Aggregate Demand and Supply Quiz

What are the components of aggregate demand?

• Consumption, investment, government spending, net exports

• Consumption, savings, taxes, imports

• Investment, savings, taxes, exports

• Government spending, savings, imports, exports

Why does the aggregate demand curve slope down from left to right?

• Due to the substitution effect

• Because of the income effect

• As a result of the wealth effect

• Because of the interest rate effect

What is the difference between short-run and long-run aggregate supply curves?

• Short-run is vertical, long-run is horizontal

• Short-run is upward sloping, long-run is vertical

• Short-run is horizontal, long-run is upward sloping

• Short-run is vertical, long-run is downward sloping

What are the causes of demand-pull inflation?

• Increase in production costs

• Increase in aggregate demand

• Decrease in aggregate supply

• Decrease in consumer spending

What are the costs and benefits of inflation?

• Costs: reduced purchasing power; Benefits: increased savings

• Costs: increased uncertainty; Benefits: reduced debt burden

• Costs: increased savings; Benefits: reduced purchasing power

• Costs: reduced debt burden; Benefits: increased uncertainty

What is the difference between deflation and disinflation?

• Deflation is a decrease in the inflation rate; disinflation is a negative inflation rate

• Deflation is a negative inflation rate; disinflation is a decrease in the inflation rate

• Deflation is a decrease in prices; disinflation is an increase in prices

• Deflation is an increase in prices; disinflation is a decrease in prices

What are the components of the balance of payments?

• Current account, capital account, financial account

• Trade balance, income balance, transfer balance

• Capital account, trade balance, income balance

• Financial account, transfer balance, trade balance

What are the causes of a current account deficit?

• High savings rate

• Low investment rate

• High import levels

• Low export levels

What is the significance of the Marshall-Lerner condition?

• It determines the effectiveness of fiscal policy

• It predicts the impact of exchange rate changes on trade balance

• It measures the elasticity of demand for imports

• It assesses the impact of inflation on savings

What is the meaning of the J-curve effect?

• Initial worsening of trade balance after currency depreciation

• Immediate improvement of trade balance after currency depreciation

• Constant trade balance after currency depreciation

• No change in trade balance after currency depreciation