ECON 313 UO

Suppose a central bank implements a monetary contraction. Which of the following would we expect to occur in the short run? A) a reduction in the nominal wage B) the AD curve to shift to the right C) the price setting curve to shift down D) the wage setting curve to shift upward E) the wage setting curve to shift downward

A) a reduction in the nominal wage

Suppose the minimum wage decreases. Given this event, we would expect which of the following to occur? A) a reduction in the price level and an increase in output in the medium run B) an increase in the aggregate price level as output increases C) an increase in the interest rate in the medium run D) none of the above

A) a reduction in the price level and an increase in output in the medium run

Assume the economy is initially operating at the natural level of output. Now suppose a budget is passed that calls for an increase in government spending. This increase in government spending will, in the medium run, have NO effect on which of the following? A) employment B) the interest rate C) the price level D) all of the above E) none of the above

A) employment

Which of the following best defines the IS curve? A) the combinations of i and Y that maintain equilibrium in the goods market B) illustrates the effects of changes in i on investment C) illustrates the effects of changes in i on desired money holdings by individuals D) the combinations of i and Y that maintain equilibrium in financial markets

A) the combinations of i and Y that maintain equilibrium in the goods market

Labor productivity is represented by which of the following? A) the ratio of output to employment B) workers per unit of capital C) capital per worker D) the ratio of output to population E) the ratio of output to the labor force

A) the ratio of output to employment

The labor force is defined as A) the sum of the employed and unemployed. B) the total number employed. C) the total number of working age individuals in the population. D) the sum of the number of employed, unemployed and discouraged individuals.

A) the sum of the employed and unemployed.

Suppose the Phillips curve is represented by the following equation: πt - πt-1 = 20 - 2ut. Given this information, we know that the natural rate of unemployment in this economy is A. 10% B. 20% C. 6.5% D. 5% E. none of the above

A. 10%

If u<un, we know with certainty that A. P>Pe B. P<Pe C. P=Pe D. Y<Yn

A. P>Pe

Suppose a central bank implements a monetary expansions. Which of the following would we expect to occur in the short run? A. an increase in the nominal wage B. the AD curve to shift to the left C. the price setting curve to shift up D. the wage setting curve to shift downwards E. the wage setting curve to shift upward

A. an increase in the nominal wage

In the aggregate supply relation, the current price level depends upon A. expected price level B. monetary policy C. fiscal policy D all of the above

A. expected price level

Which of the following individuals first discovered the relationship between unemployment and inflation for the United States? A) Solow and Friedman B) Samuelson and Solow C) Friedman and Phillips D) Friedman and Phelps

B) Samuelson and Solow

For this question, assume that the economy is initially operating at the natural level of output. An increase in the price of oil will cause which of the following in the medium run? A) a reduction in the interest rate B) a reduction in output and an increase in the aggregate price level C) a reduction in output and a reduction in the interest rate D) a reduction in unemployment, an increase in the nominal wage and an increase in the aggregate price level E) a reduction in the aggregate price level and no change in output

B) a reduction in output and an increase in the aggregate price level

The IS curve will NOT shift when which of the following occurs? A) a reduction in government spending. B) a reduction in the interest rate. C) a reduction in consumer confidence. D) all of the above E) none of the above

B) a reduction in the interest rate.

The aggregate demand (AD) curve presented in the textbook has its particular shape because of which of the following explanations? A) an increase in the money supply (M) will cause a reduction in the interest rate, an increase in investment, and an increase in output. B) an increase in the aggregate price level (P) will cause an increase in the interest rate and a reduction in output. C) an increase in P will cause a reduction in the real wage, an increase in employment, and an increase in output.

B) an increase in the aggregate price level (P) will cause an increase in the interest rate and a reduction in output.

If government spending and taxes decrease by the same amount, A) the IS curve does not shift. B) the IS curve shift leftward. C) the IS curve shifts rightward. D) the LM curve shifts downward.

B) the IS curve shift leftward.

The natural level of output is the level of output that occurs when A) the goods market and financial markets are in equilibrium. B) the economy is operating at the unemployment rate consistent with both the wage-setting and price-setting equations. C) the markup (m) is zero. D) the unemployment rate is zero. E) there are no discouraged workers in the economy.

B) the economy is operating at the unemployment rate consistent with both the wage-setting and price-setting equations.

Suppose the aggregate production function is given by the following: Y=AN. Given this information we know that labor productivity is represented by the following: A. 1/A B. A C. 1/N D. N/Y

B. A

suppose we wish to examine the determinants fo the equilibrium real wage and equilibrium level of employment (N). In a graph with the real wage on the vertical axis, and the level of employment on the horizontal axis, the price setting relation will now be A. a vertical line B. A horizontal line C. an upward sloping line D a downward sloping line E. Kinked at the natural rate of unemployment

B. A horizontal line

When a liquidity trap sitaution exists, the most appropriate policy to increase output would be A. a central bank sale of bonds B. an increase in govt spending C. a central bank purchase of bonds D. none of the above

B. an increase in govt spending

securitization can not help financial intermediaries A. diversify portfolios B. avoid bankruptcy C. attract more investors to bet and hold their securities D. decrease the cost of borrowing

B. avoid bankruptcy

Which of the following assumptions best characterized the assumption about how individuals formed expectations of inflation by the early 1970s? A. expected inflation for the current year was smaller than the previous year's inflation rate. B. expected inflation for the current year was approximately equal to the previous year's inflation rate. C. expected inflation for the current year was less than the previous year's inflation rate. D. expected inflation for the current year equal to the average inflation rate over the past five years. E. expected inflation for the current year equal to the average inflation rate over the past ten years.

B. expected inflation for the current year was approximately equal to the previous year's inflation rate.

Assume that expected inflations is based not he following πet=øπt-1. if ø=1, we know that A. a reduction in the unemployment rate will have no effect on inflations B. low rates of unemployment will cause steadily increasing rates of inflation C. the actual unemployment rate will not deviate from the natural rate of unemployment D. the Phillips curve illustrates the relationship between the level of inflation rate and the level of the unemployment rate

B. low rates of unemployment will cause steadily increasing rates of inflation

With the real wage on the vertical axis and the unemployment rate on the horizontal aces, we know that A. the WS curve is upward sloping B. the WS curve is downward sloping C. the PS curve is upward sloping D. the PS curve is downward sloping

B. the WS curve is downward sloping

an open market purchase of bonds by the central bank will cause which of the following when a liquidity trap situation exists? A. the interest will decrease B. the interest rate will not change C. output will increase D. the money supply, M, will not change E. none of the above

B. the interest rate will not change

In the aggregate demand relation, an increase int he price level causes output to decrease because of its effect on A. government spending B. the money marker and, subsequently, investment C. the nominal wage D. a firms markup over labor costs E. the expected price level

B. the money marker and, subsequently, investment

suppose the economy is operating on the LM curve but not on the IS curve. Given this information, we know that A. the goods market is in equilibrium and the money market is not in equilibrium B. the money market and bond markets are in equilibrium and the goods market is not in equilibrium C. the money market and goods market are in equilibrium and the bond market is not in equilibrium D. the money, bond and goods market are all in equilibrium E. neither the Monet, bond, and goods markets are all in equilibrium

B. the money market and bond markets are in equilibrium and the goods market is not in equilibrium

Suppose a central bank implements a monetary contraction. Which of the following would we expect to occur in the medium run? A) a decline in output B) an increase in the interest rate C) a decrease in the nominal wage D) all of the above E) none of the above

C) a decrease in the nominal wage

In the short run, a reduction in the price of oil will cause A) a reduction in output. B) an increase in the price level. C) a reduction in the interest rate. D) all of the above E) none of the above

C) a reduction in the interest rate.

Suppose that increased international trade makes product markets more competitive in the U.S. Given this information, we would expect to observe which of the following? A) an upward shift in the WS curve B) a downward shift in the WS curve C) an upward shift in the PS curve D) a downward shift in the PS curve E) none of the above

C) an upward shift in the PS curve

If government spending and taxes increase by the same amount, A) the IS curve does not shift B) the IS curve shift leftward C) the IS curve shifts rightward D) the LM curve shifts downward

C) the IS curve shifts rightward

In the wage setting relation W = PeF(u,z), the variable z does NOT include which of the following variables? A) the minimum wage B) unemployment benefits C) the extent to which firms mark up prices over their marginal cost D) all of the above E) none of the above

C) the extent to which firms mark up prices over their marginal cost

Suppose there is a simultaneous fiscal expansion and monetary contraction. We know with certainty that A) output will increase. B) output will decrease. C) the interest rate will increase. D) the interest rate will decrease. E) both output and the interest rate will increase.

C) the interest rate will increase.

When the current price level is equal to the expected price level, we know that A) the unemployment rate is zero. B) the goods market and financial markets are in equilibrium. C) the output is equal to the natural level of output. D) the money market is in equilibrium. E) none of the above

C) the output is equal to the natural level of output.

assume the economy is initially operating at the natural level of output. Now suppose a budget is passed that calls for an increase in government spending. This increase in government spending will, in the short run, cause an increase in A. interest rate B. nominal wage C. all of the above D none of the above

C. all of the above

an increase int he price of oil will cause which of the following in the medium run? A. no change int he level of output B. no change in the price level C. an increase in the unemployment rate D. a reduction the interest rate E. none of the above

C. an increase in the unemployment rate

For this question, assume that the Phillips curve equation is represented by the following: πt - πt-1 = (m+z) åut. Which of the following will cause a reduction in the natural rate of unemployment A.an increase in m B. and increase in z C. an increase in å D. and increase in actual inflation E. and increase in expected inflation

C. an increase in å

which of the following which of the following explains why the original Phillips curve relation disappeared or, as some economists have remarked, "broke down" in the 1970s? A. individuals. assumed the expected price level for the current year would be equal to the actual price level from the previous year B. Individuals assumed that expected inflation would be zero C. individuals changed the way they formed expectations of inflation D. monetary policy became contractionary E. more labor contracts became indexed to changes in inflation

C. individuals changed the way they formed expectations of inflation

Which of the following will occur when an economy is faced with a liquidity trap situation? A. a reduction in the price level will cause a rightward shift in the AD curve B. a reduction in the price level will cause a leftward shift in the AD curve C. the AD curve is now vertical D. the AD curve is now upward sloping

C. the AD curve is now vertical

what the current price level is equal to the expected price level, we know that A. the unemployment rate is zero B. the goods market and financial markets are in equilibrium C. the output is equal to the natural level of output D. the money market is in equilibrium E. none of the above

C. the output is equal to the natural level of output

Suppose the Phillips curve is represented by the following equation: πt - πt-1 = 20 - 4ut. Given this information, we know that the natural rate of unemployment in this economy is A) 10%. B) 20%. C) 6.5%. D) 5%. E) none of the above

D) 5%.

Suppose there is a simultaneous central bank sale of bonds and tax increase. We know with certainty that this combination of policies must cause A) an increase in the interest rate (i). B) a reduction in i. C) an increase in output (Y). D) a reduction in Y.

D) a reduction in Y.

The short-run aggregate supply curve (AS) presented in the textbook has its particular shape because of which of the following explanations? A) a reduction in the aggregate price level will cause a reduction in the interest rate and an increase in output. B) an increase in the aggregate price level causes an increase in nominal money demand and an increase in the interest rate. C) a drop in the nominal wage causes an increase in the amount of output that firms are willing to produce. D) a reduction in output causes a reduction in employment, an increase in unemployment, a reduction in the nominal wage and a reduction in the price level.

D) a reduction in output causes a reduction in employment, an increase in unemployment, a reduction in the nominal wage and a reduction in the price level.

An increase in the money supply will cause an increase in which of the following variables? A) output B) investment C) consumption D) all of the above E) none of the above

D) all of the above

An increase in the price of oil will likely cause which of the following? A) increase the markup in the Phillips curve equation B) increase the sum "m+ z" in the Phillips curve equation C) increase the natural rate of unemployment D) all of the above E) none of the above

D) all of the above

In the Phillips curve equation, which of the following will cause an increase in the current inflation rate? A) an increase in the expected inflation rate B) a reduction in the unemployment rate C) an increase in the markup, m D) all of the above E) none of the above

D) all of the above

Assume the economy is initially operating at the natural level of output. Which of the following events will NOT change the composition of output (i.e., the percentage of GDP composed of consumption, investment, ... etc.) in the medium run? A) a reduction in government spending B) a cut in taxes C) an increase in consumer confidence D) an increase in the money supply

D) an increase in the money supply

Suppose fiscal policy makers implement a policy to reduce the size of a budget deficit. Based on the IS-LM model, we know with certainty that the following will occur as a result of this fiscal policy action. A) investment spending will decrease. B) investment spending will increase. C) there will be no change in investment spending. D) investment spending may increase, decrease, or not change. E) none of the above

D) investment spending may increase, decrease, or not change.

Which of the following best defines the LM curve? A) the combinations of i and Y that maintain equilibrium in the goods market B) illustrates the effects of changes in i on investment C) illustrates the effects of changes in i on desired money holdings by individuals D) the combinations of i and Y that maintain equilibrium in financial markets

D) the combinations of i and Y that maintain equilibrium in financial markets

Suppose the aggregate production function is given by the following: Y=N. Given this information, we know that labor productivity is represented by the following: A. 1/N B. N C. N/Y D. 1

D. 1

the aggregate demand curve will shift to the right when which of the following occurs? A. a reduction in the money supply B. a reduction in consumer confidence C. a rise int he price level D. a reduction in taxes E. A decrease in the price level

D. a reduction in taxes

An increase in the price of oil will likely cause which of the following? A. increase the markup in the Phillips curve equation B. increase the sum "m+z" in the Phillips curve equation C. increase the natural rate of unemployment D. all of the above E. none of the above

D. all of the above

Suppose a central bank implements a monetary expansion. Which of the following would we expect to occur in the medium run? A. an increase in output B. a decrease in the interest rate C. an increase in the nominal wage D. all of the above E. none of the above

D. all of the above

When inflation has NOT been very persistent, as was the case in the US before the mid 1960s, we can expect that A. the expected price level for a given year will equal the previous year's actual price level B. the current inflation rate will not depend heavily on past years' inflation rates C. lower unemployment rates will be associated with higher inflation rates D. all of the above E. none of the above

D. all of the above

an increase in the money supply will cause an increase in which of the following variables? A. output B. Investment C. consumption D. all of the above E. none of the above

D. all of the above

when the economy is operating at a point where output is greater than the natural level of output, which of the following occurs? A. the unemployment rate is less than the natural rate of unemployment B. the price level is greater than the expected price level C. the price level will be higher next period than it is this period D. all of the above E. none of the above

D. all of the above

Suppose there is a fiscal contraction. Which of the following is a complete list of the variables that must decrease A. consumption B. consumption and investment C. consumption and output D. consumption, output and the interest rate E. consumption, output, and investment

D. consumption, output and the interest rate

Assume that expected inflation is øπt-1 if ø=0, we know that A. a reduction in the unemployment rate will have no effect on inflation B. low rates of unemployment will cause steadily increasing rates of inflation C. high rates of unemployment will cause steadily declining rates of inflation D. the Phillips curve illustrates the relationship between the level of inflation rate and the level of the unemployment rate

D. the Phillips curve illustrates the relationship between the level of inflation rate and the level of the unemployment rate

Suppose the actual unemployment rate decreases. This will cause A) an upward shift in the WS curve. B) a downward shift in the WS curve. C) an upward shift in the PS curve. D) a downward shift in the PS curve. E) none of the above

E) none of the above

The natural rate of unemployment is the rate of unemployment A) that occurs when the money market is in equilibrium. B) that occurs when the markup of prices over costs is zero. C) where the markup of prices over costs is equal to its historical value. D) that occurs when both the goods and financial markets are in equilibrium. E) none of the above

E) none of the above

When inflation has been persistent, as was the case during the 1970's, low unemployment rates will likely be associated iwth A. low natural rates of unemployment B. high natural rates of unemployment C. low but stable rates of inflation D. High but stable rates of inflation E. Increases in the inflation rate

E. Increases in the inflation rate

suppose there is an increase in consumer confidence. Which of the following represents the complete list of variables that must increase in response to this increase in consumer confidence? A. consumption B. Consumption and investment C. consumption, investment, and output D. consumption and output E. consumption, output, and the interest rate

E. consumption, output, and the interest rate

Answer this question using the AS/AD model presented in the textbook. Which of the following would cause a reduction in the natural level of output in the medium run? A. a decrease in government spending B. a decrease in the money supply C. an increase in taxes D. both a and c E. none of the above

E. none of the above

which of the following will cause the affaefate supply curve to shift down? A. an increase in firms markup over labor costs B. an increase in the expected price level C. an increase in unemployment benefits D. all of the above E. none of the above

E. none of the above