M1.4.1 AD/AS equilibrium and effects of changes in AD and AS Quiz: OCR Economics, Unit 6

The 20 questions

1. What term describes the point where total aggregate demand equals total aggregate supply?

   • Full employment
   • Microeconomic equilibrium
   • Macroeconomic equilibrium
   • Trade balance

2. Which type of inflation is directly caused by a rightward shift in aggregate demand?

   • Cost-push inflation
   • Demand-pull inflation
   • Stagflation
   • Hyperinflation

3. What situation describes falling real national output alongside rising general price levels?

   • Hyperinflation
   • Stagflation
   • Disinflation
   • Deflation

4. According to classical economists, what determines the long-run level of real national output?

   • Consumer spending
   • Interest rates
   • Aggregate demand
   • Aggregate supply

5. What is the shape of the Classical long-run aggregate supply curve on a diagram?

   • Horizontal
   • Downward sloping
   • Upward sloping
   • Vertical

6. What happens to the short-run aggregate supply curve when raw material prices increase?

   • Remains unchanged
   • Shifts right
   • Becomes vertical
   • Shifts left

7. On a Keynesian LRAS curve, what does the horizontal initial section represent?

   • Maximum output
   • Spare capacity
   • Full employment
   • Supply bottlenecks

8. What term refers to the maximum potential output of an economy at full capacity?

   • Potential national income
   • Aggregate demand
   • Output gap
   • Actual national output

9. If aggregate demand shifts right while SRAS remains constant, what happens to prices and output?

   • Both decrease
   • Prices rise output falls
   • Both increase
   • Prices fall output rises

10. Higher business confidence leads to more capital investment. Which curve initially shifts right?

    • Long-run aggregate supply
    • Short-run aggregate supply
    • Marginal cost
    • Aggregate demand

11. If a supply shock shifts SRAS left, what is the effect on prices and real output?

    • Both increase
    • Both decrease
    • Prices rise output falls
    • Prices fall output rises

12. A permanent increase in workforce productivity will shift which aggregate supply curve rightward?

    • Demand curve only
    • Consumption function
    • Import demand curve
    • Long-run aggregate supply

13. If the marginal propensity to consume is 0.8, what is the value of the multiplier?

    • 0.2
    • 4
    • 1.25
    • 5

14. If total marginal rate of leakage is 0.25, how much does national income rise from £10bn investment?

    • £100bn
    • £2.5bn
    • £40bn
    • £25bn

15. Which economic event would cause a negative output gap to widen further?

    • Cut in income tax
    • Rise in export demand
    • Fall in consumer confidence
    • Increase in government spending

16. A cut in corporation tax increases investment spending. Which curves shift right in the long run?

    • Only AD
    • Only SRAS
    • Only LRAS
    • Both AD and LRAS

17. In a Keynesian macroeconomic model, an economy can settle at equilibrium with persistent what?

    • Automatic budget surplus
    • Positive output gap
    • Deflationary output gap
    • Hyperinflation

18. If aggregate demand and short-run aggregate supply both shift right by equal amounts, prices will...

    • Increase sharply
    • Remain unchanged
    • Fall to zero
    • Decrease dramatically

19. A simultaneous oil price spike and export drop will cause real GDP to do what?

    • Rise rapidly
    • Fluctuate unpredictably
    • Fall significantly
    • Remain constant

20. What type of output gap occurs when actual real national output exceeds potential national output?

    • Structural output gap
    • Positive output gap
    • Negative output gap
    • Deficit output gap

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