Question 1

Changes in $\vec { v }$ tend to be _____, and changes in $\bar { M }$
Tend to be _____.

Accepted Answer

A)  permanent; temporary 
B)  temporary; permanent 
C)  permanent; permanent 
D)  temporary; temporary 
A)  permanent; temporary 
B)  temporary; permanent 
C)  permanent; permanent 
D)  temporary; temporary

Question 2

An increase in _____ will shift the SRAS curve.

Accepted Answer

A)  actual inflation, but not expected inflation 
B)  expected inflation, but not actual inflation 
C)  both actual inflation and expected inflation 
D)  neither actual inflation nor expected inflation 
A)  actual inflation, but not expected inflation 
B)  expected inflation, but not actual inflation 
C)  both actual inflation and expected inflation 
D)  neither actual inflation nor expected inflation

Question 3

A decrease in oil prices is an example of a _____ productivity shock.

Accepted Answer

A)  negative 
B)  positive 
C)  neutral 
D)  deflationary 
A)  negative 
B)  positive 
C)  neutral 
D)  deflationary

Question 4

Deflation can cause the economy's aggregate demand curve to shift inward because debt contracts are:

Accepted Answer

A)  adjusted for inflation. 
B)  not adjusted for inflation. 
C)  adjusted for changes in the interest rate. 
D)  not adjusted for changes in the interest rate. 
A)  adjusted for inflation. 
B)  not adjusted for inflation. 
C)  adjusted for changes in the interest rate. 
D)  not adjusted for changes in the interest rate.

Question 5

The Great Depression would have been a lot less severe if monetary policy were better understood and managed at the time.

Accepted Answer

A) True 
 B)False

Question 6

The long-run aggregate supply curve is:

Accepted Answer

A)  upward sloping. 
B)  downward sloping. 
C)  a vertical line. 
D)  a horizontal line. 
A)  upward sloping. 
B)  downward sloping. 
C)  a vertical line. 
D)  a horizontal line.

Question 7

According to the inflation parable discussed in the text, a positive shock to spending:

Accepted Answer

A)  does not affect price and output at first, but in the long run both output and price increase. 
B)  increases both price and output at first but neither price nor output changes in the long run. 
C)  increases price at first but in the long run only increases output. 
D)  increases output at first but in the long run only increases price. 
A)  does not affect price and output at first, but in the long run both output and price increase. 
B)  increases both price and output at first but neither price nor output changes in the long run. 
C)  increases price at first but in the long run only increases output. 
D)  increases output at first but in the long run only increases price.

Question 8

If spending grows by 2%, real GDP growth is 5%, and velocity is stable, then prices will be _____ at a rate of _____ according to the aggregate demand curve.

Accepted Answer

A)  falling; 3% 
B)  falling; 2% 
C)  rising; 3% 
D)  rising; 2% 
A)  falling; 3% 
B)  falling; 2% 
C)  rising; 3% 
D)  rising; 2%

Question 9

If an earthquake strikes, destroying a large number of factories, the long-run aggregate supply curve will move:

Accepted Answer

A)  to the left. 
B)  to the right. 
C)  up. 
D)  down. 
A)  to the left. 
B)  to the right. 
C)  up. 
D)  down.

Question 10

If a baker observes an increase in demand for bread, should the baker increase output or raise prices?

Accepted Answer

A)  increase output 
B)  raise prices 
C)  neither increase output nor raise prices 
D)  It depends on whether the change in demand is driven by inflation or by a stronger preference for bread. 
A)  increase output 
B)  raise prices 
C)  neither increase output nor raise prices 
D)  It depends on whether the change in demand is driven by inflation or by a stronger preference for bread.

Question 11

The unemployment rate decreases during a recession.

Accepted Answer

A) True 
 B)False

Question 12

In the basic model that includes the AD and LRAS curves only, an increase in aggregate demand:

Accepted Answer

A)  increases the inflation rate and the growth rate. 
B)  increases the inflation rate, but not the growth rate. 
C)  decreases the inflation rate and increases the growth rate. 
D)  decreases the inflation rate, but not the growth rate. 
A)  increases the inflation rate and the growth rate. 
B)  increases the inflation rate, but not the growth rate. 
C)  decreases the inflation rate and increases the growth rate. 
D)  decreases the inflation rate, but not the growth rate.

Question 13

Historically, rainfall shocks in India correlate well with India's:

Accepted Answer

A)  agricultural output and real GDP. 
B)  inflation and employment. 
C)  prices and aggregate demand. 
D)  money velocity and money supply. 
A)  agricultural output and real GDP. 
B)  inflation and employment. 
C)  prices and aggregate demand. 
D)  money velocity and money supply.

Question 14

If spending growth is 6% and inflation is also 6%, this means that:

Accepted Answer

A)  real GDP did not increase. 
B)  economic growth was 12%. 
C)  more money is chasing an increased number of goods. 
D)  a positive supply shock occurred. 
A)  real GDP did not increase. 
B)  economic growth was 12%. 
C)  more money is chasing an increased number of goods. 
D)  a positive supply shock occurred.

Question 15

If spending grows by 3%, real GDP growth is 0%, and velocity is stable, then prices will be _____ at a rate of _____ according to the aggregate demand curve.

Accepted Answer

A)  falling; 3% 
B)  falling; 2% 
C)  rising; 3% 
D)  rising 2% 
A)  falling; 3% 
B)  falling; 2% 
C)  rising; 3% 
D)  rising 2%

Question 16

An increase in spending growth causes a _____ the aggregate demand curve.

Accepted Answer

A)  rightward shift of 
B)  leftward shift of 
C)  movement up along 
D)  movement down along 
A)  rightward shift of 
B)  leftward shift of 
C)  movement up along 
D)  movement down along

Question 17

If the actual rate of inflation turns out to be higher than the expected rate of inflation, what happens to the growth rate of output before expectations are updated?

Accepted Answer

A)  The growth rate stays at the Solow growth rate. 
B)  The growth rate is higher than the Solow growth rate. 
C)  The growth rate is lower than the Solow growth rate. 
D)  The growth rate could go up or down. 
A)  The growth rate stays at the Solow growth rate. 
B)  The growth rate is higher than the Solow growth rate. 
C)  The growth rate is lower than the Solow growth rate. 
D)  The growth rate could go up or down.

Question 18

In the basic model with an AD and LRAS curve only, if spending growth is 10% and the Solow growth rate falls from 5% to 3%, then inflation will:

Accepted Answer

A)  decrease from 7% to 5%. 
B)  increase from 5% to 7%. 
C)  decrease from 13% to 8%. 
D)  increase from 8% to 13%. 
A)  decrease from 7% to 5%. 
B)  increase from 5% to 7%. 
C)  decrease from 13% to 8%. 
D)  increase from 8% to 13%.

Question 19

Which of the following is an example of a negative shock to an economy?

Accepted Answer

A)  decreases in oil prices 
B)  tax cuts 
C)  new technology 
D)  terrorist attacks 
A)  decreases in oil prices 
B)  tax cuts 
C)  new technology 
D)  terrorist attacks

Question 20

Which of the following is NOT an example of a positive AD shock?

Accepted Answer

A)  a faster growth rate of the money supply 
B)  an increase in government spending growth 
C)  an increase in productivity growth 
D)  an increase in export growth 
A)  a faster growth rate of the money supply 
B)  an increase in government spending growth 
C)  an increase in productivity growth 
D)  an increase in export growth

Exam 13: Business Fluctuations: Aggregate Demand and Supply

Changes in v⃗\vec { v }v tend to be _____, and changes in Mˉ\bar { M }Mˉ Tend to be _____.

An increase in _____ will shift the SRAS curve.

A decrease in oil prices is an example of a _____ productivity shock.

Deflation can cause the economy's aggregate demand curve to shift inward because debt contracts are:

The Great Depression would have been a lot less severe if monetary policy were better understood and managed at the time.

The long-run aggregate supply curve is:

According to the inflation parable discussed in the text, a positive shock to spending:

If spending grows by 2%, real GDP growth is 5%, and velocity is stable, then prices will be _____ at a rate of _____ according to the aggregate demand curve.

If an earthquake strikes, destroying a large number of factories, the long-run aggregate supply curve will move:

If a baker observes an increase in demand for bread, should the baker increase output or raise prices?

The unemployment rate decreases during a recession.

In the basic model that includes the AD and LRAS curves only, an increase in aggregate demand:

Historically, rainfall shocks in India correlate well with India's:

If spending growth is 6% and inflation is also 6%, this means that:

If spending grows by 3%, real GDP growth is 0%, and velocity is stable, then prices will be _____ at a rate of _____ according to the aggregate demand curve.

An increase in spending growth causes a _____ the aggregate demand curve.

If the actual rate of inflation turns out to be higher than the expected rate of inflation, what happens to the growth rate of output before expectations are updated?

In the basic model with an AD and LRAS curve only, if spending growth is 10% and the Solow growth rate falls from 5% to 3%, then inflation will:

Which of the following is an example of a negative shock to an economy?

Which of the following is NOT an example of a positive AD shock?

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

Changes in $\vec { v }$ tend to be _, and changes in $\bar { M }$ Tend to be _.

If spending grows by 2%, real GDP growth is 5%, and velocity is stable, then prices will be _ at a rate of _ according to the aggregate demand curve.

If spending grows by 3%, real GDP growth is 0%, and velocity is stable, then prices will be _ at a rate of _ according to the aggregate demand curve.