Question 1
Overheating may lead to:
A.
Zero investment B.
LRAS shifting left only C.
Deflation D.
Demand-pull inflation
Question 2
What is meant by negative output gap?
A.
Actual above potential — overheating. B.
Actual below potential — spare capacity. C.
Falling AD → unemployment → lower C. D.
Economy beyond sustainable capacity.
Question 3
What is meant by deflationary spiral?
A.
Actual above potential — overheating. B.
Actual below potential — spare capacity. C.
Falling AD → unemployment → lower C. D.
Potential GDP is unobservable.
Question 4
What is meant by output gap?
A.
Negative gap → expansionary policy may help. B.
Actual real GDP minus potential real GDP. C.
Unemployed resources below Yfe. D.
Economy beyond sustainable capacity.
Question 5
What is meant by overheating?
A.
Negative gap only temporary. B.
Economy beyond sustainable capacity. C.
Negative gap → expansionary policy may help. D.
Actual below potential — spare capacity.
Question 6
Spare capacity is associated with:
A.
A negative output gap B.
Hyperinflation C.
Full capacity D.
Positive output gap
Question 7
A positive output gap suggests:
A.
Trade surplus only B.
Actual GDP above potential C.
Zero unemployment always D.
Deflation
Question 8
What is meant by positive output gap?
A.
Negative gap → expansionary policy may help. B.
Tight labour market pushes wages up. C.
Actual below potential — spare capacity. D.
Actual above potential — overheating.
Question 9
Output gap equals:
A.
Exports minus imports B.
C + I + G C.
MPC × income D.
Actual GDP minus potential GDP
Question 10
What is meant by classical view?
A.
Negative gap → expansionary policy may help. B.
Potential GDP is unobservable. C.
Economy beyond sustainable capacity. D.
Negative gap only temporary.
Back to practice 