Full Employment & Equilibrium Quiz

What is equilibrium national income?

• When inflation is at zero

• When unemployment is zero

• When Aggregate Demand = Aggregate Supply

• When government spending = taxation

What does the vertical part of the AS curve represent?

• Rising unemployment

• Inflation

• Full employment level of output

• Consumer price index

Which of the following is NOT a characteristic of full employment?

• All available resources are used

• Natural unemployment may still exist

• All workers earn the same wage

• The economy operates at productive potential

A deflationary gap occurs when:

• Prices are falling rapidly

• The currency appreciates

• Equilibrium output is below full employment

• Imports are higher than exports

Which of the following is an injection in the circular flow?

• Taxes

• Investment

• Savings

• Imports

The economy is in equilibrium when:

• Injections = Leakages

• Taxes = Government spending

• Consumption = Investment

• Imports = Exports

An inflationary gap means that:

• Unemployment is high

• Aggregate demand exceeds full employment output

• Interest rates are too high

• The government has a budget surplus

Which policy could reduce a deflationary gap?

• Increasing taxes

• Raising interest rates

• Government increasing spending

• Reducing exports

What happens if actual national income is above full employment?

• Nothing-it is sustainable

• Inflation is likely

• Deflation occurs

• Imports fall sharply

Full employment does NOT imply:

• Zero unemployment

• Maximum efficiency

• Potential output

• Use of all productive resources