Question 1

Which of the following experiences in the Australian economy led to an increase in the unemployment rate and the inflation rate?

Accepted Answer

A)  The world oil shock of 1974 
B)  The policy of high interest rates in the late 1980s 
C)  The introduction of the Goods and Services Tax (GST) in 2000 
D)  The introduction of unemployment benefit payments in 1944 
A)  The world oil shock of 1974 
B)  The policy of high interest rates in the late 1980s 
C)  The introduction of the Goods and Services Tax (GST) in 2000 
D)  The introduction of unemployment benefit payments in 1944

Question 2

Which of the following is one of the explanations as to why the aggregate demand curve slopes downward?

Accepted Answer

A)  Increases in the price level lower the interest rate and decrease consumption spending. 
B)  Increases in the price level lower the interest rate and decrease investment spending. 
C)  Increases in Australia's price level relative to the price level in other countries lowers net exports. 
D)  Increases in the price level raise real wealth and lowers consumption spending. 
A)  Increases in the price level lower the interest rate and decrease consumption spending. 
B)  Increases in the price level lower the interest rate and decrease investment spending. 
C)  Increases in Australia's price level relative to the price level in other countries lowers net exports. 
D)  Increases in the price level raise real wealth and lowers consumption spending.

Question 3

An increase in disposable income will shift the aggregate demand curve to the right.

Accepted Answer

A) True 
 B)False

Question 4

An adverse supply shock causes the short-run aggregate supply curve to shift left,increasing the price level.

Accepted Answer

A) True 
 B)False

Question 5

Explain how the aggregate demand and supply model can be made more dynamic.
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

We can make the aggregate demand and sup

Question 6

Starting from long-run equilibrium,use the basic (static)aggregate demand and aggregate supply diagram to show what happens in both the long run and the short run when there is a decline in wealth.
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

In the following graph,before the declin

Question 7

What is the result of an increase in the price level?

Accepted Answer

A)  This will shift the aggregate demand curve to the left. 
B)  This will shift the aggregate demand curve to the right. 
C)  This will move the economy down along a stationary aggregate demand curve. 
D)  This will move the economy up along a stationary aggregate demand curve. 
A)  This will shift the aggregate demand curve to the left. 
B)  This will shift the aggregate demand curve to the right. 
C)  This will move the economy down along a stationary aggregate demand curve. 
D)  This will move the economy up along a stationary aggregate demand curve.

Question 8

Suppose the economy is at point A in Figure 15.1.If consumer spending increases in the economy,where will the eventual long-run equilibrium be?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
A)  A 
B)  B 
C)  C 
D)  D

Question 9

Which of the following is a true statement about the length of recessions and expansions in the Australian economy?

Accepted Answer

A)  After 1950, the length of expansions equalled the length of recessions. 
B)  After 1950, the length of expansions was much less than the length of recessions. 
C)  After 1950, the length of expansions was much longer than the length of recessions. 
D)  After 1950, the length of expansions was brief and almost non-existent. 
A)  After 1950, the length of expansions equalled the length of recessions. 
B)  After 1950, the length of expansions was much less than the length of recessions. 
C)  After 1950, the length of expansions was much longer than the length of recessions. 
D)  After 1950, the length of expansions was brief and almost non-existent.

Question 10

'Monetarism' is a school of thought put forth by Milton Friedman in the 1940s.He argued that the economy would most likely be

Accepted Answer

A)  below potential GDP. 
B)  at potential GDP. 
C)  unstable. 
D)  above potential GDP. 
A)  below potential GDP. 
B)  at potential GDP. 
C)  unstable. 
D)  above potential GDP.

Question 11

Suppose the economy is at a short-run equilibrium GDP that lies above potential GDP.Which of the following will occur because of the automatic mechanism adjusting the economy back to potential GDP?

Accepted Answer

A)  output will increase 
B)  prices will decline 
C)  unemployment will decline 
D)  aggregate supply will shift to the left 
A)  output will increase 
B)  prices will decline 
C)  unemployment will decline 
D)  aggregate supply will shift to the left

Question 12

Total motor vehicle sales in Australia

Accepted Answer

A)  have slowly decreased over time. 
B)  decline by a greater percentage than does GDP during an economic contraction. 
C)  decline by a smaller percentage than does GDP during an economic contraction. 
D)  remain constant during business cycles. 
A)  have slowly decreased over time. 
B)  decline by a greater percentage than does GDP during an economic contraction. 
C)  decline by a smaller percentage than does GDP during an economic contraction. 
D)  remain constant during business cycles.

Question 13

New Keynesian macroeconomic theory emphasises the role of 'sticky' prices in the economy.

Accepted Answer

A) True 
 B)False

Question 14

If more workers leave Australia to seek out better opportunities in another country than new workers arriving into Australia,then this will

Accepted Answer

A)  shift the short-run aggregate supply curve of Australia to the left. 
B)  shift the short-run aggregate supply curve of Australia to the right. 
C)  move the Australian economy up along a stationary short-run aggregate supply curve. 
D)  move the Australian economy down along a stationary short-run aggregate supply curve. 
A)  shift the short-run aggregate supply curve of Australia to the left. 
B)  shift the short-run aggregate supply curve of Australia to the right. 
C)  move the Australian economy up along a stationary short-run aggregate supply curve. 
D)  move the Australian economy down along a stationary short-run aggregate supply curve.

Question 15

Suppose the economy is at point C in Figure 15.1.If government spending decreases in the economy,where will the eventual long-run equilibrium be?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
A)  A 
B)  B 
C)  C 
D)  D

Question 16

An 'economic contraction' begins with a/an ________ in spending by firms on capital goods and a/an ________ in spending on durable goods by households.

Accepted Answer

A)  increase; decrease 
B)  increase; increase 
C)  decrease; increase 
D)  decrease; decrease 
A)  increase; decrease 
B)  increase; increase 
C)  decrease; increase 
D)  decrease; decrease

Question 17

Refer to Figure 15.2 for the following questions.
Figure 15.2  
-In Figure 15.2,given the economy is at point A in year 1 and point B in year 2,what is the rate of increase in the price level (the inflation rate)between those two years?

Accepted Answer

A)  1.8 per cent 
B)  2.7 per cent 
C)  3.0 per cent 
D)  0.9 per cent 
A)  1.8 per cent 
B)  2.7 per cent 
C)  3.0 per cent 
D)  0.9 per cent

Question 18

Refer to Figure 15.2 for the following questions.
Figure 15.2  
-In Figure 15.2,given the economy is at point A in year 1 and point B in year 2,what will happen to the unemployment rate in year 2?

Accepted Answer

A)  It will rise. 
B)  It will fall. 
C)  It will remain constant. 
D)  There is not enough information to answer the question. 
A)  It will rise. 
B)  It will fall. 
C)  It will remain constant. 
D)  There is not enough information to answer the question.

Question 19

When the short-run aggregate supply curve and the aggregate demand curve intersect,the economy is at full employment equilibrium.

Accepted Answer

A) True 
 B)False

Question 20

What is a 'supply shock',and why might a supply shock lead to 'stagflation'?
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

A supply shock is an unexpected event th

Which of the following experiences in the Australian economy led to an increase in the unemployment rate and the inflation rate?

Which of the following is one of the explanations as to why the aggregate demand curve slopes downward?

An increase in disposable income will shift the aggregate demand curve to the right.

An adverse supply shock causes the short-run aggregate supply curve to shift left,increasing the price level.

Explain how the aggregate demand and supply model can be made more dynamic. _ _

Starting from long-run equilibrium,use the basic (static)aggregate demand and aggregate supply diagram to show what happens in both the long run and the short run when there is a decline in wealth. _ _

What is the result of an increase in the price level?

Suppose the economy is at point A in Figure 15.1.If consumer spending increases in the economy,where will the eventual long-run equilibrium be?

Which of the following is a true statement about the length of recessions and expansions in the Australian economy?

'Monetarism' is a school of thought put forth by Milton Friedman in the 1940s.He argued that the economy would most likely be

Suppose the economy is at a short-run equilibrium GDP that lies above potential GDP.Which of the following will occur because of the automatic mechanism adjusting the economy back to potential GDP?

Total motor vehicle sales in Australia

New Keynesian macroeconomic theory emphasises the role of 'sticky' prices in the economy.

If more workers leave Australia to seek out better opportunities in another country than new workers arriving into Australia,then this will

Suppose the economy is at point C in Figure 15.1.If government spending decreases in the economy,where will the eventual long-run equilibrium be?

An 'economic contraction' begins with a/an in spending by firms on capital goods and a/an in spending on durable goods by households.

Refer to Figure 15.2 for the following questions. Figure 15.2 -In Figure 15.2,given the economy is at point A in year 1 and point B in year 2,what is the rate of increase in the price level (the inflation rate)between those two years?

Refer to Figure 15.2 for the following questions. Figure 15.2 -In Figure 15.2,given the economy is at point A in year 1 and point B in year 2,what will happen to the unemployment rate in year 2?

When the short-run aggregate supply curve and the aggregate demand curve intersect,the economy is at full employment equilibrium.

What is a 'supply shock',and why might a supply shock lead to 'stagflation'? _ _

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Where Prices Come From: the Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency,government Price Setting and Taxes

Technology,production and Costs

Firms in Perfectly Competitive Markets

Monopoly Markets

Monopolistic Competition and Oligopoly

The Markets for Labour and Other Factors of Production

Government Intervention in the Market

Social Policy and Inequality

Gdp: Measuring Total Production, income and Economic Growth

Unemployment and Inflation

Money,banks and the Reserve Bank of Australia

Monetary Policy

Fiscal Policy

Comparative Advantage and the Gains From International Trade

Macroeconomics in an Open Economy

Filters

Exam 15: Aggregate Demand and Aggregate Supply Analysis

Which of the following experiences in the Australian economy led to an increase in the unemployment rate and the inflation rate?

Which of the following is one of the explanations as to why the aggregate demand curve slopes downward?

An increase in disposable income will shift the aggregate demand curve to the right.

An adverse supply shock causes the short-run aggregate supply curve to shift left,increasing the price level.

Explain how the aggregate demand and supply model can be made more dynamic. _____________________________________________________________________________________________ _____________________________________________________________________________________________

What is the result of an increase in the price level?

Suppose the economy is at point A in Figure 15.1.If consumer spending increases in the economy,where will the eventual long-run equilibrium be?

Which of the following is a true statement about the length of recessions and expansions in the Australian economy?

'Monetarism' is a school of thought put forth by Milton Friedman in the 1940s.He argued that the economy would most likely be

Suppose the economy is at a short-run equilibrium GDP that lies above potential GDP.Which of the following will occur because of the automatic mechanism adjusting the economy back to potential GDP?

Total motor vehicle sales in Australia

New Keynesian macroeconomic theory emphasises the role of 'sticky' prices in the economy.

If more workers leave Australia to seek out better opportunities in another country than new workers arriving into Australia,then this will

Suppose the economy is at point C in Figure 15.1.If government spending decreases in the economy,where will the eventual long-run equilibrium be?

An 'economic contraction' begins with a/an ________ in spending by firms on capital goods and a/an ________ in spending on durable goods by households.

Refer to Figure 15.2 for the following questions. Figure 15.2 -In Figure 15.2,given the economy is at point A in year 1 and point B in year 2,what is the rate of increase in the price level (the inflation rate)between those two years?

Refer to Figure 15.2 for the following questions. Figure 15.2 -In Figure 15.2,given the economy is at point A in year 1 and point B in year 2,what will happen to the unemployment rate in year 2?

When the short-run aggregate supply curve and the aggregate demand curve intersect,the economy is at full employment equilibrium.

What is a 'supply shock',and why might a supply shock lead to 'stagflation'? _____________________________________________________________________________________________ _____________________________________________________________________________________________

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Where Prices Come From: the Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency,government Price Setting and Taxes

Technology,production and Costs

Firms in Perfectly Competitive Markets

Monopoly Markets

Monopolistic Competition and Oligopoly

The Markets for Labour and Other Factors of Production

Government Intervention in the Market

Social Policy and Inequality

Gdp: Measuring Total Production, income and Economic Growth

Unemployment and Inflation

Money,banks and the Reserve Bank of Australia

Monetary Policy

Fiscal Policy

Comparative Advantage and the Gains From International Trade

Macroeconomics in an Open Economy

Filters

Explain how the aggregate demand and supply model can be made more dynamic. _ _

An 'economic contraction' begins with a/an in spending by firms on capital goods and a/an in spending on durable goods by households.

What is a 'supply shock',and why might a supply shock lead to 'stagflation'? _ _