Economics study desk with supply and demand curves, scales and an economic city model

Focused topic practice

aggregate supply unemployment and inflation MCQs

Practise focused aggregate supply unemployment and inflation questions with marked answers for exam preparation and subject revision.

aggregate supply unemployment and inflation Mcqs
1. The classical view of the labor market is basically consistent with the assumption of _________ aggregate supply curve?
comments icon0

A. an upward sloping

B. a vertical (or almost vertical)

C. a downward sloping

D. a horizontal (or almost horizontal)

2. The Phillips curve indicates that there is a ?
comments icon0

A. positive relationship between labor supply and the inflation rate

B. negative relationship between the inflation rate and labor demand

C. negative relationship between the inflation rate and the unemployment rate

D. positive relationship between the inflation rate and the employment the

3. The classical model of macroeconomics assumes ?
comments icon0

A. A and C

B. the economy may operate below full capacity

C. wages and prices are flexible

D. B and D

E. the economy is always at full capacity

F. wages and prices are sticky

4. In the events of an increase in the international price of oil that encouraged the central bank to accept lower real interest rates, inflation would most likely ?
comments icon0

A. remain the same

B. fluctuates

C. increase

D. fall

5. The Keynesian model is a good guide to ____ behavior and the classical model describes behavior in ______?
comments icon0

A. flexible imperfect markets

B. long run, imperfect markets

C. long run, short run

D. short-term long run
6. The natural rate of unemployment is generally thought to be the sum of ?
comments icon0

A. frictional unemployment and cyclical unemployment

B. cyclical unemployment and structural unemployment

C. frictional unemployment and structural unemployment

D. frictional unemployment and seasonal unemployment

7. Doubts about the natural and the existences of the Phillips curve arose in the 1970s when the economy experienced ?
comments icon0

A. simultaneously low rates of inflation and unemployment

B. a high rate of unemployment along with a low rate of inflation

C. simultaneously high rates of inflation and unemployment

D. a high rate of inflation: along with a low rate of unemployment

8. Governments may contribute to inflationary pressure because of building up large ?
comments icon0

A. expenditures

B. numbers of employees

C. welfare plans

D. budget deficits
9. An advocate of the classical model of the economy would claim that unemployment is created when the ____ is above its equilibrium level in the ______?
comments icon0

A. interest rate, market for loanable funds

B. wage rate, labor market

C. tax rate, government budget

D. price level, aggregate economy

10. The AD schedule indicates that _______ inflation is associated with ________ output?
comments icon0

A. lower, lower

B. zero, zero

C. higher, lower

D. higher, higher

11. An unspoken agreement between workers and firms that the firm will not cut wages is known as ?
comments icon0

A. a relative-wage contract

B. an implicit or social contract

C. employment at will

D. an explicit contract

12. The costs of inflation are ?
comments icon0

A. menu costs

B. uncertainly

C. income redistribution

D. shoe leather costs

E. all of the above
13. Those who hold the classical view of the labor market are likely to believe that ?
comments icon0
A. neither monetary nor fiscal policy will have an effect on output and employment

B. monetary but not fiscal policy will have an effect on output and employment

C. Fiscal, but not monetary policy will have an effect on output and employment

D. both monetary and fiscal policy will have an effect on output and employment

14. The long-run Phillips curve is ____ at the ____?
comments icon0

A. vertical natural rate of inflation

B. horizontal natural rate of unemployment

C. vertical equilibrium rate of unemployment

D. horizontal, natural rate of inflation

15. The Phillips curve is a graph showing the relationship between ?
comments icon0

A. the inflation rate and the level of aggregate demand

B. the price level and the unemployment rate

C. the inflation rate and the unemployment rate

D. the level of aggregate output and the price level

16. Policies to reduce unemployment by reducing union power, tax cuts, reductions in unemployment benefit and investment subsidies are examples of ?
comments icon0

A. Monetarist Policies

B. Classical policies

C. Supply-side policies

D. Keynesian policies

17. In the long run, the Phillips curve will be vertical at the natural rate of unemployment if ?
comments icon0

A. the long run aggregate demand curve is vertical at potential GDP

B. the long-run aggregate demand curve is horizontal at the natural rate of inflation

C. the long run aggregate demand curve is vertical at potential GDP

D. The long run supply curve is horizontal at the natural rate of inflation

18. The abolition of income tax would probably ______ the number of workers in employment and _______ the equilibrium rate of unemployment?
comments icon0
A. increase reduce

B. increase, increase

C. reduce, increase

D. reduce, reduce

19. When economists use the term real business cycle theory they are suggesting that business cycles are caused by ?
comments icon0

A. changes in export demand due to the state of the world economy

B. Shifts in aggregate supply

C. business expectations

D. business confidence

20. Which school of economic thought suggested that one possible cause of inflation was a push from the cost side ?
comments icon0

A. New classical economists

B. Monetarists

C. Marxists

D. Keynesian.