Chapter 20

The Stock Market Boom of 2015: Imagine that in 2015 the economy is in long-run equilibrium. Then stock prices rise more than expected and stay high for some time. In the long run, the change in wages and price expectations created by the stock market boom shifts a. short-run aggregate supply left. b. long-run aggregate supply left. c. long-run aggregate supply right. d. short-run aggregate supply right.

a. short-run aggregate supply left.

Assume the minimum wage is abolished. This will cause: a. short-run aggregate supply to shift to the right b. short-run aggregate supply to shift to the left c. aggregate demand to shift to the left d. aggregate demand to shift to the right

a. short-run aggregate supply to shift to the right

When production costs rise, a. the short-run aggregate supply curve shifts to the left. b. the short-run aggregate supply curve shifts to the right. c. the aggregate demand curve shifts to the left. d. the aggregate demand curve shifts to the right.

a. the short-run aggregate supply curve shifts to the left.

Assume there is an economic expansion in Europe and China (trading partners to the US). This will cause: a. aggregate demand to shift to the left b. aggregate demand to shift to the right c. short-run aggregate supply to shift to the left d. short-run aggregate supply to shift to the right

b. aggregate demand to shift to the right

Policymakers who control monetary and fiscal policy and want to offset the effects on output of an economic contraction caused by a shift in aggregate supply could use policy to shift a. aggregate demand to the left. b. aggregate demand to the right. c. aggregate supply to the right. d. aggregate supply to the left.

b. aggregate demand to the right.

In the short-run an increase in the costs of production makes a. output and prices rise. b. output fall and prices rise. c. output rise and prices fall. d. output and prices fall.

b. output fall and prices rise.

Recessions in Canada and Mexico would cause a. the U.S. price level and real GDP to rise. b. the U.S. price level and real GDP to fall. c. the U.S. price level to fall and real GDP to rise. d. the U.S. price level to rise and real GDP to fall.

b. the U.S. price level and real GDP to fall.

The Stock Market Boom of 2015: Imagine that in 2015 the economy is in long-run equilibrium. Then stock prices rise more than expected and stay high for some time. Which curve shifts and in which direction? a. aggregate supply shifts right b. aggregate supply shifts left. c. aggregate demand shifts right d. aggregate demand shifts left

c. aggregate demand shifts right

Assume the Federal Reserve sells bonds in the open market. This will cause: a. short-run aggregate supply to shift to the right b. aggregate demand to shift to the right c. aggregate demand to shift to the left d. short-run aggregate supply to shift to the left

c. aggregate demand to shift to the left

If the economy is initially at long-run equilibrium and aggregate demand declines, then in the long run the price level a.and output are lower than in the original long-run equilibrium. b. is the same and output is lower than in the original long-run equilibrium. c. is lower and output is the same as the original long-run equilibrium. d. and output are higher than in the original long-run equilibrium.

c. is lower and output is the same as the original long-run equilibrium.

Economic expansions in Europe and China would cause a. the U.S. price level to fall and real GDP to rise. b. the U.S. price level and real GDP to fall. c. the U.S. price level and real GDP to rise. d. the U.S. price level to rise and real GDP to fall.

c. the U.S. price level and real GDP to rise.

During a recession, unemployment ​ a. ​is equal to the natural rate of unemployment. b. ​is frictional unemployment minus structural unemployment. c. ​increases. d. ​decreases.

c.increases

During recessions a. workers are laid off. b. factories are idle. c. firms may find they are unable to sell all they produce. d. All of the above are correct.

d. All of the above are correct.

The Stock Market Boom of 2015:: Imagine that in 2015 the economy is in long-run equilibrium. Then stock prices rise more than expected and stay high for some time. What happens to the expected price level and what impact does this have on wage bargaining? a. The expected price level falls. Bargains are struck for higher wages. b. The expected price level rises. Bargains are struck for lower wages. c. The expected price level falls. Bargains are struck for lower wages. d. The expected price level rises. Bargains are struck for higher wages.

d. The expected price level rises. Bargains are struck for higher wages.

If the government repeals an investment tax credit and increases income taxes, a. real GDP rises, and the price level could rise, fall, or stay the same. b. real GDP falls, and the price level could rise, fall, or stay the same. c. real GDP and the price level rise. d. real GDP and the price level fall.

d. real GDP and the price level fall.