Macro Review

An increase in aggregate supply can be caused by the following:

• A rise in the level of minimum wage

• A fall in income tax rates

• A rise in the value of the domestic currency

• A rise in average prices

The diagram illustrates a fall in aggregate demand.  This could have been caused by which of the following combination of policies?

• A fall in government spending and a fall in income tax rates

• A fall in sales tax and a fall in government spending

• A fall in tax rates and a rise in interest rates

• A fall in government spending and a fall in the money supply

The shape of the LRAS curve in keynesian economic policy can be explained by the following:

• Increasingly scarce factor resources as an economy reaches its maximum employment level

• A positive relationship between average prices and the level of real output in the economy

• A perfectly inelastic LRAS curve as the level of real output cannot go beyond its production possibility curve

• A perfectly elastic LRAS curve as producers will respond to rising price levels by raising their production levels

The size of the multiplier depends on which of the following:

• The size of the marginal propensity to consume in the economy

• The willingness of producers to respond to rises in aggregate demand by increasing investment levels in the economy

• The level of demand in the economy

• The size of the marginal propensity to invest in the economy

An economy has an output gap of $ 50 billion and the MPC is 0.6.  According to keynesian multiplier theory the government must inject $ ? billion into the economy HL only.

• $ 15 B

• $ 20 B

• $ 50 B

• $ 30 B

According to keynesian economic theory government spending is more effective in raising national income than tax cuts because of the following:

• Some of the additional disposable income received by individuals will be saved or spent on imports

• Tax cuts do not increase aggregate demand in the economy because it will not circulate around the economy

• Tax cuts will increase levels of government debt which will act as a drag on the economy

• Tax cuts will increase supply levels in the economy rather than aggregate demand

Unemployment can be defined as:

• The number of people in the economy who are economically inactive

• The number of people in the economy without a job

• The number of economically active people who are without paid employment

• The number of people in the economy without paid employment

Which of the following is not an example of equilibrium unemployment?

• Structural unemployment

• Frictional unemployment

• Classical unemployment

• Seasonal unemployment

Which of the following does not contribute to the difficulties of calculating unemployment?

• The number of people who are economically inactive in the population

• Workers working illegally and not counted as unemployed

• The number of people working part time in the economy

• Underemployment in the economy

The natural rate of unemployment includes which of the following types of unemployment?

• Cyclical, real wage and frictional unemployment

• Structural, frictional and seasonal unemployment

• Cyclical, structural and frictional unemployment

• Structural, frictional and real wage unemployment