AUGUST 25 - ECO 1200 Revision Test 2

The natural rate of output is the level of real GDP produced _____________.

• when the economy is at the natural rate of unemployment

• when the economy is at the natural rate of investment

• when the economy is at the natural rate of aggregate demand

  unemployment

• when there is no unemployment

What is the general slope of the aggregate demand curve?

 

• Vertical

• Horizontal

• Upwards

• Downwards

   

What happen to aggregate supply curve when the cost of raw materials increases significantly?

• It shifts right

• It becomes vertical

• It shifts left

• It does not shift

Which of the following does NOT cause the aggregate demand curve to shift to the left?

• decrease in government spending

• A decrease in taxes

• A decrease in consumer confidence

• A decrease in the money supply

Which of the following factors is NOT a determinant of shifting aggregate supply?

• The availability of labour

• The cost of production (e.g., wages, raw materials)

   

• The price level

• The level of technology in the economy

Stagflation is a situation where an economy experiences:

• High inflation and high unemployment, often accompanied by stagnant economic growth.

• Low inflation and low unemployment during periods of recession.

• High inflation and low unemployment with rapid economic growth.

• Low inflation and high unemployment with rapid economic growth.

Which of the following statements are TRUE of the aggregate demand curve?

• The aggregate demand curve shifts leftward when there is an increase in consumer confidence.

• The aggregate demand curve shifts rightward when interest rates increase.

• The aggregate demand curve describes the relationship between the quantity of output demanded in the short run and the price level.

• All the above.

Which of the following sources of spending is NOT included in aggregate demand?

• Consumers

• Businesses

• Government

• Foreigners

Suppose the price level increases, but due to long-term contracts, the nominal wages do not adjust immediately. As a result, workers feel that their wages are lower in real terms, leading to higher production costs for firms. This situation is a demonstration of the _____________.

• Sticky-wage theory of the short-run aggregate supply curve.

• Misperceptions theory of the short-run aggregate supply curve.

•  Sticky-price theory of the short-run aggregate supply curve.

• Classical dichotomy theory of the short-run aggregate supply curve.

According to aggregate demand and supply analysis, which of the following is TRUE?

• A one-time increase in government spending leads to a permanent increase in aggregate output.

• A one-time increase in the money supply results in a permanent boost to aggregate output.

• Monetary and fiscal policies impact output only in the short run.

• Both (A) and (B) are accurate statements.