Question 1

A 2% increase in real growth, ceteris paribus, _____ inflation by _____.

Accepted Answer

A)  increases; 1% 
B)  increases; 2% 
C)  decreases; 1% 
D)  decreases; 2% 
A)  increases; 1% 
B)  increases; 2% 
C)  decreases; 1% 
D)  decreases; 2%

Question 2

Imagine that an economy experiences a long-lasting banking crisis and that subsequently consumption growth permanently falls. Using the AD-AS model, draw a diagram and explain the effects of the permanent decline in consumption growth on the inflation rate and the real growth rate in both the short run and the long run.

Accepted Answer

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

Question 3

Use the following to answer questions: Figure: Aggregate Demand  
-(Figure: Aggregate Demand) Point B on this aggregate demand curve represents an inflation rate of:

Accepted Answer

A)  3%. 
B)  4%. 
C)  5%. 
D)  7%. 
A)  3%. 
B)  4%. 
C)  5%. 
D)  7%.

Question 4

Figure: Real Output Shock   This figure shows how real output growth reacts to a shock of a 10% increase in the price of oil. How long does it take for the economy to return to normal?

Accepted Answer

A)  5 quarters 
B)  5 years 
C)  10 years 
D)  2.5 years 
A)  5 quarters 
B)  5 years 
C)  10 years 
D)  2.5 years

Question 5

An increase in the rate of expected inflation causes:

Accepted Answer

A)  the short-run aggregate supply curve to shift down. 
B)  the short-run aggregate supply curve to shift up. 
C)  an upward movement along the short-run aggregate supply curve. 
D)  a downward movement along the short-run aggregate supply curve. 
A)  the short-run aggregate supply curve to shift down. 
B)  the short-run aggregate supply curve to shift up. 
C)  an upward movement along the short-run aggregate supply curve. 
D)  a downward movement along the short-run aggregate supply curve.

Question 6

If the growth rate of the money supply in an economy is 5%, the growth rate of output is 2%, and the velocity of money is constant, what will the inflation rate in this economy be?

Accepted Answer

A)  2% 
B)  3% 
C)  5% 
D)  7% 
A)  2% 
B)  3% 
C)  5% 
D)  7%

Question 7

Wages that do not respond quickly to changes in the inflation rate are:

Accepted Answer

A)  real wages. 
B)  flexible wages. 
C)  decreasing wages. 
D)  sticky wages. 
A)  real wages. 
B)  flexible wages. 
C)  decreasing wages. 
D)  sticky wages.

Question 8

If velocity is stable, then $\vec { v }$ equals:

Accepted Answer

A)  0%. 
B)  1%. 
C)  10%. 
D)  100%. 
A)  0%. 
B)  1%. 
C)  10%. 
D)  100%.

Question 9

A 1% increase in real growth, ceteris paribus, _____ inflation by _____.

Accepted Answer

A)  increases; 1% 
B)  increases; 2% 
C)  decreases; 1% 
D)  decreases; 2% 
A)  increases; 1% 
B)  increases; 2% 
C)  decreases; 1% 
D)  decreases; 2%

Question 10

A temporary decrease in spending decreases both inflation and real growth in the long run.

Accepted Answer

A) True 
 B)False

Question 11

An increase in expected inflation will cause the economy's long-run aggregate supply curve to:

Accepted Answer

A)  shift outward. 
B)  shift inward. 
C)  become steeper. 
D)  remain unchanged. 
A)  shift outward. 
B)  shift inward. 
C)  become steeper. 
D)  remain unchanged.

Question 12

Greater growth of government spending represents a negative AD shock.

Accepted Answer

A) True 
 B)False

Question 13

When consumers suddenly become more pessimistic about the economy, a negative aggregate demand shock shifts the:

Accepted Answer

A)  LRAS curve inward, reducing the real growth rate in the short run. 
B)  LRAS curve outward, reducing the real growth rate in the short run. 
C)  AD curve inward, reducing the real growth rate in the short run. 
D)  AD curve outward, reducing the real growth rate in the short run. 
A)  LRAS curve inward, reducing the real growth rate in the short run. 
B)  LRAS curve outward, reducing the real growth rate in the short run. 
C)  AD curve inward, reducing the real growth rate in the short run. 
D)  AD curve outward, reducing the real growth rate in the short run.

Question 14

An increase in the growth rate of velocity shifts the aggregate demand curve to the right.

Accepted Answer

A) True 
 B)False

Question 15

Politicians and especially the general public worry about recessions because of:

Accepted Answer

A)  high interest rates. 
B)  high inflation. 
C)  high unemployment. 
D)  lower wages. 
A)  high interest rates. 
B)  high inflation. 
C)  high unemployment. 
D)  lower wages.

Question 16

Which of the following would result from a positive productivity shock?

Accepted Answer

A)  an increase in the rate of inflation 
B)  a shift to the right of the aggregate demand curve 
C)  a shift to the left of the long-run aggregate supply curve 
D)  an increase in the economy's long-run potential growth rate 
A)  an increase in the rate of inflation 
B)  a shift to the right of the aggregate demand curve 
C)  a shift to the left of the long-run aggregate supply curve 
D)  an increase in the economy's long-run potential growth rate

Question 17

When inflation is 4% and the real GDP growth rate is 2%, what is the spending growth rate?

Accepted Answer

A)  -2% 
B)  2% 
C)  6% 
D)  8% 
A)  -2% 
B)  2% 
C)  6% 
D)  8%

Question 18

A positive real shock to the economy will result in an increase in the growth rate of output and a decrease in the rate of inflation.

Accepted Answer

A) True 
 B)False

Question 19

In the AD-AS model, money is not neutral in the short run if:

Accepted Answer

A)  unexpected inflation turns into expected inflation. 
B)  wages and prices are sticky. 
C)  wages and prices are flexible. 
D)  the change in the money supply is fully anticipated. 
A)  unexpected inflation turns into expected inflation. 
B)  wages and prices are sticky. 
C)  wages and prices are flexible. 
D)  the change in the money supply is fully anticipated.

Question 20

The Great Depression was due primarily to the:

Accepted Answer

A)  excessive amount of money supply. 
B)  extensive underutilization of resources. 
C)  great fall in aggregate demand. 
D)  rising labor unions. 
A)  excessive amount of money supply. 
B)  extensive underutilization of resources. 
C)  great fall in aggregate demand. 
D)  rising labor unions.

A 2% increase in real growth, ceteris paribus, _ inflation by _.

Use the following to answer questions: Figure: Aggregate Demand -(Figure: Aggregate Demand) Point B on this aggregate demand curve represents an inflation rate of:

Figure: Real Output Shock This figure shows how real output growth reacts to a shock of a 10% increase in the price of oil. How long does it take for the economy to return to normal?

An increase in the rate of expected inflation causes:

If the growth rate of the money supply in an economy is 5%, the growth rate of output is 2%, and the velocity of money is constant, what will the inflation rate in this economy be?

Wages that do not respond quickly to changes in the inflation rate are:

If velocity is stable, then $\vec { v }$ equals:

A 1% increase in real growth, ceteris paribus, _ inflation by _.

A temporary decrease in spending decreases both inflation and real growth in the long run.

An increase in expected inflation will cause the economy's long-run aggregate supply curve to:

Greater growth of government spending represents a negative AD shock.

When consumers suddenly become more pessimistic about the economy, a negative aggregate demand shock shifts the:

An increase in the growth rate of velocity shifts the aggregate demand curve to the right.

Politicians and especially the general public worry about recessions because of:

Which of the following would result from a positive productivity shock?

When inflation is 4% and the real GDP growth rate is 2%, what is the spending growth rate?

A positive real shock to the economy will result in an increase in the growth rate of output and a decrease in the rate of inflation.

In the AD-AS model, money is not neutral in the short run if:

The Great Depression was due primarily to the:

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

Exam 13: Business Fluctuations: Aggregate Demand and Supply

A 2% increase in real growth, ceteris paribus, _____ inflation by _____.

Use the following to answer questions: Figure: Aggregate Demand -(Figure: Aggregate Demand) Point B on this aggregate demand curve represents an inflation rate of:

Figure: Real Output Shock This figure shows how real output growth reacts to a shock of a 10% increase in the price of oil. How long does it take for the economy to return to normal?

An increase in the rate of expected inflation causes:

If the growth rate of the money supply in an economy is 5%, the growth rate of output is 2%, and the velocity of money is constant, what will the inflation rate in this economy be?

Wages that do not respond quickly to changes in the inflation rate are:

If velocity is stable, then v⃗\vec { v }v equals:

A 1% increase in real growth, ceteris paribus, _____ inflation by _____.

A temporary decrease in spending decreases both inflation and real growth in the long run.

An increase in expected inflation will cause the economy's long-run aggregate supply curve to:

Greater growth of government spending represents a negative AD shock.

When consumers suddenly become more pessimistic about the economy, a negative aggregate demand shock shifts the:

An increase in the growth rate of velocity shifts the aggregate demand curve to the right.

Politicians and especially the general public worry about recessions because of:

Which of the following would result from a positive productivity shock?

When inflation is 4% and the real GDP growth rate is 2%, what is the spending growth rate?

A positive real shock to the economy will result in an increase in the growth rate of output and a decrease in the rate of inflation.

In the AD-AS model, money is not neutral in the short run if:

The Great Depression was due primarily to the:

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

A 2% increase in real growth, ceteris paribus, _ inflation by _.

If velocity is stable, then $\vec { v }$ equals:

A 1% increase in real growth, ceteris paribus, _ inflation by _.