Aggregate Demand - Quiz One [ncea Level Two Economics]

10 Questions | Total Attempts: 58

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Aggregate Demand  - Quiz One [ncea Level Two Economics]

EcoBizOnline. Com Welcome to another awesome on-line quiz from EcoBizOnline. Com. The purpose of this quiz is to check your understanding of Aggregate Demand. If you are unsure of a question, just give it your best shot :) Remember all the resources on Aggregate Demand can be found at our website www. EcoBizOnline. Com.


Questions and Answers
  • 1. 
    Aggregate demand [AD] is the total demand for final goods and services in the economy at a given time and price level. It is called 'economic activity'
    • A. 

      True

    • B. 

      False

  • 2. 
    The Aggregate Demand [AD] and Aggregate Supply [AS] economic model is used to:
    • A. 

      Provide insights into the operation of an economy.

    • B. 

      Make me really confused.

    • C. 

      Help pay John Key's salary.

    • D. 

      Aid in understanding changes in the price level [inflation], real output [GDP], employment, and unemployment.

    • E. 

      Predict when the All Blacks will win the next rugby world cup.

  • 3. 
    Yf on the Aggregate Demand [AD] and Aggregate Supply [AS] economic model, tells us that there is full employment and all resources are fully employed, and firms are working to their capacity.
    • A. 

      True

    • B. 

      False

  • 4. 
    What is a deflationary [recessionary] gap?
    • A. 

      A really pumping economy.

    • B. 

      Buy more balloons to inflate.

    • C. 

      Equilibrium income, employment and output is below the full employment [Yf]

  • 5. 
    What does Aggregate Demand consist of? Remember the formula: C + I + G + (X-M)
    • A. 

      Total consumption spending by consumers.

    • B. 

      Total costs of production.

    • C. 

      Total appreciating and depreciating exchange rate.

    • D. 

      Total investment spending by firms and Government.

    • E. 

      Net productivity gains.

    • F. 

      Total Government spending.

    • G. 

      Net Exports [Exports - Imports]

  • 6. 
    What will cause Aggregate Demand to shift to the left?
    • A. 

      Consumption spending decreases due to income tax increasing.

    • B. 

      The costs of production fall (decrease in wages).

    • C. 

      Investment spending decreases due to a lack of business confidence.

    • D. 

      The Government has a budget surplus and spends less than it receives in revenue.

    • E. 

      An appreciating exchange rate reduces the cost of importing raw materials.

    • F. 

      An increase in productivity due to new technology or a better educated workforce.

    • G. 

      Net exports fall.

    • H. 

      Decrease in indirect taxes such as GST.

  • 7. 
    Shifts in the Aggregate Demand curve depend on the level of 'spending' by major sectors of the economy.
    • A. 

      True

    • B. 

      False

  • 8. 
    Interest rate changes have a major imapct on the Aggregate Demand curve because they influence the level of spending by households and investments by firms.
    • A. 

      True

    • B. 

      False

  • 9. 
    What is an inflationary gap?
    • A. 

      Equilibrium income, output, and employment is above the full employment level of income, output, and employment.

    • B. 

      Economic bliss.

    • C. 

      The economy is operating at a level of output beyond its long-run capacity.

    • D. 

      Firms may produce the required quantity by working longer hours and paying overtime to workers.

    • E. 

      Dial 0800 John Key.

  • 10. 
    In response to an inflationary gap, wages will be forced upwards as firms compete for scarce labour [remember all resources are fully employed]. This will force the AS curve to shift to AS1, which is the long run Aggregate Supply curve or vertical at Yf. Thus, the inflationary gap will be eliminated.
    • A. 

      True

    • B. 

      False