1. The aggregate demand curve
a. slopes upward.
b. slopes downward.
c. is perfectly vertical.
d. is perfectly horizontal.
2. When an inflationary gap exists, the job prospects of new college graduates are
a. very dim.
b. somewhat encouraging.
c. worse in comparison to a recessionary gap.
d. excellent.
3. A shift outward of the aggregate supply curve could be caused by
a. higher import prices.
b. lower import prices.
c. energy shortages.
d. rising wage rates.
4. Which of the following events will lead to an inward shift of the aggregate supply curve?
a. an increase in the price level
b. an increase in consumer spending
c. an increase in labor productivity
d. an increase in wage rates
5. Refer to Figure 10-7. Which of the diagrams in Figure 10-7 represents a period of economic growth and inflation?
a. Panel (A)
b. Panel (B)
c. Panel (C)
d. Panel (D)
6. Which of the panels in Figure 10-7 shows an economic recession caused by primarily by a change aggregate demand?
a. Panel (A)
b. Panel (B)
c. Panel (C)
d. Panel (D)
7. Which of the panels in Figure 10-7 shows an economic expansion caused primarily by a change in aggregate demand?
a. Panel (A)
b. Panel (B)
c. Panel (C)
d. Panel (D)
8. If an economy is growing, but experiences no inflation, this means
a. aggregate demand increased, but aggregate supply did not.
b. aggregate supply increased, but aggregate demand did not.
c. aggregate demand and aggregate supply increased by the same amount.
d. aggregate demand and aggregate supply decreased by the same amount.
9. Figure 10-8 illustrates a period of
a. lower unemployment and higher inflation.
b. lower unemployment and lower inflation.
c. higher unemployment and higher inflation.
d. higher unemployment and lower inflation.
10. Figure 10-9 illustrates a period of
a. economic growth and high inflation.
b. economic growth and low inflation.
c. economic recession and high inflation.
d. economic recession and low inflation.
11. Which of the following items are included in GDP? For those items not included, explain why they are not included in GDP.
a. Jane buys newly issued shares of stock in Macro.com, Inc.
b. Ross buys a new pair of jeans at a local department store.
c. Joey has his mustache trimmed at his local hair salon.
d. Monica makes her own pasta sauce in her apartment.
e. Phoebe grows her own herbs on her apartment balcony.
12. What are intermediate goods? Why do economists exclude the value of intermediate goods while calculating national income?
13. Name and describe the three principal types of unemployment.
14. What is aggregate demand? What are its major components?
15. Define the terms recessionary gap and inflationary gap.
16. What is the aggregate supply curve, what does it represent? Draw the appropriate graph to illustrate your answer. Be sure and label all axes and curves.
17. What is meant by an economy's self correcting mechanism? Explain the process through which self correcting mechanism reduces inflationary gap.
18. Explain how a "conservative" and a "liberal" might differ in the types of policies they advocate to counteract a recessionary gap.
19. Explain some of the steps that a government would wish to adopt in an inflationary environment.
20. Discuss the pros and cons of supply-side fiscal policy. Is it an effective tool for closing recessionary gaps?
21. What are the Three goals of Macro Economics and what measure is used as an indicators for each? (hint 3 different indicators)
22. Draw the Aggregate Demand and Aggregate Supply model to show (hint: show only one curve moving)
a. an increase in income taxes?
b. an increase in government spending?
23. Given what you know so far describe a recent fiscal policy (a general description is all you need) passed by congress and explain why congress feels it may help our current economic situation.
24. What is Gross Domestic Product? What is included in this statistic? What is excluded? (Note: Give two examples of goods or services that are included in GDP and two examples of goods or services that are excluded.)