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.   Showing how close the economy is to potential or full employment level of GDP.
B.   By depicting how much the AD curve has moved past potential or full employment.
C.   By depicting the duration of the recession on the diagram.
Question #2
As interest rates rise, the effect on aggregate demand is to
A.   reduce consumer borrowing and consumption spending.
B.   increase firm borrowing and investment spending.
C.   increase consumer borrowing and saving.
Question #3
Aggregate Demand (AD) is defined as C + I + G + (X-M). I refers to ________.
A.   industry
B.   investment spending
C.   interest rates
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 steep; remain steep
B.   relatively flat; remain flat
C.   relatively steep; relatively flat
Question #6
The economic model of aggregate demand curve and aggregate supply curve helps explain the
A.   three goals of economic policy which are economic growth, high inflation, and full employment.
B.   shifts in real GDP and the price level.
C.   expansion and contractions in individual markets.
Question #7
What accurately describes the AD-AS model?
A.   Real GDP is shown on the vertical axis and the price level 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.   Aggregate demand is show on the vertical axis and aggregate supply is shown on the horizontal axis.
Question #8
Events that can cause a shift in the aggregate demand might include
A.   technological innovation.
B.   loss of consumer confidence.
C.   production inputs.
Question #9
Which of the following descriptions reflects the AD-AS model most accurately?
A.   Real GDP is shown on the horizontal axis and price level is shown on the vertical 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 vertical axis and the price level is shown on the horizontal 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.   consumption
B.   government spending
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.   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 left in the long run.
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.   aggregate GDP
B.   macroeconomic equilibrium
C.   potential 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.   potential GDP
C.   aggregate supply
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.   actual GDP falls below potential real GDP in the equilibrium of the AD and short-run AS curves.
C.   aggregate supply increases.
Question #17
  
A.   potential GDP is being met.
B.   the economy is in recession.
C.   potential GDP is being exceeded.
Question #18
If the aggregate supply increases, the ________.
A.   price level in an economy rises
B.   real GDP decreases
C.   price level in an economy falls
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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