Related Topics
Take Another Quiz

Aggregate Demand & Aggregate Supply

20 Questions
Economics Quizzes & Trivia

Aggregate demand and aggregate supply

Questions and Answers
  • 1. 
    Which of the following would not be included in GDP?
    • A. 

      Bobbie buys a case of wine from a winery in France

    • B. 

      Boeing purchases a new metal stretching machine used to produce airplane wings.

    • C. 

      Malcolm pays a doctor $200 to treat a finger that he broke playing a dodge ball.

    • D. 

      Patrick rents a five-year old house from Craig

  • 2. 
    The Department of Commerce sums the payments made to resources to arrive at GDP in the form of wages, self-employment income, rents, interest, profits, indirect taxes, and depreciation. This method of deriving GDP is called the
    • A. 

      Opportunity cost approach

    • B. 

      Resource cost-income approach

    • C. 

      Expenditure approach

    • D. 

      Monetarist approach

  • 3. 
    The primary cause of frictional unemployment is      
    • A. 

      Discouraged workers who give up looking for work

    • B. 

      Fluctuations in aggregate demand

    • C. 

      The lack of training and marketable qualifications in job seekers

    • D. 

      Inaccurate and costly information about job opportunities

  • 4. 
    Which of the following would be officially classified as unemployed?     
    • A. 

      A school administrator who has been working as a substitute teacher one day per week while looking for a full-time job in administration

    • B. 

      A mathematician who returned to graduate school after failing to find a job the last four months

    • C. 

      A 60-year-old former steel worker who would like to work but has given up actively seeking employment

    • D. 

      A laid-off construction worker waiting to return to a previous job

  • 5. 
    When individuals are unemployed because they lack the qualifications to fill available jobs, this is called     
    • A. 

      Frictional unemployment

    • B. 

      Natural unemployment

    • C. 

      Cyclical unemployment

    • D. 

      Structural unemployment

  • 6. 
    • A. 

      An inflation rate that is equal to 4.5%

    • B. 

      An unanticipated increase in the general level of prices

    • C. 

      An increase in the general level of prices that was accurately anticipated

    • D. 

      An inflation rate that is less than what people anticipated

  • 7. 
    High and variable rates of inflation will  
    • A. 

      Distort the information delivered by market prices

    • B. 

      Encourage people to spend more time producing and less time trying to protect their wealth

    • C. 

      Decrease the risks that accompany the undertaking of long-term investment projects

    • D. 

      Promote economic growth and the efficient use of resources

  • 8. 
    The nominal salary paid to the president of the United States and the Consumer Price Index (CPI) are given for various years below.Year        Presidential Salary           CPI (2000=100)1920         $75,000                               11.61940         $75,000                                 8.11960         $100,000                              17.21980         $200,000                              49.92000         $400,000                            100.0During which of the above years was the purchasing power of the president's salary highest?
    • A. 

      1920

    • B. 

      1940

    • C. 

      1960

    • D. 

      1980

    • E. 

      2000

  • 9. 
    Which of the following explains why higher prices in the goods and services market will lead to an upward-sloping short-run aggregate supply curve?
    • A. 

      The higher prices will temporarily improve profit margins because many of the cost components of firms will be fixed in the short run

    • B. 

      The higher prices will reduce the purchasing power of the fixed quantity of money and, thereby, stimulate additional output.

    • C. 

      The higher prices will expand the economy's resource base and, thereby, stimulate additional output

    • D. 

      The higher prices will improve technology, and thereby, stimulate additional output

  • 10. 
    When economic growth (a gradual shift of LRAS to the right) expands the PPC of an economy,
    • A. 

      A higher rate of real output can be achieved in the short run, but it cannot be sustained in the long-run

    • B. 

      A larger output can be attained even if unemployment remains at its natural rate

    • C. 

      The general level of prices will rise if the money supply is held constant

    • D. 

      The equilibrium in the goods and services market will be disrupted

  • 11. 
    Which of the following would be most likely to shift the long-run aggregate supply curve (LRAS) to the right?
    • A. 

      Favorable weather conditions that increased the size of this year's grain harvest

    • B. 

      An increase in resource prices relative to product prices

    • C. 

      An increase in labor productivity as the result of improved computer technology and expansion of the Internet

    • D. 

      An increase in the cost of security as the result of terrorist activities

  • 12. 
    Macro-equilibrium requires that equilibrium be achieved in all four key macroeconomic markets and that they are in harmony with each other
    • A. 

      The above statement is true!

    • B. 

      The above statement is false!

  • 13. 
                                  1996                             1997Nominal GDP         $7,661.6 billion         $8,110.9 billionGDP Deflator          109.5                             111.6Using the information in the table, answer the following questions:a. What was the 1997 real GDP expressed in 1996 prices?b. What were the 1996 and 1997 GDPs expressed in the base-year prices?c. What was the percent change in real GDP between 1996 and 1997?d. What was the inflation rate between 1996 and 1997?
  • 14. 
  • 15. 
    A country with a civilian population of 120, 000 (all over age 16) has 100,000 employed and 10,000 unemployed persons, of which 5,000 are frictionally unemployed and another 3,000 structurally unemployed (assume no seasonal unemployment).a. What is the size of the labor forceb. What is the actual unemployment ratec. What is the labor force participation rate?d. What is the natural rate of unemployment?e. Is this economy in a recession or a boom? Explain!
  • 16. 
    Assuming the economy is operating at equilibrium, predict what happens to the equilibrium price level (inflation) and the equilibrium real national income level (GDP) in the short-run as a result of :A. a decrease in the raw materials:   AD___     APL___     GDP___B. Mexico's economy grows:            AD___     APL___     GDP___C. an increase in oil prices:              AD___     APL___     GDP___D. consumer confidence deterioratesAD___     APL___      GDP___
  • 17. 
    Given the situation in the previous question d, how will the self-correcting mechanism work to get real GDP back to the economy's long-run potential?
  • 18. 
    Given a graph with an LRAS curve that reflects an economy that is operating at less than full employment (potential level of output),a. What will happen (theoretically) to the real rate of interest and to resource prices relative to product prices?b. Is the average price level higher or lower than the economy anticipated?
  • 19. 
    Your brother graduated from college 10 years ago and started to work at a salary of $20,000. You expect to graduate this year and start to work for $35,000. If the Consumer Price Index (CPI) was 80 ten years ago and is 140 this year, who will have received the higher real starting salary?
    • A. 

      You will have

    • B. 

      Your brother did

    • C. 

      You and your brother both will have started at the same real salary level

    • D. 

      Not enough information is supplied to answer the question

  • 20. 
    Which of the following is true of the business cycle record of the United States?
    • A. 

      Recessions have been lengthier during the last two decades than was true prior to 1980

    • B. 

      Real GDP contracted throughout most of the 1950s

    • C. 

      Real GDP in 2000 was approximately the same as 1950

    • D. 

      Since 1950, the fluctuations in GDP have been less severe than before 1950