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WorksheetsAggregate Demand Component and Business Cycle
Total questions: 12
Worksheet time: 9mins
Consider the following data for a hypothetical economy.
Using this data, which one of the following statements about the hypothetical economy is correct?
A. It is contracting, because savings are greater than taxation receipts.
B. It is contracting, because leakages are greater than injections.
C. It is expanding, because injections are greater than leakages.
D. It is expanding, because imports are greater than private investment.
Which one of the following actions are economists most likely to consider as investment expenditure?
A. an individual buying shares
B. a supermarket installing self-serve checkouts
C. a company paying its workers higher wages
D. a household purchasing a home entertainment unit
As a component of Aggregate Demand, Private Investment expenditure (I) would:
not include the purchase of new machinery by firms.
include the purchase of a microwave by a family.
include the construction of new houses on the outskirts of Melbourne and in regional towns such as Ballarat.
include spending on government infrastructure projects around Australia.
The largest component of Aggregate Demand is:
A. Exports minus imports (Net Exports)
B. Government spending
C. Private Consumption spending
D. Private Investment spending
Which one of the following is a leakage from the circular flow model of income?
A. an increase in consumption spending
B. transfer payments made by the government
C. an increase in imports
D. an increase in investment spending
Which of the following combination of indicators would be most likely to be considered ‘lagging’ indicators?
A. i, ii, iii
B. i, iv, v
C. ii, v, vi
D. i, v, vii
Which of the following is most likely to be considered Investment expenditure within the Australian economy?
A. An individual educating themself
B. The government paying wages to university lecturers
C. A trucking business purchasing more vehicles
D. China buying more iron ore from Australia
Government spending on the East West Link in Melbourne is an example of:
A. business confidence.
B. good financial management.
C. government infrastructure spending.
D. government consumption spending.
If the value of each of the following components were reduced by 10%, which would have the largest negative impact on aggregate demand and economic growth?
A. net exports
B. consumption
C. private investment
D. government spending
The diagram below represents the circular flow model of income, with one major imperfection.
Which of the following accurately describes the imperfection?
A. The arrows relating to flows 1 and 2 are pointing in the wrong direction
B. Leakages and injections are in the wrong position
C. Savings and Investment are in the wrong position
D. Exports and Imports are in the wrong position
In relation to the business cycle diagram above, which of the following statements is incorrect?
A. At points i and v the rate of unemployment is likely to be relatively high
B. At point iv, wages growth is likely to be rising
C. At points iii and vi, inflation is likely to be high
D. At point ii, import spending is likely to be rising
Which of the following would be expected to occur during a recovery in the business cycle?
(a) Higher levels of unemployment
(b) A fall in the volume of imports purchased
(c) A fall in the total number of hours worked
(d) Rising job vacancies and job advertisements
