Economics Quiz

Aggregate demand may be measured by adding

• consumption, investment, savings, and imports

• savings, government spending, and business inventories

• consumption, investment, government spending, and net exports

• domestic private expenditures and government spending

• domestic expenditures and imports

The graph above shows the macroeconomic conditions of Wattsonia. Many economists estimate that the natural rate of unemployment is 6 percent. If this is true and the current rate of unemployment is 9.1 percent, at what rate of real gross domestic product is the economy currently producing?

• Less than Y1

• At Y1

• At Y2

• Greater than Y1 and less than Y2

• Greater than Y2

The economy of a country is currently in equilibrium at point A in the diagram above. If the government does nothing and wages are flexible, which of the following will most likely occur in the long run?

• Falling wages will shift the aggregate demand curve to the right, producing full employment.

• Rising wages will shift the aggregate demand curve to the right, producing full employment.

• The economy will remain at point A.

• Rising wages will shift the aggregate supply curve to the right, producing full employment.

• Falling wages will shift the aggregate supply curve to the right, producing full employment.

Assume that the economy is at full-employment equilibrium in the diagram shown above. Which of the following would lead to stagflation?

• A leftward shift of the short-run aggregate supply curve only

• A rightward shift of the short-run aggregate supply curve only

• A leftward shift of the aggregate demand curve only

• A rightward shift of the aggregate demand curve only

• A rightward shift in both the short-run aggregate supply curve and the aggregate demand curve

The intersection of the aggregate supply curve and the aggregate demand curve occurs at the economy's equilibrium level of

• real investment and the interest rate

• real disposable income and unemployment

• real national output and the price level

• government expenditures and taxes

• imports and exports

A major advantage of automatic stabilizers in fiscal policy is that they

• reduce the public debt

• increase the possibility of a balanced budget

• stabilize the unemployment rate

• go into effect without passage of new legislation

• automatically reduce the inflation rate

If the government increases expenditures on goods and services and increases taxation by the same amount, which of the following will occur?

• Aggregate demand will be unchanged.

• Aggregate demand will increase.

• Interest rates will decrease.

• The money supply will decrease.

• The money supply will increase.

Faced with a large federal budget deficit, the government decides to decrease expenditures and tax revenues by the same amount. This action will affect output and interest rates in which of the following ways?

• A

• B

• C

• D

• E

A change in which of the following will cause the short-run aggregate supply curve to shift? I. The price level II. Government spending III. The cost of all inputs

• I only

• II only

• III only

• I and II only

• I, II, and III

Which of the following will most likely occur if a government adopts an annually balanced budget rule that requires the government to eliminate any deficits or surpluses?

• Unemployment will be eliminated and prices will be stable.

• The national debt will increase.

• Business cycles will become more stable.

• The automatic stabilizing effect of fiscal policy will be eliminated.

• The government will be forced to spend less when there are surpluses.