Macroeconomics Unit 1-3

What happens to the equilibrium price and quantity when there is an increase in demand but no change in supply?

• The equilibrium price will decrease while the quantity remains the same.

• The equilibrium price and quantity will both decrease.

• The equilibrium price and quantity will both increase.

• The equilibrium price will remain the same while the quantity increases.

What is the formula to calculate Gross Domestic Product (GDP)?

• GDP = C + I + G - (X+M)

• GDP = C - I + G + (X-M)

• GDP = C + I - G + (X-M)

• GDP = C + I + G + (X-M)

Define inflation and explain one cause of inflation.

• Inflation is the rate at which the general level of prices for goods and services is decreasing.

• Inflation is caused by a decrease in the money supply in an economy.

• Inflation occurs when the demand for goods and services decreases.

• Inflation is the rate at which the general level of prices for goods and services is rising, leading to a decrease in purchasing power over time. One cause of inflation is an increase in the money supply in an economy without a corresponding increase in goods and services.

How does expansionary fiscal policy affect the economy during a recession?

• Expansionary fiscal policy leads to higher unemployment rates during a recession

• Expansionary fiscal policy can help stimulate economic growth, increase consumer and business spending, create jobs, and lead to economic recovery during a recession.

• Expansionary fiscal policy causes deflation in the economy during a recession

• Expansionary fiscal policy reduces government spending during a recession

Explain the concept of supply in the context of the supply and demand model.

• Supply in the supply and demand model represents the quantity of a good or service that producers are willing and able to offer for sale at different prices.

• Supply is the relationship between the price of a good and the quantity supplied by producers.

• Supply refers to the amount of money consumers are willing to pay for a product.

• Supply is the demand for goods and services in the market.

What are the components of GDP and how are they calculated?

• Consumption - Investment + Government Spending + (Exports - Imports)

• Consumption + Investment + Government Spending - (Exports - Imports)

• Consumption + Investment + Government Spending + (Exports - Imports)

• Consumption + Investment - Government Spending + (Exports - Imports)

What is the difference between demand-pull inflation and cost-push inflation?

• Demand-pull inflation is caused by supply shortages, while cost-push inflation is caused by high consumer demand.

• Demand-pull inflation results from increased production efficiency, while cost-push inflation results from decreased consumer spending.

• Demand-pull inflation occurs during economic recession, while cost-push inflation occurs during economic expansion.

• Demand-pull inflation is driven by consumer demand, while cost-push inflation is driven by production costs.

How does contractionary fiscal policy affect the economy during a period of high inflation?

• Contractionary fiscal policy leads to deflation during high inflation

• Contractionary fiscal policy has no impact on high inflation

• Contractionary fiscal policy can help reduce high inflation by decreasing overall demand in the economy.

• Contractionary fiscal policy increases overall demand in the economy

Describe a situation where there is a surplus in the market. What factors could lead to this surplus?

• A surplus in the market can be caused by overproduction, decrease in consumer demand, increase in production efficiency, or government intervention like price floors.

• Underproduction

• Increase in consumer demand

• Lack of government intervention

• Decrease in production efficiency

What role does the government play in influencing the economy through fiscal policy?

• The government influences the economy through fiscal policy by adjusting spending levels and tax rates.

• The government influences the economy through fiscal policy by setting interest rates.

• The government influences the economy through fiscal policy by controlling the stock market.

• The government influences the economy through fiscal policy by regulating international trade.