Question 1

If there is a decrease in the expected future profitability of capital,

Accepted Answer

A) the aggregate demand curve will shift right. 
B) the aggregate demand curve will shift left. 
C) the aggregate demand curve will become steeper. 
D) the aggregate demand curve will be unaffected. 
A) the aggregate demand curve will shift right. 
B) the aggregate demand curve will shift left. 
C) the aggregate demand curve will become steeper. 
D) the aggregate demand curve will be unaffected. B

Question 2

Which of the following is NOT a characteristic of competitive markets?

Accepted Answer

A) standardized product 
B) purchases and sales of individual traders are small relative to the total volume traded 
C) prices adjust quickly 
D) there are relatively few sellers 
A) standardized product 
B) purchases and sales of individual traders are small relative to the total volume traded 
C) prices adjust quickly 
D) there are relatively few sellers D

Question 3

Suppose that initially U.S. households are saving only a small fraction of their incomes because they are relying on rapid increase in stock prices to increase their wealth. If stock prices decline and households decide to increase their saving rate, what will be impact on output in the new Keynesian view? Be sure to distinguish the short run from the long run.

Accepted Answer

The increase in the saving rate will shift the AD curve to the left. In the short run, output falls. In the long run, the SRAS shifts to the right. As a result, the price level falls, restoring equilibrium at the full employment level of output.

Question 4

When output exceeds its full-employment level,

Accepted Answer

A) the short-run aggregate supply function shifts up. 
B) wages fall. 
C) the short-run aggregate supply function shifts down. 
D) aggregate supply exceeds aggregate demand. 
A) the short-run aggregate supply function shifts up. 
B) wages fall. 
C) the short-run aggregate supply function shifts down. 
D) aggregate supply exceeds aggregate demand.

Question 5

How does an increase in the price level lead to a higher interest rate?

Accepted Answer

An increase in the price level reduces t

Question 6

If labor costs rise at the same time that the federal government decreases its purchases, in the short run

Accepted Answer

A) aggregate output and the price level will both increase. 
B) aggregate output will increase, but the price level will fall. 
C) aggregate output and the price level will both fall. 
D) aggregate output will fall, but the price level may either increase or decrease. 
A) aggregate output and the price level will both increase. 
B) aggregate output will increase, but the price level will fall. 
C) aggregate output and the price level will both fall. 
D) aggregate output will fall, but the price level may either increase or decrease.

Question 7

If the coefficient a in the new classical expression for short-run aggregate supply were equal to zero,

Accepted Answer

A) aggregate output would always be at its full-employment level. 
B) the short-run aggregate supply curve would slope down. 
C) the short-run aggregate supply curve would be a horizontal line. 
D) aggregate output would only differ from its full-employment level if the actual price level did not equal the expected price level. 
A) aggregate output would always be at its full-employment level. 
B) the short-run aggregate supply curve would slope down. 
C) the short-run aggregate supply curve would be a horizontal line. 
D) aggregate output would only differ from its full-employment level if the actual price level did not equal the expected price level.

Question 8

Productivity growth occurs when:

Accepted Answer

A) there are more inputs 
B) firms can produce more output per unit of input 
C) more output is produced 
D) employees work extra hours 
A) there are more inputs 
B) firms can produce more output per unit of input 
C) more output is produced 
D) employees work extra hours

Question 9

In the new Keynesian view, the larger the proportion of firms in the economy with sticky prices,

Accepted Answer

A) the steeper the SRAS curve will be. 
B) the flatter the SRAS curve will be. 
C) the greater the increase in the price level for a given shift in the AD curve. 
D) the less effective is fiscal policy in increasing output. 
A) the steeper the SRAS curve will be. 
B) the flatter the SRAS curve will be. 
C) the greater the increase in the price level for a given shift in the AD curve. 
D) the less effective is fiscal policy in increasing output.

Question 10

Most economists believe that the aggregate supply curve is

Accepted Answer

A) upward-sloping in the short run, but vertical in the long run. 
B) upward-sloping in the long run, but vertical in the short run. 
C) upward-sloping in both the short run and in the long run. 
D) vertical in both the short run and in the long run. 
A) upward-sloping in the short run, but vertical in the long run. 
B) upward-sloping in the long run, but vertical in the short run. 
C) upward-sloping in both the short run and in the long run. 
D) vertical in both the short run and in the long run.

Question 11

Monetary neutrality refers to the fact that changes in the money supply

Accepted Answer

A) affect output more in the long run than in the short run. 
B) have no effect on output in the long run. 
C) affect only output in the long run. 
D) have a greater effect on prices in the short run than in the long run. 
A) affect output more in the long run than in the short run. 
B) have no effect on output in the long run. 
C) affect only output in the long run. 
D) have a greater effect on prices in the short run than in the long run.

Question 12

The Federal Reserve pursued an expansionary monetary policy during 1964 in order to

Accepted Answer

A) pull the United States out of a deep recession. 
B) counteract the effects of a deep cut in federal income taxes. 
C) keep interest rates from rising. 
D) bring down the inflation rate. 
A) pull the United States out of a deep recession. 
B) counteract the effects of a deep cut in federal income taxes. 
C) keep interest rates from rising. 
D) bring down the inflation rate.

Question 13

An increase in oil prices will

Accepted Answer

A) shift the short-run aggregate supply curve up and to the left. 
B) shift the short-run aggregate supply curve down and to the right. 
C) cause a movement along the short-run aggregate supply curve. 
D) not affect the short-run aggregate supply curve. 
A) shift the short-run aggregate supply curve up and to the left. 
B) shift the short-run aggregate supply curve down and to the right. 
C) cause a movement along the short-run aggregate supply curve. 
D) not affect the short-run aggregate supply curve.

Question 14

The new classical approach to the aggregate supply curve assumes that businesses are

Accepted Answer

A) better informed about the general price level than they are about prices in their own markets. 
B) better informed about prices in their own markets than they are about the general price level. 
C) equally well informed about prices in their own markets and the general price level. 
D) reluctant to engage in investment spending because of a lack of information concerning future prices. 
A) better informed about the general price level than they are about prices in their own markets. 
B) better informed about prices in their own markets than they are about the general price level. 
C) equally well informed about prices in their own markets and the general price level. 
D) reluctant to engage in investment spending because of a lack of information concerning future prices.

Question 15

Which of the following will NOT shift the short-run aggregate supply function?

Accepted Answer

A) changes in labor costs 
B) changes in the costs of nonlabor inputs 
C) changes in the price level 
D) changes in the expected price level 
A) changes in labor costs 
B) changes in the costs of nonlabor inputs 
C) changes in the price level 
D) changes in the expected price level

Question 16

Which of the following expressions is correct?

Accepted Answer

A) AE = C + I + G - NX. 
B) AE = C + I + G + NX. 
C) AE = C + I + (G - T)+ NX. 
D) AE = C + I + (G - T)- NX. 
A) AE = C + I + G - NX. 
B) AE = C + I + G + NX. 
C) AE = C + I + (G - T)+ NX. 
D) AE = C + I + (G - T)- NX.

Question 17

Everything else being constant, a lower real interest rate

Accepted Answer

A) increases desired saving and net exports. 
B) decreases desired saving but increases net exports. 
C) increases desired saving and investment. 
D) increases desired investment but decreases net exports. 
A) increases desired saving and net exports. 
B) decreases desired saving but increases net exports. 
C) increases desired saving and investment. 
D) increases desired investment but decreases net exports.

Question 18

Which of the following is most likely to have an impact on the growth of productivity?

Accepted Answer

A) a decrease in the price level 
B) a decrease in real money balances 
C) an increase in the labor supply 
D) improvements in worker training 
A) a decrease in the price level 
B) a decrease in real money balances 
C) an increase in the labor supply 
D) improvements in worker training

Question 19

If the economy is initially at equilibrium and an unexpected decline in aggregate demand takes place, in the short run aggregate output will

Accepted Answer

A) fall in the new classical view, but not in the new Keynesian view. 
B) fall in the new Keynesian view, but not in the new classical view. 
C) fall in both the new Keynesian and new classical views. 
D) remain at full employment in both the new classical and new Keynesian views. 
A) fall in the new classical view, but not in the new Keynesian view. 
B) fall in the new Keynesian view, but not in the new classical view. 
C) fall in both the new Keynesian and new classical views. 
D) remain at full employment in both the new classical and new Keynesian views.

Question 20

Why is the short-term nominal interest rate the opportunity cost of holding money?

Accepted Answer

The higher the interest rate o

If there is a decrease in the expected future profitability of capital,

Which of the following is NOT a characteristic of competitive markets?

When output exceeds its full-employment level,

How does an increase in the price level lead to a higher interest rate?

If labor costs rise at the same time that the federal government decreases its purchases, in the short run

If the coefficient a in the new classical expression for short-run aggregate supply were equal to zero,

Productivity growth occurs when:

In the new Keynesian view, the larger the proportion of firms in the economy with sticky prices,

Most economists believe that the aggregate supply curve is

Monetary neutrality refers to the fact that changes in the money supply

The Federal Reserve pursued an expansionary monetary policy during 1964 in order to

An increase in oil prices will

The new classical approach to the aggregate supply curve assumes that businesses are

Which of the following will NOT shift the short-run aggregate supply function?

Which of the following expressions is correct?

Everything else being constant, a lower real interest rate

Which of the following is most likely to have an impact on the growth of productivity?

If the economy is initially at equilibrium and an unexpected decline in aggregate demand takes place, in the short run aggregate output will

Why is the short-term nominal interest rate the opportunity cost of holding money?

Introducing Money and the Financial System

Money and the Payments System

Interest Rates and Rates of Return

Determining Interest Rates

The Risk Structure and Term Structure of Interest Rates

The Stock Market, Information, and Financial Market Efficiency

Derivatives and Derivative Markets

The Market for Foreign Exchange

Transactions Costs, Asymmetric Information, and the Structure of the Financial System

The Economics of Banking

Investment Banks, Mutual Funds, Hedge Funds, and the Shadow Banking System

Financial Crises and Financial Regulation

The Federal Reserve and Central Banking

The Federal Reserves Balance Sheet and the Money Supply Process

Monetary Policy

The International Financial System and Monetary Policy

Monetary Theory II: The IS-MP Model

Filters

Exam 17: Monetary Theory I: The Aggregate Demand and Aggregate Supply Model

If there is a decrease in the expected future profitability of capital,

Which of the following is NOT a characteristic of competitive markets?

When output exceeds its full-employment level,

How does an increase in the price level lead to a higher interest rate?

If labor costs rise at the same time that the federal government decreases its purchases, in the short run

If the coefficient a in the new classical expression for short-run aggregate supply were equal to zero,

Productivity growth occurs when:

In the new Keynesian view, the larger the proportion of firms in the economy with sticky prices,

Most economists believe that the aggregate supply curve is

Monetary neutrality refers to the fact that changes in the money supply

The Federal Reserve pursued an expansionary monetary policy during 1964 in order to

An increase in oil prices will

The new classical approach to the aggregate supply curve assumes that businesses are

Which of the following will NOT shift the short-run aggregate supply function?

Which of the following expressions is correct?

Everything else being constant, a lower real interest rate

Which of the following is most likely to have an impact on the growth of productivity?

If the economy is initially at equilibrium and an unexpected decline in aggregate demand takes place, in the short run aggregate output will

Why is the short-term nominal interest rate the opportunity cost of holding money?

Introducing Money and the Financial System

Money and the Payments System

Interest Rates and Rates of Return

Determining Interest Rates

The Risk Structure and Term Structure of Interest Rates

The Stock Market, Information, and Financial Market Efficiency

Derivatives and Derivative Markets

The Market for Foreign Exchange

Transactions Costs, Asymmetric Information, and the Structure of the Financial System

The Economics of Banking

Investment Banks, Mutual Funds, Hedge Funds, and the Shadow Banking System

Financial Crises and Financial Regulation

The Federal Reserve and Central Banking

The Federal Reserves Balance Sheet and the Money Supply Process

Monetary Policy

The International Financial System and Monetary Policy

Monetary Theory II: The IS-MP Model

Filters