   loss of consumer confidence.
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.   Congress can pass tax cuts.
B.   The Federal Reserve can increase interest rates.
C.   Government can decrease its spending.
Question #11
Which component of aggregate demand would initially be affected by a change in exchange rates?
A.   net exports
B.   government spending
C.   consumption
Question #12
If equilibrium occurs in the flat range of the AS curve, then the:
A.   economy is producing at its potential GDP.
B.   economy is experiencing unemployment.
C.   price level is not stable.
Question #13
In the AS-AD model depicting economic growth, the vertical line that represents potential GDP will
A.   shift to the right in the long run AD curve.
B.   gradually shift to the right in the long run.
C.   gradually shift to the left 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.   aggregate supply
B.   potential GDP
C.   GDP deflator
Question #16
In the AS-AD model, cyclical unemployment occurs when
A.   the economy is not at a short run equilibrium in the AS-AD model.
B.   aggregate supply increases.
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.   real GDP decreases
B.   price level in an economy rises
C.   price level in an economy falls
Question #19
If real GDP is less than potential GDP then
A.   he unemployment rate is at the natural rate and price levels are lowering
B.   the unemployment rate is high and price levels are stable.
C.   the unemployment rate is low and prices levels are rising.

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