Question 1

If exports increase,investment and consumption will be lower in the long run.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is another term for the recovery period?

Accepted Answer

A) Medium run 
B) Recession 
C) Short run 
D) Boom 
E) Long run 
A) Medium run 
B) Recession 
C) Short run 
D) Boom 
E) Long run

Question 3

If government purchases decline,during the medium run consumption will be below its baseline level while net exports and investment will be above their baseline levels.

Accepted Answer

A) True 
 B)False

Question 4

The difference between the medium run and the long run is that inflation is constant in the long run.

Accepted Answer

A) True 
 B)False

Question 5

Exhibit 25-2  
-According to Exhibit 25-2,which of the following best describes the path followed by the U.S.economy during recent economic fluctuations?

Accepted Answer

A) FCBAD 
B) FCGBA 
C) CBADE 
D) CGBED 
E) CGBEF 
A) FCBAD 
B) FCGBA 
C) CBADE 
D) CGBED 
E) CGBEF

Question 6

The period from 1979 to 1987 is an example of

Accepted Answer

A) the large effect monetary policy can have on potential GDP. 
B) how monetary policy can be managed so it causes only a temporary growth slowdown. 
C) why monetary policy doesn't always work. 
D) how monetary policy brings about disinflation. 
E) how monetary policy results in reinflation. 
A) the large effect monetary policy can have on potential GDP. 
B) how monetary policy can be managed so it causes only a temporary growth slowdown. 
C) why monetary policy doesn't always work. 
D) how monetary policy brings about disinflation. 
E) how monetary policy results in reinflation.

Question 7

Compared to the baseline,the long-run effect of a monetary policy change to reduce the rate of inflation is for there to be

Accepted Answer

A) an increase in investment and net exports along with a decrease in consumption. 
B) an increase in consumption,a decrease in investment,and no change in net exports. 
C) an increase in consumption and net exports and a decrease in investment. 
D) no change in consumption,investment,and net exports. 
E) no change in consumption and investment,but a decrease in net exports. 
A) an increase in investment and net exports along with a decrease in consumption. 
B) an increase in consumption,a decrease in investment,and no change in net exports. 
C) an increase in consumption and net exports and a decrease in investment. 
D) no change in consumption,investment,and net exports. 
E) no change in consumption and investment,but a decrease in net exports.

Question 8

The leftward shift of the AD curve during 2007 occurred partly because of

Accepted Answer

A) higher net exports. 
B) a balanced federal government budget. 
C) an increase in consumer confidence. 
D) a stock market crash. 
E) the Fed lowering interest rates. 
A) higher net exports. 
B) a balanced federal government budget. 
C) an increase in consumer confidence. 
D) a stock market crash. 
E) the Fed lowering interest rates.

Question 9

Among economists,there is a consensus that the recovery from the Great Depression was due to

Accepted Answer

A) increases in government purchases. 
B) decreases in taxes. 
C) None of these 
D) a falling price level. 
E) lower interest rates. 
A) increases in government purchases. 
B) decreases in taxes. 
C) None of these 
D) a falling price level. 
E) lower interest rates.

Question 10

The long-run effect of a change in government spending will not cause real GDP to differ from its baseline value.However,in the long run,the values of the individual components of aggregate expenditure will differ from their baseline values.Why is this the case?

Accepted Answer

The change in government purch

Question 11

Economic fluctuations in the United States during the period 2007-09 are best explained by shifts of the inflation adjustment line.

Accepted Answer

A) True 
 B)False

Question 12

When the Fed changes monetary policy to reduce the rate of inflation,which of the following should occur in the medium run?

Accepted Answer

A) The AD curve should shift to the right. 
B) The IA line should shift down. 
C) The AD curve should shift to the left. 
D) The IA line should shift up. 
E) The aggregate expenditure line should shift down. 
A) The AD curve should shift to the right. 
B) The IA line should shift down. 
C) The AD curve should shift to the left. 
D) The IA line should shift up. 
E) The aggregate expenditure line should shift down.

Question 13

Reinflation causes

Accepted Answer

A) a temporary boom. 
B) a price shock. 
C) an increase in potential GDP. 
D) a growth slowdown. 
E) a temporary recession. 
A) a temporary boom. 
B) a price shock. 
C) an increase in potential GDP. 
D) a growth slowdown. 
E) a temporary recession.

Question 14

A single factor caused the 2008-09 recession.

Accepted Answer

A) True 
 B)False

Question 15

The United States economy never recovered from the recession brought about by the Volcker disinflation.

Accepted Answer

A) True 
 B)False

Question 16

Monetary policy designed to reduce the rate of inflation in the early 1980s resulted in a recession.

Accepted Answer

A) True 
 B)False

Question 17

The leftward shift of the aggregate demand curve in 2007 is explained in part by

Accepted Answer

A) a change in net exports. 
B) a sharp increase in oil prices. 
C) a decrease in government spending. 
D) a change in monetary policy. 
E) an increase in taxes. 
A) a change in net exports. 
B) a sharp increase in oil prices. 
C) a decrease in government spending. 
D) a change in monetary policy. 
E) an increase in taxes.

Question 18

By definition,real GDP can never be above potential GDP.

Accepted Answer

A) True 
 B)False

Question 19

If exports permanently decline,we would expect,in the medium run,

Accepted Answer

A) interest rates to increase and the rate of inflation to fall. 
B) interest rates to fall and the rate of inflation to increase. 
C) a decline in both the rate of inflation and interest rates. 
D) no change in interest rates or the rate of inflation. 
E) a decline in both the price level and interest rates. 
A) interest rates to increase and the rate of inflation to fall. 
B) interest rates to fall and the rate of inflation to increase. 
C) a decline in both the rate of inflation and interest rates. 
D) no change in interest rates or the rate of inflation. 
E) a decline in both the price level and interest rates.

Question 20

When government purchases decline,the Fed can prevent a change in inflation or real GDP by increasing the target rate of inflation.

Accepted Answer

A) True 
 B)False

Exam 25: Using the Economic Fluctuations Model

If exports increase,investment and consumption will be lower in the long run.

Which of the following is another term for the recovery period?

If government purchases decline,during the medium run consumption will be below its baseline level while net exports and investment will be above their baseline levels.

The difference between the medium run and the long run is that inflation is constant in the long run.

Exhibit 25-2 -According to Exhibit 25-2,which of the following best describes the path followed by the U.S.economy during recent economic fluctuations?

The period from 1979 to 1987 is an example of

Compared to the baseline,the long-run effect of a monetary policy change to reduce the rate of inflation is for there to be

The leftward shift of the AD curve during 2007 occurred partly because of

Among economists,there is a consensus that the recovery from the Great Depression was due to

The long-run effect of a change in government spending will not cause real GDP to differ from its baseline value.However,in the long run,the values of the individual components of aggregate expenditure will differ from their baseline values.Why is this the case?

Economic fluctuations in the United States during the period 2007-09 are best explained by shifts of the inflation adjustment line.

When the Fed changes monetary policy to reduce the rate of inflation,which of the following should occur in the medium run?

Reinflation causes

A single factor caused the 2008-09 recession.

The United States economy never recovered from the recession brought about by the Volcker disinflation.

Monetary policy designed to reduce the rate of inflation in the early 1980s resulted in a recession.

The leftward shift of the aggregate demand curve in 2007 is explained in part by

By definition,real GDP can never be above potential GDP.

If exports permanently decline,we would expect,in the medium run,

When government purchases decline,the Fed can prevent a change in inflation or real GDP by increasing the target rate of inflation.

The Central Idea

Observing and Explaining the Economy

The Supply and Demand Model

Subtleties of the Supply and Demand Model: Price Floors,price Ceilings,and Elasticity

The Demand Curve and the Behavior of Consumers

The Supply Curve and the Behavior of Firms

The Interaction of People in Markets

Costs and the Changes at Firms Over Time

The Rise and Fall of Industries

Monopoly

Product Differentiation, monopolistic Competition, and Oligopoly

Antitrust Policy and Regulation

Labor Markets

Taxes, transfers, and Income Distribution

Public Goods, externalities, and Government Behavior

Capital and Financial Markets

Macroeconomics: the Big Picture

Measuring the Production, income, and Spending of Nations

The Spending Allocation Model

Unemployment and Employment

Productivity and Economic Growth

Money and Inflation

The Nature and Causes of Economic Fluctuations

The Economic Fluctuations Model

Fiscal Policy

Monetary Policy

Economic Growth and Globalization

International Trade

International Finance

Reading,understanding,and Creating Graphs

Consumer Theory With Indifference Curves

Producer Theory With Isoquants

Present Discounted Value

The Miracle of Compound Growth

Deriving the Growth Accounting Formula

Deriving the Formula for the Keynesian Multiplier and the Forward-Looking Consumption Model

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