ECON1002 Cumulative Quizzes (Wk8-12) Questions With Complete Solutions

For a given level of inflation, if bright prospects for the future of the economy cause businesses to increase their spending on new capital, then the _____ shifts _____. - aggregate demand curve; right - aggregate demand curve; left - aggregate supply line; upward - aggregate supply line; downward correct answer: - aggregate demand curve; right Policymakers' use of stabilisation policy to eliminate output gaps is more appropriate when an economy self-corrects very _____ and when the out gap is very _____. - rapidly; large - slowly; large - rapidly; small - slowly; small correct answer: - slowly; large Fiscal policy can shift: - only short-run functions - aggregate demand only - both aggregate demand and short-run aggregate supply, but not long-run aggregate supply - Both aggregate demand and potential output correct answer: - both aggregate demand and potential output Since increases in inflation reduce planned spending and short-run equilibrium output: - the aggregate demand curve is downward sloping - the aggregate supply line is downward sloping - the aggregate demand curve is horizontal - the aggregate supply line is upward sloping correct answer: - the aggregate demand curve is downward sloping The behaviour by the Reserve Bank is a key factor underlying the link between _____ and _____, and is summarised by the aggregate demand curve. - inflation; output - inflation; input - inflation; income - inflation; taxes correct answer: - inflation; output A supply-side policy is a policy that: - prevents recessionary gaps that shift the AS curve - shifts the aggregate demand curve