Practice Questions Exam 2

A fall in prices causes:

movement along a curve,not a shift in a curve

A fall in prices leads to a:

movement down and to the left along the same aggreagte supply curve

A government can promote the development of human capital by:

subsidizing secondary school education

the business cycle refers to the:

short-term fluctuations in economic activity

The government passes a new investment tax credit initiative. Which input in the production function changes, and what is the effect on economic growth in the country?

the capital stock increases, and economic growth is positively affected

suppose that an economy is in a recession. You woudl expect to see the unemploymet rate:

rise above the equilibrium unemployement rate

Which of the following explain the shape of the aggregate production function?

the law of diminishing returns

The government removes an existing investment tax credit. Which input in the production function changes, and what is the effect on economic growth in the country?

thecaptial stock decreases, and economic growth is negatively affected

The aggregate production function Y = f(L, H, K) shows that economic growth can occur if: (i) more labor is employed. (ii) human capital is reduced. (iii) the dependency ratio rises. (iv) the capital stock stays constant.

(i) only

New ideas can generate unlimited economic growth because they:

can be freely shared, do not depreciate, and can generate further ideas

You are the analyst preparing a forecast of the effects of macroeconomic changes in the economy. What happens to prices and GDP when corporate taxes rise in the economy?

Both pices and GDP decrease

The moral of the story of the Solow growth model is that:

capital accumulation alone cannot lead to sustainable economic growth

Consider the production functions shown here, which show the output of a bakery over time. Suppose that the bakery institutes robotic baking, which greatly increases efficiency and productivity. Which of the movements reflects this scenario?

E to C

The aggregate production function is represented as:

Y=F(L,H,K)

Which of the following scenarios shows a production function at work?

You buy flour and eggs and bake a cake to sell in your bakery.

a production funtion is:

a method through whic imputs can be tunred into outputs, given the avaliable resources

Which of the following changes will lead to an increase in both the price level and the quantity of output in an economy?

a rise in aggregate demand

output gap formula

actual-potential/potential x 100

Macroeconomic equilibrium occurs where:

aggregate demand intersects with aggregate supply

On a macroeconics scale, demand and suppply are represented by:

aggregate supply and aggregate demand

Economic expansions:

do not last forever due to adverse shocks

In Malaysia, the Community Communications Development Program teaches computer literacy skills to people in rural communities, especially women. This initiative is an example of a project that will:

enhance human capital

Suppose that an economy is in a recession. You would expect to see real GDP:

fall below potential GDP

Suppose that the Federal Reserve engages in contractionary monetary policy. Ceteris paribus, which of the graphs shows the correct effect in the AD-AS framework?

graph with decreased AD

The international trade effect is the:

inverse relationship betweeen domestic prices and net exports

Which of the following correctly describes the business cycle?

it is hte fluctuations of GDP around the poterntial output

Ceteris paribus, a decrease in exports leads to a:

left shift of AD curve

In 2019, South Africa's consumer confidence index dipped sharply. Ceteris paribus, which of the graphs shows the correct effect on aggregate demand?

left shift of AD curve

You are an analyst preparing a forecast of the effects of macroeconomic changes in the economy. Which graph shows the correct effect on prices and GDP when the government engages in contractionary fiscal policy?

left shift of AD curve

Which of the following will rise when the economy is expanding?

real GDP growth

An example of a leading indicator is:

business confidence

Which of the following is an example of effective property rights leading to economic growth?

patents

The four stages of the business cycle are:

peak, recession, trough, and expansion.

An economy's potential output level is:

the output that is possible when all resources are fully employed

A previously enacted steel tariff is removed. Which of the graphs shows the correct effect on the AD-AS framework for the country exporting steel?

increase AS curve

Expansionary monetary policy _____ consumption, investment, and net exports; _____ aggregate expenditures; and _____ aggregate demand.

increases boosts raises

Kia motors announces a plan to produce Kia automobiles in pakistan. How does this change the ecomomic growth in pakistan?

increases due to capitla accumulation

Which of the following will rise when the economy is expanding?

industrial production

Ceteris paribus, an increase in imports leads to a:

left shift of the AD curve

A rise in prices leads to a:

movement up and to the left, along the same AD curve

When inflation rises above its target rate, the Federal Reserve will:

raise in intrest rates

Ceteris Paribus, an increase in exports leads to a:

right shift of the aggregate demand curve

Expansionary monetary policy causes a:

right shift of the aggregate demand curve

Suppose that an economy is overheating. You would expect to see real GDP:

rise above potential GDP

The aggregate supply curve shows the relationship between the price level and the:

tota; quantity of output that suppliers collectively produce

Along the same aggregate production function, the level of _____ is the same.

technology

IN the AD-AS framework, price and quantity are represented by, _______ respectively

the GDP deflator and the real GDP

The government begins taxing savings in banks. Which input in the production function changes, and what is the effect on economic growth in the country?

the capital stock decreases, and the economic growth is negativley effected

Which graph correctly depicts the long-run aggregate supply curve?

vertical

Which of the following will probably rise when the economy is in a recession?

initial unemployment claims