B321 Macro Econs

Question 2

What does Aggregate Demand (AD) measure?

Answer 2

The demand for all goods and services at different price levels

It shows the relationship between the general price level and the quantity demanded of real GDP.

Question 3

What is the formula for Aggregate Demand (AD)?

Answer 3

AD = C + I + G + (X - M)

Where C is consumption, I is investment, G is government expenditure, X is exports, and M is imports.

Question 4

What are the components of Aggregate Demand (AD)?

Answer 4

• C: Consumption expenditure
• I: Domestic investment expenditure
• G: Government expenditure
• X: Exports
• M: Imports

Question 5

What happens to the quantity demanded for goods and services when the general price level falls?

Answer 5

It increases, resulting in a movement along the AD curve.

Question 6

What causes the AD curve to shift right?

Answer 6

An increase in consumption, investment, government expenditure, or net exports.

Question 7

What causes the AD curve to shift left?

Answer 7

A decrease in consumption, investment, government expenditure, or net exports.

Question 8

What is Aggregate Supply (AS)?

Answer 8

The total amount of goods and services produced by all industries in the economy at any given price level.

Question 9

What are the two time frames associated with Aggregate Supply?

Answer 9

• Short-run aggregate supply (SRAS)
• Long-run aggregate supply (LRAS)

Question 10

Why does the SRAS curve slope upward?

Answer 10

A rise in price level causes an increase in the quantity of real GDP supplied.

Question 11

What are some factors that can shift the SRAS curve?

Answer 11

• Changes in wages
• Oil prices
• Cost of raw materials
• Government indirect taxes and subsidies

Question 12

What happens to the SRAS curve with adverse supply shocks?

Answer 12

It shifts to the left, causing the price level for a given amount of output to rise.

Question 13

What causes the SRAS curve to shift right?

Answer 13

Positive supply shocks, such as decreases in oil prices.

Question 14

What is the short-run macroeconomic equilibrium?

Answer 14

Where Aggregate Demand (AD) equals Short-run Aggregate Supply (SRAS).

Question 15

In the short-run, what does an increase in AD cause?

Answer 15

• Real GDP to increase
• General price level to increase

Question 16

What is the characteristic of Long-run Aggregate Supply (LRAS)?

Answer 16

It is vertical because all prices adjust in the long-run.

Question 17

What does LRAS depend on?

Answer 17

• Capital
• Labour
• State of technology

Question 18

What happens in the long-run when AD increases?

Answer 18

There is no impact on real GDP; the economy continues to operate at potential GDP.

Question 19

What factors can shift the LRAS curve to the right?

Answer 19

• Increase in resource quantity
• Rise in productive capacity
• Increase in resource quality
• Rise in productivity

Question 20

What factors can shift the LRAS curve to the left?

Answer 20

• Decrease in resource quantity
• Fall in productive capacity
• Decrease in resource quality
• Fall in productivity

Question 21

What does LRAS stand for?

Answer 21

Long-Run Aggregate Supply

LRAS represents the total supply of goods and services in an economy at full employment.

Question 22

What is the effect of an increase in resource quantity on productive capacity?

Answer 22

Rise in productive capacity

An increase in the quantity of resources leads to a potential increase in the economy’s output.

Question 23

Fill in the blank: A decrease in resource quality leads to a ______ in productivity.

Answer 23

Fall

Decreased quality of resources results in less efficient production.

Question 24

What are the factors of production that can shift LRAS?

Answer 24

• Increase in Quantity
• Improvement in Quality

Changes in factors of production can lead to shifts in the Long-Run Aggregate Supply curve.

Question 25

What does an increase in Equilibrium Real GDP indicate when the economy is at full employment?

Answer 25

Higher price level (inflation) without an increase in real GDP ## Footnote This occurs when aggregate demand increases without a corresponding increase in output.

Question 26

True or False: Technological advancements can increase access to resources.

Answer 26

True ## Footnote Innovations can lead to improved resource discovery and utilization.

Question 27

What are some examples of factors that can increase the labor force?

Answer 27

* Increase in birth rate * Immigration * Education and training ## Footnote These factors contribute to a larger, more skilled workforce.

Question 28

What impact does increased government spending have on Aggregate Demand (AD)?

Answer 28

Rise in AD ## Footnote Government expenditures can stimulate economic activity by increasing demand.

Question 29

What is the expected outcome of the lifting of COVID-19 border measures on tourism in Singapore?

Answer 29

Tourism receipts expected to climb to $21 billion ## Footnote The recovery of tourism is crucial for economic growth, especially in sectors reliant on foreign visitors.

Question 30

What is the role of the National Productivity Fund?

Answer 30

Provides grants for companies to invest in productivity and training ## Footnote This fund supports businesses in enhancing their capabilities and workforce skills.

Question 31

What does an increase in investment (I) typically indicate for an economy?

Answer 31

Growth in manufacturing and job creation ## Footnote Increased investment often leads to higher production capacity and employment opportunities.

Question 32

What are the components that shift the Aggregate Demand curve?

Answer 32

* Consumption (C) * Investment (I) * Government spending (G) * Net exports (X-M) ## Footnote Changes in these components can lead to shifts in the AD curve.

Question 33

Fill in the blank: A rise in exports (X) contributes to an increase in ______.

Answer 33

Aggregate Demand ## Footnote Increased export levels reflect higher demand for domestic goods from foreign markets.

Question 34

What is one consequence of a rise in general price levels?

Answer 34

Potential inflation ## Footnote An increase in price levels can erode purchasing power and affect economic stability.

Question 35

What does SRAS stand for?

Answer 35

Short-Run Aggregate Supply ## Footnote SRAS reflects the total production of goods and services in the short run when prices are sticky.

Question 36

What is the expected impact of digital and automation solutions on labor productivity?

Answer 36

Increase in productivity ## Footnote Implementing advanced technologies can lead to more efficient production processes.

Question 37

What is the relationship between AD and SRAS shifts?

Answer 37

Both can shift rightward due to increased economic activity ## Footnote A rise in aggregate demand can lead to increased short-run aggregate supply as firms respond to higher demand.

Question 38

What is one of the main goals of the RIE2025 strategy?

Answer 38

Strengthening research and development ## Footnote This strategy aims to boost innovation and economic growth through increased R&D investment.