Assume that between 2005 and 2015 the price level doubled. What is the approximate average annual rate of inflation over this ten-year period?

Select one:

a.

5%

b.

2%

c.

7%

d.

1%

e.

10%

If the economy is close to full employment, what will be the result of an increase in aggregate demand?

Select one:

a.

The price level will increase a lot, and Real GDP will increase only a little.

b.

The price level will increase only a little, and Real GDP will increase a lot.

c.

Both the price level and Real GDP will increase a lot.

d.

Both the price level and Real GDP willincrease only a little.

Refer to the above graph to answer this question. What could cause the movement from point A to point B?

Select one:

a.

An increase in productivity.

b.

A decrease in the interest rate.

c.

A decrease in labour costs.

d.

A decrease in labour productivity.

e.

A decrease in government spending.

All of the following, except one, will cause an increase in both aggregate supply and long-run aggregate supply. Which is the exception?

Select one:

a.

An increase in the capital stock.

b.

A decrease in factor prices.

c.

An increase in human capital.

d.

Technological improvement.

Refer to the graph above to answer this question. Which of the following statements is not true if the economy is at point A?

Select one:

a.

Unemployment is above its natural rate.

b.

An increase in aggregate supply will move the economy towards full employment.

c.

Nominal wages will eventually be forced down.

d.

Firms will find it difficult to hire labour and people will find it easy to find jobs.

What is the shape of the aggregate supply curve, according to neoclassical economists?

Select one:

a.

Vertical, because prices tend to be inflexible.

b.

Horizontal, because prices are flexible.

c.

Vertical at the capacity level of output in the economy.

d.

Horizontal, because wages are flexible.

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Refer to the data above to answer this question. What is the equation for the consumption function?

Select one:

a.

C = 200Y.

b.

C = 200 + 0.8Y.

c.

C = 200 + 0.4Y.

d.

C = 200 + 0.6Y.

Under what circumstance will the aggregate expenditure function shift upwards?

Select one:

a.

If the price level rises.

b.

If the price level falls.

c.

If income rises.

d.

If consumer expectations turn pessimistic.If the age of consumer durables is very low.

Under what circumstance will the aggregate expenditure function shift upwards?

Select one:

a.

If the price level rises.

b.

If the price level falls.

c.

If income rises.

d.

If consumer expectations turn pessimistic.If the age of consumer durables is very low.

Which variable is changed to derive an aggregate demand curve from the expenditure equilibrium diagram?

Select one:

a.

The price level

b.

Real output

c.

National income

d.

Autonomous expenditure

e.

The interest rate

Which of the following is explained by the combination of the substitution effect and the income effect?

Select one:

a.

Equilibrium price.

b.

Downward sloping demand curves.

c.

Market demand.

d.

Ceteris paribus.