Deck 33: 5: Sec 335 Mc Two Causes of Economic Fluctuations

Question 1

Which of the following would cause prices to fall and output to rise in the short run?

A)short-run aggregate supply shifts right
B)short-run aggregate supply shifts left
C)aggregate demand shifts right
D)aggregate demand shifts left

Answer 1

B

Question 2

If the economy is initially at long-run equilibrium and aggregate demand declines,then in the long run the price level

A)and output are higher than in the original long-run equilibrium.
B)and output are lower than in the original long-run equilibrium.
C)is lower and output is the same as the original long-run equilibrium.
D)is the same and output is lower than in the original long-run equilibrium.

Answer 2

B

Question 3

Consider the exhibit below for the following questions.
Figure 33-4
Refer to Figure 33-4.If the economy is at A and there is a fall in aggregate demand,in the short run the economy

A)stays at A.
B)moves to B.
C)moves to C.
D)moves to D.

Answer 3

A

Question 4

In which case can we be sure real GDP rises in the short run?

A)government purchases increase and taxes rise.
B)government purchases increase and taxes fall.
C)government purchases decrease and taxes rise.
D)government purchases decrease and taxes fall.

Question 5

Recessions in Canada and Mexico would cause

A)the U.S.price level and real GDP to rise.
B)the U.S.price level and real GDP to fall.
C)the U.S.price level to rise and real GDP to fall.
D)the U.S.price level to fall and real GDP to rise.

Question 6

Consider the exhibit below for the following questions.
Figure 33-4
Refer to Figure 33-4.If the economy starts at A,a decrease in the money supply moves the economy

A)to A in the long run.
B)to C in the long run.
C)back to A in the long run.
D)to D in the long run.

Question 7

Consider the exhibit below for the following questions.
Figure 33-4
Refer to Figure 33-4.A decrease in taxes would move the economy from C to

A)B in the short run and the long run.
B)D in the short run and the long run.
C)B in the short run and A in the long run.
D)D in the short run and C in the long run.

Question 8

Consider the exhibit below for the following questions.
Figure 33-4
Refer to Figure 33-4.If the economy starts at A and there is a fall in aggregate demand,the economy moves

A)back to A in the long run.
B)to B in the long run.
C)to C in the long run.
D)to D in the long run.

Question 9

If aggregate demand shifts right then in the short run

A)firms will increase production.In the long run increased price expectations shift the short-run aggregate supply curve to the right.
B)firms will increase production.In the long run increased price expectations shift the short-run aggregate supply curve to the left.
C)firms will decrease production.In the long run increased price expectations shift the short-run aggregate supply curve to the right.
D)firms will decrease production.In the long run increased price expectations shift the short-run aggregate supply curve to the left.

Question 10

An economic expansion caused by a shift in aggregate demand remedies itself over time as the expected price level

A)falls,shifting aggregate demand right.
B)rises,shifting aggregate demand left.
C)falls,shifting aggregate supply right.
D)rises,shifting aggregate supply left.

Question 11

If the government repeals an investment tax credit and increases income taxes,

A)real GDP rises,and the price level could rise,fall,or stay the same.
B)real GDP falls,and the price level could rise,fall,or stay the same.
C)real GDP and the price level rise.
D)real GDP and the price level fall.

Question 12

If aggregate demand shifts left,then in the short run

A)the price level and real GDP both rise.
B)the price level rises and real GDP falls.
C)the price level falls and real GDP rises.
D)the price and real GDP both fall.

Question 13

In which case can we be sure that real GDP and the price level rise in the short run?

A)foreign economies expand and taxes increase.
B)foreign economies expand and taxes decrease.
C)foreign economies contract and taxes decrease.
D)foreign economies contract and taxes increase.

Question 14

Which of the following would cause prices and real GDP to rise in the short run?

A)an increase in the expected price level
B)an increase in the money supply
C)a decrease in the capital stock
D)an increase in taxes.

Question 15

An economic expansion caused by a shift in aggregate demand causes prices to

A)rise in the short run,and rise even more in the long run.
B)rise in the short run,and fall back to their original level in the long run.
C)fall in the short run,and fall even more in the long run.
D)fall in the short run,and rise back to their original level in the long run.

Question 16

In which case can we be sure real GDP rises in the short run?

A)foreign economies expand and government purchases rise.
B)foreign economies expand and government purchases fall.
C)foreign economies contract and government purchases fall.
D)foreign economies contract and government purchases rise.

Question 17

If output is above its natural rate,then according to sticky-wage theory

A)workers and firms will strike bargains for lower wages.In response to the lower wages firms will produce less at any given price level.
B)workers and firms will strike bargains for lower wages.In response to the lower wages firms will produce more at any given price level.
C)workers will strike bargains for higher wages.In response to the higher wages firms will produce less at any given price level.
D)workers and firms will strike bargains for higher wages.In response to the higher wages firms will produce more at any given price level.

Question 18

Which of the following would cause prices and real GDP to rise in the short run?

A)short-run aggregate supply shifts right
B)short-run aggregate supply shifts left
C)aggregate demand shifts right
D)aggregate demand shifts left

Question 19

Economic expansions in Europe and China would cause

A)the U.S.price level and real GDP to rise.
B)the U.S.price level and real GDP to fall.
C)the U.S.price level to rise and real GDP to fall.
D)the U.S.price level to fall and real GDP to rise.

Question 20

The price level rises in the short run if

A)aggregate demand or aggregate supply shifts right.
B)aggregate demand shifts right or aggregate supply shifts left.
C)aggregate demand shifts left or aggregate supply shifts right.
D)aggregate demand or aggregate supply shifts right.

Question 21

Consider the exhibit below for the following questions.
Figure 33-4
Refer to Figure 33-4.If the economy starts at A and moves to D in the short run,the economy

A)moves to A in the long run.
B)moves to B in the long run.
C)moves to C in the long run.
D)stays at D in the long run.

Question 22

Figure 33-7.
Refer to Stock Market Boom 2015.Which curve shifts and in which direction?

A)aggregate demand shifts right
B)aggregate demand shifts left
C)aggregate supply shifts right
D)aggregate supply shifts left.

Question 23

Figure 33-6.
Refer to Figure 33-6.Which of the long-run aggregate-supply curves is consistent with a recession?

A)LRAS₁
B)LRAS₂
C)LRAS₃
D)Both LRAS₁ and LRAS₃

Question 24

Figure 33-7.
Refer to Optimism.Which curve shifts and in which direction?

A)aggregate demand shifts right
B)aggregate demand shifts left
C)aggregate supply shifts right.
D)aggregate supply shifts left.

Question 25

Figure 33-6.
Refer to Figure 33-6.Which of the long-run aggregate-supply curves is consistent with a short-run economic expansion?

A)LRAS₁
B)LRAS₂
C)LRAS₃
D)Both LRAS₁ and LRAS₃

Question 26

Figure 33-7.
Refer to Stock Market Boom 2015.How is the new long-run equilibrium different from the original one?

A)the price level and real GDP are higher
B)the price level and real GDP are lower.
C)the price level is higher and real GDP is the same.
D)the price level is the same and real GDP is higher.

Question 27

Consider the exhibit below for the following questions.
Figure 33-4
Refer to Figure 33-4.If the economy is in long-run equilibrium,then an adverse shift in aggregate supply would move the economy from

A)A to B.
B)C to D.
C)B to A.
D)D to C.

Question 28

Consider the exhibit below for the following questions.
Figure 33-4
Refer to Figure 33-4.In the short run,a favorable shift in aggregate supply would move the economy from

A)A to B.
B)B to C.
C)C to D.
D)D to A.

Question 29

Figure 33-7.
Refer to Stock Market Boom 2015.What happens to the expected price level and what impact does this have on wage bargaining?

A)The expected price level falls.Bargains are struck for higher wages.
B)The expected price level falls.Bargains are struck for lower wages.
C)The expected price level rises.Bargains are struck for higher wages.
D)The expected price level rises.Bargains are struck for lower wages.

Question 30

Consider the exhibit below for the following questions.
Figure 33-4
Refer to Figure 33-4.The economy would be moving to long-run equilibrium if it started at

A)A and moved to B.
B)C and moved to B.
C)D and moved to C.
D)None of the above is correct.

Question 31

Figure 33-5.
Refer to Figure 33-5.Starting from point B and assuming that aggregate demand is held constant,in the long run the economy is likely to experience

A)a falling price level and a falling level of output,as the economy moves to point C.
B)a falling price level and a rising level of output,as the economy moves to point A.
C)a rising price level and a falling level of output,as the economy moves to point A.
D)a rising price level and a rising level of output,as the economy moves to point C.

Question 32

Figure 33-5.
Refer to Figure 33-5.In Figure 33-5,

A)Point B represents a short-run equilibrium and a long-run equilibrium.
B)Point B represents a short-run equilibrium,and Point A represents a long-run equilibrium.
C)Point B represents a long-run equilibrium,and Point A represents a short-run equilibrium.
D)Point B represents a long-run equilibrium,and Point C represents a short-run equilibrium.

Question 33

Figure 33-5.
Refer to Figure 33-5.The shift of the short-run aggregate-supply curve from SRAS₁ to SRAS₂

A)could be caused by an outbreak of war in the Middle East.
B)could be caused by a decrease in the expected price level.
C)causes the economy to experience an increase in the unemployment rate.
D)causes the economy to experience stagflation.

Question 34

Figure 33-7.
Refer to Figure 33-7.Suppose the economy starts at Y.If aggregate demand increases from AD₂ to AD₃,then the economy moves to

A)V.
B)W.
C)X.
D)Z.

Question 35

Figure 33-7.
Refer to Stock Market Boom 2015.In the long run,the change in price expectations created by the stock market boom shifts

A)long-run aggregate supply right.
B)long-run aggregate supply left.
C)short-run aggregate supply right.
D)short-run aggregate supply left.

Question 36

Figure 33-7.
Refer to Optimism.In the short run what happens to the price level and real GDP?

A)both the price level and real GDP rise.
B)both the price level and real GDP fall.
C)the price level rises and real GDP falls.
D)the price level falls and real GDP rises.

Question 37

Figure 33-5.
Refer to Figure 33-5.The appearance of the long-run aggregate-supply (LRAS)curve

A)is consistent with the concept of monetary neutrality.
B)is consistent with the idea that point A represents a long-run equilibrium and a short-run equilibrium when the relevant short-run aggregate-supply curve is SRAS₁.
C)indicates that Y₁ is the natural rate of output.
D)All of the above are correct.

Question 38

Figure 33-7.
Refer to Figure 33-7.If the economy starts at Y,then a recession occurs at

A)V.
B)W.
C)X.
D)Z.

Question 39

Figure 33-7.
Refer to Figure 33-7.Suppose the economy starts at Y.If there is a fall in aggregate demand,then the economy moves to

A)V in the long run.
B)W in the long run.
C)X in the long run.
D)Z in the long run.

Question 40

Figure 33-7.
Refer to Stock Market Boom 2015.In the short run what happens to the price level and real GDP?

A)both the price level and real GDP rise.
B)both the price level and real GDP fall.
C)the price level rises and real GDP falls.
D)the price level falls and real GDP rises.

Question 41

Figure 33-7.
Refer to Optimism.In the long run,the change in price expectations created by optimism shifts

A)long-run aggregate supply right.
B)long-run aggregate supply left.
C)short-run aggregate supply right.
D)short-run aggregate supply left.

Question 42

Figure 33-7.
Refer to Pessimism.What happens to the expected price level and what's the result for wage bargaining?

A)The expected price level rises.Bargains are struck for higher wages.
B)The expected price level rises.Bargains are struck for lower wages.
C)The expected price level falls.Bargains are struck for higher wages.
D)The expected price level falls.Bargains are struck for lower wages.

Question 43

Figure 33-7.
Refer to Financial Crisis.What happens to the price level and real GDP in the short run?

A)both the price level and real GDP rise
B)the price level rises and real GDP falls
C)the price level falls and real GDP rises
D)both the price level and real GDP fall

Question 44

Figure 33-7.
Refer to Financial Crisis.In the long run,if the Fed does not respond,the change in price expectations created by the crisis shifts

A)aggregate demand right.
B)aggregate demand left.
C)short-run aggregate supply right.
D)short-run aggregate supply left.

Question 45

If output is above its natural rate,then according to sticky-wage theory

A)workers and firms will strike bargains for higher wages.This increase in wages shifts the short-run aggregate supply curve right.
B)workers and firms will strike bargains for higher wages.This increase in wages shifts the short-run aggregate supply curve left.
C)workers and firms will strike bargains for lower wages.This decrease in wages shifts the short-run aggregate supply curve right.
D)workers and firms will strike bargains for lower wages.This decrease in wages shifts the short-run aggregate supply curve left.

Question 46

Which of the following is a lesson concerning shifts in aggregate demand?

A)they contribute to fluctuations in output.
B)in the long-run they change real output,but not the price level.
C)policymakers are unable to mitigate the severity of economic fluctuations.
D)All of the above are correct.

Question 47

Figure 33-7.
Refer to Optimism.What happens to the expected price level and what's the result for wage bargaining?

A)The expected price level falls.Bargains are struck for higher wages.
B)The expected price level falls.Bargains are struck for lower wages.
C)The expected price level rises.Bargains are struck for higher wages.
D)The expected price level rises.Bargains are struck for lower wages.

Question 48

Which of the following would increase output in the short run?

A)an increase in stock prices makes people feel wealthier
B)government spending increases
C)firms chose to purchase more investment goods
D)All of the above are correct.

Question 49

Suppose the economy is in long-run equilibrium and the government decreases its expenditures.Which of the following helps explain the logic of why the economy moves back to long-run equilibrium?

A)as people revise their price-level expectations upward,firms and workers strike bargains for higher nominal wages.
B)as people revise their price-level expectations upward,firms and workers strike bargains for lower nominal wages.
C)as people revise their price-level expectations downward,firms and workers strike bargains for higher nominal wages.
D)as people revise their price-level expectations downward,firms and workers strike bargains for lower nominal wages.

Question 50

The long-run effect of an increase in household consumption is to raise

A)both real output and the price level.
B)real output and lower the price level.
C)real output and leave the price level unchanged.
D)the price level and leave real output unchanged.

Question 51

Figure 33-7.
Refer to Optimism.How is the new long-run equilibrium different from the original one?

A)both price and real GDP are higher
B)both price and real GDP are lower.
C)the price level is the same and GDP is higher.
D)the price level is higher and real GDP is the same.

Question 52

Figure 33-7.
Refer to Pessimism.In the short run what happens to the price level and real GDP?

A)Both the price level and real GDP rise.
B)Both the price level and real GDP fall.
C)The price level rises and real GDP falls.
D)The price level falls and real GDP rises.

Question 53

Figure 33-7.
Refer to Pessimism.How is the new long-run equilibrium different from the original one?

A)both price and real GDP are higher.
B)both price and real GDP are lower.
C)the price level is the same and GDP is lower.
D)the price level is lower and real GDP is the same.

Question 54

Which of the following would increase the price level?

A)an increase in the money supply.
B)an increase in taxes.
C)a decrease in the expected price level.
D)a decrease in the natural rate of unemployment.

Question 55

Suppose the economy is in long-run equilibrium.If the government increases its expenditures,eventually the increase in aggregate demand causes price expectations to

A)rise.This rise in price expectations shifts the short-run aggregate supply curve to the right.
B)rise.This rise in price expectations shifts the short-run aggregate supply curve to the left.
C)fall.This fall in price expectations shifts the short-run aggregate supply curve to the right.
D)fall.This fall in price expectations shifts the short-run aggregate supply curve to the left.

Question 56

Figure 33-7.
Refer to Pessimism.In the long run,the change in price expectations created by pessimism shifts

A)long-run aggregate supply right.
B)long-run aggregate supply left.
C)short-run aggregate supply right.
D)short-run aggregate supply left.

Question 57

Figure 33-7.
Refer to Financial Crisis.If nominal wages are sticky,which of the following helps explains the change in output?

A)real wages fall,so firms choose to produce less
B)real wages fall,so firms choose to produce more
C)real wages rise,so firms choose to produce less
D)real wages rise,so firms choose to produce more

Question 58

In the early 1930s in the United States,there was a

A)large increase in output.In the early 1940s there was also a large increase in output.
B)large increase in output.In the early 1940s there was a large decrease in output.
C)large decrease in output.In the early 1940s there was a large increase in output.
D)large decrease in output.In the early 1940s there was also a large decrease in output.

Question 59

Which of the following has been suggested as a cause of the Great Depression?

A)a decline in the money supply
B)a decrease in stock prices
C)the collapse of the banking system
D)All of the above are correct.

Question 60

Figure 33-7.
Refer to Pessimism.Which curve shifts and in which direction?

A)aggregate demand shifts right
B)aggregate demand shifts left
C)aggregate supply shifts right.
D)aggregate supply shifts left.

Question 61

During World War II,

A)government purchases of goods and services increased fivefold.
B)the economy's production increased about 25 percent.
C)unemployment fell to about 5%.
D)All of the above are correct.

Question 62

During World War II,the economy's production increased about

A)25 percent and prices rose about 5 percent.
B)50 percent and prices rose about 10 percent.
C)75 percent and prices rose about 15 percent.
D)100 percent and prices rose about 20 percent.

Question 63

In the first few years of the Great Depression,unemployment rose to about

A)10 percent,and prices rose about 14 percent.
B)15 percent,and prices rose about 22 percent.
C)20 percent,and prices fell about 14 percent.
D)25 percent,and prices fell about 22 percent.

Question 64

Suppose that during the Great Depression long-run aggregate supply shifted left.To be consistent with what happened to the price level and output,what would have had to happen to aggregate demand?

A)It would have to have shifted left by less than aggregate supply.
B)It would have to have shifted left by more than aggregate supply.
C)It would have to have shifted right by less than aggregate supply.
D)It would have to have shifted right by more than aggregate supply.

Question 65

Which of the following alone can explain the change in the price level and output during World War II?

A)aggregate demand shifted right
B)aggregate demand shifted left
C)aggregate supply shifted right
D)aggregate supply shifted left

Question 66

Policymakers who control monetary and fiscal policy and want to offset the effects on output of an economic contraction caused by a shift in aggregate supply could use policy to shift

A)aggregate supply to the right.
B)aggregate supply to the left.
C)aggregate demand to the right.
D)aggregate demand to the left.

Question 67

A decrease in the availability of an important major resource such as oil shifts

A)aggregate supply right.
B)aggregate supply left.
C)aggregate demand right.
D)aggregate demand left.

Question 68

When production costs rise,

A)the short-run aggregate supply curve shifts to the right.
B)the short-run aggregate supply curve shifts to the left.
C)the aggregate demand curve shifts to the right.
D)the aggregate demand curve shifts to the left.

Question 69

Suppose that during World War II the long-run aggregate supply curve shifted right.In order for price and output to have changed in the direction they did,what would have to have happened to aggregate demand?

A)It would have to have shifted left by less than aggregate supply shifted
B)It would have to have to shifted left by more than aggregate supply shifted.
C)It would have to have shifted right by less than aggregate supply shifted
D)It would have to have to shifted right by more than aggregate supply shifted.

Question 70

An increase in the price level and a reduction in output would result from

A)an increase in the money supply.
B)an increase in government expenditures.
C)a fall in stock prices.
D)bad weather in farm states.

Question 71

Which of the following would cause stagflation?

A)aggregate demand shifts right
B)aggregate demand shifts left
C)aggregate supply shifts right
D)aggregate supply shifts left

Question 72

An increase in the price level and a reduction in output would result from

A)a fall in stock prices.
B)a decrease in the supply of an important resource.
C)an increase in government expenditures.
D)an increase in taxes.

Question 73

The economic boom of the early 1940s resulted mostly from

A)increased government expenditures.
B)falling prices of oil and other natural resources.
C)an increase in the growth rate of the money supply.
D)rapid developments in transportation,electronics,and communication.

Question 74

Which of the following shifts short-run aggregate supply left?

A)an increase in price expectations
B)an increase in the actual price level
C)a decrease in the money supply
D)a decrease in the price of oil

Question 75

Stagflation exists when prices

A)rise and unemployment falls.
B)rise and unemployment rises.
C)fall and unemployment rises.
D)fall and unemployment falls.

Question 76

Which of the following did not happen during the onset of the Great Depression?

A)The money supply fell as households took money out of bank deposits.
B)The Fed conducted expansionary monetary policy.
C)Stock prices fell about 90 percent.
D)Disruption of the banking system made it difficult for some firms to obtain funds for investment.

Question 77

Which of the following by itself is consistent with the directions that the price level and real GDP changed at the onset of the Great Depression?

A)aggregate demand shifted right
B)aggregate demand shifted left
C)aggregate supply shifted right
D)aggregate supply shifted left

Question 78

Suppose a shift in aggregate demand creates an economic contraction.If policymakers can respond with sufficient speed and precision,they can offset the initial shift by shifting

A)aggregate supply right.
B)aggregate supply left.
C)aggregate demand right.
D)aggregate demand left.

Question 79

If there are floods or droughts or a decrease in the availability of raw materials

A)aggregate supply shifts right.
B)output falls in the short run.
C)prices fall in the short run.
D)None of the above is correct.

Question 80

In the short-run an increase in the costs of production makes

A)output and prices rise.
B)output rise and prices fall.
C)output fall and prices rise.
D)output and prices fall.