Question 1

Equilibrium between aggregate supply and aggregate demand is best described as a situation in which:

Accepted Answer

A)   quantity demanded exceeds quantity supplied
B)   the slope of aggregate demand equals the slope of aggregate supply
C)   aggregate quantity demanded equals aggregate quantity supplied at a unique price level
D)   quantity supplied exceeds quantity demanded at a unique price levelE) A) and D)
F) A) and C)

Question 2

Deflation decreases the real value of household debt.

Accepted Answer

A) True 
 B)False

Question 3

A change in technology will shift the aggregate demand curve to the right, (assuming other factors remain constant).

Accepted Answer

A) True 
 B)False

Question 4

Demand- pull inflation is associated with a long- term decrease in unemployment.

Accepted Answer

A) True 
 B)False

Question 5

As a result of deflation:

Accepted Answer

A)   borrowers gain and lenders lose
B)   both borrowers and lenders gain
C)   borrowers lose and lenders gain
D)   both borrowers and lenders loseE) A) and D)
F) None of the above

Question 6

Domestic monopoly power can lead to:

Accepted Answer

A)   wage- push inflation
B)   profit- push inflation
C)   demand- pull inflation
D)   import- price- push inflationE) A) and C)
F) B) and C)

Question 7

The aggregate demand curve will shift inwards when:

Accepted Answer

A)   new technology arises
B)   the costs of production inputs rise
C)   the government increases income tax rates
D)   the government reduces company tax ratesE) A) and D)
F) B) and C)

Question 8

Which of the following is an assumption made under the 'new classical view'?

Accepted Answer

A)   wages are flexible
B)   prices are fixed
C)   wages are fixed
D)   expectations play no role in decision makingE) None of the above
F) C) and D)

Question 9

As more output is demanded, unemployment falls, therefore the demand- pull inflation that results when output increases is good for the economy.

Accepted Answer

A) True 
 B)False

Question 10

Hyperinflation is:

Accepted Answer

A)   a period of increases in interest rates
B)   a period of rapid increases in the overall price level
C)   a period of deflation and rising unemployment
D)   a sustained increase in the overall price levelE) All of the above
F) None of the above

Question 11

An increase in aggregate demand will cause a _________increase in the price level when the economy is _________of the business cycle.

Accepted Answer

A)   smaller; near the peak
B)   larger; moving into the recessionary part
C)   larger; near the trough
D)   larger; near the peakE) B) and C)
F) A) and D)

Question 12

Aggregate demand is denoted by:

Accepted Answer

A)   C + I + X - M - S - G
B)   C + I + G + (X - M) 
C)   C + I + G + X
D)   C + I + G + (M - X) E) B) and D)
F) None of the above

Question 13

Demand- pull inflation and cost- push inflation cannot occur at the same time due to the very different causes of each type of inflation.

Accepted Answer

A) True 
 B)False

Question 14

Between 2006 and 2007 oil prices nearly doubled. This caused:

Accepted Answer

A)   the short- run aggregate supply curve to move to the right
B)   a movement downwards along the short- run aggregate supply curve
C)   the short- run aggregate supply curve to move to the left
D)   a movement upwards along the short- run aggregate supply curveE) None of the above
F) A) and D)

Question 15

Why is business confidence important for an economic recovery?

Accepted Answer

If business people feel confident about ...

Question 16

The 'new classical view' states that generally government policy to increase aggregate demand will be ineffective.

Accepted Answer

A) True 
 B)False

Question 17

In the short run, diminishing returns can help to explain why the aggregate supply curve slopes upwards.

Accepted Answer

A) True 
 B)False

Question 18

Decreasing membership in and power of Australian trade unions is likely to have:

Accepted Answer

A)   increased the potential for cost- push inflation in Australia
B)   eliminated cost- push inflation in Australia
C)   decreased the potential for cost- push inflation in Australia
D)   decreased the potential for cost- push inflation in Australia, but increased the potential for demand- pull inflationE) None of the above
F) A) and C)

Question 19

The long- run aggregate supply curve will shift outwards and to the right when:

Accepted Answer

A)   the government reduces personal income tax
B)   the government increases company tax rates
C)   new technology is developed
D)   the costs of inputs in production riseE) A) and B)
F) All of the above

Question 20

Cost- push inflation can be caused by persistent increases in government expenditure.

Accepted Answer

A) True 
 B)False

Exam 12: Inflation

As more output is demanded, unemployment falls, therefore the demand- pull inflation that results when output increases is good for the economy.

Correct AnswerverifiedShow Answer

An increase in aggregate demand will cause a _________increase in the price level when the economy is _________of the business cycle.

Correct AnswerverifiedShow Answer

The long- run aggregate supply curve will shift outwards and to the right when:

Correct AnswerverifiedShow Answer

Aggregate demand is denoted by:

Correct AnswerverifiedShow Answer

Why is business confidence important for an economic recovery?

Correct AnswerverifiedIf business people feel confident about ...View AnswerShow Answer

As a result of deflation:

Correct AnswerverifiedShow Answer

Equilibrium between aggregate supply and aggregate demand is best described as a situation in which:

Correct AnswerverifiedShow Answer

Hyperinflation is:

Correct AnswerverifiedShow Answer

A change in technology will shift the aggregate demand curve to the right, (assuming other factors remain constant).

Correct AnswerverifiedShow Answer

Between 2006 and 2007 oil prices nearly doubled. This caused:

Correct AnswerverifiedShow Answer

Domestic monopoly power can lead to:

Correct AnswerverifiedShow Answer

The 'new classical view' states that generally government policy to increase aggregate demand will be ineffective.

Correct AnswerverifiedShow Answer

Demand- pull inflation is associated with a long- term decrease in unemployment.

Correct AnswerverifiedShow Answer

Deflation decreases the real value of household debt.

Correct AnswerverifiedShow Answer

Decreasing membership in and power of Australian trade unions is likely to have:

Correct AnswerverifiedShow Answer

Cost- push inflation can be caused by persistent increases in government expenditure.

Correct AnswerverifiedShow Answer

The aggregate demand curve will shift inwards when:

Correct AnswerverifiedShow Answer

Which of the following is an assumption made under the 'new classical view'?

Correct AnswerverifiedShow Answer

Demand- pull inflation and cost- push inflation cannot occur at the same time due to the very different causes of each type of inflation.

Correct AnswerverifiedShow Answer

In the short run, diminishing returns can help to explain why the aggregate supply curve slopes upwards.

Correct AnswerverifiedShow Answer

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An increase in aggregate demand will cause a _increase in the price level when the economy is _of the business cycle.

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If business people feel confident about ...
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