Question 1

Improvements in inventory control help to reduce fluctuations in real GDP.

Accepted Answer

A) True 
 B)False

Question 2

A period of economic expansion ends with a business cycle trough.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following correctly describes the automatic mechanism through which the economy adjusts to long-run equilibrium?

Accepted Answer

A)  The leftward shift in short-run aggregate supply that occurs after a recession. 
B)  The rightward shift in short-run aggregate supply that occurs after a recession. 
C)  The leftward shift in aggregate demand that occurs after a recession. 
D)  The rightward shift in aggregate demand that occurs after a recession. 
A)  The leftward shift in short-run aggregate supply that occurs after a recession. 
B)  The rightward shift in short-run aggregate supply that occurs after a recession. 
C)  The leftward shift in aggregate demand that occurs after a recession. 
D)  The rightward shift in aggregate demand that occurs after a recession.

Question 4

If planned aggregate expenditure is greater than total production

Accepted Answer

A)  actual inventories will equal planned inventories. 
B)  firms will experience an unplanned increase in inventories. 
C)  GDP will increase. 
D)  the economy is in equilibrium. 
A)  actual inventories will equal planned inventories. 
B)  firms will experience an unplanned increase in inventories. 
C)  GDP will increase. 
D)  the economy is in equilibrium.

Question 5

When the price level rises,the interest rate effect states that wealth levels fall for all consumers,as they have to withdraw more funds from banks to pay for their goods and services.

Accepted Answer

A) True 
 B)False

Question 6

If workers expect the rate of inflation to rise from 3 per cent to 5 per cent next year,this should

Accepted Answer

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

Question 7

Which of the following would not be considered a positive addition to household wealth?

Accepted Answer

A)  The equity that homeowners have in their own homes. 
B)  1000 shares in Qantas Airlines. 
C)  A credit card balance. 
D)  The balance in your savings account. 
A)  The equity that homeowners have in their own homes. 
B)  1000 shares in Qantas Airlines. 
C)  A credit card balance. 
D)  The balance in your savings account.

Question 8

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 9

Technological change can reduce the inflationary effects of total spending rising over time.

Accepted Answer

A) True 
 B)False

Question 10

Figure 14.1  
-Which of the points in Figure 14.1 are possible short-run equilibriums but not long-run equilibriums?

Accepted Answer

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

Question 11

Why are the long-run effects of an increase in aggregate demand on price and output different from the short-run effects?

Accepted Answer

The long-run effects differ from the sho

Question 12

Figure 14.2  
-In Figure 14.2,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 13

The aggregate demand curve shows the relationship between the ________ and ________.

Accepted Answer

A)  inflation rate; quantity of real GDP demanded 
B)  real interest rate; quantity of real GDP supplied 
C)  nominal interest rate; quantity of real GDP demanded 
D)  price level; quantity of real GDP demanded 
A)  inflation rate; quantity of real GDP demanded 
B)  real interest rate; quantity of real GDP supplied 
C)  nominal interest rate; quantity of real GDP demanded 
D)  price level; quantity of real GDP demanded

Question 14

Spending on the national defence force is categorised as government purchases.How do increases in spending on defence 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 15

Explain what happens to inflation and unemployment during the business cycle.

Accepted Answer

The changes in the inflation rate depend

Question 16

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 17

Workers expect the rate of inflation to fall from 4 per cent to 1 per cent next year.As a result,this should

Accepted Answer

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

Question 18

Long-run macroeconomic equilibrium occurs when

Accepted Answer

A)  aggregate demand equals short-run aggregate supply. 
B)  aggregate demand equals short-run aggregate supply and they intersect at a point on the long-run supply curve. 
C)  unemployment equals zero. 
D)  output is above potential GDP. 
A)  aggregate demand equals short-run aggregate supply. 
B)  aggregate demand equals short-run aggregate supply and they intersect at a point on the long-run supply curve. 
C)  unemployment equals zero. 
D)  output is above potential GDP.

Question 19

Suppose the economy is at full employment and firms become more optimistic about the future profitability of new investment.Which of the following will happen in the short run?

Accepted Answer

A)  Output will decline. 
B)  Prices will decline. 
C)  Unemployment will decline. 
D)  Aggregate demand will shift to the left. 
A)  Output will decline. 
B)  Prices will decline. 
C)  Unemployment will decline. 
D)  Aggregate demand will shift to the left.

Question 20

When potential GDP increases,short-run aggregate supply also increases but long-run aggregate supply does not change.

Accepted Answer

A) True 
 B)False

Improvements in inventory control help to reduce fluctuations in real GDP.

A period of economic expansion ends with a business cycle trough.

Which of the following correctly describes the automatic mechanism through which the economy adjusts to long-run equilibrium?

If planned aggregate expenditure is greater than total production

When the price level rises,the interest rate effect states that wealth levels fall for all consumers,as they have to withdraw more funds from banks to pay for their goods and services.

If workers expect the rate of inflation to rise from 3 per cent to 5 per cent next year,this should

Which of the following would not be considered a positive addition to household wealth?

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

Technological change can reduce the inflationary effects of total spending rising over time.

Figure 14.1 -Which of the points in Figure 14.1 are possible short-run equilibriums but not long-run equilibriums?

Why are the long-run effects of an increase in aggregate demand on price and output different from the short-run effects?

Figure 14.2 -In Figure 14.2,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?

The aggregate demand curve shows the relationship between the and .

Spending on the national defence force is categorised as government purchases.How do increases in spending on defence affect the aggregate demand curve?

Explain what happens to inflation and unemployment during the business cycle.

How do changes in income tax policies affect aggregate demand?

Workers expect the rate of inflation to fall from 4 per cent to 1 per cent next year.As a result,this should

Long-run macroeconomic equilibrium occurs when

Suppose the economy is at full employment and firms become more optimistic about the future profitability of new investment.Which of the following will happen in the short run?

When potential GDP increases,short-run aggregate supply also increases but long-run aggregate supply does not change.

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Healthcare

Firms,the Stock Market,and Corporate Governance

Consumer Choice and Elasticity

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust

Monopolistic Competition and Oligopoly

GDP: Measuring Total Production and Income

Unemployment and Inflation

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, international Trade, and Exchange Rates

Filters

Exam 14: Economic Growth, the Financial System and Business Cycles

Improvements in inventory control help to reduce fluctuations in real GDP.

A period of economic expansion ends with a business cycle trough.

Which of the following correctly describes the automatic mechanism through which the economy adjusts to long-run equilibrium?

If planned aggregate expenditure is greater than total production

When the price level rises,the interest rate effect states that wealth levels fall for all consumers,as they have to withdraw more funds from banks to pay for their goods and services.

If workers expect the rate of inflation to rise from 3 per cent to 5 per cent next year,this should

Which of the following would not be considered a positive addition to household wealth?

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

Technological change can reduce the inflationary effects of total spending rising over time.

Figure 14.1 -Which of the points in Figure 14.1 are possible short-run equilibriums but not long-run equilibriums?

Why are the long-run effects of an increase in aggregate demand on price and output different from the short-run effects?

Figure 14.2 -In Figure 14.2,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?

The aggregate demand curve shows the relationship between the ________ and ________.

Spending on the national defence force is categorised as government purchases.How do increases in spending on defence affect the aggregate demand curve?

Explain what happens to inflation and unemployment during the business cycle.

How do changes in income tax policies affect aggregate demand?

Workers expect the rate of inflation to fall from 4 per cent to 1 per cent next year.As a result,this should

Long-run macroeconomic equilibrium occurs when

Suppose the economy is at full employment and firms become more optimistic about the future profitability of new investment.Which of the following will happen in the short run?

When potential GDP increases,short-run aggregate supply also increases but long-run aggregate supply does not change.

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Healthcare

Firms,the Stock Market,and Corporate Governance

Consumer Choice and Elasticity

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust

Monopolistic Competition and Oligopoly

GDP: Measuring Total Production and Income

Unemployment and Inflation

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, international Trade, and Exchange Rates

Filters

The aggregate demand curve shows the relationship between the and .