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Worksheetsecn 211 Kovrijnykh
Total questions: 151
Worksheet time: 1hrs 16mins
In the circular-flow diagram
factors of production flow from government to firms.
goods and services flow from households to firms.
income paid to the factors of production flows from firms to households.
spending on goods and services flows from firms to households.
Which of the following transactions takes place in the markets for the factors of production in the circular-flow diagram?
Dylan receives a salary for his work as a financial analyst for an investment firm.
Kristin buys two business suits to wear to her job as a Chief Information Officer.
Jim receives clean water in his home in exchange for paying his water bill.
Caroline owns a nail salon and receives payments from her clients for her services.
Comparative advantage in a good or service refers to
the ability to produce the good or service at the lowest opportunity cost.
the ability to produce the good or service using the least amount of resources.
the ability to produce the good or service in the lowest amount of time.
the ability to produce the highest quantity of a good or service
A person can benefit from specialization and trade by obtaining a good at a price that is
lower than his or her opportunity cost of that good.
the same as his or her opportunity cost of that good.
higher than his or her opportunity cost of that good.
different than his or her opportunity cost of that good.
Suppose new information is available that suggest the price of gold will be higher in the future than previously expected. As a result of this new information,
there is a decrease in quantity demanded and a movement along the current demand curve.
there is an increase in quantity demanded an a movement along the current demand curve.
there is a rightward shift in the current demand curve for gold.
there is a leftward shift in the current demand curve for gold.
After an increase in income, the equilibrium price of tablet computers _____ and equilibrium quantity of tablet computers ______.
increases/decreases
increases/increases
decreases/decreases
decreases/cannot be determined
If the price of train tickets decreases, what will be the impact in the market for bus travel ?
The demand curve for bus travel shifts to the right.
The quantity of bus travel demanded increases.
The demand curve for bus travel shifts to the left.
The quantity of bus travel demanded decreases.
A university's football stadium is always sold out, and students who wait in line for hours may be turned away. This indicates
the ticket price is above the equilibrium price.
the ticket price is below the equilibrium price.
the ticket price is at the equilibrium price.
nothing about the equilibrium price.
Which of the following is TRUE regarding GDP per person as a measure of standard of living?
GDP per capita is closely associated with other measures of standard of living.
Goods produced in the home are included in GDP
GDP is adjusted to account for environmental quality.
GDP includes information on income distribution.
The table below displays data from the Bureau of Economic Analysis for the United States in 2007.
Calculate nominal GDP in 2007
$18.77
$14.03
$16.40
$1545
Refer to the table. What is the value of the GDP deflator in 2009?
110
100
105
90
Refer to the figure above. Which of the following best describes the change in the market for pizzas after an increase in the population?
A
B
C
D
E
A
B
C
D
E
A
B
C
E
F
positive
negative
normative
inverse
Jonny loses his job and, as a result, buys more frozen pizzas. For Jonny, frozen pizzas are a(n)
inferior good
luxury good
normal good
complementary good
decrease in demand
increase in demand
decrease in quantity demanded
increase in quantity demanded
A movement along the supply curve might be caused by a change in
production tech
input prices
expectations about future prices
the price of the good or service that is being supplied
Who gets scarce resources in a market economy?
whoever is willing and able to pay the price
the government
whoever the government decides gets them
whoever wants them
Which of the following leads to an increase in GDP for the United States in 2011?
I. $10,000 worth of Washington apples are sold to a grocery firm in Mexico in October 2011
II. A customer pays $50 for a haircut in a Tempe salon in June 2011.
III. A GM car is produced in Detroit in July 2011 and sold to a dealer. The car sits on the lot until 2012.
IV. A plumber is paid $500 for services provided in Tempe in March 2011, but he conceals his income from tax authorities.
I and II
I, II, and III
II and III
all of the above
If consumers view cappuccinos and lattés as substitutes, what would happen to the equilibrium price and quantity of lattés if the price of cappuccinos rises?
Both the equilibrium price and quantity would increase.
Both the equilibrium price and quantity would decrease.
The equilibrium price would increase, and the equilibrium quantity would decrease.
The equilibrium price would decrease, and the equilibrium quantity would increase.
Which of the following events would unambiguously cause a decrease in the equilibrium price of cotton shirts?
an increase in the price of wool shirts and a decrease in the price of raw cotton
a decrease in the price of wool shirts and a decrease in the price of raw cotton
an increase in the price of wool shirts and an increase in the price of raw cotton
a decrease in the price of wool shirts and an increase in the price of raw cotton
Suppose the income of buyers in a market for an inferior good decreases and a technological advancement occurs also. What would we expect to happen in the market?
Equilibrium price would decrease, but the impact on equilibrium quantity would be ambiguous.
Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous.
Equilibrium quantity would decrease, but the impact on equilibrium price would be ambiguous.
None of the above is correct.
Which of the following is a positive economic statement?
The minimum wage law causes unemployment.
The government should subsidize solar power for homeowners.
The number of work visas should not be limited by the government.
People should not buy imported fruits and vegetables.
The opportunity cost of taking the exam today is
is the dollar value of the money that could be earned if you spent the exam time working.
is the value of tuition that the exam period represents.
is zero since the exam is part of your grade.
the next best use of the time taking the test.
there is a shortage of about 45 thousand pounds of apples.
there is a surplus about 45 thousand pounds of apples.
there is a shortage of about 20 thousand pounds of apples.
the market remains in equilibrium because the price ceiling is not binding.
150 units of consumption goods.
75 units of capital goods
50 units of consumption goods.
It depends on the preferences of society.
200 units of consumption goods
75 units of consumption goods.
50 units of consumption goods.
75 units of capital goods
175 units of consumption goods
It depends on the preferences of society.
It takes Suzi 6 hours to sew a shirt and 4 hours to bake a cake. Anna can sew a shirt in 3 hours and bake a cake in 1 hour.
If Anna and Suzi decide to specialize and trade, who should make cakes?
Anna
Suzi
both
neither
Rational people make decisions at the margin by comparing
average costs and benefits.
total costs and benefits.
marginal costs and benefits.
opportunity costs and benefits.
Scarcity refers to the situation in which
unlimited resources exceed limited wants.
a nation's poverty level increases faster than its population.
unlimited wants exceed limited resources.
a country's population is larger than its resource base.
A rightward shift in the supply curve for fresh apples would most likely be caused by
an increase is the wage rate paid to workers that harvest apples.
an increase technology that results in more productive apple trees.
an increase in the price of pears, a substitute good.
an increase in income
all of the above
Workers at a bicycle assembly plant currently earn the mandatory minimum wage. If the federal government increases the minimum wage by $1.00 per hour, then it is likely that the
supply of bicycles will shift to the left.
firm must increase output to maintain profit levels.
supply of bicycles will shift to the right.
demand for bicycle assembly workers will increase.
Suppliers will be willing to supply a product in all of the following situations except
the price received is greater than the additional cost of producing the product.
the price received is at least equal to the additional cost of producing the product.
the price received is equal to the additional cost of producing the product.
the price received is less than the additional cost of producing the product.
When a binding price ceiling is imposed on a market to benefit buyers,
no buyers actually benefit.
some buyers benefit, but no buyers are harmed.
some buyers benefit, and some buyers are harmed.
all buyers benefit
If a price floor is not binding, then
the equilibrium price is above the price floor.
the equilibrium price is below the price floor.
there will be a surplus in the market.
there will be a shortage in the market.
I
II, III and IV
I and II
no one is helped by a price ceiling
Which of the following is considered a liability of a bank?
bank capital
deposits from households and businesses.
loans to households and businesses.
reserves held as cash
When a bank is insolvent
all of these
bank capital is negative
bank capital is negative
liabilities exceed assets
6.4
1.43
4.9
1.50
Dollar bills in the modern economy serve as money because
they are backed by the gold stored in Fort Knox.
they can be redeemed for gold by the central bank.
people have confidence that others will accept them as money.
they have value as a commodity independent of their use as money.
Which of the following price indexes includes the prices that foreigners pay when importing domestically produced fresh apples?
the GDP deflator
the CPI and GDP deflator
neither GDP deflator nor CPI
the CPI
As prices rise, consumers change consumption habits and choose to purchase cheaper goods. This describes the _____ bias in the CPI and is one reason why the CPI ______ the true cost of living.
outlet / under-estimates
substitution / over-estimates
substitution / under-estimates
outlet / over-estimates
cheaper goods / perfectly measures
When the consumer price index rises, the typical consumer
has to spend more dollars to maintain the same standard of living.
can offset the effects of rising prices by saving more.
finds that its standard of living is not affected.
can spend fewer dollars to maintain the same standard of living.
When the CPI index number increases, this means that
the cost of maintaining a "middle-class" lifestyle has risen.
the cost of maintaining a "middle-class" lifestyle has risen.
the cost of producing goods and services has risen.
all consumers must spend more to maintain the same standard of living.
2,740
291,536
29,519
16,378
If a country increases its savings rate,
capital increases and productivity growth decreases for a short while.
capital increases and productivity growth increases permanently.
capital increases and productivity growth increases for a short while.
capital increases and productivity growth decreases for a short while.
Which of the following causes the unemployment rate to understate the true extent of joblessness?
Persons who collect unemployment benefits report themselves to be searching for a job.
Discouraged workers are not counted as unemployed.
Many full time workers really want to be part time workers.
Discouraged workers are counted as unemployed.
Of the following, who is considered officially unemployed?
none of these are considered officially unemployed
Tess lost her job as a typesetter and sought work for about 2 years, but has given up looking.
Buffy works part-time at the Double Meat Palace and has been actively seeking full time work as an administrative assistant.
Sissy is a 20-year old college student who quit her job at a fast food restaurant to focus on school.
The Federal Funds rate
is also called the prime rate.
increases when the quantity of bank reserves decreases.
is the interest rate banks pay on loans from the Federal Reserve.
is the interest rate households pay on many types of consumer loans.
In addition to controlling the money supply, the Federal Reserve
makes loans to private businesses.
collects taxes from the public.
acts as a lender of last resort to banks.
finances government expenditures.
Which of the following best illustrates the unit of account function of money?
You list prices for candy sold on your Web site, www.sweettooth.com, in dollars.
You pay for your theater tickets with dollars.
None of these are correct.
You hold currency even though you don’t intend to spend it right away.
When in France you notice that prices are posted in euros, this best illustrates money’s function as
a medium of exchange.
a unit of account.
a method of barter.
a store of value.
Which of the following can be measured by the level of real GDP per person?
neither the standard of living nor productivity
productivity
both productivity and standard of living
the standard of living
Janet is a farmer. Which of the following are included in her human capital?
what she’s learned from experience but not her tractor
her tractor but not what she’s learned from experience
her tractor and what she’s learned from experience
neither her tractor nor what she’s learned from experience
The labor force is best described by
all employed workers plus unemployed workers plus discouraged workers.
all employed workers plus unemployed.
the working-aged population.
all full-time workers plus unemployed workers seeking full-time jobs.
Which list ranks assets from most to least liquid?
Treasury bonds, money, cars, houses
money, Treasury bonds, cars, houses
Treasury bonds, cars, money, houses
money, cars, houses, Treasury bonds
Refer to the above market. A minimum wage of $16 per hour
would increase unemployment by 400 persons.
would increase unemployment by 200 persons.
would not result in a change in unemployment.
would decrease unemployment by 200 persons.
would decrease unemployment by 400 persons.
Which of the following is a tool of monetary policy?
interest on bank reserves
federal funds rate
all are tools
government transfers
tax rates
Suppose the reserve requirement is 20%. What is the maximum possible expansion of deposits that could result from an initial deposit of $500?
2500
20,000
1000
5000
Which of the following is currently NOT part of the U.S. money supply?
I. A $20 bill
II. A bank deposit in the amount of $5,000
III. A U.S. Treasury bond worth $10,000
IV. An ounce of gold bullion
III and IV
II, III and IV
all are money
I, II and III
I, II and IV
Which of the following types of unemployment represents the deviation of unemployment from the natural rate?
cyclical
structural
all of these
frictional
Suppose bankrate.com displays a 30-year mortgage quote of 4.25%. If the annual inflation rate is 3%, what is the annual real interest rate?
2.25
7.25
0
-4
1.25
21,000
2,500
400
0
500
Celeste is searching for a job after taking a break from employment to stay home with her children. Celeste is an example of
cyclical unemployment.
a discouraged worker.
frictional unemployment.
structural unemployment.
Francis lost his job in as an autoworker due to low demand during a recession. Francis is an example of
cyclical unemployment
a discouraged worker
frictional unemployment
structural unemployment
The labor force is
The labor force participation rate is
The unemployment rate is
139,600 / 68.1 / 4.7
143,970 / 64.9/ 7.6
139,600 / 64.9 / 4.7
139,600 / 68.1 / 7.6
Suppose the Federal Reserve wanted to decrease the money supply. It could
decrease the interest rate paid on bank reserves.
decrease the reserve requirement.
perform open market sales of securities.
make loans to banks.
Suppose the Federal Reserve wanted to increase the money supply. It could
perform open market purchases of securities.
increase the interest rate paid on bank reserves.
increase the discount rate.
increase the reserve requirement.
Which of the following is not correct?
A country's standard of living and its productivity are closely related.
Countries that have had higher output growth per person have typically done so without higher productivity growth.
Productivity refers to output produced per unit of labor input.
Increases in productivity can be used to increase output or leisure.
Which of the following is FALSE?
Growth in human capital leads to productivity growth.
Growth in capital can lead to growth in real GDP per person, but is not a source of sustained economic growth.
Abundant natural resources are required to sustain economic growth.
Growth in productivity is required for sustained economic growth.
None are false
Which of the following would increase productivity?
an increase in the physical capital stock per worker
an increase in human capital per worker
an increase in natural resources per worker
All of these are correct.
Technological knowledge
does not play a role in the relationship that economists call the production function.
is a determinant of productivity.
can be discovered but it can never be kept secret.
is the same thing as human capital.
Matt is going to college to become a pharmacist. What he learns about existing information increases
both technological knowledge and human capital.
technological knowledge but not human capital.
neither technological knowledge nor human capital.
human capital but not technological knowledge.
The real interest rate
is always greater than the nominal rate.
is not affected by inflation.
is less than the nominal interest rate if the inflation rate is greater than zero.
is greater than the nominal interest rate if the inflation rate is greater than zero.
CHECK ALL THAT APPLY
I
II
III
IV
none
Increase level of technology.
Pay workers higher wages.
Improve quantity and quality of resources.
Choose a different allocation of resources
In the circular-flow diagram,
factors of production flow from government to firms.
goods and services flow from households to firms.
income paid to the factors of production flows from firms to households.
spending on goods and services flows from firms to households.
Assume that Greece has a comparative advantage in fish and Germany has a comparative advantage in cars. Also assume that Germany has an absolute advantage in both fish and cars. If these two countries specialize and trade so as to maximize the benefits of specialization and trade, then
the two countries’ combined output of both goods will be higher than it would be in the absence of trade.
All are correct.
Greece will produce more fish than it would produce in the absence of trade.
Germany will produce more cars than it would produce in the absence of trade.
Which of the following statements is not correct?
Comparative advantage is the basis for mutually beneficial trade.
Absolute advantage is the basis for mutually beneficial trade.
Trade has the potential to benefit all nations.
Trade allows nations to consume outside of their production possibilities curves.
Flights to Paris are a normal good and people's incomes rise. At the same time, the price of jet fuel rises. The equilibrium price of a flight to Paris ________ and the equilibrium quantity of flights to Paris ________.
might rise, fall, or not change; increases
falls; decreases.
rises; increases
rises; might increase, decrease, or not change
Which of the following correctly describes how price adjustments eliminate a shortage?
As the price rises, the quantity demanded decreases while the quantity supplied increases.
As the price rises, the quantity demanded increases while the quantity supplied decreases.
As the price falls, the quantity demanded decreases while the quantity supplied increases.
As the price falls, the quantity demanded increases while the quantity supplied decreases.
The French have lower GDP per capita relative to the United States and spend more time producing goods in the home for consumption. French real GDP per capita _____ the standard of living in France relative to the United States.
underestimates
is a perfect measure
overestimates
$17.33 Trillion
$16.25 Trillion
$21.70 Trillion
$13.94 Trillion
100
105
89
113
A downward-sloping demand curve illustrates
the law of demand.
that demand decreases over time.
that prices fall over time.
the relationship between income and quantity demanded.
Which of the following is true?
For an inferior good, when income increases, the demand curve shifts leftward.
The demand curve for a good shifts leftward when the price of a substitute rises.
If consumers expect the price of a good will rise in the future, the demand curve shifts leftward.
An increase in population shifts the demand curve for most goods leftward.
A movement along the supply curve might be caused by a change in
the price of the good or service that is being supplied.
production technology.
input prices.
expectations about future prices.
The signals that guide the allocation of resources in a market economy are
surpluses and shortages.
quantities.
government policies.
prices.
Which of the following would lead to an increase in GDP for the United States in 2013?
I. Toyota, a Japanese firm, produces cars in Kentucky in the first quarter of 2013.
II. A 2013 model year Ford Fiesta is produced, but sits on a dealer lot until February 2014.
III. $10,000 worth of new-crop Washington-grown wheat is exported to Japan in October 2013.
IV. An international student purchases a ham sandwich from a Tempe Subway sandwich shop in May 2013
I
II
III
IV
Suppose the income of buyers in a market for an inferior good decreases and a technological advancement occurs also. What would we expect to happen in the market?
Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous.
Equilibrium price would decrease, but the impact on equilibrium quantity would be ambiguous.
Equilibrium quantity would decrease, but the impact on equilibrium price would be ambiguous.
None of the above is correct.
Which of the following would cause price to decrease?
a decrease in supply
an increase in demand
an increase in supply
a shortage of the good
Which the following in an example of positive economic analysis?
Policy makers decide to spend more on education.
A simple study is conducted that shows people should finish their college degrees.
Policy makers believe that education is currently a more important issue than inflation.
A simple study is conducted that shows annual earnings increase with education level.
Which of the following would lead to a leftward shift in the supply curve for iPads (a normal good)?
A decrease in the price of the applications that run on iPads
A decrease in the value of household wealth
The price of silicon, an input in production, increases
A decrease in the price of iPads
Which of the following is the most likely explanation for the imposition of a price ceiling on the market for milk?
Buyers of milk, recognizing that the price ceiling is good for them, have pressured policymakers into imposing the price ceiling.
Policymakers have studied the effects of the price ceiling carefully, and they recognize that the price ceiling is advantageous for society as a whole.
Sellers of milk, recognizing that the price ceiling is good for them, have pressured policymakers into imposing the price ceiling.
Buyers and sellers of milk have agreed that the price ceiling is good for both of them and have therefore pressured policymakers into imposing the price ceiling.
A price floor is
a legal minimum on the price at which a good can be sold.
often imposed when sellers of a good are successful in their attempts to convince the government that the market outcome is unfair without a price floor.
a source of inefficiency in a market.
All of the above are correct.
Which of the following is/are considered an asset of a bank?
reserves
bank capital
deposits from households and businesses
debt or bank borrowing
Fiat money is
money without intrinsic value that is used as money because of government decree.
money with intrinsic value that is used as money because of government decree.
money with intrinsic value used as money without any government support or decree.
a commodity, like gold or silver
Which of the following price changes would be reflected in the CPI?
I. The price of haircuts from a Tempe, AZ salon increases.
II. The price of cars imported by the United States from Japan increases.
III. The price of heavy farm equipment purchased by farmers in the United States increases.
IV. The price of ammunition purchased by the United States government for military operations increases.
I
II
III
IV
Common biases is the CPI include _____ and as a result, the CPI ______ the true cost of living.
unmeasured quality change, substitution and introduction of new goods / overestimates
none / perfectly estimates
unmeasured quality change, introduction of new goods and substitution / underestimates
quantity, outlet and substitution / overestimates
When the consumer price index falls, the typical consumer
can spend fewer dollars to maintain the same standard of living.
has to spend more dollars to maintain the same standard of living.
finds that its standard of living is not affected.
can save less because they do not need to offset the effects of rising prices.
Because of diminishing returns, an increase in the saving rate leads to
an increase in productivity growth only for a while.
a permanent decrease in productivity growth.
a permanent increase in productivity growth.
a decrease in productivity growth only for a while.
Which of the following is a store of value?
U.S. government bonds
fine art
currency
All of these are correct.
Mia puts money into a piggy bank so she can spend it later. What function of money does this illustrate?
store of value
None of these are correct.
medium of exchange
unit of account
Which of the following can be measured by the level of real GDP per person?
both productivity and standard of living
neither the standard of living nor productivity
productivity
the standard of living
Suppose the reserve requirement is 5%. What is the maximum possible expansion of deposits that could result from an initial deposit of $500?
10,000
20,000
1000
500
Which of the following is currently considered part of the U.S. money supply?
I. A savings deposit in the amount of $10,000
II. A bank deposit in the amount of $5,000
III. A $100 bill
IV. A Treasury Bond worth $10,000
select all that apply
I
II
III
IV
Suppose the published interest rate on a one-year security (like a Treasury) is 3% and the inflation rate is 3%. The real interest rate is
2
3
0
6
800
1200
2200
3000
Which of the following types of unemployment is associated with longer spells of unemployment?
structural
frictional
cyclical
If the Fed carries out an open market sale of U.S. government securities, the quantity of bank reserves ________ and the money supply ________.
falls; decreases
rises; decreases
rises; increases
falls; increases
Suppose the Federal Reserve wanted to decrease the money supply. It could
increase the interest rate paid on bank reserves.
make loans to banks.
decrease the reserve requirement.
perform open market purchases.
Which of the following is TRUE?
growth in capital per worker is required for sustained growth in real GDP per person.
abundant natural resources are required for sustained growth in real GDP per person.
growth in productivity is required for sustained growth in real GDP per capita.
stable or declining population is required for sustained growth in real GDP per person.
Productivity is defined as the quantity of
goods and services produced per unit of time.
goods and services produced from each unit of labor input.
labor required to produce one unit of goods and services.
labor required to produce a nation’s GDP.
If the Fed wants to raise the Federal Funds rate it will
sell government securities in order to increase the quantity of reserves.
buy government securities in order to decrease the quantity of reserves.
sell government securities in order to decrease the quantity of reserves.
buy government securities in order to increase the quantity of reserves.
Refer to the figure above. Suppose the economy is producing at point A. Which of the following best describes the adjustment back to the natural level of output?
Aggregate demand decreases and the new equilibrium point is D.
The economy will not adjust back to the natural level in this case.
Wages and input prices rise and the new equilibrium in point B.
Aggregate supply increases and in the new equilibrium point is D.
Wages and input prices fall and the new equilibrium is point D.
Which of the following would not lead to a decrease in aggregate demand and a leftward shift in the AD curve?
an increase in domestic price level.
a decrease in housing prices.
an in increase in interest rate.
all of the above would increase aggregate demand and shift the AD curve leftward.
The short-run consequence of an increase in the personal income tax levied on households is best described by graph
a
b
c
d
f
Refer to the figure above. Which of the following would cause a movement from point B to C?
a fall in housing prices
a decrease in the wage rate
a decrease in the personal income tax rate
an increase in the price of energy, an input in production.
Other things the same, when the price level falls, interest rates
rise, so firms decrease investment.
fall, so firms decrease investment.
rise, so firms increase investment.
fall, so firms increase investment.
Which of the following shifts both the short-run and long-run aggregate supply right?
an increase in the actual price level
an increase in the capital stock
an increase in the expected price level
none of the above
Which of the following would lead to a shift in the short-run aggregate supply curve but no change in the long-run aggregate supply curve?
A decrease in the expected price level.
An increase in the population.
An increase in the level of capital stock.
All would shift both the long-run aggregate supply and short-run aggregate supply curves.
Which of the following would be classified as fiscal policy?
The federal government cuts taxes to stimulate the economy.
The Federal Reserve cuts interest rates to stimulate the economy.
A state government passes laws regarding voting access.
The federal government passes laws restricting the use of dangerous chemical in food production.
If the economy is producing below the natural rate of output in the short-run, wages and input prices will eventually ____ and ____ will increase, returning the economy to long-run equilibrium.
rise / short-run aggregate supply
fall / aggregate demand
fall / long-run aggregate supply
fall / short-run aggregate supply
Relative-price variability
falls with inflation, leading to a misallocation of resources.
falls with inflation, leading to an improved allocation of resources.
rises with inflation, leading to an improved allocation of resources.
rises with inflation, leading to a misallocation of resources.
D to C to B
D to A to D
A to B to C
B to C to D
D
C
A
B
A
B
C
D
In the short-run, an increase in aggregate supply leads to _____ price level and _____ in unemployment.
an increase / no change
an increase / an increase
a decrease / an increase
a decrease / a decrease
Examples of automatic stabilizers include government expenditures that ____ when national income decreases and help explain why deficits are ____ during recessions.
decrease / smaller
decrease / larger
increase / smaller
increase / larger
A favorable supply shock, like a decrease in the price of oil, would cause
the short-run Phillips curve to shift to the right and no change in the trade-off between unemployment and inflation.
the short-run Phillips curve to shift to the left and a more favorable trade-off between unemployment and inflation.
the short-run Phillips curve to shift to the right and a less-favorable trade-off between unemployment and inflation.
a movement up and along the short-run Phillips curve .
Money neutrality suggests that an increase in the money supply leads to _____ in price level and inflation and _____ in real GDP.
an increase / no change
an increase / a decrease
a decrease / a decreases
an increase / an increase
Consumer confidence indexes suggest that households and firms have become more optimistic about future income. This leads to a
a rightward shift in the long-run aggregate supply curve.
a leftward shift in the short-run aggregate supply curve.
leftward shift in the aggregate demand curve.
rightward shift in the aggregate demand curve.
Which of the following would not lead to a decrease in aggregate demand and a leftward shift in the AD curve?
an in increase in interest rate.
a decrease in housing prices.
an increase in domestic price level.
an appreciation of the domestic currency.
All else held constant, a fall in the foreign price level would cause a(n)
decrease in long-run aggregate supply.
decrease in aggregate demand.
increase in short-run aggregate supply.
increase in aggregate demand.
As the price level falls and other things remain the same, real monetary wealth ________ and ________.
decreases / short-run aggregate supply decreases
decreases / the quantity of real GDP demanded decreases
increases / aggregate demand increases
increases / the quantity of real GDP demanded increases
Refer to the figure above. Which of the following is an example of a fiscal policy that might be used to move the economy from point C to the natural rate of output?
reduce deficit spending
all of these
conduct an open market purchase of securities
increase government spending on infrastructure .
increase taxes on personal income
A reduction in the inflation rate would make relative prices
less variable, making it more likely that resources will be allocated to their best use.
less variable, making it less likely that resources will be allocated to their best use.
more variable, making it more likely that resources will be allocated to their best use.
more variable, making it less likely that resources will be allocated to their best use.
Refer to the figures above. Which graph best describes the effect of an increase in price level, all else constant?
A
B
C
D
The Phillips curve suggests that a reduction in the inflation rate results in a(n) _____ in the unemployment rate. However this trade-off exists only in the ____.
increase / short-run
decrease / short-run
increase / long-run
decrease / short-run
Recessions come at
irregular intervals. During recessions investment spending falls relatively more than consumption spending.
regular intervals. During recessions consumption spending falls relatively more than investment spending.
regular intervals. During recessions investment spending falls relatively more than consumption spending.
irregular intervals. During recessions consumption spending falls relatively more than investment spending.
Other things the same, automatic stabilizers tend to
raise expenditures during expansions and recessions.
lower expenditures during expansions and recessions.
raise expenditures during recessions and lower expenditures during expansions.
raise expenditures during expansions and lower expenditures during recessions.
2.0
9.6
5
10.4
A
B
C
D
E
F
E
C
A
B
Suppose the economy is producing below the natural rate of output. Which of the following best describes the automatic adjustment to the long-run?
wages and input prices decline and short-run aggregate supply increases
wages and input prices increase and short-run aggregate supply decreases.
wages and input prices decline and aggregate demand increases.
consumption increases and aggregate demand increases
Suppose the economy is producing above the natural rate of output. Which of the following best describes the automatic adjustment to the long-run?
wages and input prices increase and short-run aggregate supply decreases.
wages and input prices decline and aggregate demand increases.
wages and input prices increase and long-run aggregate supply decreases.
wages and input prices decline and short-run aggregate supply increases.
Which of the following shifts the short-run aggregate supply curve to the right?
a decrease in the expected price level
an increase in the money supply
a decrease in the expected price level
All of the above are correct.
In the 1970s, the U.S. experienced adverse supply shocks in the form of high oil prices. The result was stagflation. Stagflation is
a combination of high inflation and high unemployment.
a combination of low inflation and low unemployment.
just high inflation.
just high unemployment.
Most economists believe that classical theory describes the world
in the long run.
in both the short run and the long run.
in the short run.
in neither the short run nor the long run.
A tax cut shifts the aggregate demand curve the farthest if
the MPC is small and if the tax cut is temporary.
the MPC is small and if the tax cut is permanent.
the MPC is large and if the tax cut is temporary.
the MPC is large and if the tax cut is permanent.
