ECON 202 - Module 11 Quiz

Which of the following statements best describes consumer confidence as measured by the consumer confidence index, from just prior to the Great Recession until late 2008?

According to the consumer confidence index, consumer confidence averaged around 90 prior to the Great Recession, and then it fell to below 60 in late 2008, which was the lowest it had been since 1980.

Click an item in one column, then select its match in the other column. If using a keyboard, use the tab key to highlight an item, then use the space bar to select it.

Aggregate demand curve - The total spending on goods and services at each price level Aggregate demand - The amount of total spending on goods and services in an economy Demand - The amount of spending on a product or service Demand curve - The spending on goods and services at each price level

What will happen to aggregate demand if there is a recession in the rest of the world?

Aggregate demand will decrease due to decrease in net exports.

Which of the following statements best describes the perspective of many mainstream economists?

Many mainstream economists take a Keynesian perspective, emphasizing the importance of aggregate demand, for the short run, and a neoclassical perspective, emphasizing the importance of aggregate supply, for the long run.

In which zone will small shifts in AD, either to the right or the left, have relatively little effect on the output level, but instead will have greater effect on the price level?

Neoclassical

Whether the economy is in a recession is illustrated in the AD/AS model by how close which of the following is to the potential GDP line?

Equilibrium

Which of the following best describes Keynes' argument about the economy?

He argued the economy often produced less than its full potential, not because it was technically impossible to produce more with the existing workers and machines, but because a lack of demand in the economy as a whole led to inadequate incentives for firms to produce.

Which of the following statements best describes how economic growth is represented in the AD/AS diagram?

In the AD/AS diagram, long-run economic growth due to productivity increases over time will be represented by a gradual shift to the right of aggregate supply.

Which of the following statements best describes the intermediate zone of the aggregate supply curve?

In the intermediate zone of the AS curve, movement in AD to the right will increase both the output level and the price level, while a movement in AD to the left would decrease both the output level and the price level.

Which of the following terms describes a situation where sufficient credit is available, but the economy experiences a reduction in consumption and investment?

Interest rate effect

When the interest rate decreases what will happen to aggregate demand?

Investments will increase and aggregate demand will increase

In which zone will small shifts in AD, either to the right or the left, affect the output level, but will not much affect the price level?

Keynesian

Which of the following statements about economists is correct?

Keynesian economists generally emphasize the importance of aggregate demand in determining the size of the macroeconomy over the short run.

Which of the following is considered to be the most important factor in the AD/AS model?

Productivity growth

Which of the following statements about stagflation is correct?

Stagflation results when an economy experiences high unemployment and high inflation at the same time.

Which of the following will have the greatest influence on the slope of the demand curve in a single market model?

Substitute goods

Which of the following happens when an economy's output increases and the price level decreases?

The AS curve has shifted to the right.

An unexpected event like a drought in the Midwest causing a loss of wheat crops would be an example of

a supply shock.

Fill in the blank with the correct answer by typing in the box. Aggregate supply reveals how __________ throughout the economy will react to a higher price level for outputs.

businesses

Select whether the statement is true or false. If business confidence is low, then firms tend to spend more on investment, believing that the future payoff from that investment will be substantial.

false

Fill in the blank with the correct answer by typing in the box. The Keynesian zone is the portion of the short run aggregate supply curve on the far left, which is relatively ______.

flat

Fill in the blank with the correct answer by typing in the box. _________ GDP is the quantity that an economy can produce by fully employing its existing levels of labor, physical capital, and technology, in the context of its existing market and legal institutions.

potential

Fill in the blank with the correct answer by typing in the box. Higher government spending will cause aggregate demand to shift to the ________.

right

Fill in the blank with the correct answer by typing in the box. Higher prices for inputs that are widely used across the entire economy can have a macroeconomic impact on aggregate ________.

supply

Fill in the blank with the correct answer by typing in the box. The constraints on what an economy can ______ at the macroeconomic level do not disappear just because of an increase in demand.

supply

Select whether the statement is true or false. Aggregate supply (AS) refers to the total quantity of output firms will produce and sell.

true

Select whether the statement is true or false. Higher inflation rates have typically occurred either during or just after economic booms.

true

Select whether the statement is true or false. In the long run, the most important factor shifting the aggregate supply curve is productivity growth.

true

Select whether the statement is true or false. Say's law is: "Supply creates its own demand."

true

Select whether the statement is true or false. The AD/AS model can be used to illustrate both Say's law that supply creates its own demand and Keynes' law that demand creates its own supply.

true