Question 1

A reduction in the target rate of inflation

Accepted Answer

A)  occurred during the 1970s. 
B)  has never occurred in the United States. 
C)  is what caused the Great Depression. 
D)  occurred in the United States during the early 1980s. 
E)  occurred in the United States during the late 1960s. 
A)  occurred during the 1970s. 
B)  has never occurred in the United States. 
C)  is what caused the Great Depression. 
D)  occurred in the United States during the early 1980s. 
E)  occurred in the United States during the late 1960s. D

Question 2

What is meant by a baseline?

Accepted Answer

This is the path the economy would take if the contemplated policy were not adopted.

Question 3

A change in monetary policy will not cause the AD curve to shift.

Accepted Answer

A) True 
 B)False  False

Question 4

Monetary policy that attempts to increase the rate of inflation is called a

Accepted Answer

A)  reinflation. 
B)  supply shock. 
C)  recession. 
D)  temporary growth slowdown. 
E)  disinflation. 
A)  reinflation. 
B)  supply shock. 
C)  recession. 
D)  temporary growth slowdown. 
E)  disinflation.

Question 5

Exhibit 25-1  
-Suppose the economy is initially at point A in Exhibit 25-1. If government purchases increase, which point best depicts where the economy will be in the short run as a result of the change in spending?

Accepted Answer

A)  F 
B)  D 
C)  B 
D)  E 
E)  C 
A)  F 
B)  D 
C)  B 
D)  E 
E)  C

Question 6

If the Fed raises interest rates because inflation is too high, this will cause

Accepted Answer

A)  a long-term recession. 
B)  a temporary slowdown in growth but not a recession. 
C)  a permanent slowdown in growth. 
D)  either a temporary slowdown in growth or a recession. 
E)  a temporary recession. 
A)  a long-term recession. 
B)  a temporary slowdown in growth but not a recession. 
C)  a permanent slowdown in growth. 
D)  either a temporary slowdown in growth or a recession. 
E)  a temporary recession.

Question 7

In the short run, when government purchases fall, income and hence consumption fall, so

Accepted Answer

A)  real GDP falls by more than the fall in government purchases. 
B)  both real GDP and potential GDP fall by the same amount as the fall in government purchases. 
C)  real GDP falls by the same amount as the fall in government purchases. 
D)  real GDP falls by less than the fall in government purchases. 
E)  both real GDP and potential GDP fall by more than the fall in government purchases. 
A)  real GDP falls by more than the fall in government purchases. 
B)  both real GDP and potential GDP fall by the same amount as the fall in government purchases. 
C)  real GDP falls by the same amount as the fall in government purchases. 
D)  real GDP falls by less than the fall in government purchases. 
E)  both real GDP and potential GDP fall by more than the fall in government purchases.

Question 8

Disinflation can be defined as

Accepted Answer

A)  a decrease in the overall price level. 
B)  a higher rate of inflation that is accompanied by economic growth. 
C)  a rate of inflation that is spiraling out of control. 
D)  an inflation hike that is not accompanied by a higher nominal interest rate, thereby creating negative real rates of return. 
E)  None of these. 
A)  a decrease in the overall price level. 
B)  a higher rate of inflation that is accompanied by economic growth. 
C)  a rate of inflation that is spiraling out of control. 
D)  an inflation hike that is not accompanied by a higher nominal interest rate, thereby creating negative real rates of return. 
E)  None of these.

Question 9

The long-run overall effect of decreased government purchases is that

Accepted Answer

A)  investment is higher. 
B)  consumption and net exports are the same, and investment is higher. 
C)  consumption is lower, and investment is higher. 
D)  consumption and net exports are higher. 
E)  consumption, investment, and net exports are all higher. 
A)  investment is higher. 
B)  consumption and net exports are the same, and investment is higher. 
C)  consumption is lower, and investment is higher. 
D)  consumption and net exports are higher. 
E)  consumption, investment, and net exports are all higher.

Question 10

In economics, the short run is an expression used to describe events that take at least two to three weeks to unfold.

Accepted Answer

A) True 
 B)False

Question 11

During the period known as the Volcker disinflation

Accepted Answer

A)  the unemployment rate rose to 10.8 percent. 
B)  real GDP fell below potential GDP. 
C)  investment and net exports declined. 
D)  the real interest rate rose. 
E)  All of these 
A)  the unemployment rate rose to 10.8 percent. 
B)  real GDP fell below potential GDP. 
C)  investment and net exports declined. 
D)  the real interest rate rose. 
E)  All of these

Question 12

All of the following are likely reasons for the 2007-09 recession in the United States except

Accepted Answer

A)  a rightward shift of the AD curve. 
B)  an upward shift of the IA line. 
C)  an increase in potential GDP. 
D)  a decrease in potential GDP. 
E)  an increase in aggregate supply. 
A)  a rightward shift of the AD curve. 
B)  an upward shift of the IA line. 
C)  an increase in potential GDP. 
D)  a decrease in potential GDP. 
E)  an increase in aggregate supply.

Question 13

The long-run interest rate effect of decreased government purchases is that

Accepted Answer

A)  consumption is lower, and investment is higher. 
B)  consumption and net exports are the same, and investment is higher. 
C)  investment is higher. 
D)  consumption, investment, and net exports are all higher. 
E)  consumption and net exports are higher. 
A)  consumption is lower, and investment is higher. 
B)  consumption and net exports are the same, and investment is higher. 
C)  investment is higher. 
D)  consumption, investment, and net exports are all higher. 
E)  consumption and net exports are higher.

Question 14

A decrease in government purchases causes the interest-sensitive components of GDP to increase in the long run.

Accepted Answer

A) True 
 B)False

Question 15

The short-run effect of an oil price increase is

Accepted Answer

A)  an upward shift of the inflation adjustment line and a leftward shift of the aggregate demand curve as the Fed raises interest rates. 
B)  an upward shift of the inflation adjustment line and a leftward shift of the aggregate demand curve as the Fed lowers the target inflation rate. 
C)  an upward shift of the inflation adjustment line and a leftward shift of the aggregate demand curve as spending falls. 
D)  a downward shift of the inflation adjustment line. 
E)  an upward shift of the inflation adjustment line. 
A)  an upward shift of the inflation adjustment line and a leftward shift of the aggregate demand curve as the Fed raises interest rates. 
B)  an upward shift of the inflation adjustment line and a leftward shift of the aggregate demand curve as the Fed lowers the target inflation rate. 
C)  an upward shift of the inflation adjustment line and a leftward shift of the aggregate demand curve as spending falls. 
D)  a downward shift of the inflation adjustment line. 
E)  an upward shift of the inflation adjustment line.

Question 16

The best explanation for the recent economic fluctuations observed in the U.S. economy is

Accepted Answer

A)  one leftward shift of the aggregate demand curve, followed by price adjustment, followed by one rightward shift of the aggregate demand curve, followed by price adjustment. 
B)  one leftward shift of the aggregate demand curve followed by multiple shifts in the inflation adjustment line. 
C)  one rightward shift of the aggregate demand curve, followed by price adjustment, followed by one leftward shift of the aggregate demand curve, followed by price adjustment. 
D)  one rightward shift of the aggregate demand curve followed by multiple shifts in the inflation adjustment line. 
E)  one leftward shift of the aggregate demand curve followed by one rightward shift. 
A)  one leftward shift of the aggregate demand curve, followed by price adjustment, followed by one rightward shift of the aggregate demand curve, followed by price adjustment. 
B)  one leftward shift of the aggregate demand curve followed by multiple shifts in the inflation adjustment line. 
C)  one rightward shift of the aggregate demand curve, followed by price adjustment, followed by one leftward shift of the aggregate demand curve, followed by price adjustment. 
D)  one rightward shift of the aggregate demand curve followed by multiple shifts in the inflation adjustment line. 
E)  one leftward shift of the aggregate demand curve followed by one rightward shift.

Question 17

If there is a sharp increase in oil prices, in the short run

Accepted Answer

A)  consumption and investment will fall. 
B)  consumption will fall, investment will increase, and net exports will fall. 
C)  consumption, investment, and net exports will stay constant. 
D)  consumption will fall while investment and net exports will stay constant. 
E)  consumption will fall, net exports will increase, and investment will stay constant. 
A)  consumption and investment will fall. 
B)  consumption will fall, investment will increase, and net exports will fall. 
C)  consumption, investment, and net exports will stay constant. 
D)  consumption will fall while investment and net exports will stay constant. 
E)  consumption will fall, net exports will increase, and investment will stay constant.

Question 18

Explain why the Fed would ever pursue a policy to cause reinflation.

Accepted Answer

It seems unlikely the Fed would willingl

Question 19

Which of the following did not contribute to the decline in aggregate demand during 2007?

Accepted Answer

A)  A commodity price shock 
B)  A drop in stock prices 
C)  A change in monetary policy 
D)  A drop in consumer confidence 
E)  A decrease in lending from banks 
A)  A commodity price shock 
B)  A drop in stock prices 
C)  A change in monetary policy 
D)  A drop in consumer confidence 
E)  A decrease in lending from banks

Question 20

A sharp increase in oil prices will result in

Accepted Answer

A)  a deflation. 
B)  a decline in potential GDP. 
C)  stagflation. 
D)  disinflation. 
E)  hyperinflation. 
A)  a deflation. 
B)  a decline in potential GDP. 
C)  stagflation. 
D)  disinflation. 
E)  hyperinflation.

A reduction in the target rate of inflation

What is meant by a baseline?

A change in monetary policy will not cause the AD curve to shift.

Monetary policy that attempts to increase the rate of inflation is called a

Exhibit 25-1 -Suppose the economy is initially at point A in Exhibit 25-1. If government purchases increase, which point best depicts where the economy will be in the short run as a result of the change in spending?

If the Fed raises interest rates because inflation is too high, this will cause

In the short run, when government purchases fall, income and hence consumption fall, so

Disinflation can be defined as

The long-run overall effect of decreased government purchases is that

In economics, the short run is an expression used to describe events that take at least two to three weeks to unfold.

During the period known as the Volcker disinflation

All of the following are likely reasons for the 2007-09 recession in the United States except

The long-run interest rate effect of decreased government purchases is that

A decrease in government purchases causes the interest-sensitive components of GDP to increase in the long run.

The short-run effect of an oil price increase is

The best explanation for the recent economic fluctuations observed in the U.S. economy is

If there is a sharp increase in oil prices, in the short run

Explain why the Fed would ever pursue a policy to cause reinflation.

Which of the following did not contribute to the decline in aggregate demand during 2007?

A sharp increase in oil prices will result in

The Central Idea

Observing and Explaining the Economy

The Supply and Demand Model

Subtleties of the Supply and Demand Model

Macroeconomics: the Big Picture

Measuring the Production, Income, and Spending of Nations

The Spending Allocation Model

Unemployment and Employment

Productivity and Economic Growth

Money and Inflation

The Nature and Causes of Economic Fluctuations

The Economic Fluctuations Model

Fiscal Policy

Monetary Policy

Capital and Financial Markets

Economic Growth Around the World

International Trade

International Finance

Filters

Exam 13: Using the Economic Fluctuations Model

A reduction in the target rate of inflation

What is meant by a baseline?

A change in monetary policy will not cause the AD curve to shift.

Monetary policy that attempts to increase the rate of inflation is called a

Exhibit 25-1 -Suppose the economy is initially at point A in Exhibit 25-1. If government purchases increase, which point best depicts where the economy will be in the short run as a result of the change in spending?

If the Fed raises interest rates because inflation is too high, this will cause

In the short run, when government purchases fall, income and hence consumption fall, so

Disinflation can be defined as

The long-run overall effect of decreased government purchases is that

In economics, the short run is an expression used to describe events that take at least two to three weeks to unfold.

During the period known as the Volcker disinflation

All of the following are likely reasons for the 2007-09 recession in the United States except

The long-run interest rate effect of decreased government purchases is that

A decrease in government purchases causes the interest-sensitive components of GDP to increase in the long run.

The short-run effect of an oil price increase is

The best explanation for the recent economic fluctuations observed in the U.S. economy is

If there is a sharp increase in oil prices, in the short run

Explain why the Fed would ever pursue a policy to cause reinflation.

Which of the following did not contribute to the decline in aggregate demand during 2007?

A sharp increase in oil prices will result in

The Central Idea

Observing and Explaining the Economy

The Supply and Demand Model

Subtleties of the Supply and Demand Model

Macroeconomics: the Big Picture

Measuring the Production, Income, and Spending of Nations

The Spending Allocation Model

Unemployment and Employment

Productivity and Economic Growth

Money and Inflation

The Nature and Causes of Economic Fluctuations

The Economic Fluctuations Model

Fiscal Policy

Monetary Policy

Capital and Financial Markets

Economic Growth Around the World

International Trade

International Finance

Filters