Question 1. Historical evidence for the U.S. economy indicates that
recessions have occurred roughly once every six years since the 1960s.
the unemployment rate usually decreases during a recession and increases shortly after the recession ends.
real GDP usually remains roughly constant during a recession and decreases shortly after the recession ends.
changes in real GDP over the business cycle are largely attributable to changes in investment over the business cycle.
Question 2
Which of the following is most commonly used to monitor short-run changes in economic activity?
the inflation rate
real GDP
aggregate demand
aggregate supply
Question 3
During recessions investment
falls by a larger percentage than GDP.
falls by about the same percentage as GDP.
falls by a smaller percentage than GDP.
falls but the percentage change is sometimes much larger and sometimes much smaller.
Question 4
The classical model is appropriate for analysis of the economy in the
long run, since evidence indicates that money is not neutral in the long run.
long run, since real and nominal variables are essentially determined separately in the long run.
short run, provided money is not neutral.
short run, provided real and nominal variables are highly intertwined.
Question 5
Real and nominal variables are highly intertwined, and changes in the money supply change real GDP. Most economists would agree that this statement accurately describes
both the short run and the long run.
the short run, but not the long run.
the long run, but not the short run.
neither the long run nor the short run.
Question 6
Aggregate demand includes
the quantity of goods and services both the government and customers abroad want to buy.
the quantity of goods and services neither the government nor customers abroad want to buy.
the quantity of goods and service the government wants to buy, but not the quantity of goods and services customers abroad want to buy.
the quantity of goods and services customers abroad want to buy, but not the quantity of goods and services the government wants to buy.
Question 7
The model of aggregate demand and aggregate supply
is different from the model of supply and demand for a particular market, in that we cannot focus on the substitution of resources between markets to explain aggregate relationships.
is different from the model of supply and demand for a particular market, in that we have to separate real and nominal variables in the aggregate model.
is a straightforward extension of the model of supply and demand for a particular market, in which substitution of resources between markets is highlighted.
is a straightforward extension of the model of supply and demand for a particular market, in which the interaction between real and nominal variables is highlighted.
Question 8
When the price level falls the quantity of
consumption goods demanded rises, while the quantity of net exports demanded falls.
consumption goods demanded and the quantity of net exports demanded both rise.
consumption goods demanded and the quantity of net exports demanded both fall.
consumption goods demanded falls, while the quantity of net exports demand rises.
Question 9
When the price level changes, which of the following variables will change and thereby cause a change in the aggregate quantity of goods and services demanded?
the real value of wealth
the interest rate
the value of currency in the market for foreign exchange
All of the above are correct.
Question 10
Other things the same, a decrease in the price level makes the dollars people hold worth
more, so they can buy more.
more, so they can buy less.
less, so they can buy more.
less, so they can buy less.
Question 11
When the price level falls
households want to lend more, so the interest rate rises making the quantity of goods and services demanded rise.
households want to lend more, so the interest rate falls, making the quantity of goods and services demanded rise.
households want to lend more, so the interest rate rises, making the quantity of goods and services demanded fall.
None of the above are correct.
Question 12
Other things the same, if the U.S. price level falls, then
the supply of dollars in the market for foreign-currency exchange increases, so the exchange rate rises.
the supply of dollars in the market for foreign-currency exchange increases, so the exchange rate falls.
the supply of dollars in the market for foreign-currency exchange decreases, so the exchange rate rises.
the supply of dollars in the market for foreign-currency exchange decreases, so the exchange rate falls.
Question 13
As the price level rises,
the exchange rate falls, so net exports fall.
the exchange rate falls, so net exports rise.
the exchange rate rises, so net exports fall.
the exchange rate rises, so net exports rise.
Question 14
Other things the same, as the price level rises, the real value of a dollar
rises, and interest rates rise.
rises, and interest rates fall.
falls, and interest rates rise.
falls, and interest rates fall.
Question 15.
Other things the same, as the price level falls, a country's exchange rate
and interest rates rise.
and interest rates fall.
falls and interest rates rise.
rises and interest rates fall.
Question 16.
Suppose a fall in stock prices makes people feel poorer. The decrease in wealth would induce people to desire
decreased consumption, shown as a movement to the left along a given aggregate-demand curve.
increase consumption, shown as a movement to the right along a given aggregate-demand curve.
decreased consumption, shifting the aggregate-demand curve to the left.
increased consumption, shifting the aggregate-demand curve to the right.
Question 17.
Which of the following both shift aggregate demand left?
Question 18.
If speculators bid up the value of the U.S. dollar in the market for foreign exchange, then
Question 19.
The long-run aggregate supply curve shows that by itself a permanent change in aggregate demand would lead to a long-run change
Question 20.
The long-run aggregate supply curve shifts right if
Question 21.
According to the aggregate demand and aggregate supply model, in the long run an increase in the money supply leads to
Question 22.
In the long run, technological progress
Question 23.
If the price level rises above what was expected and nominal wages are fixed, then
Question 24
Other things the same, when the price level rises more than expected, some firms will have
Question 25.
According to the misperceptions theory of aggregate supply, if a firm thought that inflation was going to be 5 percent and actual inflation was 6 percent, then the firm would believe that the relative price of what they produce had
Question 26.
The effects of a higher than expected price level are shown by
Question 27.
A decrease in the expected price level shifts
Question 28.
Which of the following shifts short-run, but not long-run aggregate supply right?
Question 29.
In 1986, OPEC countries increased their production of oil. This caused
Question 30.
Keynes believed that economies experiencing high unemployment should adopt policies to
Question 31 The interest-rate effect
Question 32 The wealth effect stems from the idea that a higher price level
Question 33 According to John Maynard Keynes,
Question 34 While a television news reporter might state that "Today the Fed lowered the federal funds rate from 5.5 percent to 5.25 percent," a more precise account of the Fed's action would be as follows:
Question 35 People choose to hold a smaller quantity of money if
Question 36 If expected inflation is constant, then when the nominal interest rate increases, the real interest rate
Question 37 When the Fed sells government bonds, the reserves of the banking system
Question 38 The opportunity cost of holding money
Question 39 If there is excess money supply, people will
Question 40 According to liquidity preference theory, if the price level increases, then the equilibrium interest rate
Question 41 If the MPC = 3/5, then the government purchases multiplier is
Question 42 If the multiplier is 5, then the MPC is
Question 43 In a certain economy, when income is $200, consumer spending is $145. The value of the multiplier for this economy is 6.25. It follows that, when income is $230, consumer spending is
Question 44 If the MPC is 0.80 and there are no crowding-out or accelerator effects, then an initial increase in aggregate demand of $100 billion will eventually shift the aggregate demand curve to the right by
Question 45 Suppose that the MPC is 0.60; there is no investment accelerator; and there are no crowding-out effects. If government expenditures increase by $25 billion, then aggregate demand
Question 46 The economist A.W. Phillips published a famous article in 1958 in which he showed a
Question 47 In the short run, policy that changes aggregate demand changes
Question 48 If policymakers decrease aggregate demand, then in the short run the price level
Question 49 If the central bank increases the money supply, then in the short run prices
Question 50 According to the short-run Phillips curve, if the central bank increases the money supply, then