Aggregate Supply Quiz Questions
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The definition of aggregate supply is:
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The definition of aggregate supply is:
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The total amount of goods and services in an economy.
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The sum of goods and services in the short run.
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Explore key concepts of macroeconomics with the Aggregate Supply Quiz. Assess your understanding of the aggregate supply curve, its shifts, and the impact of supply-side policies on the economy. This quiz is crucial for students studying economics or professionals in economic planning.
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1. What does the aggregate supply curve show?
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The total demand for goods and services in an economy
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The supply of services in an economy
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The total supply of goods and services in an economy
Correct Answer
A. The total supply of goods and services in an economyExplanation
The aggregate supply curve shows the total supply of goods and services in an economy. It represents the relationship between the overall price level and the quantity of output that firms are willing and able to supply. As the price level increases, firms are incentivized to produce more goods and services, leading to an upward sloping aggregate supply curve. Conversely, as the price level decreases, firms may reduce their production, resulting in a downward sloping aggregate supply curve. The aggregate supply curve is an important tool for understanding the dynamics of the economy and analyzing factors that affect the overall supply of goods and services.Rate this question:
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- 3.
1. What is the slope of the short-run aggregate supply curve?
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Downward
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Upward
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Vertical
Correct Answer
A. UpwardExplanation
The correct answer is "Upward" because the short-run aggregate supply curve shows the relationship between the price level and the quantity of real GDP supplied in the short run. As the price level increases, firms are willing to supply more output due to higher profits, resulting in an upward sloping curve. Conversely, as the price level decreases, firms reduce their output due to lower profits, causing the curve to slope upwards. This relationship is based on the assumption that input prices remain constant in the short run.Rate this question:
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- 4.
1. What is the slope of the long-run aggregate supply curve?
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Upward
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Vertical
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Horizontal
Correct Answer
A. VerticalExplanation
The slope of the long-run aggregate supply curve is vertical because in the long run, the economy's output is determined by the available resources and technology, not by the price level. This means that changes in the price level do not affect the level of output in the long run, resulting in a vertical slope.Rate this question:
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- 5.
1. What will cause the LRAS curve to shift to the right?
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The LRAS curve will shift to the right if there is an improvement in the quality of the factors of production or an increase in the quantity of the factors of production
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The LRAS curve will shift to the right if there is a decrease in the quality of the factors of production or an increase in the quantity of the factors of production.
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The LRAS curve will shift to the right if there is an improvement in the quality of the factors of production or an decrease in the quantity of the factors of production
Correct Answer
A. The LRAS curve will shift to the right if there is an improvement in the quality of the factors of production or an increase in the quantity of the factors of productionExplanation
An improvement in the quality of the factors of production or an increase in the quantity of the factors of production will cause the LRAS (Long-Run Aggregate Supply) curve to shift to the right. This means that the economy's potential output will increase, as there are either better inputs or more inputs available for production. This can result in higher levels of real GDP and lower levels of unemployment in the long run.Rate this question:
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- 6.
1. The overarching goal of supply side policies is:
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To decrease the potential output of the economy by increasing the quantity of the factors of production and or improving the quality of the factors of production
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To increase the potential output of the economy by decreasing the quantity of the factors of production improving the quality of the factors of production
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To increase the potential output of the economy by increasing the quantity of the factors of production and or improving the quality of the factors of production
Correct Answer
A. To increase the potential output of the economy by increasing the quantity of the factors of production and or improving the quality of the factors of productionExplanation
Supply side policies aim to increase the potential output of the economy by either increasing the quantity of factors of production or improving their quality. By increasing the quantity of factors of production, such as labor and capital, the economy can produce more goods and services. Additionally, improving the quality of factors of production, through investments in education and technology, can also enhance productivity and output. Therefore, the correct answer is to increase the potential output of the economy by increasing the quantity of factors of production and/or improving their quality.Rate this question:
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- 7.
1. If taxes are reduced, it is hoped that:
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The will be less incentive for labor to work harder and to become more productive.
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There will be greater incentive for labor to work harder and to become more productive
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There will be no effect in the incentive for labor to work harder and to become more productive.
Correct Answer
A. There will be greater incentive for labor to work harder and to become more productiveExplanation
When taxes are reduced, individuals have more disposable income. This can lead to increased motivation for labor to work harder and become more productive. With the expectation of keeping more of their earnings, individuals are incentivized to put in more effort and strive for higher productivity. Therefore, there will be a greater incentive for labor to work harder and become more productive when taxes are reduced.Rate this question:
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- 8.
1. If businesses’ taxes are reduced:
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They will have less incentive to produce efficiently
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Their production will not be affected
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They will have more incentive to produce efficiently
Correct Answer
A. They will have more incentive to produce efficientlyExplanation
When businesses' taxes are reduced, they will have more incentive to produce efficiently. This is because lower taxes mean they can keep a larger portion of their profits, providing a financial incentive to maximize their productivity and efficiency. With reduced taxes, businesses have more resources available to invest in new technologies, improve operations, and expand their production capabilities. This increased incentive to produce efficiently can lead to higher productivity, lower costs, and ultimately, greater profitability for the businesses.Rate this question:
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- 9.
1. A reduction in trade union power will:
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Reduce the ability of unions to negotiate high wages and therefore lower the costs of production to firms, thus increasing their potential output.
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Increase the ability of unions to negotiate high wages and therefore lower the costs of production to firms, thus increasing their potential output.
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Reduce the ability of unions to negotiate high wages, therefore increasing the costs of production, and decreasing their potential output.
Correct Answer
A. Reduce the ability of unions to negotiate high wages and therefore lower the costs of production to firms, thus increasing their potential output.Explanation
A reduction in trade union power will decrease the ability of unions to negotiate high wages, which in turn lowers the costs of production for firms. This decrease in costs allows firms to increase their potential output.Rate this question:
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- 10.
1. If governments have placed many regulations on the operations of business, then this may:
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Decrease their costs of production, and increase aggregate supply
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Increase their costs of production, and reducing aggregate supply
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Decreasing their costs of production, and decreasing aggregate supply
Correct Answer
A. Increase their costs of production, and reducing aggregate supplyExplanation
The correct answer is "Increase their costs of production, and reducing aggregate supply." When governments place regulations on business operations, it often leads to increased costs for businesses. This can be due to compliance costs, such as implementing new safety measures or environmental standards, or increased administrative costs. These increased costs of production can then lead to a decrease in aggregate supply, as businesses may have to reduce their output or increase prices to offset the higher costs.Rate this question:
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- 11.
1. Privately owned profit-maximizing firms will be:
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Efficiency will not be affected.
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Much less efficient and productive than government run firms.
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Much more efficient and productive than government run firms.
Correct Answer
A. Much more efficient and productive than government run firms.Explanation
Privately owned profit-maximizing firms are likely to be much more efficient and productive than government-run firms. This is because private firms have a profit motive, which incentivizes them to operate efficiently and maximize their productivity in order to generate higher profits. They have the flexibility to make quick decisions and adapt to market demands, without being constrained by bureaucratic processes and political considerations that often slow down government-run firms. Additionally, private firms are subject to competition, which further drives them to improve efficiency and productivity in order to stay competitive in the market.Rate this question:
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- 12.
1. How many phases are in the Keynesian LRAS curve?
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1
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2
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3
Correct Answer
A. 3Explanation
The Keynesian Long-Run Aggregate Supply (LRAS) curve has three phases. These phases represent different levels of output and employment in the economy. The first phase is the horizontal portion of the curve, indicating a recessionary gap with high unemployment and low output. The second phase is the upward sloping portion, indicating a range of output levels where increases in aggregate demand result in higher prices but not significant increases in output or employment. The third phase is the vertical portion, indicating full employment and maximum output where increases in aggregate demand only lead to higher prices and not higher output.Rate this question:
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- 13.
1. In the last phase of the Keynesian LRAS curve, it is impossible to:
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Decrease output
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Increase output
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Output doesn’t change
Correct Answer
A. Increase outputExplanation
In the last phase of the Keynesian LRAS curve, it is impossible to increase output. This is because the Keynesian LRAS curve represents the long-run aggregate supply, which is the level of output that can be sustained in the long run. In the last phase, the economy is already operating at its full potential and any attempt to increase output beyond this level would lead to inflationary pressures. Therefore, increasing output is not possible in this phase.Rate this question:
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Mar 21, 2023Quiz Edited by
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Sep 20, 2010Quiz Created by
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