Question 1

The crowding- in effect implies that a decrease in government purchases causes:

Accepted Answer

A)  interest rates to rise, which increases investment. 
B)  interest rates to fall, which increases investment. 
C)  interest rates to fall, which decreases investment. 
D)  interest rates to rise, which decreases investment. 
A)  interest rates to rise, which increases investment. 
B)  interest rates to fall, which increases investment. 
C)  interest rates to fall, which decreases investment. 
D)  interest rates to rise, which decreases investment.

Question 2

In the short run, it is likely that an increase in the money supply will cause both output and the price level to increase.

Accepted Answer

A) True 
 B)False

Question 3

According to Keynes, the level of employment is determined by:

Accepted Answer

A)  price and wages. 
B)  technological progress. 
C)  interest rates. 
D)  the level of aggregate demand for goods and services. 
A)  price and wages. 
B)  technological progress. 
C)  interest rates. 
D)  the level of aggregate demand for goods and services.

Question 4

In the short run, which of the following determines the level of real GDP?

Accepted Answer

A)  prices 
B)  stock prices 
C)  aggregate demand 
D)  wages 
A)  prices 
B)  stock prices 
C)  aggregate demand 
D)  wages

Question 5

If left alone, the boom experienced by an economy will cause the short- run

Accepted Answer

A)  aggregate demand curve to shift downward until the equilibrium GDP is back to full employment. 
B)  aggregate supply curve to shift downward until the equilibrium GDP is back to full employment. 
C)  aggregate supply curve to shift upward until the equilibrium GDP is back to full employment. 
D)  aggregate demand curve to shift upward until the equilibrium GDP is back to full employment. 
A)  aggregate demand curve to shift downward until the equilibrium GDP is back to full employment. 
B)  aggregate supply curve to shift downward until the equilibrium GDP is back to full employment. 
C)  aggregate supply curve to shift upward until the equilibrium GDP is back to full employment. 
D)  aggregate demand curve to shift upward until the equilibrium GDP is back to full employment.

Question 6

Figure 15.1
-Refer to Figure 15.1. If the wage rate can easily adjust to clear the market, then if the wage rate is currently at $12:

Accepted Answer

A)  the wage rate will decrease to eliminate the shortage. 
B)  the wage rate will decline to eliminate the surplus. 
C)  the wage rate will decline to eliminate the shortage. 
D)  the wage rate will increase to eliminate the shortage. 
A)  the wage rate will decrease to eliminate the shortage. 
B)  the wage rate will decline to eliminate the surplus. 
C)  the wage rate will decline to eliminate the shortage. 
D)  the wage rate will increase to eliminate the shortage.

Question 7

Describe how the wage rate adjusts so that the labor market reaches equilibrium.

Accepted Answer

When there is excess supply in the labor

Question 8

An increase in government spending will decrease the real interest rate.

Accepted Answer

A) True 
 B)False

Question 9

Suppose the economy is at full employment. An increase in the money supply will _______ in the short run and _______ in the long run.

Accepted Answer

A)  increase interest rates, increase the price level 
B)  decrease interest rates, increase the price level 
C)  decrease interest rates, decrease the price level 
D)  increase interest rate, have no effect on the price level. 
A)  increase interest rates, increase the price level 
B)  decrease interest rates, increase the price level 
C)  decrease interest rates, decrease the price level 
D)  increase interest rate, have no effect on the price level.

Question 10

Which of the following sequence of events follows an increase in taxes?

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 11

What is crowding in?

Accepted Answer

Crowding in occurs when the go

Question 12

In the long run, real GDP is determined by the total level of demand for goods and services.

Accepted Answer

A) True 
 B)False

Question 13

Suppose that potential output is $6 trillion and real GDP is currently $5.5 trillion. In the long run, we would expect that:

Accepted Answer

A)  wages and input prices will fall. 
B)  the price level will rise. 
C)  real GDP will fall. 
D)  all of the above 
A)  wages and input prices will fall. 
B)  the price level will rise. 
C)  real GDP will fall. 
D)  all of the above

Question 14

Figure 15.2
-Refer to Figure 15.2. Suppose the economy is currently at Point A producing potential output Y0. If the government increases spending, the economy moves to Point _______ in the short- run and to Point _______ in the long- run.

Accepted Answer

A)  B; C 
B)  C; B 
C)  B; D 
D)  D; E 
A)  B; C 
B)  C; B 
C)  B; D 
D)  D; E

Question 15

Say's Law states that:

Accepted Answer

A)  people are motivated by self- interest. 
B)  demand always creates its own supply. 
C)  supply creates its own demand. 
D)  economic markets are unstable. 
A)  people are motivated by self- interest. 
B)  demand always creates its own supply. 
C)  supply creates its own demand. 
D)  economic markets are unstable.

Question 16

How can a government policy be used to prevent a wage- price spiral? Explain.

Accepted Answer

A wage- price spiral occurs when an econ

Question 17

Which of the following curves is illustrated as an upward sloping line?

Accepted Answer

A)  the long- run aggregate demand curve 
B)  the short- run aggregate supply curve 
C)  the long- run aggregate supply curve 
D)  the short- run aggregate demand curve 
A)  the long- run aggregate demand curve 
B)  the short- run aggregate supply curve 
C)  the long- run aggregate supply curve 
D)  the short- run aggregate demand curve

Question 18

When an incumbent politician uses expansionary fiscal and monetary policy to increase the chance of re- election, that politician is generating a/an:

Accepted Answer

A)  political dynasty. 
B)  political business cycle. 
C)  a sociological depression. 
D)  economically sound campaign. 
A)  political dynasty. 
B)  political business cycle. 
C)  a sociological depression. 
D)  economically sound campaign.

Question 19

One possible explanation for the existence of unemployment is:

Accepted Answer

A)  that the wage does not adjust immediately to changes in labor demand. 
B)  the quantity of labor is sticky downward and does not adjust to an increase in wages. 
C)  the labor market is perfectly competitive. 
D)  labor supply always shifts in such a way as to lead to unemployment. 
A)  that the wage does not adjust immediately to changes in labor demand. 
B)  the quantity of labor is sticky downward and does not adjust to an increase in wages. 
C)  the labor market is perfectly competitive. 
D)  labor supply always shifts in such a way as to lead to unemployment.

Question 20

The wage- price spiral occurs when:

Accepted Answer

A)  the economy is producing a level of output above or below full employment. 
B)  the economy is producing a level of output exactly at full employment. 
C)  the economy is producing a level of output below full employment. 
D)  the economy is producing a level of output above full employment. 
A)  the economy is producing a level of output above or below full employment. 
B)  the economy is producing a level of output exactly at full employment. 
C)  the economy is producing a level of output below full employment. 
D)  the economy is producing a level of output above full employment.

The crowding- in effect implies that a decrease in government purchases causes:

In the short run, it is likely that an increase in the money supply will cause both output and the price level to increase.

According to Keynes, the level of employment is determined by:

In the short run, which of the following determines the level of real GDP?

If left alone, the boom experienced by an economy will cause the short- run

Figure 15.1 -Refer to Figure 15.1. If the wage rate can easily adjust to clear the market, then if the wage rate is currently at $12:

Describe how the wage rate adjusts so that the labor market reaches equilibrium.

An increase in government spending will decrease the real interest rate.

Suppose the economy is at full employment. An increase in the money supply will _ in the short run and _ in the long run.

Which of the following sequence of events follows an increase in taxes?

What is crowding in?

In the long run, real GDP is determined by the total level of demand for goods and services.

Suppose that potential output is $6 trillion and real GDP is currently $5.5 trillion. In the long run, we would expect that:

Figure 15.2 -Refer to Figure 15.2. Suppose the economy is currently at Point A producing potential output Y₀. If the government increases spending, the economy moves to Point _ in the short- run and to Point _ in the long- run.

Say's Law states that:

How can a government policy be used to prevent a wage- price spiral? Explain.

Which of the following curves is illustrated as an upward sloping line?

When an incumbent politician uses expansionary fiscal and monetary policy to increase the chance of re- election, that politician is generating a/an:

One possible explanation for the existence of unemployment is:

The wage- price spiral occurs when:

Introduction: What Is Economics

The Key Principles of Economics

Exchange and Markets

Demand, Supply, and Market Equilibrium

Measuring a Nations Production and Income

Unemployment and Inflation

The Economy at Full Employment

Why Do Economies Grow

Aggregate Demand and Aggregate Supply

Fiscal Policy

The Income-Expenditure Model

Investment and Financial Markets

Money and the Banking System

The Federal Reserve and Monetary Policy

The Dynamics of Inflation and Unemployment

Macroeconomic Policy Debates

International Trade and Public Policy

The World of International Finance

Filters

Exam 15: Modern Macroeconomics: From the Short Run to the Long Run

The crowding- in effect implies that a decrease in government purchases causes:

In the short run, it is likely that an increase in the money supply will cause both output and the price level to increase.

According to Keynes, the level of employment is determined by:

In the short run, which of the following determines the level of real GDP?

If left alone, the boom experienced by an economy will cause the short- run

Figure 15.1 -Refer to Figure 15.1. If the wage rate can easily adjust to clear the market, then if the wage rate is currently at $12:

Describe how the wage rate adjusts so that the labor market reaches equilibrium.

An increase in government spending will decrease the real interest rate.

Suppose the economy is at full employment. An increase in the money supply will _______ in the short run and _______ in the long run.

Which of the following sequence of events follows an increase in taxes?

What is crowding in?

In the long run, real GDP is determined by the total level of demand for goods and services.

Suppose that potential output is $6 trillion and real GDP is currently $5.5 trillion. In the long run, we would expect that:

Figure 15.2 -Refer to Figure 15.2. Suppose the economy is currently at Point A producing potential output Y0. If the government increases spending, the economy moves to Point _______ in the short- run and to Point _______ in the long- run.

Say's Law states that:

How can a government policy be used to prevent a wage- price spiral? Explain.

Which of the following curves is illustrated as an upward sloping line?

When an incumbent politician uses expansionary fiscal and monetary policy to increase the chance of re- election, that politician is generating a/an:

One possible explanation for the existence of unemployment is:

The wage- price spiral occurs when:

Introduction: What Is Economics

The Key Principles of Economics

Exchange and Markets

Demand, Supply, and Market Equilibrium

Measuring a Nations Production and Income

Unemployment and Inflation

The Economy at Full Employment

Why Do Economies Grow

Aggregate Demand and Aggregate Supply

Fiscal Policy

The Income-Expenditure Model

Investment and Financial Markets

Money and the Banking System

The Federal Reserve and Monetary Policy

The Dynamics of Inflation and Unemployment

Macroeconomic Policy Debates

International Trade and Public Policy

The World of International Finance

Filters

Suppose the economy is at full employment. An increase in the money supply will _ in the short run and _ in the long run.

Figure 15.2 -Refer to Figure 15.2. Suppose the economy is currently at Point A producing potential output Y₀. If the government increases spending, the economy moves to Point _ in the short- run and to Point _ in the long- run.