Understanding Economic Conflicts

What is the primary goal of contractionary monetary policy?

• To encourage excessive borrowing and spending.

• To increase inflation and stimulate growth.

• To maintain current interest rates indefinitely.

• To reduce inflation and stabilize the economy.

How does an increase in government spending affect aggregate demand?

• An increase in government spending only affects supply, not demand.

• An increase in government spending decreases aggregate demand.

• An increase in government spending raises aggregate demand.

• Government spending has no effect on aggregate demand.

What happens to the supply curve when production costs decrease?

• The supply curve shifts to the right.

• The supply curve becomes vertical.

• The supply curve remains unchanged.

• The supply curve shifts to the left.

Which economic theory describes the trade-off between inflation and unemployment?

• Monetarism

• Phillips Curve

• Supply-Side Economics

• Keynesian Theory

How can economic growth lead to higher inflation rates?

• Higher inflation rates cause economic growth to slow down.

• Economic growth can increase demand, leading to higher prices and inflation.

• Economic growth reduces consumer spending, leading to lower inflation.

• Economic growth has no impact on inflation rates.

What is the relationship between interest rates and consumer spending?

• Lower interest rates lead to decreased consumer spending.

• Interest rates inversely affect consumer spending; lower rates boost spending, while higher rates reduce it.

• Interest rates have no effect on consumer spending.

• Higher interest rates always increase consumer spending.

How does a decrease in taxes influence disposable income?

• A decrease in taxes increases disposable income.

• A decrease in taxes decreases disposable income.

• A decrease in taxes only benefits the wealthy.

• A decrease in taxes has no effect on disposable income.

What effect does a rise in interest rates have on business investment?

• A rise in interest rates has no effect on business investment.

• A rise in interest rates generally decreases business investment.

• A rise in interest rates leads to more borrowing for business investment.

• A rise in interest rates increases business investment.

What is the impact of supply shocks on inflation and unemployment?

• Supply shocks have no effect on inflation or unemployment.

• Supply shocks reduce inflation and decrease unemployment.

• Supply shocks lead to lower inflation and higher unemployment.

• Supply shocks generally lead to higher inflation and higher unemployment.

How can central banks use interest rates to control inflation?

• Raising rates to increase government spending

• Lowering rates to increase inflation

• Keeping rates constant to control inflation

• Central banks use interest rates to control inflation by increasing rates to reduce spending during high inflation and decreasing rates to stimulate spending during low inflation.