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Aggregate Supply, Unemployment And Inflation
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Aggregate Supply, Unemployment And Inflation – MCQs
45 questions. Click to practice.
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Correct options are highlighted when revealed.
1.
According to classical economic theory, what is the reason some individuals remain unemployed?
They have voluntarily decided not to work at the prevailing market wage.
They have stopped searching for employment but would accept a job if offered the current wage.
Their productivity level is too high to be hired at the existing wage.
They cannot secure a job at the current wage rate.
None of the above.
2.
According to the classical perspective, the aggregate supply curve is generally assumed to be which of the following?
Vertical or nearly vertical
Sloping downward
Horizontal or nearly horizontal
Sloping upward
Nonexistent
3.
Which of the following factors can lead to involuntary unemployment?
Minimum wage legislation
International trade
Economies of scale
Insider-outsider labor market dynamics
None of the above
4.
If the tax rate on earnings exceeding Rs 30,000 rises from 30% to 40%, what is the marginal tax rate for an individual earning Rs 31,000?
30 percent
10 percent
70 percent
40 percent
Not applicable
5.
What type of unemployment occurs when an individual is willing to accept the current wage but is unable to secure employment?
Involuntary unemployment
Structural unemployment
Voluntary unemployment
Cyclical unemployment
Seasonal unemployment
6.
Typically, how does the size of the labor force compare to the number of workers willing to accept job offers at a given real wage rate?
Less than the number of willing workers
Greater than the number of willing workers
Equal to the number of willing workers
Cannot be determined
No relationship
7.
According to the classical economic theory, unemployment arises when the ____ exceeds its equilibrium point in the ____?
general price index, overall economy
tax percentage, fiscal budget
wage rate, labor market
borrowing cost, loanable funds market
none of the above
8.
Which of the following are considered costs associated with inflation?
Excessive currency handling expenses
Expenses related to frequently updating price lists
Redistribution effects on income among different groups
Increased unpredictability in economic decisions
All of the above
9.
How is the long-run Phillips curve characterized at the equilibrium unemployment rate?
flat, at the natural inflation level
horizontal, at the natural unemployment level
upright, at the natural inflation rate
vertical, at the equilibrium unemployment rate
not defined
10.
How can governments potentially increase inflationary pressures in the economy?
Increasing the size of the workforce
Expanding social welfare programs
Accumulating significant budget deficits
Rising levels of government spending
None of the above
11.
If the global price of oil rises and the central bank responds by allowing real interest rates to decline, what is the most probable effect on inflation?
Decrease
Rise
Stay unchanged
Vary irregularly
No effect
12.
Which economic model best explains short-term behavior, and which one is more applicable to long-term behavior?
Long-run behavior; short-run behavior
Flexible markets with imperfections
Short-run dynamics; long-run equilibrium
Long-run perspective; imperfect market conditions
None of the above
13.
The inflation rate at equilibrium is established at the point where which two curves intersect?
Aggregate demand and aggregate supply
Investment-savings and liquidity preference-money supply
Labor demand and labor supply
Market demand and market supply
None of the above
14.
If an individual feels financially improved following a 10% raise in wages, while prices have also increased by 10%, what economic phenomenon are they likely experiencing?
Inflation
A disruption in supply
Reduction in private spending due to government borrowing
Misinterpretation of real income due to price changes
No change in economic condition
15.
According to the classical macroeconomic model, which of the following assumptions is made about the economy?
Wages and prices do not adjust immediately
Wages and prices adjust freely and quickly
The economy can function below its maximum potential
The economy consistently operates at full output
None of the above
16.
Why can explicit contracts remain efficient during economic downturns despite potentially causing layoffs?
They reduce the expenses related to bargaining processes
They lessen the negative impact on joblessness
They ensure that only the lowest-performing employees are dismissed
They fairly distribute layoffs between experienced and newer staff
None of the above
17.
What is the term for the unwritten understanding between employees and employers that wages will remain unchanged?
an implicit or social agreement
a wage comparison contract
at-will employment
a formal written contract
no agreement
18.
Which group of economists developed the expectations-augmented Phillips curve?
Followers of new classical economic theory
Advocates of Keynesian economics
Proponents of monetarist theory
Supporters of Marxist economic thought
None of the above
19.
According to the interpretation of the Phillips curve in the 1960s, what effect would policies aimed at reducing unemployment typically have on inflation?
Reducing unemployment would generally cause a decrease in inflation.
Decreasing unemployment would usually lead to an increase in inflation.
Increasing inflation would typically result in higher unemployment.
Lowering inflation would commonly cause unemployment to rise.
None of the above.
20.
What relationship does the Phillips curve illustrate in economics?
The connection between overall price changes and joblessness
The correlation between inflation rates and unemployment levels
The association between total output and general price changes
The link between inflation fluctuations and aggregate demand
None of the above
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