Question 1

A 'technical recession' is defined as

Accepted Answer

A)  one year of negative economic growth. 
B)  six months of negative economic growth. 
C)  a contraction in the economic growth rate from 5 per cent to 3 per cent. 
D)  a period of rising prices. 
A)  one year of negative economic growth. 
B)  six months of negative economic growth. 
C)  a contraction in the economic growth rate from 5 per cent to 3 per cent. 
D)  a period of rising prices.

Question 2

The impact of a natural disaster on consumers in the economy can make them very pessimistic about their future incomes.How would an increase in pessimism affect the aggregate demand curve?

Accepted Answer

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

Question 3

Outline the phases of the business cycle,and explain why business cycles have generally become less severe in Australia since the 1950s.
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_____________________________________________________________________________________________

Accepted Answer

The phases are: the expansion phase,the

Question 4

The short-run aggregate supply curve is upward sloping because wages rise more slowly than output prices.

Accepted Answer

A) True 
 B)False

Question 5

Workers expect the rate of inflation to fall from 5 per cent to 2 per cent next year.As a result,this should

Accepted Answer

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

Question 6

What is the level of real GDP called in the long run?

Accepted Answer

A)  Frictional GDP 
B)  Short-run GDP 
C)  Potential GDP 
D)  Low capacity GDP 
A)  Frictional GDP 
B)  Short-run GDP 
C)  Potential GDP 
D)  Low capacity GDP

Question 7

The result of lower personal income taxes is

Accepted Answer

A)  a decrease in aggregate demand. 
B)  a decrease in disposable income. 
C)  an increase in aggregate demand. 
D)  an increase in transfer payments. 
A)  a decrease in aggregate demand. 
B)  a decrease in disposable income. 
C)  an increase in aggregate demand. 
D)  an increase in transfer payments.

Question 8

After an unexpected increase in the price of oil,the long-run adjustment ________ the price level and ________ the unemployment rate as they return to their original levels.

Accepted Answer

A)  increases; increases 
B)  increases; decreases 
C)  decreases; increases 
D)  decreases; decreases 
A)  increases; increases 
B)  increases; decreases 
C)  decreases; increases 
D)  decreases; decreases

Question 9

Which of the following goods would usually see the largest decline in demand during a recession?

Accepted Answer

A)  Cars 
B)  Food 
C)  Clothing 
D)  Hair cuts 
A)  Cars 
B)  Food 
C)  Clothing 
D)  Hair cuts

Question 10

The 'long boom' in Australia referred to the general period of strong economic growth that occurred between _______.

Accepted Answer

A)  1928 and 1931 
B)  the late 1950s to the late 1980s 
C)  the late 1940s to the early 1970s 
D)  1991 and 2007 
A)  1928 and 1931 
B)  the late 1950s to the late 1980s 
C)  the late 1940s to the early 1970s 
D)  1991 and 2007

Question 11

Why might the short-run aggregate supply curve shift to the right in the long run,following a decrease in aggregate demand?

Accepted Answer

A)  Workers and firms adjust their expectations of wages and prices downward and they accept lower wages and prices. 
B)  Workers and firms adjust their expectations of wages and prices downward and they push for higher wages and prices. 
C)  Workers and firms adjust their expectations of wages and prices upward and they push for higher wages and prices. 
D)  Workers and firms adjust their expectations of wages and prices upward and they accept lower wages and prices. 
A)  Workers and firms adjust their expectations of wages and prices downward and they accept lower wages and prices. 
B)  Workers and firms adjust their expectations of wages and prices downward and they push for higher wages and prices. 
C)  Workers and firms adjust their expectations of wages and prices upward and they push for higher wages and prices. 
D)  Workers and firms adjust their expectations of wages and prices upward and they accept lower wages and prices.

Question 12

Which of the following will shift the aggregate demand curve to the left,ceteris paribus?

Accepted Answer

A)  An increase in interest rates 
B)  An increase in disposable income 
C)  An increase in expected profits for firms 
D)  An increase in net exports 
A)  An increase in interest rates 
B)  An increase in disposable income 
C)  An increase in expected profits for firms 
D)  An increase in net exports

Question 13

How do changes in income tax policies affect aggregate demand?

Accepted Answer

A)  Higher taxes increase disposable income, consumption and aggregate demand. 
B)  Higher taxes reduce disposable income, consumption and aggregate demand. 
C)  Higher taxes increase corporate investment and aggregate demand. 
D)  Higher taxes increase aggregate supply and thus increase aggregate demand as well. 
A)  Higher taxes increase disposable income, consumption and aggregate demand. 
B)  Higher taxes reduce disposable income, consumption and aggregate demand. 
C)  Higher taxes increase corporate investment and aggregate demand. 
D)  Higher taxes increase aggregate supply and thus increase aggregate demand as well.

Question 14

What happens when a recession ends?

Accepted Answer

A)  Firms increase the amount of borrowing 
B)  Households decrease spending on durable goods 
C)  The household sector decreases spending substantially 
D)  Interest rates decrease 
A)  Firms increase the amount of borrowing 
B)  Households decrease spending on durable goods 
C)  The household sector decreases spending substantially 
D)  Interest rates decrease

Question 15

Which of the following is true of a long-run aggregate supply curve?

Accepted Answer

A)  It is downward sloping when prices are falling and upward sloping when prices are rising. 
B)  It is upward sloping due to the effects of changes in the price level on production. 
C)  It is the same as the short-run aggregate supply curve at full-employment equilibrium. 
D)  It is vertical at the full employment level of output. 
A)  It is downward sloping when prices are falling and upward sloping when prices are rising. 
B)  It is upward sloping due to the effects of changes in the price level on production. 
C)  It is the same as the short-run aggregate supply curve at full-employment equilibrium. 
D)  It is vertical at the full employment level of output.

Question 16

Which of the following is not a reason why the Australian economy has generally been more stable since 1950 than before that time?

Accepted Answer

A)  Goods have become a larger fraction of GDP and services have become a smaller fraction of GDP. 
B)  The government has actively pursued economic policy to combat recessions and prolong expansions. 
C)  Unemployment benefits and other government programs curtail the decline in spending that occurs during a recession. 
D)  Services have become a larger fraction of GDP and goods have become a smaller fraction of GDP. 
A)  Goods have become a larger fraction of GDP and services have become a smaller fraction of GDP. 
B)  The government has actively pursued economic policy to combat recessions and prolong expansions. 
C)  Unemployment benefits and other government programs curtail the decline in spending that occurs during a recession. 
D)  Services have become a larger fraction of GDP and goods have become a smaller fraction of GDP.

Question 17

If Australia's economic growth rate is slower relative to other countries' economic growth rates,this will

Accepted Answer

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

Question 18

Rational expectations means that workers and firms form their expectations using

Accepted Answer

A)  all the information available to them. 
B)  only information from the past. 
C)  only information provided to them by the government. 
D)  only information gathered from random sources. 
A)  all the information available to them. 
B)  only information from the past. 
C)  only information provided to them by the government. 
D)  only information gathered from random sources.

Question 19

The dynamic aggregate demand and aggregate supply model assumes that potential GDP is constant across time.

Accepted Answer

A) True 
 B)False

Question 20

Use the dynamic aggregate demand and aggregate supply model to illustrate a supply shock that causes an increase in the price level and a decline in real GDP.Assume that potential GDP continues to grow due to other factors,and that the aggregate demand curve does not change.
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

The economy begins at the point P₁Y₁ on th

A 'technical recession' is defined as

The impact of a natural disaster on consumers in the economy can make them very pessimistic about their future incomes.How would an increase in pessimism affect the aggregate demand curve?

Outline the phases of the business cycle,and explain why business cycles have generally become less severe in Australia since the 1950s. _ _

The short-run aggregate supply curve is upward sloping because wages rise more slowly than output prices.

Workers expect the rate of inflation to fall from 5 per cent to 2 per cent next year.As a result,this should

What is the level of real GDP called in the long run?

The result of lower personal income taxes is

After an unexpected increase in the price of oil,the long-run adjustment the price level and the unemployment rate as they return to their original levels.

Which of the following goods would usually see the largest decline in demand during a recession?

The 'long boom' in Australia referred to the general period of strong economic growth that occurred between _______.

Why might the short-run aggregate supply curve shift to the right in the long run,following a decrease in aggregate demand?

Which of the following will shift the aggregate demand curve to the left,ceteris paribus?

How do changes in income tax policies affect aggregate demand?

What happens when a recession ends?

Which of the following is true of a long-run aggregate supply curve?

Which of the following is not a reason why the Australian economy has generally been more stable since 1950 than before that time?

If Australia's economic growth rate is slower relative to other countries' economic growth rates,this will

Rational expectations means that workers and firms form their expectations using

The dynamic aggregate demand and aggregate supply model assumes that potential GDP is constant across time.

Use the dynamic aggregate demand and aggregate supply model to illustrate a supply shock that causes an increase in the price level and a decline in real GDP.Assume that potential GDP continues to grow due to other factors,and that the aggregate demand curve does not change. _ _

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

A 'technical recession' is defined as

The impact of a natural disaster on consumers in the economy can make them very pessimistic about their future incomes.How would an increase in pessimism affect the aggregate demand curve?

The short-run aggregate supply curve is upward sloping because wages rise more slowly than output prices.

Workers expect the rate of inflation to fall from 5 per cent to 2 per cent next year.As a result,this should

What is the level of real GDP called in the long run?

The result of lower personal income taxes is

After an unexpected increase in the price of oil,the long-run adjustment ________ the price level and ________ the unemployment rate as they return to their original levels.

Which of the following goods would usually see the largest decline in demand during a recession?

The 'long boom' in Australia referred to the general period of strong economic growth that occurred between _______.

Why might the short-run aggregate supply curve shift to the right in the long run,following a decrease in aggregate demand?

Which of the following will shift the aggregate demand curve to the left,ceteris paribus?

How do changes in income tax policies affect aggregate demand?

What happens when a recession ends?

Which of the following is true of a long-run aggregate supply curve?

Which of the following is not a reason why the Australian economy has generally been more stable since 1950 than before that time?

If Australia's economic growth rate is slower relative to other countries' economic growth rates,this will

Rational expectations means that workers and firms form their expectations using

The dynamic aggregate demand and aggregate supply model assumes that potential GDP is constant across time.

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

After an unexpected increase in the price of oil,the long-run adjustment the price level and the unemployment rate as they return to their original levels.