Name: Which business cycle theory posits that technological

shocks and changes in productivity are the primary

ID: drivers of economic cycles?

Time: 25 Minutes A. Classical Theory

B. Keynesian Theory
Marks: 10 C. Monetarist Theory
D. Real Business Cycle Theory
Question 1:
Question 6:
Which of the following phases of the business cycle is
Which of the following represents the correct equation
characterized by rising GDP, higher employment levels,
for Aggregate Demand (AD)?
increased consumer spending, and business investment?
A. AD = C + I + G + (X - M)
A. Peak
B. AD = C + I + G - T
B. Contraction
C. AD = C + S + G + (X - M)
C. Expansion
D. AD = C + I + T + (X - M)
D. Trough
Question 7:
Question 2:
Which component of Aggregate Demand is influenced
According to Keynesian theory, what primarily drives
by disposable income, consumer confidence, and interest
business cycles?
rates?
A. Fluctuations in the money supply
A. Government Spending (G)
B. Fluctuations in aggregate demand
B. Consumption (C)
C. Technological shocks and changes in productivity
C. Investment (I)
D. Temporary imbalances between aggregate demand
D. Net Exports (X - M)
and aggregate supply
Question 8:
Question 3:
What effect does a decrease in the price level have on
What is the term used for the lowest point in the
the quantity of goods and services demanded, assuming
business cycle, characterized by high unemployment and
movement along the AD curve?
negative GDP growth?
A. Increase in quantity demanded
A. Peak
B. Decrease in quantity demanded
B. Expansion
C. No change in quantity demanded
C. Contraction
D. Increase in AD curve shift
D. Trough
Question 9:
Question 4:
What does the short-run Aggregate Supply (SRAS)
Which of the following is NOT a feature of business
curve depict?
cycles?
A. The relationship between price level and quantity
A. Duration
supplied in the long run
B. Amplitude
B. The relationship between price level and quantity
C. Asymmetry
demanded in the short run
D. Uniformity across sectors
C. The relationship between price level and quantity
supplied in the short run
Question 5: D. The relationship between potential output and price
level
Question 10: A. It shifts to the right
B. It shifts to the left
What shape does the long-run Aggregate Supply C. It moves upward
(LRAS) curve typically have? D. It remains unchanged

A. Downward sloping Question 16:

B. Upward sloping
C. Horizontal According to the AD and AS framework, what impact
D. Vertical does an increase in government spending have on AD?

Question 11: A. It shifts the AD curve to the left

B. It causes movement along the AD curve
What causes movement along the Aggregate Supply C. It shifts the AD curve to the right
(AS) curve? D. It has no impact on the AD curve

A. Changes in government policy Question 17:

B. Changes in technology
C. Changes in the price level What was one of the primary causes of the "War Time
D. Changes in input prices Boom" between 1965 and 1969?

Question 12: A. Tight monetary policy

B. Decrease in government spending
Which of the following would shift the AS curve to the C. United States' involvement in the Vietnam War
right? D. Increase in oil prices

A. Increase in wages Question 18:

B. Technological advancements
C. Increase in raw material costs Which economic condition was a significant effect of the
D. Stricter government regulations 1973-1975 Oil Price Shock?

Question 13: A. Deflation

B. Stagflation
What component of AD represents spending by firms on C. High unemployment with low inflation
capital goods like machinery and buildings? D. Rapid economic growth

A. Consumption (C) Question 19:

B. Investment (I)
C. Government Spending (G) During the "War Time Boom," which of the following
D. Net Exports (X - M) economic effects was NOT observed?

Question 14: A. Rapid economic growth

B. Low unemployment
In the context of AD, what does (X - M) represent? C. Deflation
D. Rising inflation
A. Total exports
B. Net exports Question 20:
C. Total imports
D. Trade balance Which of the following would shift the AD curve to the
right?
Question 15:
A. Decrease in consumer confidence
What typically happens to the SRAS curve when input B. Contractionary fiscal policy
prices decrease? C. Increase in interest rates
D. Depreciation of the domestic currency