Aggregate Demand - Quiz One [ncea Level Two Economics]

10 Questions | By Kerikeri | Last updated: Feb 21, 2012 | Total Attempts: 58

Questions

Settings

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