Worksheetsmacro practice
Total questions: 95
Worksheet time: 48mins
According to the model of AD-AS, in the medium run, an increase in the money supply should cause:
prices to rise and output to rise
prices to fall and output to fall
prices to rise and output to remain unchanged
prices to fall and output to remain unchanged
The natural rate of output is the amount of real GDP produced:
when the economy is at the natural rate of aggregate demand
when the economy is at the natural rate of unemployment
when the economy is at the natural rate of spending
when the economy is at the natural rate of aggregate supply
Which of the following statements is true regarding the long-run AS curve? The long-run aggregate supply curve:
Is vertical because the economy goes back to the initial production level
Is positively sloped because the higher the P level the higher the Y level
is totally elastic
Which of the following statements is true regarding the long-run AS curve? The long-run aggregate supply curve:
is vertical because an equal change in prices and wages leaves Y unaffected
is positively sloped because prices and wages are fixed in the long run
shifts right when the government raises the minimum wage
shifts left when the natural rate of unemployment falls
The short run aggregate supply according to the neoclassical approach is:
Inelastic (vertical)
Elastic (horizontal)
Upward sloping
Downward sloping
The short run aggregate supply according to the Keynesian approach is:
Inelastic (vertical)
Elastic (horizontal)
Upward sloping
Downward sloping
Suppose the economy is initially in long-run equilibrium. Then suppose there is an increase in military spending.
Prices rise; output rises.
Prices rise; output falls.
Prices fall; output rises.
Prices fall; output falls.
Suppose the economy is in long-run equilibrium. Suppose there is an increase in G, what happens in the long run?
Output and the price level are unchanged from their initial values
Prices rise; output is unchanged from its initial value
Prices fall; output is unchanged from its initial value
Output falls; prices are unchanged from the initial value
According to the model of AD-AS, in the long run, an increase in the money supply should cause
prices to fall and output to remain unchanged
prices to rise and output to rise
prices to fall and output to fall
prices to rise and output to remain unchanged
Economic prosperity is given by:
The GDP growth rate
The GDP pc
The GDP in bill€
Non is correct
Reasons for the GDP to increase:
A higher endowment of resources
A higher product per worker
A higher productivity of capital
They are all correct
A country can increase productivity by promoting...
Investment
Exports
Aggregate demand
Government spending
An example of human capital in a restaurant's kitchen:
Someone's recipe
A Thermomix
An oven
A kitchen assistant
The latest version of the Thermomix is Technological knowledge, rather than physical capital.
True
False
The productivity of Labour is represented as:
L/Y
K/L
L/K
Y/L
Physical capital per worker is represented by:
A) L/K
B) K/L
C) Y/K
D) Y/L
Which one is correct?
Y/L depends on K/L
K/L depends on Y/L
K/L depends on L/K
None is correct
Economic factors that increase productivity:
Investment: domestic and FDI
Property Rights
Education
They are all correct
How does the FDI increase a country’s productivity?
Knowledge and technology transfer
Increasing the production capacity
Hiring workers
Buying inputs in the country
Which one is correct?
Human capital is more productive than unskilled workers
Unskilled workers are more productive when working with human capital
Human capital optimizes the use of technology
They are all correct
The investments are fueled by:
Demand
Supply
Savings
Interests
A production function showing constant returns to scale means:
Doble inputs make doble output
You cannot doble inputs, they have to be kept constant
Doble inputs, constant output
Constant inputs, doble ouput
According to Neoclassical model:
There is only one real wage of equilibrium
Nominal wages do not react to prices
Nominal wage is what matters to workers
There is money illusion
According to the neoclassical model:
Unemployment is voluntary
Unemployment is positive (> than natural rate)
Unemployment is unavoidable
None od the above
Full money illusion means
Only nominal wage matters
Both kind of wages matter
Only real wage matters
None of the above
According to Keynes
The unemployment rate has an impact on real wages
The unemployment rate depends on real wages
The unemployment rate does not affect real wages
None of the above
According to Keynes
The unemployment rate affects the money illusion of workers
The unemployment rate does not affect the money illusion
Both are independent
None of the above
Which of the following is the concept of "reservation wage"?
the wage reserved for the most productive workers
the wage workers reserve for the future
the wage of workers in the reserve
the wage that makes workers indifferent between working or becoming unemployed
How much bargaining power a worker has depends on ...
The unemployment rate
How costly it would be for the firm to replace him or her
How hard it would be for him/her to find another job
they are all correct
According to the neoclassical model, the aggregate supply curve that represents the labor market dynamics is fully price inelastic
False, it is upward sloping
False, it is fully elastic at the natural level of production
Correct, at the natural level of production
Correct, at the initial equilibrium, when the economic policy is implemented
Which of the following is true
A. A higher expected inflation rate will decrease current prices
B. Expected inflation and current inflation are not necessarily related
C. A higher expected inflation rate will not affect current prices
D. A higher expected inflation rate will increase current prices
If you are running a company, your worker’s real wage (W/P) should depend on
The mark up over the wage level that defines the selling price: 1/(1+μ)
None is correct
The expected price level and the nominal wage level
The mark up and the expected price for the next year
A high unemployment rate gives ... bargaining capacity to companies and ... to the workers
less/less
more/less
more/more
less/more
Workers caring about the real wage instead of the nominal wage means that ...
A) Workers care about how many dollars they receive, not about how many goods they can buy with those dollars.
B) Workers care about the dollars that they receive in their current account.
C) Workers do not care about how many dollars they receive but about how many goods they can buy with those dollars.
D) Workers care about how much money they actually make
From the workers point of view, the wage level should take into consideration:
only the unemployment rate because it makes it more difficult to find another job
the current price level, the unemployment rate and the institutional and qualitative variables of the labor market
the expected price level and unemployment rate.
the expected price level, the unemployment rate and the institutional and qualitative variables of the labor market
If all companies set up higher markups ...
the natural unemployment rate remains unchanged due to adjustment mechanisms
the natural unemployment rate decreases
the natural unemployment rate increases
the natural unemployment rate remains unaffected
According to the neoclassical approach studied in the course, If the expected price level increases, we can expect ....
unchanged real wages
higher current prices
they are all correct
The labour market and the production functions of companies explain that, at a country level, for producer companies ....
the higher the employment the higher the wages
the higher the wages the higher the prices are
they are all correct
the higher the higher the production the higher the employment is
Which of the following is not an element included in the catchall variable (z or institutional variable) in the wage setting equation:
the unemployment rate
unemployment subsidy
the minimum wage
the unemployment benefits
The upward sloping curve of the AS of goods and services is explained by ...
the wage setting equation
the other 3 answers all together
the production function
the price setting equation
The neoclassical approach to the labor market considers that...
partial money illusion and prices are sticky
wages are sticky and prices are flexible
full money illusion and price flexibility
the wages are not sticky and only the real wage matters
What causes the AS curve to shift upward from the short run to the medium run?
An improvement in technology
An increase in nominal wages due to higher expected prices
An increase in taxes and lower spending
A fall in money supply
According to the AD-AS Model, fiscal policy affects the aggregate demand through
Interest rates
Financial investment
Consumption and government spending
Exports
Consider an increase in the aggregate demand, and in prices, that needs to be offset. The following must be done:
the government lowers the unemployment insurance
the Central Bank increases the money supply
the Central Bank increases the interest rate
the Government drops taxes
According to the FT Inflation and Interest Rates Tracker, what caused the sharp rise in global inflation after the pandemic?
Higher wages and increased productivity
Central banks cutting interest rates too early
Supply chain disruptions and rising energy prices
In the short run, what most affects the capacity of production at the aggregate level is
the investment in innovation
the wage level and the unemployment rate
the technology endowment per unit of labour
the capital market
Which adjustment process is correct:
A. A monetary expansion increases the AD and that leads to higher current and expected prices, lower wages and higher aggregate supply, increasing prices more.
B. A monetary expansion increases the AD and that leads to higher current and expected prices, higher wages and higher aggregate supply, increasing prices more.
C. A monetary expansion increases the AD and that leads to higher current and expected prices, lower wages and lower aggregate supply, increasing prices more.
D. A monetary expansion increases the AD and that leads to higher current and expected prices, higher wages and lower aggregate supply, increasing prices more.
A decrease in the budget deficit causes:
An initial increase in output and an increase in the AS
No change in aggregate demand or aggregate supply
An initial decrease in output and an decrease in the AS
A monetary expansion will boost GDP in the short run but in the medium run, the GDP will return to its natural level
This is true and it is known as the 'neutrality of money'
This is true and it will require a monetary contraction in the medium-long run to offset its effect on prices
This is true and it will also create inflation in the medium-long run
they are all correct
Russia-Ukraine war disrupts natural-gas flows. What’s the most accurate macro characterization?
Pure demand-pull inflation with rising output
Cost-push shock causing higher inflation and weaker output (stagflationary)
Disinflation due to energy conservation
Neutral for inflation; only FX moves
Consider a eurozone country in its long-run equilibrium. According to the AD-AS model, if the European Central Bank buys bonds through Open Market Operations, there will probably be
a reduction in employment in the short-run and a reduction in prices in the long-run
a rise in employment in the short-run and a reduction in prices in the long-run
a reduction in employment in the short run and a rise in prices in the long-run
a rise in employment in the short-run and a rise in prices in the long-run
In the medium run, after a monetary expansion:
the phenomenon called "neutrality of money" happens
They are all correct
Prices increase
output returns to its natural level
Which of the following adjustment processes is correct?
A) A reduction in the money supply causes an excess demand for money and higher prices shifting the AS leftward
B) An increase in the money supply causes an excess demand for bonds and a fall in the interest rate that increases the price level shifting the AD rightward
C) An increase in public spending increases demand and income and lowers the inflation rate
D) A decline in autonomous investment reduces the aggregate demand and increases the price level
The neutrality of money implies that:
In the medium run, changes in nominal money affect only prices
Monetary policy is effective in the long run
Money has no role in determining prices
An increase in nominal money always raises output
If a country is growing, we can expect
lower unemployment rate, higher nominal wages and lower prices
higher unemployment rate, lower nominal wages and higher prices
lower unemployment rate, higher nominal wages and higher prices
In the model of aggregate demand and aggregate supply, the initial impact of an increase in consumer optimism due to higher disposable income is to:
shift the aggregate demand curve to the right.
shift the short-run aggregate supply curve to the right.
shift the aggregate demand curve to the left.
shift the short-run aggregate supply curve to the left.
The aggregate supply relation implies that an increase in output leads to an increase in the price level
True
False
The natural level of output can be determined by looking at the aggregate supply relation alone
True
False
The aggregate demand relation implies that an increase in the price level leads to an increase in output
True
False
The economy will always remain at the natural level of output in the long run
True
False
Expansionary monetary policy has no effect on the level of output in the medium and long run
True
False
In the medium run, prices and output always return to the same value
True
False
Among developed economies, which of the following sources of economic growth is most likely to explain (sustained economic) growth in the very long run?
Technological improvement
Capital stock
Higher demand
Higher supply of labor
Trade Unions expect that future inflation will rise and, therefore, demand a rise in wages. According to the AS-AD model, this represents
a negative supply shock that forces a reduction in prices and a rise in output
supply shock that forces a reduction in prices and a rise in output; a positive supply shock that forces a rise in prices and a reduction in output
that forces a rise in prices and a reduction in output
a negative supply shock that forces a reduction in prices and a reduction in output
Suppose that you live in an economy based on farming. There is a drought and there is no production of agricultural products. Which of the following will be the effect of this event on prices and output according to a model with flexible prices?
There will be a reduction in output and a rise in prices, both in the short-run and in the medium-run
Output will decrease but prices will remain the same in the short-run. In the long-run, none of the variables will be affected.
Prices will rise and output will decrease. Nevertheless, in the medium-run the production will move back to its initial equilibrium.
The Italian government announces a decline in labor productivity, and it expects this trend to continue into the future. In our AD AS model, it is represented by a shift in Aggregate Demand to the left, and therefore, a reduction in output.
True
False
The number of students studying engineering has dramatically increased at Chinese universities over the last decade. As a consequence, output has increased in the short-run but it has no effect on long-run output (potential output).
True
False
According to the theory studied in our Macroeconomics course, low interest rates observed in Europe nowadays are the result of intentional expansionary monetary policy conducted by the European Central Bank to slow down economic growth.
True
False
In the neoclassical aggregate supply unemployment is voluntary, workers don’t have monetary illusion and the AS is price inelastic
True
False
Suppose the economy is initially in long-run equilibrium. Then suppose there is an increase in military spending due to rising international tensions. According to the model of aggregate demand and aggregate supply, what happens to prices and output in the long run?
Output falls; prices are unchanged from the initial value
Prices rise; output is unchanged from its initial value.
Output and the price level are unchanged from their initial values.
Prices rise; output is unchanged from its initial value.
The natural rate of output is the amount of real GDP produced
When the economy is at the natural rate of unemployment.
When the economy is at the natural rate of investment.
When the economy is at the natural rate of aggregate demand.
Which of the following statements is true regarding the long-run aggregate supply curve? The long-run aggregate supply curve
is vertical according to the neoclassical approach of the labour market.
is positively sloped because price expectations and wages are fixed in the long run.
shifts right when the government raises the minimum wage.
none of the above
The concept "neutrality of money" refers to the fact that:
monetary policy cannot be implemented in the long run
An increase in money supply creates only inflation in the long run
An increase in money supply only creates growth in the medium run, not in the short run
None is correct
In Continental Europe and many other countries, the wage level is the result of
a bargaining process between the companies and the workers
the recent history in European countries
the conditions established by Trade Unions only
A high unemployment rate makes it harder for companies to replace their workers
True
False
A high unemployment rate makes it harder for workers to find another job
True
False
The higher the unemployment rate, the lower the real wage W/P
yes, that is why the wage setting equation is downward sloping in the labor market graph.
yes, that is why the wage setting equation is upward sloping in the labor market graph.
No, these variables are unrelated actually
From the workers point of view, the wage level should take into consideration:
the expected price level and the unemployment rate.
the current price level, the unemployment rate and the institutional and qualitative variables of the labor market
the expected price level, the unemployment rate and the institutional and qualitative variables of the labor market.
From the firms' point of view, the real wage depends on:
the expected price level and the nominal wage level
the mark up over the wage level to set the selling price
the mark up and the expected price for the next year
The reservation wage is the wage that makes the workers indifferent between working or becoming unemployed
True
False
The production level that corresponds to the natural rate of unemployment is called the
expected level of production
regular level of production
natural level of production
Workers caring about the real wage instead of the nominal wage means that ...
Workers care about how many dollars they receive, not about how many goods they can buy with those dollars.
Workers do not care about how many dollars they receive but about how many goods they can buy with those dollars.
Workers care about the quantity of dollars that they receive in their current account.
Firms do not care about the nominal wages they pay but about the nominal wages W they pay relative to the price of the goods they sell P.
True
False
Which of the following is correct:
The natural rate of unemployment is the unemployment rate such that the real wage chosen in wage setting is higher than the real wage implied by price setting
The natural rate of unemployment is the unemployment rate such that the nominal wage chosen in wage setting is equal to the real wage implied by price setting
The natural rate of unemployment is the unemployment rate such that the real wage chosen in wage setting is equal to the real wage implied by price setting
The equilibrium unemployment rate is
Unemployment rate = U = 0
Unemployment rate = Un = natural rate of unemployment
Unemployment rate = U = structural unemployment
At a given unemployment rate, higher unemployment benefits lead to a ........ real wage
unchanged
lower
higher
An increase in unemployment benefits leads to a decrease in the natural rate of unemployment.
True
False
An increase in markups decreases the real wage, and leads to an increase in the natural rate of unemployment
True
False
The natural level of output is such that, at the associated rate of unemployment, the real wage chosen in wage setting is equal to the real wage implied by price setting.
True
False
The unemployment rate can be calculated as
Both are correct
the difference between the labour force and the number of workers divided by the labour force
the number of adults looking for a job divided by the labour force
The natural level of output is the ...
Output produced when the labour market is in equilibrium
Output produced when the real wage chosen in wage setting is equal to the real wage implied by price setting
Both are correct
Which of the following is correct?
The aggregate supply relation captures the effects of output on the price level
The aggregate supply is derived from the behavior of wages and prices.
The aggregate supply curve is upward sloping so that the higher the output the higher the prices
They are all correct
The unemployment rate can be expressed in terms of output:
u = 1 - Y/L
u = Y/L
u = 1 Y /L
Further to the previous question: for a given labor force, the higher is output, the lower is the unemployment rate
True
False
The price level depends on the expected price level, Pe, and the level of output, Y, (and also μ, z, and L, but we take those as constant here).
True
False
