Question 1

According to the quantity theory of money, an increase in money supply causes an increase in:

Accepted Answer

A)  production. 
B)  velocity of money. 
C)  real GDP. 
D)  prices. 
A)  production. 
B)  velocity of money. 
C)  real GDP. 
D)  prices.

Question 2

Decreased import growth represents a positive AD shock.

Accepted Answer

A) True 
 B)False

Question 3

If spending in an economy increases by 3% and real GDP increases by 1%, the result will be:

Accepted Answer

A)  a recession. 
B)  inflation. 
C)  a positive supply shock. 
D)  war. 
A)  a recession. 
B)  inflation. 
C)  a positive supply shock. 
D)  war.

Question 4

Business fluctuations are variations in:

Accepted Answer

A)  real income (GDP) growth around its trend growth rate. 
B)  inflation around its trend growth rate. 
C)  the unemployment rate around its trend growth rate. 
D)  mortgage defaults around their trend growth rate. 
A)  real income (GDP) growth around its trend growth rate. 
B)  inflation around its trend growth rate. 
C)  the unemployment rate around its trend growth rate. 
D)  mortgage defaults around their trend growth rate.

Question 5

Using an AD-AS model, graphically depict an economy operating in a boom and explain what will happen to this economy in the long run.

Accepted Answer

A boom is depicted as short-run growth b

Question 6

The average annual rate of growth of real GDP in the United States has fluctuated around ____ for the last 60 years.

Accepted Answer

A)  1.2% 
B)  3.2% 
C)  5% 
D)  -1% 
A)  1.2% 
B)  3.2% 
C)  5% 
D)  -1%

Question 7

Expected shocks are more difficult to deal with than unexpected shocks.

Accepted Answer

A) True 
 B)False

Question 8

The term "business fluctuations" refers to:

Accepted Answer

A)  the different stages of a product cycle. 
B)  changes in the prices of goods and services over time. 
C)  movement in real GDP around its long-term trend. 
D)  the trend in real GDP over a long period of time. 
A)  the different stages of a product cycle. 
B)  changes in the prices of goods and services over time. 
C)  movement in real GDP around its long-term trend. 
D)  the trend in real GDP over a long period of time.

Question 9

Business fluctuations are fluctuations in the:

Accepted Answer

A)  level of real GDP around its long-term trend. 
B)  level of nominal GDP around its long-term trend. 
C)  growth rate of real GDP around its trend growth rate. 
D)  growth rate of nominal GDP around its trend growth rate. 
A)  level of real GDP around its long-term trend. 
B)  level of nominal GDP around its long-term trend. 
C)  growth rate of real GDP around its trend growth rate. 
D)  growth rate of nominal GDP around its trend growth rate.

Question 10

"Animal spirits" can cause a shock to $\vec { C }$ .

Accepted Answer

A) True 
 B)False

Question 11

In a diagram with the inflation rate on the vertical axis and the real growth rate on the horizontal axis, the long-run aggregate supply curve is:

Accepted Answer

A)  upward sloping. 
B)  downward sloping. 
C)  a vertical line at the Solow growth rate. 
D)  a horizontal line at the expected inflation rate. 
A)  upward sloping. 
B)  downward sloping. 
C)  a vertical line at the Solow growth rate. 
D)  a horizontal line at the expected inflation rate.

Question 12

Large increases in oil prices are positive shocks to aggregate demand.

Accepted Answer

A) True 
 B)False

Question 13

Based on the discussion in the textbook, the Great Depression was caused by:

Accepted Answer

A)  only aggregate demand shocks. 
B)  only real shocks. 
C)  neither aggregate demand shocks nor real shocks. 
D)  both aggregate demand shocks and real shocks. 
A)  only aggregate demand shocks. 
B)  only real shocks. 
C)  neither aggregate demand shocks nor real shocks. 
D)  both aggregate demand shocks and real shocks.

Question 14

An increase in consumer pessimism will lead to increased inflation in:

Accepted Answer

A)  the short run only. 
B)  the long run only. 
C)  both the short run and the long run. 
D)  neither the short run nor the long run. 
A)  the short run only. 
B)  the long run only. 
C)  both the short run and the long run. 
D)  neither the short run nor the long run.

Question 15

For any given expected inflation rate, the short-run aggregate supply curve shows the relationship between:

Accepted Answer

A)  the money supply and the growth rate of output. 
B)  inflation and the growth rate of output. 
C)  production factors and wages. 
D)  inflation and wages. 
A)  the money supply and the growth rate of output. 
B)  inflation and the growth rate of output. 
C)  production factors and wages. 
D)  inflation and wages.

Question 16

Use the following to answer questions: Figure: Long-Run Aggregate Supply Curves  
-(Figure: Long-Run Aggregate Supply Curves) Which of the following can explain the shift of the long-run aggregate supply curve from A to C in the figure?

Accepted Answer

A)  development of new technology 
B)  an increase in the nation's factors of production 
C)  negative supply shock 
D)  increase in oil supply 
A)  development of new technology 
B)  an increase in the nation's factors of production 
C)  negative supply shock 
D)  increase in oil supply

Question 17

In the AD-AS model, $\bar { M }$ represents the:

Accepted Answer

A)  money supply. 
B)  money velocity. 
C)  rate of money supply growth. 
D)  rate of money velocity growth. 
A)  money supply. 
B)  money velocity. 
C)  rate of money supply growth. 
D)  rate of money velocity growth.

Question 18

If nominal spending growth equals 6% and the real growth rate equals 4%, what is the inflation rate?

Accepted Answer

A)  2/3% 
B)  2% 
C)  4% 
D)  10% 
A)  2/3% 
B)  2% 
C)  4% 
D)  10%

Question 19

If spending grows by 3%, real GDP grows by 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 20

In 1931, the Federal Reserve:

Accepted Answer

A)  successfully lessened the severity of the Great Depression. 
B)  held aggregate demand steady in response to the stock market crash. 
C)  acted aggressively to counter the effects of the banking crisis. 
D)  failed to respond to the banking crisis. 
A)  successfully lessened the severity of the Great Depression. 
B)  held aggregate demand steady in response to the stock market crash. 
C)  acted aggressively to counter the effects of the banking crisis. 
D)  failed to respond to the banking crisis.

Exam 13: Business Fluctuations: Aggregate Demand and Supply

According to the quantity theory of money, an increase in money supply causes an increase in:

Decreased import growth represents a positive AD shock.

If spending in an economy increases by 3% and real GDP increases by 1%, the result will be:

Business fluctuations are variations in:

Using an AD-AS model, graphically depict an economy operating in a boom and explain what will happen to this economy in the long run.

The average annual rate of growth of real GDP in the United States has fluctuated around ____ for the last 60 years.

Expected shocks are more difficult to deal with than unexpected shocks.

The term "business fluctuations" refers to:

Business fluctuations are fluctuations in the:

"Animal spirits" can cause a shock to C⃗\vec { C }C .

In a diagram with the inflation rate on the vertical axis and the real growth rate on the horizontal axis, the long-run aggregate supply curve is:

Large increases in oil prices are positive shocks to aggregate demand.

Based on the discussion in the textbook, the Great Depression was caused by:

An increase in consumer pessimism will lead to increased inflation in:

For any given expected inflation rate, the short-run aggregate supply curve shows the relationship between:

Use the following to answer questions: Figure: Long-Run Aggregate Supply Curves -(Figure: Long-Run Aggregate Supply Curves) Which of the following can explain the shift of the long-run aggregate supply curve from A to C in the figure?

In the AD-AS model, Mˉ\bar { M }Mˉ represents the:

If nominal spending growth equals 6% and the real growth rate equals 4%, what is the inflation rate?

If spending grows by 3%, real GDP grows by 5%, and velocity is stable, then prices will be _____ at a rate of _____ according to the aggregate demand curve.

In 1931, the Federal Reserve:

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

"Animal spirits" can cause a shock to $\vec { C }$ .

In the AD-AS model, $\bar { M }$ represents the:

If spending grows by 3%, real GDP grows by 5%, and velocity is stable, then prices will be _ at a rate of _ according to the aggregate demand curve.