Question 1

Gordon suggests that the Japanese deflation is bad because it is caused by

Accepted Answer

A)  too high a rate of technological progress. 
B)  a downward shift in the short-run aggregates supply schedule. 
C)  a contraction in aggregate demand. 
D)  B and C 
A)  too high a rate of technological progress. 
B)  a downward shift in the short-run aggregates supply schedule. 
C)  a contraction in aggregate demand. 
D)  B and C

Question 2

With a falling price level, we move ________ along the demand for labor curve and thus trace ________ along the short-run aggregate supply curve.

Accepted Answer

A)  upward, upward 
B)  upward, downward 
C)  downward, upward 
D)  downward, downward 
A)  upward, upward 
B)  upward, downward 
C)  downward, upward 
D)  downward, downward

Question 3

The long-run buildup of an economy's capital stock ________ the marginal product of labor thus shifting the labor demand curve to the ________, which then causes ________.

Accepted Answer

A)  increases, right, SAS to shift to the right 
B)  increases, right, movement up the SAS curve 
C)  increases, left, SAS to shift to the left 
D)  decreases, right, SAS to shift to the left 
E)  decreases, left, movement down the SAS curve 
A)  increases, right, SAS to shift to the right 
B)  increases, right, movement up the SAS curve 
C)  increases, left, SAS to shift to the left 
D)  decreases, right, SAS to shift to the left 
E)  decreases, left, movement down the SAS curve

Question 4

Keynes' argued that monetary policy would be impotent during the Great Depression, because

Accepted Answer

A)  both the IS and the LM curve were vertical. 
B)  IS curve was continuously shifting, while the LM curve was stable. 
C)  IS curve was vertical and stuck at a low level of Y. 
D)  none of the above 
A)  both the IS and the LM curve were vertical. 
B)  IS curve was continuously shifting, while the LM curve was stable. 
C)  IS curve was vertical and stuck at a low level of Y. 
D)  none of the above

Question 5

Consider an initial IS-LM equilibrium point which corresponds to a point labeled "A" on the current AD curve.
-Refer to the information above. If government spending increases with no change in the price level, the resulting IS-LM equilibrium corresponds to a point in the AD diagram

Accepted Answer

A)  which has moved downward along the same AD curve. 
B)  straight above A on a new AD curve. 
C)  straight below A on a new AD curve. 
D)  directly to the right of A on a new AD curve. 
E)  directly to the left of A on a new AD curve. 
A)  which has moved downward along the same AD curve. 
B)  straight above A on a new AD curve. 
C)  straight below A on a new AD curve. 
D)  directly to the right of A on a new AD curve. 
E)  directly to the left of A on a new AD curve.

Question 6

The AD curve will shift to the

Accepted Answer

A)  right if the price level falls and the quantity of money is held constant. 
B)  right if the price level rises and the quantity of money is held constant. 
C)  right if the price level is held constant and the quantity of money rises. 
D)  right if the price level is held constant and the quantity of money falls. 
A)  right if the price level falls and the quantity of money is held constant. 
B)  right if the price level rises and the quantity of money is held constant. 
C)  right if the price level is held constant and the quantity of money rises. 
D)  right if the price level is held constant and the quantity of money falls.

Question 7

John Maynard Keynes revolutionized macroeconomics with the 1936 publication of his book

Accepted Answer

A)  Macro-Economics. 
B)  The Wealth of Nations. 
C)  The General Theory of Employment, Interest, and Money. 
D)  Aggregate Economic Analysis. 
A)  Macro-Economics. 
B)  The Wealth of Nations. 
C)  The General Theory of Employment, Interest, and Money. 
D)  Aggregate Economic Analysis.

Question 8

The SAS curve is positively sloped because workers, in the short-run, will supply the labor required by

Accepted Answer

A)  households at the fixed real wage. 
B)  business firms at the fixed real wage. 
C)  business firms at the fixed nominal wage. 
D)  A and B. 
A)  households at the fixed real wage. 
B)  business firms at the fixed real wage. 
C)  business firms at the fixed nominal wage. 
D)  A and B.

Question 9

Keynes held out the possibility of "monetary impotence" causing the aggregate demand curve to be ________ below the natural real GDP, which results in an economy with ________ self-correction.

Accepted Answer

A)  vertical, instant 
B)  vertical, no 
C)  horizontal, instant 
D)  horizontal, no 
A)  vertical, instant 
B)  vertical, no 
C)  horizontal, instant 
D)  horizontal, no

Question 10

In the short-run with fixed wages, the SAS curve is positively sloped because

Accepted Answer

A)  the marginal product of labor declines, marginal costs rise. 
B)  the marginal product of labor increases, marginal costs rise. 
C)  marginal cost equals price and marginal costs decline. 
D)  None of the above. 
A)  the marginal product of labor declines, marginal costs rise. 
B)  the marginal product of labor increases, marginal costs rise. 
C)  marginal cost equals price and marginal costs decline. 
D)  None of the above.

Question 11

If money demand relative to the level of real output is constant then, the slope of the AD curve is

Accepted Answer

A)  steeper the steeper the slope of the LM curve. 
B)  flatter the flatter the slope of the LM curve. 
C)  steeper the flatter the slope of the LM curve. 
D)  horizontal if the LM curve is vertical. 
A)  steeper the steeper the slope of the LM curve. 
B)  flatter the flatter the slope of the LM curve. 
C)  steeper the flatter the slope of the LM curve. 
D)  horizontal if the LM curve is vertical.

Question 12

A bad deflation such as that experienced by Japan over the past decade poses problems

Accepted Answer

A)  for monetary policy because it lowers the real interest rate below the nominal interest rate. 
B)  for fiscal policy because it raises the ratio of public debt to nominal GDP even if public debt is fixed. 
C)  for monetary and fiscal policy because it makes it impossible to use these together to shift the IS and LM curves rightward at the same time. 
D)  for monetary and fiscal policy because it makes it impossible to use these together to shift the IS and LM curves leftward at the same time. 
A)  for monetary policy because it lowers the real interest rate below the nominal interest rate. 
B)  for fiscal policy because it raises the ratio of public debt to nominal GDP even if public debt is fixed. 
C)  for monetary and fiscal policy because it makes it impossible to use these together to shift the IS and LM curves rightward at the same time. 
D)  for monetary and fiscal policy because it makes it impossible to use these together to shift the IS and LM curves leftward at the same time.

Question 13

As firms hire more labor

Accepted Answer

A)  the supply of labor increases. 
B)  each additional worker hired produces an additional amount of output but at a diminishing rate. 
C)  each additional worker hired produces an additional amount of output but at an increasing rate. 
D)  the marginal labor cost of output decreases. 
A)  the supply of labor increases. 
B)  each additional worker hired produces an additional amount of output but at a diminishing rate. 
C)  each additional worker hired produces an additional amount of output but at an increasing rate. 
D)  the marginal labor cost of output decreases.

Question 14

When the nominal wage rate rises by x percent we

Accepted Answer

A)  move upward along the SAS curve by x percent. 
B)  move downward along the SAS curve by x percent. 
C)  shift SAS upward by x percent. 
D)  shift SAS downward by x percent. 
A)  move upward along the SAS curve by x percent. 
B)  move downward along the SAS curve by x percent. 
C)  shift SAS upward by x percent. 
D)  shift SAS downward by x percent.

Question 15

If the Pigou effect characterizes the economy then the slope

Accepted Answer

A)  of the aggregate demand curve is zero; the aggregate supply curve is vertical 
B)  of the aggregate supply curve is zero; the aggregate demand curve is vertical 
C)  of both the AD and SAS curves are vertical 
D)  of the AD cannot be vertical; the aggregate supply curve is unaffected 
A)  of the aggregate demand curve is zero; the aggregate supply curve is vertical 
B)  of the aggregate supply curve is zero; the aggregate demand curve is vertical 
C)  of both the AD and SAS curves are vertical 
D)  of the AD cannot be vertical; the aggregate supply curve is unaffected

Question 16

Consider an initial IS-LM equilibrium point which corresponds to a point labeled "A" on the current AD curve.
-Refer to the information above. If the nominal money supply falls by 4 percent, accompanied by a 4 percent fall in the price level, the resulting IS-LM equilibrium corresponds to a point in the AD diagram

Accepted Answer

A)  which is exactly point A again. 
B)  4 percent straight above A on a new AD curve. 
C)  4 percent straight below A on a new AD curve. 
D)  directly to the right of A on a new AD curve. 
E)  directly to the left of A on a new AD curve. 
A)  which is exactly point A again. 
B)  4 percent straight above A on a new AD curve. 
C)  4 percent straight below A on a new AD curve. 
D)  directly to the right of A on a new AD curve. 
E)  directly to the left of A on a new AD curve.

Question 17

If the price level were to rise, the short-run aggregate supply curve in the next period will

Accepted Answer

A)  shift upward. 
B)  shift downward. 
C)  become steeper. 
D)  None of the above is correct. 
A)  shift upward. 
B)  shift downward. 
C)  become steeper. 
D)  None of the above is correct.

Question 18

Suppose that the nominal wage falls by x percent, and a certain change in the price level maintains the same real wage as before. In the SAS diagram these events cause

Accepted Answer

A)  no change at all, as they offset each other. 
B)  a downward movement along the SAS curve. 
C)  an upward movement along the SAS curve. 
D)  a downward shift of the SAS curve. 
E)  an upward shift of the SAS curve. 
A)  no change at all, as they offset each other. 
B)  a downward movement along the SAS curve. 
C)  an upward movement along the SAS curve. 
D)  a downward shift of the SAS curve. 
E)  an upward shift of the SAS curve.

Question 19

The labor supply curve may be shifted if

Accepted Answer

A)  jobs are scarce. 
B)  jobs are plentiful. 
C)  real wages change. 
D)  immigration increases. 
A)  jobs are scarce. 
B)  jobs are plentiful. 
C)  real wages change. 
D)  immigration increases.

Question 20

Because of ________ marginal product of labor, the labor demand curve slopes ________.

Accepted Answer

A)  rising, upward 
B)  rising, downward 
C)  diminishing, downward 
D)  diminishing, upward 
A)  rising, upward 
B)  rising, downward 
C)  diminishing, downward 
D)  diminishing, upward

Gordon suggests that the Japanese deflation is bad because it is caused by

With a falling price level, we move along the demand for labor curve and thus trace along the short-run aggregate supply curve.

The long-run buildup of an economy's capital stock the marginal product of labor thus shifting the labor demand curve to the , which then causes .

Keynes' argued that monetary policy would be impotent during the Great Depression, because

Consider an initial IS-LM equilibrium point which corresponds to a point labeled "A" on the current AD curve. -Refer to the information above. If government spending increases with no change in the price level, the resulting IS-LM equilibrium corresponds to a point in the AD diagram

The AD curve will shift to the

John Maynard Keynes revolutionized macroeconomics with the 1936 publication of his book

The SAS curve is positively sloped because workers, in the short-run, will supply the labor required by

Keynes held out the possibility of "monetary impotence" causing the aggregate demand curve to be below the natural real GDP, which results in an economy with self-correction.

In the short-run with fixed wages, the SAS curve is positively sloped because

If money demand relative to the level of real output is constant then, the slope of the AD curve is

A bad deflation such as that experienced by Japan over the past decade poses problems

As firms hire more labor

When the nominal wage rate rises by x percent we

If the Pigou effect characterizes the economy then the slope

If the price level were to rise, the short-run aggregate supply curve in the next period will

Suppose that the nominal wage falls by x percent, and a certain change in the price level maintains the same real wage as before. In the SAS diagram these events cause

The labor supply curve may be shifted if

Because of marginal product of labor, the labor demand curve slopes .

What Is Macroeconomics

The Measurement of Income, Prices, and Unemployment

Spending, Income, and Interest Rates

Monetary and Fiscal Policy in the Is-Lm Model

The Government Budget, Foreign Borrowing, and the Twin Deficits

International Trade, Exchange Rates, and Macroeconomic Policy

Inflation: Its Causes and Cures

The Goals of Stabilization Policy: Low Inflation and Low Unemployment

The Theory of Economic Growth

The Big Questions of Economic Growth

The Government Budget, the Public Debt, and Social Security

Money and Financial Markets

Stabilization Policy in the Closed and Open Economy

The Economics of Consumption Behavior

The Economics of Investment Behavior

New Classical Macro Confronts New Keynesian Macro

Conclusion: Where We Stand

Filters

Exam 7: Aggregate Demand, Aggregate Supply, and the Self-Correcting Economy

Gordon suggests that the Japanese deflation is bad because it is caused by

With a falling price level, we move ________ along the demand for labor curve and thus trace ________ along the short-run aggregate supply curve.

The long-run buildup of an economy's capital stock ________ the marginal product of labor thus shifting the labor demand curve to the ________, which then causes ________.

Keynes' argued that monetary policy would be impotent during the Great Depression, because

Consider an initial IS-LM equilibrium point which corresponds to a point labeled "A" on the current AD curve. -Refer to the information above. If government spending increases with no change in the price level, the resulting IS-LM equilibrium corresponds to a point in the AD diagram

The AD curve will shift to the

John Maynard Keynes revolutionized macroeconomics with the 1936 publication of his book

The SAS curve is positively sloped because workers, in the short-run, will supply the labor required by

Keynes held out the possibility of "monetary impotence" causing the aggregate demand curve to be ________ below the natural real GDP, which results in an economy with ________ self-correction.

In the short-run with fixed wages, the SAS curve is positively sloped because

If money demand relative to the level of real output is constant then, the slope of the AD curve is

A bad deflation such as that experienced by Japan over the past decade poses problems

As firms hire more labor

When the nominal wage rate rises by x percent we

If the Pigou effect characterizes the economy then the slope

If the price level were to rise, the short-run aggregate supply curve in the next period will

Suppose that the nominal wage falls by x percent, and a certain change in the price level maintains the same real wage as before. In the SAS diagram these events cause

The labor supply curve may be shifted if

Because of ________ marginal product of labor, the labor demand curve slopes ________.

What Is Macroeconomics

The Measurement of Income, Prices, and Unemployment

Spending, Income, and Interest Rates

Monetary and Fiscal Policy in the Is-Lm Model

The Government Budget, Foreign Borrowing, and the Twin Deficits

International Trade, Exchange Rates, and Macroeconomic Policy

Inflation: Its Causes and Cures

The Goals of Stabilization Policy: Low Inflation and Low Unemployment

The Theory of Economic Growth

The Big Questions of Economic Growth

The Government Budget, the Public Debt, and Social Security

Money and Financial Markets

Stabilization Policy in the Closed and Open Economy

The Economics of Consumption Behavior

The Economics of Investment Behavior

New Classical Macro Confronts New Keynesian Macro

Conclusion: Where We Stand

Filters

With a falling price level, we move along the demand for labor curve and thus trace along the short-run aggregate supply curve.

The long-run buildup of an economy's capital stock the marginal product of labor thus shifting the labor demand curve to the , which then causes .

Keynes held out the possibility of "monetary impotence" causing the aggregate demand curve to be below the natural real GDP, which results in an economy with self-correction.

Because of marginal product of labor, the labor demand curve slopes .