In-class Quiz 5

In a certain economy, when income is $400, comsumer spending is $325. The value of the multiplier for this economy is 3.33. It follows that, when income is 450$, consumer spending is

A reduction in U.S net exports would shift U.S. aggregate demand

• rightward. In an attempt to stabilize the economy, the government could increase expenditures.

• leftward. In an attempt to stabilize the economy, the government could increase expenditures.

• rightward. In an attempt to stabilize the economy, the government could decrease expenditures.

• leftward. In an attempt to stabilize the economy, the government could decrease expenditures.

People had been expecting the price level to be 140 but it turns out to be 138. Johnson Family Restaurants increases the number of workers it employs. What could explain this?

• sticky wage theory but not sticky price theory

• sticky price theory but not sticky wage theory

• neither sticky wage theory nor sticky price theory

• both sticky price theory and sticky wage theory

If the sacrifice ratio is 4, then reducing the inflation rate from 9 percent to 5 percent would require sacrificing

• 16 percent of annual output.

• 12 percent of annual output.

• 8 percent of annual output.

• 4 percent of annual output.

If inflation expectations decline, then the short-run Phillips curve shifts

• left, so that at any inflation rate unemployment is higher in the short run than before.

• right, so that at any inflation rate unemployment is lower in the short run than before.

• right, so that at any inflation rate unemployment is higher in the short run than before.

• left, so that at any inflation rate unemployment is lower in the short run than before.

Other things the same, if the U.S. price level rises, 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 decreases, so the exchange rate falls.

• 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.

Consider the following sequence of events: price level ↑ → demand for money ↑ → equilibrium interest rate ↑ → quantity of goods and services demanded ↓ This sequence explains why the

• money-supply curve is vertical.

• aggregate-demand curve slopes downward.

• aggregate-demand curve shifts rightward in response to a monetary injection.

• aggregate-demand curve shifts leftward in response to a monetary injection.

Which of the following rises when the U.S. price level falls?

• the value of the dollar in the market for foreign-currency exchange

• interest rates

• real wealth

• All of the above are correct.

If an increase in inflation permanently reduced unemployment, then

• money would not be neutral and the long-run Phillips curve would slope downward.

• money would not be neutral and the long-run Phillips curve would slope upward.

• money would be neutral and the long run Phillips curve would slope upward.

• money would be neutral and the long-run Phillips curve would slope downward