Reference no: EM13758725

Question 1. Historical evidence for the U.S. economy indicates that

recessions have occurred roughly once every six years since the 1960s.

the unemployment rate usually decreases during a recession and increases shortly after the recession ends.

real GDP usually remains roughly constant during a recession and decreases shortly after the recession ends.

changes in real GDP over the business cycle are largely attributable to changes in investment over the business cycle.

Question 2

Which of the following is most commonly used to monitor short-run changes in economic activity?

the inflation rate

real GDP

aggregate demand

aggregate supply

Question 3
During recessions investment

falls by a larger percentage than GDP.

falls by about the same percentage as GDP.

falls by a smaller percentage than GDP.

falls but the percentage change is sometimes much larger and sometimes much smaller.

Question 4

The classical model is appropriate for analysis of the economy in the

long run, since evidence indicates that money is not neutral in the long run.

long run, since real and nominal variables are essentially determined separately in the long run.

short run, provided money is not neutral.

short run, provided real and nominal variables are highly intertwined.

Question 5

Real and nominal variables are highly intertwined, and changes in the money supply change real GDP. Most economists would agree that this statement accurately describes

both the short run and the long run.

the short run, but not the long run.

the long run, but not the short run.

neither the long run nor the short run.

Question 6

Aggregate demand includes

the quantity of goods and services both the government and customers abroad want to buy.

the quantity of goods and services neither the government nor customers abroad want to buy.

the quantity of goods and service the government wants to buy, but not the quantity of goods and services customers abroad want to buy.

the quantity of goods and services customers abroad want to buy, but not the quantity of goods and services the government wants to buy.

Question 7

The model of aggregate demand and aggregate supply

is different from the model of supply and demand for a particular market, in that we cannot focus on the substitution of resources between markets to explain aggregate relationships.

is different from the model of supply and demand for a particular market, in that we have to separate real and nominal variables in the aggregate model.

is a straightforward extension of the model of supply and demand for a particular market, in which substitution of resources between markets is highlighted.

is a straightforward extension of the model of supply and demand for a particular market, in which the interaction between real and nominal variables is highlighted.

Question 8

When the price level falls the quantity of

consumption goods demanded rises, while the quantity of net exports demanded falls.

consumption goods demanded and the quantity of net exports demanded both rise.

consumption goods demanded and the quantity of net exports demanded both fall.

consumption goods demanded falls, while the quantity of net exports demand rises.

Question 9

When the price level changes, which of the following variables will change and thereby cause a change in the aggregate quantity of goods and services demanded?

the real value of wealth

the interest rate

the value of currency in the market for foreign exchange

All of the above are correct.

Question 10

Other things the same, a decrease in the price level makes the dollars people hold worth

more, so they can buy more.

more, so they can buy less.

less, so they can buy more.

less, so they can buy less.

Question 11

When the price level falls

households want to lend more, so the interest rate rises making the quantity of goods and services demanded rise.

households want to lend more, so the interest rate falls, making the quantity of goods and services demanded rise.

households want to lend more, so the interest rate rises, making the quantity of goods and services demanded fall.

None of the above are correct.

Question 12

Other things the same, if the U.S. price level falls, then

the supply of dollars in the market for foreign-currency exchange increases, so the exchange rate rises.

the supply of dollars in the market for foreign-currency exchange increases, so the exchange rate falls.

the supply of dollars in the market for foreign-currency exchange decreases, so the exchange rate rises.

the supply of dollars in the market for foreign-currency exchange decreases, so the exchange rate falls.

Question 13

As the price level rises,

the exchange rate falls, so net exports fall.

the exchange rate falls, so net exports rise.

the exchange rate rises, so net exports fall.

the exchange rate rises, so net exports rise.

Question 14

Other things the same, as the price level rises, the real value of a dollar

rises, and interest rates rise.

rises, and interest rates fall.

falls, and interest rates rise.

falls, and interest rates fall.

Question 15.

Other things the same, as the price level falls, a country's exchange rate

and interest rates rise.

and interest rates fall.

falls and interest rates rise.

rises and interest rates fall.

Question 16.
Suppose a fall in stock prices makes people feel poorer. The decrease in wealth would induce people to desire

decreased consumption, shown as a movement to the left along a given aggregate-demand curve.

increase consumption, shown as a movement to the right along a given aggregate-demand curve.

decreased consumption, shifting the aggregate-demand curve to the left.

increased consumption, shifting the aggregate-demand curve to the right.

Question 17.
Which of the following both shift aggregate demand left?

Question 18.
If speculators bid up the value of the U.S. dollar in the market for foreign exchange, then

Question 19.
The long-run aggregate supply curve shows that by itself a permanent change in aggregate demand would lead to a long-run change

Question 20.
The long-run aggregate supply curve shifts right if

Question 21.
According to the aggregate demand and aggregate supply model, in the long run an increase in the money supply leads to

Question 22.
In the long run, technological progress

Question 23.
If the price level rises above what was expected and nominal wages are fixed, then

Question 24

Other things the same, when the price level rises more than expected, some firms will have

Question 25.
According to the misperceptions theory of aggregate supply, if a firm thought that inflation was going to be 5 percent and actual inflation was 6 percent, then the firm would believe that the relative price of what they produce had

Question 26.
The effects of a higher than expected price level are shown by

Question 27.
A decrease in the expected price level shifts

Question 28.
Which of the following shifts short-run, but not long-run aggregate supply right?

Question 29.
In 1986, OPEC countries increased their production of oil. This caused

Question 30.
Keynes believed that economies experiencing high unemployment should adopt policies to

Question 31 The interest-rate effect

Question 32 The wealth effect stems from the idea that a higher price level

Question 33 According to John Maynard Keynes,

Question 34 While a television news reporter might state that "Today the Fed lowered the federal funds rate from 5.5 percent to 5.25 percent," a more precise account of the Fed's action would be as follows:

Question 35 People choose to hold a smaller quantity of money if

Question 36 If expected inflation is constant, then when the nominal interest rate increases, the real interest rate

Question 37 When the Fed sells government bonds, the reserves of the banking system

Question 38 The opportunity cost of holding money

Question 39 If there is excess money supply, people will

Question 40 According to liquidity preference theory, if the price level increases, then the equilibrium interest rate

Question 41 If the MPC = 3/5, then the government purchases multiplier is

Question 42 If the multiplier is 5, then the MPC is

Question 43 In a certain economy, when income is $200, consumer spending is $145. The value of the multiplier for this economy is 6.25. It follows that, when income is $230, consumer spending is

Question 44 If the MPC is 0.80 and there are no crowding-out or accelerator effects, then an initial increase in aggregate demand of $100 billion will eventually shift the aggregate demand curve to the right by

Question 45 Suppose that the MPC is 0.60; there is no investment accelerator; and there are no crowding-out effects. If government expenditures increase by $25 billion, then aggregate demand

Question 46 The economist A.W. Phillips published a famous article in 1958 in which he showed a

Question 47 In the short run, policy that changes aggregate demand changes

Question 48 If policymakers decrease aggregate demand, then in the short run the price level

Question 49 If the central bank increases the money supply, then in the short run prices

Question 50 According to the short-run Phillips curve, if the central bank increases the money supply, then