Question 1

The aggregate supply curve is upward sloping _____.

Accepted Answer

A)   in the long run
B)   in the short run
C)   when the marginal cost of production is high
D)   when wages rise faster than inﬂation B

Question 2

Total expenditure in an economy is equal to consumption, plus savings, plus government purchases, plus imports.

Accepted Answer

A) True 
 B)False  False

Question 3

The following ﬁgure shows the business cycle for an economy over time. Refer to the ﬁgure to answer the question.  An economic boom in the country is represented by _____.

Accepted Answer

A)   point A
B)   point B
C)   point C
D)   point D C

Question 4

Which of the following will occur when net exports in an economy increase?

Accepted Answer

A)   The aggregate demand curve will shift to the left.
B)   The aggregate supply curve will shift to the right.
C)   The aggregate supply curve will shift to the left.
D)   The aggregate demand curve will shift to the right.

Question 5

Explain the Organisation for Economic Co-operation and Development (OECD) summary forecast for Germany using aggregate demand-aggregate supply analysis: 'The export-led recovery is continuing, with domestic demand, notably business investment and private consumption, increasingly contributing to growth. Employment continues to rise and, coupled with wage increases, should support private consumption growth over the next couple of years.'

Accepted Answer

The answer of Explain the Organisation for Economic Co-operation and...

Question 6

During a recession, a ﬁrm that faces an elastic demand curve should _____ to increase revenues.

Accepted Answer

A)   engage in price wars
B)   offer niche, high-quality goods
C)   offer price discounts
D)   increase the ﬁxed costs of production

Question 7

In the early 2010s the UK economy was characterized by _____.

Accepted Answer

A)   low inﬂation and unemployment levels
B)   high interest rates since growth was strong
C)   rising unemployment and tax increases
D)   low budget and current account deﬁcits

Question 8

The simple circular ﬂow model shows that _____.

Accepted Answer

A)   ﬁrms supply inputs to households and households supply output to ﬁrms
B)   households supply goods and services to the economy
C)   ﬁrms supply output to households and households supply inputs to ﬁrms
D)   households supply both output and inputs to the economy

Question 9

The level of aggregate demand in an economy is the same as the level of _____.

Accepted Answer

A)   total expenditure
B)   net investment
C)   government spending
D)   total consumption

Question 10

In the circular ﬂow model, households offer the services of factors of production to ﬁrms in return for income.

Accepted Answer

A) True 
 B)False

Question 11

In an inﬂationary recession, _____.

Accepted Answer

A)   national output falls but inﬂation rises
B)   both national output and inﬂation rise
C)   national output rises but inﬂation falls
D)   both national output and inﬂation fall

Question 12

Net exports is equal to _____.

Accepted Answer

A)   exports minus the inﬂation rate
B)   exports plus imports
C)   imports plus the inﬂation rate
D)   exports minus imports

Question 13

Firms that have high ﬁxed costs tend to be highly proﬁtable during a recession.

Accepted Answer

A) True 
 B)False

Question 14

When the aggregate demand curve shifts to the right, _____.

Accepted Answer

A)   the level of national output decreases in real terms
B)   national output in the economy remains unchanged
C)   the willingness to demand national output increases
D)   the level of inﬂation in the economy falls

Question 15

Inﬂation is the average level of prices in an economy.

Accepted Answer

A) True 
 B)False

Question 16

An increase in the real wage rate leads to an increase in the aggregate supply.

Accepted Answer

A) True 
 B)False

Question 17

When households decrease consumption spending, which of the following is likely to occur?

Accepted Answer

A)   The overall level of economic activity in the circular ﬂow of income will remain unchanged.
B)   Firms will increase the level of investment in capital equipment and assets.
C)   Firms will employ more factors of production in an attempt to stimulate household spending.
D)   Firms will decrease their demand for the factors of production from households.

Question 18

When the factors of production are hired to produce output, _____.

Accepted Answer

A)   the costliest resources available in the market are usually employed
B)   the level of spending on goods and services will fall
C)   income is generated for households to spend on goods
D)   ﬁrms will use the income they earn to buy goods and services

Question 19

When the rate of in?ation in an economy is low, _____ in order to avoid de?ation.

Accepted Answer

A)   the government has to reduce spending
B)   the central bank has to raise interest rates
C)   the central bank has to cut interest rates
D)   the government has to increase taxes

Question 20

An injection into the circular ﬂow is additional spending on goods and services that does not come from _____.

Accepted Answer

A)   spending by consumers on exports
B)   income earned by households
C)   the investments made by ﬁrms
D)   government spending

Exam 9: Introduction to the Macroeconomy

The aggregate supply curve is upward sloping _____.

Total expenditure in an economy is equal to consumption, plus savings, plus government purchases, plus imports.

The following ﬁgure shows the business cycle for an economy over time. Refer to the ﬁgure to answer the question. An economic boom in the country is represented by _____.

Which of the following will occur when net exports in an economy increase?

During a recession, a ﬁrm that faces an elastic demand curve should _____ to increase revenues.

In the early 2010s the UK economy was characterized by _____.

The simple circular ﬂow model shows that _____.

The level of aggregate demand in an economy is the same as the level of _____.

In the circular ﬂow model, households offer the services of factors of production to ﬁrms in return for income.

In an inﬂationary recession, _____.

Net exports is equal to _____.

Firms that have high ﬁxed costs tend to be highly proﬁtable during a recession.

When the aggregate demand curve shifts to the right, _____.

Inﬂation is the average level of prices in an economy.

An increase in the real wage rate leads to an increase in the aggregate supply.

When households decrease consumption spending, which of the following is likely to occur?

When the factors of production are hired to produce output, _____.

When the rate of in?ation in an economy is low, _____ in order to avoid de?ation.

An injection into the circular ﬂow is additional spending on goods and services that does not come from _____.