,1. Multiple Choice: Which of the following is not a
component of the Aggregate Demand (AD) curve?
a) Consumer Spending
b) Investment Spending
c) Net Exports
d) Stock Market Index
Correct Answer: d) Stock Market Index
Rationale: The AD curve represents the total spending on
a nation's goods and services at various price levels and
does not directly include the stock market index.
2. Fill-in-the-Blank: The __________ model is used to
analyze the economy's equilibrium without the influence of
government policy or international transactions.
Correct Answer: Classical
Rationale: The classical model assumes a closed
economy and no government intervention, focusing on long-
term economic outcomes.
3. True/False: In the Keynesian framework, total spending
is always equal to total output.
Correct Answer: False
Rationale: According to Keynesian economics, there can
be periods where aggregate demand does not meet the
total output, leading to unemployment and underutilized
resources.
, b) Government intervention can smooth out business
cycles.
c) The economy is always in equilibrium.
d) Individual agents are rational and have perfect
foresight.
Correct Answers: a), c), d)
Rationale: Real Business Cycle theory attributes
economic fluctuations to real (not monetary) shocks like
technology changes and assumes that even during cycles,
the economy is in a state of equilibrium with rational agents.
5. Multiple Choice: The concept of 'hysteresis' in economics
refers to:
a) The delayed effects of monetary policy
b) The persistence of economic events over time
c) The immediate impact of fiscal stimulus
d) The cyclical nature of consumer confidence
Correct Answer: b) The persistence of economic events
over time
Rationale: Hysteresis describes situations where effects
persist after the initial causes are removed, such as
unemployment rates remaining high after a recession has
ended.
6. Fill-in-the-Blank: __________ inflation occurs when
prices increase because the cost of production increases.
Correct Answer: Cost-push
Rationale: Cost-push inflation is driven by increases in the
cost of inputs like labor or raw materials, leading to higher
prices for consumers.
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller NURSATI. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $12.49. You're not tied to anything after your purchase.
