Question 1

The statistical relationship between changes in real GDP and changes in the unemployment rate is called:

Accepted Answer

A)  the Phillips curve. 
B)  the Solow residual. 
C)  the Fisher effect. 
D)  Okun's law. 
A)  the Phillips curve. 
B)  the Solow residual. 
C)  the Fisher effect. 
D)  Okun's law.

Question 2

For a fixed money supply, the aggregate demand curve slopes downward because at a lower price level real money balances are ______, generating a ______ quantity of output demanded.

Accepted Answer

A)  higher; greater 
B)  higher; smaller 
C)  lower; greater 
D)  lower; smaller 
A)  higher; greater 
B)  higher; smaller 
C)  lower; greater 
D)  lower; smaller

Question 3

According to the IS-LM model, what do an inward and outward shift in the aggregate demand curve mean?

Accepted Answer

An inward shift in the aggregate demand

Question 4

Along an aggregate demand curve, which of the following are held constant?

Accepted Answer

A)  real output and prices 
B)  nominal output and velocity 
C)  the money supply and real output 
D)  the money supply and velocity 
A)  real output and prices 
B)  nominal output and velocity 
C)  the money supply and real output 
D)  the money supply and velocity

Question 5

In the mid-1980s, oil prices ______, inflation was ______, and the unemployment rate ______.

Accepted Answer

A)  rose rapidly; high; rose 
B)  rose slowly; moderate; high 
C)  fell; low; declined 
D)  fell; low; rose 
A)  rose rapidly; high; rose 
B)  rose slowly; moderate; high 
C)  fell; low; declined 
D)  fell; low; rose

Question 6

Leading economic indicators are:

Accepted Answer

A)  the most popular economic statistics. 
B)  data that are used to construct the consumer price index and the unemployment rate. 
C)  variables that tend to fluctuate in advance of the overall economy. 
D)  standardized statistics compiled by the National Bureau of Economic Research. 
A)  the most popular economic statistics. 
B)  data that are used to construct the consumer price index and the unemployment rate. 
C)  variables that tend to fluctuate in advance of the overall economy. 
D)  standardized statistics compiled by the National Bureau of Economic Research.

Question 7

In the aggregate demand-aggregate supply model, long-run equilibrium occurs at the combination of output and prices where:

Accepted Answer

A)  aggregate demand is greater than long-run aggregate supply. 
B)  aggregate demand equals short-run aggregate supply. 
C)  aggregate demand equals short-run and long-run aggregate supply. 
D)  short-run aggregate supply equals long-run aggregate supply. 
A)  aggregate demand is greater than long-run aggregate supply. 
B)  aggregate demand equals short-run aggregate supply. 
C)  aggregate demand equals short-run and long-run aggregate supply. 
D)  short-run aggregate supply equals long-run aggregate supply.

Question 8

When GDP growth declines, investment spending typically ______ and consumption spending typically ______.

Accepted Answer

A)  increases; increases 
B)  increases; decreases 
C)  decreases; decreases 
D)  decreases; increases 
A)  increases; increases 
B)  increases; decreases 
C)  decreases; decreases 
D)  decreases; increases

Question 9

If the long-run aggregate supply curve is vertical, then changes in aggregate demand affect:

Accepted Answer

A)  neither prices nor level of output. 
B)  both prices and level of output. 
C)  level of output but not prices. 
D)  prices but not level of output. 
A)  neither prices nor level of output. 
B)  both prices and level of output. 
C)  level of output but not prices. 
D)  prices but not level of output.

Question 10

If the short-run aggregate supply curve is horizontal, then changes in aggregate demand affect:

Accepted Answer

A)  level of output but not prices. 
B)  prices but not level of output. 
C)  both prices and level of output. 
D)  neither prices nor level of output. 
A)  level of output but not prices. 
B)  prices but not level of output. 
C)  both prices and level of output. 
D)  neither prices nor level of output.

Question 11

Most economists believe that prices are:

Accepted Answer

A)  flexible in the short run but many are sticky in the long run. 
B)  flexible in the long run but many are sticky in the short run. 
C)  sticky in both the short and long runs. 
D)  flexible in both the short and long runs. 
A)  flexible in the short run but many are sticky in the long run. 
B)  flexible in the long run but many are sticky in the short run. 
C)  sticky in both the short and long runs. 
D)  flexible in both the short and long runs.

Question 12

The aggregate demand curve is the ______ relationship between the quantity of output demanded and the ______.

Accepted Answer

A)  positive; money supply 
B)  negative; money supply 
C)  positive; price level 
D)  negative; price level 
A)  positive; money supply 
B)  negative; money supply 
C)  positive; price level 
D)  negative; price level

Question 13

Use the following to answer questions :
Exhibit: Shift in Aggregate Demand  
-(Exhibit: Shift in Aggregate Demand) In this graph, initially the economy is at point E, with price P0 and output Y. Aggregate demand is given by curve AD0, and SRAS and LRAS represent, respectively, short-run and long-run aggregate supply. Now assume that the aggregate demand curve shifts so that it is represented by AD1. The economy moves first to point ______ and then, in the long run, to point ______.

Accepted Answer

A)  A; D 
B)  D; A 
C)  C; B 
D)  B; C 
A)  A; D 
B)  D; A 
C)  C; B 
D)  B; C

Question 14

Explain the meaning of monetary neutrality and illustrate graphically that there is monetary neutrality in the long run in the aggregate demand-aggregate supply model. Be sure to label: i. the axes; ii. the curves; iii. the initial equilibrium values; iv. the direction the curves shift; v. the short-run equilibrium values; and vi. the long-run equilibrium values. Explain in words what your graph illustrates.

Accepted Answer

@#IMG-DLM& Monetary neutrality is the property tha

Question 15

If the Fed reduces the money supply by 5 percent, then the real interest rate will:

Accepted Answer

A)  rise in both the short run and the long run. 
B)  rise in the short run but return to its original equilibrium level in the long run. 
C)  rise in the short run but will fall below its original equilibrium level in the long run. 
D)  be unaffected in both the short run and the long run. 
A)  rise in both the short run and the long run. 
B)  rise in the short run but return to its original equilibrium level in the long run. 
C)  rise in the short run but will fall below its original equilibrium level in the long run. 
D)  be unaffected in both the short run and the long run.

Question 16

A difference between the economic long run and the short run is that:

Accepted Answer

A)  the classical dichotomy holds in the short run but not in the long run. 
B)  monetary and fiscal policy affect output only in the long run. 
C)  demand can affect output and employment in the short run, whereas supply is the ruling force in the long run. 
D)  prices and wages are sticky in the long run only. 
A)  the classical dichotomy holds in the short run but not in the long run. 
B)  monetary and fiscal policy affect output only in the long run. 
C)  demand can affect output and employment in the short run, whereas supply is the ruling force in the long run. 
D)  prices and wages are sticky in the long run only.

Question 17

Monetary neutrality, the irrelevance of the money supply in determining values of _____ variables, is generally thought to be a property of the economy in the long run.

Accepted Answer

A)  real 
B)  nominal 
C)  real and nominal 
D)  neither real nor nominal 
A)  real 
B)  nominal 
C)  real and nominal 
D)  neither real nor nominal

Question 18

Starting from long-run equilibrium, if the velocity of money increases (due to, for example, the invention of automatic teller machines), the Fed might be able to stabilize output by:

Accepted Answer

A)  decreasing the money supply. 
B)  increasing the money supply. 
C)  decreasing the price level. 
D)  increasing the price level. 
A)  decreasing the money supply. 
B)  increasing the money supply. 
C)  decreasing the price level. 
D)  increasing the price level.

Question 19

A supply shock does not occur when:

Accepted Answer

A)  a drought destroys crops. 
B)  unions push wages up. 
C)  the Fed increases the money supply. 
D)  an oil cartel increases world oil prices. 
A)  a drought destroys crops. 
B)  unions push wages up. 
C)  the Fed increases the money supply. 
D)  an oil cartel increases world oil prices.

Question 20

In the long run, the level of output is determined by the:

Accepted Answer

A)  interaction of supply and demand. 
B)  money supply and the levels of government spending and taxation. 
C)  amounts of capital and labor and the available technology. 
D)  preferences of the public. 
A)  interaction of supply and demand. 
B)  money supply and the levels of government spending and taxation. 
C)  amounts of capital and labor and the available technology. 
D)  preferences of the public.

The statistical relationship between changes in real GDP and changes in the unemployment rate is called:

For a fixed money supply, the aggregate demand curve slopes downward because at a lower price level real money balances are , generating a quantity of output demanded.

According to the IS-LM model, what do an inward and outward shift in the aggregate demand curve mean?

Along an aggregate demand curve, which of the following are held constant?

In the mid-1980s, oil prices , inflation was , and the unemployment rate __.

Leading economic indicators are:

In the aggregate demand-aggregate supply model, long-run equilibrium occurs at the combination of output and prices where:

When GDP growth declines, investment spending typically and consumption spending typically .

If the long-run aggregate supply curve is vertical, then changes in aggregate demand affect:

If the short-run aggregate supply curve is horizontal, then changes in aggregate demand affect:

Most economists believe that prices are:

The aggregate demand curve is the relationship between the quantity of output demanded and the .

If the Fed reduces the money supply by 5 percent, then the real interest rate will:

A difference between the economic long run and the short run is that:

Monetary neutrality, the irrelevance of the money supply in determining values of _____ variables, is generally thought to be a property of the economy in the long run.

Starting from long-run equilibrium, if the velocity of money increases (due to, for example, the invention of automatic teller machines), the Fed might be able to stabilize output by:

A supply shock does not occur when:

In the long run, the level of output is determined by the:

The Science of Macroeconomics

The Data of Macroeconomics

National Income: Where It Comes From and Where It Goes

The Monetary System: What It Is and How It Works

Inflation: Its Causes, Effects, and Social Costs

The Open Economy

Unemployment and the Labor Market

Economic Growth I: Capital Accumulation and Population Growth

Economic Growth II: Technology, Empirics, and Policy

Aggregate Demand I: Building the Is-Lm Model

Aggregate Demand Ii: Applying the Is-Lm Model

The Open Economy Revisited: the Mundell-Fleming Model and the Exchange-Rate Regime

Aggregate Supply and the Short-Run Tradeoff Between Inflation and Unemployment

A Dynamic Model of Economic Fluctuations

Understanding Consumer Behavior

The Theory of Investment

Alternative Perspectives on Stabilization Policy

Government Debt and Budget Deficits

The Financial System: Opportunities and Dangers

Filters

Exam 10: Introduction to Economic Fluctuations

The statistical relationship between changes in real GDP and changes in the unemployment rate is called:

For a fixed money supply, the aggregate demand curve slopes downward because at a lower price level real money balances are ______, generating a ______ quantity of output demanded.

According to the IS-LM model, what do an inward and outward shift in the aggregate demand curve mean?

Along an aggregate demand curve, which of the following are held constant?

In the mid-1980s, oil prices ______, inflation was ______, and the unemployment rate ______.

Leading economic indicators are:

In the aggregate demand-aggregate supply model, long-run equilibrium occurs at the combination of output and prices where:

When GDP growth declines, investment spending typically ______ and consumption spending typically ______.

If the long-run aggregate supply curve is vertical, then changes in aggregate demand affect:

If the short-run aggregate supply curve is horizontal, then changes in aggregate demand affect:

Most economists believe that prices are:

The aggregate demand curve is the ______ relationship between the quantity of output demanded and the ______.

If the Fed reduces the money supply by 5 percent, then the real interest rate will:

A difference between the economic long run and the short run is that:

Monetary neutrality, the irrelevance of the money supply in determining values of _____ variables, is generally thought to be a property of the economy in the long run.

Starting from long-run equilibrium, if the velocity of money increases (due to, for example, the invention of automatic teller machines), the Fed might be able to stabilize output by:

A supply shock does not occur when:

In the long run, the level of output is determined by the:

The Science of Macroeconomics

The Data of Macroeconomics

National Income: Where It Comes From and Where It Goes

The Monetary System: What It Is and How It Works

Inflation: Its Causes, Effects, and Social Costs

The Open Economy

Unemployment and the Labor Market

Economic Growth I: Capital Accumulation and Population Growth

Economic Growth II: Technology, Empirics, and Policy

Aggregate Demand I: Building the Is-Lm Model

Aggregate Demand Ii: Applying the Is-Lm Model

The Open Economy Revisited: the Mundell-Fleming Model and the Exchange-Rate Regime

Aggregate Supply and the Short-Run Tradeoff Between Inflation and Unemployment

A Dynamic Model of Economic Fluctuations

Understanding Consumer Behavior

The Theory of Investment

Alternative Perspectives on Stabilization Policy

Government Debt and Budget Deficits

The Financial System: Opportunities and Dangers

Filters

For a fixed money supply, the aggregate demand curve slopes downward because at a lower price level real money balances are , generating a quantity of output demanded.

In the mid-1980s, oil prices , inflation was , and the unemployment rate __.

When GDP growth declines, investment spending typically and consumption spending typically .

The aggregate demand curve is the relationship between the quantity of output demanded and the .