Question 1

Which of the following combinations would be on an aggregate demand curve with a spending growth rate of 6%?

Accepted Answer

A)  inflation rate of 3%, real growth rate of 6% 
B)  inflation rate of 6%, real growth rate of 3% 
C)  inflation rate of 2%, real growth rate of 8% 
D)  inflation rate of 8%, real growth rate of -2% 
A)  inflation rate of 3%, real growth rate of 6% 
B)  inflation rate of 6%, real growth rate of 3% 
C)  inflation rate of 2%, real growth rate of 8% 
D)  inflation rate of 8%, real growth rate of -2%

Question 2

The increase in oil prices that took place during the mid-2000s was driven mainly by:

Accepted Answer

A)  decreases in supply. 
B)  increases in demand. 
C)  increases in both supply and demand. 
D)  increases in supply and decreases in demand. 
A)  decreases in supply. 
B)  increases in demand. 
C)  increases in both supply and demand. 
D)  increases in supply and decreases in demand.

Question 3

Lower taxes represent a negative AD shock.

Accepted Answer

A) True 
 B)False

Question 4

With the aid of a diagram, explain how a shock that raises labor productivity affects the inflation rate and the real growth rate in the long run.

Accepted Answer

@#IMG-DLM& The diagram shows the economy initially

Question 5

In the equation $\vec { M } + \vec { v } = \vec { P } + \vec { Y } _ { R }$ , what does $\bar { M }$
Stand for?

Accepted Answer

A)  the money supply 
B)  growth in the money supply 
C)  money velocity 
D)  growth in money velocity 
A)  the money supply 
B)  growth in the money supply 
C)  money velocity 
D)  growth in money velocity

Question 6

All the combinations of inflation and real growth consistent with a specific rate of spending growth is called the:

Accepted Answer

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

Question 7

If velocity is constant, the growth rate of the money supply is 2%, and inflation is 3%, then real output growth will be:

Accepted Answer

A)  -5%. 
B)  -1%. 
C)  1%. 
D)  5%. 
A)  -5%. 
B)  -1%. 
C)  1%. 
D)  5%.

Question 8

The aggregate demand curve shows the relationship between the:

Accepted Answer

A)  growth rate of real output and the inflation rate. 
B)  inflation rate and the growth rate of the money supply. 
C)  growth rate of real output and the growth rate of the money supply. 
D)  growth rate of consumption and the inflation rate. 
A)  growth rate of real output and the inflation rate. 
B)  inflation rate and the growth rate of the money supply. 
C)  growth rate of real output and the growth rate of the money supply. 
D)  growth rate of consumption and the inflation rate.

Question 9

Since changes in $\vec { C }$ , $\vec { I }$
, $\text { G }$
, or $\overrightarrow { N X }$
Do not change the rate of inflation in the long run, sustained inflation requires ongoing increases in the money supply.

Accepted Answer

A) True 
 B)False

Question 10

Imagine that a government starts out with the budget surplus. If in the next period the government temporarily runs a budget deficit, what would you expect to happen to aggregate demand?

Accepted Answer

A)  AD would increase. 
B)  AD would lie on the Solow growth rate. 
C)  AD would stay the same. 
D)  AD would decrease. 
A)  AD would increase. 
B)  AD would lie on the Solow growth rate. 
C)  AD would stay the same. 
D)  AD would decrease.

Question 11

The aggregate demand curve shows the relationship between real GDP growth and the:

Accepted Answer

A)  actual inflation rate. 
B)  expected inflation rate. 
C)  long-run inflation rate. 
D)  interest rate. 
A)  actual inflation rate. 
B)  expected inflation rate. 
C)  long-run inflation rate. 
D)  interest rate.

Question 12

What type of shock could be responsible for an increase in growth and a decrease in the inflation rate?

Accepted Answer

A)  a positive real shock 
B)  a positive demand shock 
C)  a negative real shock 
D)  a negative demand shock 
A)  a positive real shock 
B)  a positive demand shock 
C)  a negative real shock 
D)  a negative demand shock

Question 13

A real shock is any shock that increases or decreases the growth rate of:

Accepted Answer

A)  nominal GDP. 
B)  real GDP. 
C)  potential GDP. 
D)  prices. 
A)  nominal GDP. 
B)  real GDP. 
C)  potential GDP. 
D)  prices.

Question 14

Which of the following is NOT a negative aggregate demand shock?

Accepted Answer

A)  a slower money growth rate 
B)  higher taxes 
C)  lower growth of government spending 
D)  decreased import growth 
A)  a slower money growth rate 
B)  higher taxes 
C)  lower growth of government spending 
D)  decreased import growth

Question 15

A positive real shock causes a shift of the:

Accepted Answer

A)  long-run aggregate supply curve to the right. 
B)  long-run aggregate supply curve to the left. 
C)  aggregate demand curve to the right. 
D)  aggregate demand curve to the left. 
A)  long-run aggregate supply curve to the right. 
B)  long-run aggregate supply curve to the left. 
C)  aggregate demand curve to the right. 
D)  aggregate demand curve to the left.

Question 16

Sticky wages will often help end a recession sooner.

Accepted Answer

A) True 
 B)False

Question 17

(Figure: Potential LRAS Curves) Which of these diagrams depicts the long-run aggregate supply curve?

Accepted Answer

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

Question 18

The long-run growth potential of an economy does not depend on the level of inflation.

Accepted Answer

A) True 
 B)False

Question 19

If both the growth rate and the velocity of the money supply are fixed, then a higher inflation rate will cause:

Accepted Answer

A)  an upward movement along the AD curve. 
B)  a downward movement along the AD curve. 
C)  a shift of the AD curve to the left. 
D)  a shift of the AD curve to the right. 
A)  an upward movement along the AD curve. 
B)  a downward movement along the AD curve. 
C)  a shift of the AD curve to the left. 
D)  a shift of the AD curve to the right.

Question 20

Variations in real GDP growth around its trend growth rate are called:

Accepted Answer

A)  business fluctuations. 
B)  recessions. 
C)  inflation variations. 
D)  Solow growth rates. 
A)  business fluctuations. 
B)  recessions. 
C)  inflation variations. 
D)  Solow growth rates.

Exam 13: Business Fluctuations: Aggregate Demand and Supply

Which of the following combinations would be on an aggregate demand curve with a spending growth rate of 6%?

The increase in oil prices that took place during the mid-2000s was driven mainly by:

Lower taxes represent a negative AD shock.

With the aid of a diagram, explain how a shock that raises labor productivity affects the inflation rate and the real growth rate in the long run.

In the equation M⃗+v⃗=P⃗+Y⃗R\vec { M } + \vec { v } = \vec { P } + \vec { Y } _ { R }M+v=P+YR​ , what does Mˉ\bar { M }Mˉ Stand for?

All the combinations of inflation and real growth consistent with a specific rate of spending growth is called the:

If velocity is constant, the growth rate of the money supply is 2%, and inflation is 3%, then real output growth will be:

The aggregate demand curve shows the relationship between the:

Since changes in C⃗\vec { C }C , I⃗\vec { I }I , G \text { G } G , or NX→\overrightarrow { N X }NX Do not change the rate of inflation in the long run, sustained inflation requires ongoing increases in the money supply.

Imagine that a government starts out with the budget surplus. If in the next period the government temporarily runs a budget deficit, what would you expect to happen to aggregate demand?

The aggregate demand curve shows the relationship between real GDP growth and the:

What type of shock could be responsible for an increase in growth and a decrease in the inflation rate?

A real shock is any shock that increases or decreases the growth rate of:

Which of the following is NOT a negative aggregate demand shock?

A positive real shock causes a shift of the:

Sticky wages will often help end a recession sooner.

(Figure: Potential LRAS Curves) Which of these diagrams depicts the long-run aggregate supply curve?

The long-run growth potential of an economy does not depend on the level of inflation.

If both the growth rate and the velocity of the money supply are fixed, then a higher inflation rate will cause:

Variations in real GDP growth around its trend growth rate are called:

The Big Ideas

The Power of Trade and Comparative Advantage

Supply and Demand

Equilibrium: How Supply and Demand Determine Prices

Price Ceilings and Floors

GDP and the Measurement of Progress

The Wealth of Nations and Economic Growth

Growth, Capital Accumulation and the Economics of Ideas: Catching up Vs the Cutting Edge

Saving, Investment, and the Financial System

Stock Markets and Personal Finance

Unemployment and Labor Force Participation

Inflation and the Quantity Theory of Money

Transmission and Amplification Mechanisms

The Federal Reserve System and Open Market Operations

Monetary Policy

The Federal Budget: Taxes and Spending

Fiscal Policy

International Trade

International Finance

Political Economy and Public Choice

Filters

In the equation $\vec { M } + \vec { v } = \vec { P } + \vec { Y } _ { R }$ , what does $\bar { M }$ Stand for?

Since changes in $\vec { C }$ , $\vec { I }$ , $\text { G }$ , or $\overrightarrow { N X }$ Do not change the rate of inflation in the long run, sustained inflation requires ongoing increases in the money supply.