Historical evidence for the U.S. economy

Question 1

1.

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Historical evidence for the U.S. economy indicates that

Answer

[removed] recessions have occurred roughly once every six years since the 1960s.
[removed] 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.

2 points

Question 2

1.

Which of the following is most commonly used to monitor short-run changes in economic activity?

Answer

the inflation rate
real GDP
aggregate demand
[removed] aggregate supply

2 points

Question 3

1.

During recessions investment

Answer

falls by a larger percentage than GDP.
[removed] falls by about the same percentage as GDP.
[removed] falls by a smaller percentage than GDP.
[removed] falls but the percentage change is sometimes much larger and sometimes much smaller.

2 points

Question 4

1.

The classical model is appropriate for analysis of the economy in the

Answer

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.
[removed] short run, provided money is not neutral.
[removed] short run, provided real and nominal variables are highly intertwined.

2 points

Question 5

1.

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

Answer

both the short run and the long run.
the short run, but not the long run.
[removed] the long run, but not the short run.
[removed] neither the long run nor the short run.

2 points

Question 6

1.

Aggregate demand includes

Answer

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.
[removed] the quantity of goods and service the government wants to buy, but not the quantity of goods and services customers abroad want to buy.
[removed] the quantity of goods and services customers abroad want to buy, but not the quantity of goods and services the government wants to buy.

2 points

Question 7

1.

The model of aggregate demand and aggregate supply

Answer

[removed] 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.

2 points

Question 8

1.

When the price level falls the quantity of

Answer

[removed] 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.

2 points

Question 9

1.

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?

Answer

the real value of wealth
the interest rate
[removed] the value of currency in the market for foreign exchange
[removed] All of the above are correct.

2 points

Question 10

1.

Other things the same, a decrease in the price level makes the dollars people hold worth

Answer

more, so they can buy  more.
more, so they can buy less.
[removed] less, so they can buy more.
[removed] less, so they can buy less.

2 points

Question 11

1.

When the price level falls

Answer

[removed] 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.
[removed] None of the above are correct.

2 points

Question 12

1.

Other things the sameif the U.S. price level falls, then

Answer

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.
[removed] the supply of dollars in the market for foreign-currency exchange decreases, so the exchange rate rises.
[removed] the supply of dollars in the market for foreign-currency exchange decreases, so the exchange rate falls.

2 points

Question 13

1.

As the price level rises,

Answer

[removed] the exchange rate falls, so net exports fall.
the exchange rate falls, so net exports rise.
the exchange rate rises, so net exports fall.
[removed] the exchange rate rises, so net exports rise.

2 points

Question 14

1.

Other things the same, as the price level rises, the real value of a dollar

Answer

[removed] rises, and interest rates rise.
rises, and interest rates fall.
falls, and interest rates rise.
[removed] falls, and interest rates fall.

2 points

Question 15

1.

Other things the same, as the price level falls, a country’s exchange rate

Answer

[removed] and interest rates rise.
and interest rates fall.
falls and interest rates rise.
[removed] rises and interest rates fall.

2 points

Question 16

1.

Suppose a fall in stock prices makes people feel poorer. The decrease in wealth would induce people to desire

Answer

[removed] 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.
[removed] increased consumption, shifting the aggregate-demand curve to the right.

2 points

Question 17

1.

Which of the following both shift aggregate demand left?

Answer

2 points

Question 18

1.

If speculators bid up the value of the U.S. dollar in the market for foreign exchange, then

Answer

2 points

Question 19

1.

The long-run aggregate supply curve shows that by itself a permanent change in aggregate demand would lead to a long-run change

Answer

2 points

Question 20

1.

The long-run aggregate supply curve shifts right if

Answer

2 points

Question 21

1.

According to the aggregate demand and aggregate supply model, in the long run an increase in the money supply leads to

Answer

2 points

Question 22

1.

In the long run, technological progress

Answer

2 points

Question 23

1.

If the price level rises above what was expected and nominal wages are fixed, then

Answer

2 points

Question 24

1.

Other things the same, when the price level rises more than expected, some firms will have

Answer

2 points

Question 25

1.

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

Answer

2 points

Question 26

1.

The effects of a higher than expected price level are shown by

Answer

2 points

Question 27

1.

A decrease in the expected price level shifts

Answer

2 points

Question 28

1.

Which of the following shifts short-run, but not long-run aggregate supply right?

Answer

2 points

Question 29

1.

In 1986, OPEC countries increased their production of oil. This caused

Answer

2 points

Question 30

1.

Keynes believed that economies experiencing high unemployment should adopt policies to

Answer

2 points

Question 31

1.

The interest-rate effect

Answer

2 points

Question 32

1.

The wealth effect stems from the idea that a higher price level

Answer

2 points

Question 33

1.

According to John Maynard Keynes,

Answer

2 points

Question 34

1.

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:

Answer

2 points

Question 35

1.

People choose to hold a smaller quantity of money if

Answer

2 points

Question 36

1.

If expected inflation is constant, then when the nominal interest rate increases, the real interest rate

Answer

2 points

Question 37

1.

When the Fed sells government bonds, the reserves of the banking system

Answer

2 points

Question 38

1.

The opportunity cost of holding money

Answer

2 points

Question 39

1.

If there is excess money supply, people will

Answer

2 points

Question 40

1.

According to liquidity preference theory, if the price level increases, then the equilibrium interest rate

Answer

2 points

Question 41

1.

If the MPC = 3/5, then the government purchases multiplier is

Answer

2 points

Question 42

1.

If the multiplier is 5, then the MPC is

Answer

2 points

Question 43

1.

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

Answer

2 points

Question 44

1.

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

Answer

2 points

Question 45

1.

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

Answer

2 points

Question 46

1.

The economist A.W. Phillips published a famous article in 1958 in which he showed a

Answer

2 points

Question 47

1.

In the short run, policy that changes aggregate demand changes

Answer

2 points

Question 48

1.

If policymakers decrease aggregate demand, then in the short run the price level

Answer

2 points

Question 49

1.

If the central bank increases the money supply, then in the short run prices

2 points

Question 50

1.

According to the short-run Phillips curve, if the central bank increases the money supply, then

Answer

 

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