AD/AS & Macroeconomics

Economy A has the following macroeconomic data for the current year

Economic Growth 2.3%

Unemployment Rate 5.3%

Inflation Rate 1.8%

State the current position on an AD/AS Model

• Inflationary Gap

• Full Employment

• Deflationary Gap

State what phase of the business cycle Economy A is in from 2017-2019

• Expansion

• Downturn

• Contraction

• Recession

• Boom

The component of AD that is not evident in the table above is _________________

Disinflation is

• A decrease in the general price level

• A decrease in the rate of inflation, but the prices of goods and services are still rising

• A sustained increase in the general price level

• A decrease in the rate of economic growth but it remains positive

• A rate of negative economic growth

Deflation is

• A decrease in the general price level

• A decrease in the rate of inflation, but the prices of goods and services are still rising

• A sustained increase in the general price level

• A decrease in the rate of economic growth but it remains positive

• A rate of negative economic growth

The labour force participation rate is

• The percentage of people in the labour force who are employed and unemployed but seeking work

• The percentage of people above 15 that are employed and unemployed but seeking work

• The total number of unemployed persons

• The percentage of people in the labour force who are unemployed but seeking work

• The total number of unemployed and employed persons

The unemployment rate is

• The percentage of people in the labour force who are employed and unemployed but seeking work

• The percentage of people above 15 that are employed and unemployed but seeking work

• The total number of unemployed persons

• The percentage of people in the labour force who are unemployed but seeking work

• The total number of unemployed and employed persons

The government budget balance is -15billion. What does this mean?

• A budget deficit. Leakages > Injections

• A buget surplus. Injections > Leakages

• A budget deficit. Injections > Leakages

• A budget surplus. Leakages > Injections

What could cause AD to increase

• An increase in wealth

• An decrease in corporate tax rates

• A depreciation of the exchange rate

• An increase in income taxes

• A decrease in interest rates

What could cause this change

• A decrease in productivity

• A decrease in the amount of resources

• An increase in interest rates

• An decrease in income tax