Macro Final Quizzes ch 31-35

a

A. W. Phillips' findings were based on data Select one: a. from 1861-1957 for the United Kingdom. Correct b. from 1861-1957 for the United States. c. mostly from the post-World War II period in the United Kingdom. d. mostly from the post-World War II period in the United States

a

A Big Mac in Japan costs 400 yen while it costs $4.50 in the U.S.. The nominal exchange rate is 100 yen per dollar. Which of the following would both make the real exchange rate move towards purchasing-power parity? Select one: a. the price of Big Macs in the U.S. falls, the nominal exchange rate falls b. the price of Big Macs in the U.S. falls, the nominal exchange rate rises c. the price of Big Macs in the U.S. rises, the nominal exchange rate falls d. the price of Big Macs in the U.S. rises, the nominal exchange rate rises

d

A central bank sets out to reduce unemployment by changing the money supply growth rate. The long-run Phillips curve shows that in comparison to their original rates, this policy will eventually lead to Select one: a. an increase in both the inflation rate and the unemployment rate. b. an increase in the inflation rate and a reduction in the unemployment rate. c. no change in either the inflation rate or the unemployment rate. d. an increase in the inflation rate and no change in the unemployment rate.

a

A change in expected inflation shifts Select one: a. the short-run Phillips curve, but not the long run Phillips curve. b. the long-run Phillips curve, but not the long run Phillips curve. c. neither the short-run nor the long-run Phillips curve. d. both the short-run and long-run Phillips curve right.

c

A country has $100 million of net exports and $170 million of saving. Net capital outflow is Select one: a. $70 million and domestic investment is $170 million. b. $70 million and domestic investment is $270 million. c. $100 million and domestic investment is $70 million. d. None of the above is correct.

d

A country has a trade deficit. Its Select one: a. net capital outflow must be positive, and saving is larger than investment. b. net capital outflow must be positive and saving is smaller than investment. c. net capital outflow must be negative and saving is larger than investment. d. net capital outflow must be negative and saving is smaller than investment.

c

A country has a trade deficit. Which of the following must also be true? Select one: a. net capital outflow is positive and domestic investment is larger than saving b. net capital outflow is positive and saving is larger than domestic investment c. net capital outflow is negative and domestic investment is larger than saving d. net capital outflow is negative and saving is larger than domestic investment

a

A country's saving is greater than its domestic investment. This difference means that its Select one: a. net capital outflow and net exports are positive. b. net capital outflow and net exports are negative. c. net capital outflow is positive and net exports are negative. d. net capital outflow is negative and net exports are positive.

c

A country's trade balance Select one: a. must be zero. b. must be greater than zero. c. is greater than zero only if exports are greater than imports. d. is greater than zero only if imports are greater than exports.

b

A decrease in the expected price level shifts short-run aggregate supply to the Select one: a. right, and an increase in the actual price level shifts short-run aggregate supply to the right. b. right, and an increase in the actual price level does not shift short-run aggregate supply. c. left, and an increase in the actual price level shifts short-run aggregate supply to the left. d. left, and an increase in the actual price level does not shift short-run aggregate supply.

d

A decrease in the price level Select one: a. increases the quantity of goods and services supplied in the short run. b. decreases the quantity of goods and services supplied in the long run. c. decreases the quantity of goods and services demanded. d. increases the quantity of goods and services demanded

b

A depreciation of the U.S. real exchange rate induces U.S. consumers to buy Select one: a. fewer domestic goods and fewer foreign goods. b. more domestic goods and fewer foreign goods. c. fewer domestic goods and more foreign goods. d. more domestic goods and more foreign goods.

d

A favorable supply shock will cause inflation to Select one: a. rise and shift the short-run Phillips curve right. b. rise and shift the short-run Phillips curve left. c. fall and shift the short-run Phillips curve right. d. fall and shift the short-run Phillips curve left.

a

A policy that raised the natural rate of unemployment would shift Select one: a. both the short-run and the long-run Phillips curves to the right. b. the short-run Phillips curve right but leave the long-run Phillips curve unchanged. c. the long-run Phillips curve right but leave the short-run Phillips curve unchanged. d. neither the long-run Phillips curve nor the short-run Phillips curve right.

d

A politician blames the Federal Reserve for being "soft on unemployment" and claims that a permanently higher money supply growth rate will lead to a permanent reduction in the unemployment rate. The politician's argument is Select one: a. consistent with the long-run Phillips curve. Further, the long-run Phillips curve implies that such a policy would not increase inflation. b. consistent with the long-run Phillips curve. However, the long-run Phillips curve implies that such a policy would increase inflation. c. inconsistent with the long-run Phillips curve. However, the long-run Phillips curve implies that such a policy would not increase inflation. d. inconsistent with the long-run Phillips curve. Further, the long-run Phillips curve implies that such a policy would increase inflation.

c

A vertical long-run Phillips curve is consistent with Select one: a. the conclusion of Friedman and Phelps, but it is not consistent with the classical idea of monetary neutrality. b. the classical idea of monetary neutrality, but it is not consistent with the conclusion of Friedman and Phelps. c. both the conclusion of Friedman and Phelps and the classical idea of monetary neutrality. d. neither the conclusion of Friedman and Phelps nor the classical idea of monetary neutrality.

d

According to Friedman and Phelps's analysis of the Phillips curve, Select one: a. the unemployment rate will be below its natural rate whenever inflation is negative. b. the unemployment rate will be below its natural rate whenever inflation is positive. c. the unemployment rate will be below its natural rate only if inflation is less than expected. d. the unemployment rate will be below its natural rate only if inflation is greater than expected.

a

According to purchasing-power parity which of the following would happen if a country raised its money supply growth rate? Select one: a. its nominal exchange rate would fall b. its real exchange rate would fall c. its real net exports would rise d. All of the above would happen.

a

According to the Phillips curve, policymakers can reduce inflation by Select one: a. contracting aggregate demand. This contraction results in a temporarily higher unemployment rate. b. contracting aggregate demand. This contraction results in a temporarily lower unemployment rate. c. expanding aggregate demand. This expansion results in a temporarily lower unemployment rate. d. expanding aggregate demand. This expansion results in a temporarily higher unemployment rate.

c

According to the aggregate demand and aggregate supply model, in the long run a decrease in the money supply leads to Select one: a. decreases in both the price level and real GDP. b. an increase in real GDP and an increase in the price level. c. a decrease in the price level but does not change real GDP. d. an increase in the price level but does not change real GDP.

c

According to the classical model, an increase in the money supply causes Select one: a. output to increase in the long run. b. the unemployment rate to fall in the long run. c. prices to rise in the long run. d. interest rates to fall in the long run.

d

According to the short-run Phillips curve, if the central bank increases the money supply, then Select one: a. inflation and unemployment will both fall. b. inflation and unemployment will both rise. c. inflation will fall and unemployment will rise. d. inflation will rise and unemployment will fall.

a

Aggregate demand includes Select one: a. the quantity of goods and services the government, households, firms, and customers abroad want to buy. b. neither the quantity of goods and services the government, households, nor firms want to buy nor the quantity of goods and services customers abroad want to buy. c. the quantity of goods and service the government wants to buy, but not the quantity of goods and services households, firms, or customers abroad want to buy. d. the quantity of goods and services households and firms want to buy, but not the quantity of goods and services the government wants to buy.

d

Aggregate demand shifts left if Select one: a. government purchases increase and shifts left if stock prices rise. b. government purchases increase and shifts left if stock prices fall. c. government purchases decrease and shifts left if stock prices rise. d. government purchases decrease and shifts left is stock prices fall

b

Aggregate demand shifts right if Select one: a. government purchases increase and shifts left if stock prices rise. b. government purchases increase and shifts left if stock prices fall. c. government purchases decrease and shifts left if stock prices rise. d. government purchases decrease and shifts left is stock prices fall.

b

An increase in expected inflation shifts Select one: a. the long-run Phillips curve right. b. the short-run Phillips curve right. c. neither the short-run nor long-run Phillips curve right. d. both the short-run and long-run Phillips curve right.

b

Any policy change that reduced the natural rate of unemployment Select one: a. would shift the long-run Phillips curve to the right. b. would shift the long-run aggregate-supply curve to the right. c. would be a policy change that impeded the functioning of the labor market. d. All of the above are correct.

c

As aggregate demand shifts left along the short-run aggregate supply curve, Select one: a. inflation and unemployment are higher. b. inflation is higher and unemployment is lower. c. unemployment is higher and inflation is lower. d. unemployment and inflation are lower.

a

During recessions investment Select one: a. falls by a larger percentage than GDP. b. falls by about the same percentage as GDP. c. falls by a smaller percentage than GDP. d. falls but the percentage change is sometimes much larger and sometimes much smaller.

d

France has a higher natural rate of unemployment than the United States. This suggests that Select one: a. France is at a higher point on its long-run Phillips curve and so has higher inflation than the United States. b. France is at a lower point on its long-run Phillips curve and so has lower inflation than the United States. c. France's Phillips curve is to the left of that of the United States, possibly because they have higher inflation. d. France's Phillips curve is to the right of that of the United States, possibly because they have more generous unemployment compensation.

c

Historically, as recessions have ended the unemployment rate declined Select one: a. gradually to near zero. b. rapidly to near zero. c. gradually to a rate of about 5%-6%. d. rapidly to a rate of about 5%-6%

a

If a bushel of wheat costs $6.40 in the United States, costs 40 pesos in Mexico, and the nominal exchange rate is 10 pesos per dollar, then the real exchange rate is Select one: a. 1.60 b. 1.25 c. .625 d. None of the above is correct.

d

If a central bank decreases the money supply, then Select one: a. prices, output, and unemployment rise. b. prices and output rise and unemployment falls. c. prices rise and output and unemployment fall. d. prices and output fall and unemployment rises.

a

If a country has Y > C + I + G, then Select one: a. S > I and it has a trade surplus. b. S > I and it has a trade deficit. c. S < I and it has a trade surplus. d. S < I and it has a trade deficit.

d

If aggregate demand shifts left, then in the short run Select one: a. the price level and real GDP both rise. b. the price level rises and real GDP falls. c. the price level falls and real GDP rises. d. the price and real GDP both fall

b

If an increase in inflation permanently reduced unemployment, then Select one: a. money would not be neutral and the long-run Phillips curve would slope upward. b. money would not be neutral and the long-run Phillips curve would slope downward. c. money would be neutral and the long-run Phillips curve would slope upward. d. money would be neutral and the long-run Phillips curve would slope downward

c

If consumption expenditures fall, then in the short run Select one: a. inflation and unemployment rise. b. inflation rises and unemployment falls. c. inflation falls and unemployment rises. d. inflation and unemployment fall.

b

If purchasing-power parity holds, a dollar will buy Select one: a. more goods in foreign countries than in the United States. b. as many goods in foreign countries as it does in the United States. c. fewer goods in foreign countries than it does in the United States. d. None of the above is implied by purchasing-power parity.

d

If sales of Saudi Arabian oil to the rest of the world increase and Saudis use the proceeds to buy foreign goods, which of the following increases? Select one: a. Saudi Arabian net exports but not Saudi Arabian net capital outflow b. Saudi Arabian net capital outflow but not Saudi Arabian net exports c. both Saudi Arabian net exports and net capital outflow d. neither Saudi Arabian net exports nor net capital outflow

c

If taxes rise, then aggregate demand shifts Select one: a. right, making unemployment higher than otherwise. b. right, making unemployment lower than otherwise. c. left, making unemployment higher than otherwise. d. left, making unemployment lower than otherwise

c

If the Federal Reserve decreases the rate at which it increases the money supply, then unemployment is higher in Select one: a. the long run and the short run. b. the long run but not the short run. c. the short run but not the long run. d. neither the short run nor the long run.

c

If the central bank raises the rate at which it increases the money supply, then in the short run unemployment is Select one: a. above its natural rate. The short-run Phillips curve shifts right as the economy moves back to its natural rate of unemployment. b. above its natural rate. The long-run Phillips curve shifts left as the economy moves back to its natural rate of unemployment. c. below its natural rate. The short-run Phillips curve shifts right as the economy moves back to its natural rate of unemployment. d. below its natural rate. The long-run Phillips curve shifts left as the economy moves back to its natural rate of unemployment.

c

If the exchange rate is .70 euro per dollar, the price of an MP3 player in Paris is 150 euros and the price of an MP3 player in the U.S. is $150, then what is the real exchange rate? Select one: a. 1/.70 French MP3 players per U.S. MP3 player b. 1 French MP3 players per U.S. MP3 player c. .70 French MP3 players per U.S. MP3 player. d. None of the above are correct.

a

If the natural rate of unemployment falls, Select one: a. both the short-run Phillips curve and the long-run Phillips curve shift. b. only the short-run Phillips curve shifts. c. only the long-run Phillips curve shifts. d. neither the short-run nor the long-run Phillips curves shift.

b

If the short-run Phillips curve were stable, which of the following would be unusual? Select one: a. an increase in government spending and a fall in unemployment b. an increase in inflation and a decrease in output c. a decrease in the inflation rate and a rise in the unemployment rate d. a decrease in the money supply and a rise in the unemployment rate.

d

If wages are sticky, then a greater than expected increase in the price level Select one: a. raises the real costs of production, so the short-run aggregate supply curve shifts left. b. raises the real costs of production, so the aggregate quantity of goods and services declines. c. reduces the real costs of production, so the short-run aggregate supply curve shifts right. d. reduces the real costs of production, so the aggregate quantity of goods and services rises

a

In the 1970s, the Fed accommodated a(n) Select one: a. adverse supply shock and so contributed to higher inflation. b. adverse supply shock and so contributed to lower inflation. c. favorable supply shock and so contributed to higher inflation. d. favorable supply shock and so contributed to lower inflation

d

In the long run, a decrease in the money supply growth rate Select one: a. increases inflation and shifts the short-run Phillips curve right. b. increases inflation and shifts the short-run Phillips curve left. c. decreases inflation and shifts the short-run Philips curve right. d. decreases inflation and shifts the short-run Phillips curve left.

a

In the long run, an increase in the money supply growth rate Select one: a. increases inflation and shifts the short-run Phillips curve right. b. increases inflation and shifts the short-run Phillips curve left. c. decreases inflation and shifts the short-run Philips curve right. d. decreases inflation and shifts the short-run Phillips curve left.

b

Most economists believe that classical theory describes the world Select one: a. in the short run. b. in the long run. c. in both the short run and the long run. d. in neither the short run nor the long run.

a

Most economists use the aggregate demand and aggregate supply model primarily to analyze Select one: a. short-run fluctuations in the economy. b. the effects of macroeconomic policy on the prices of individual goods. c. the long-run effects of international trade policies. d. productivity and economic growth.

b

Net capital outflow measures the imbalance between the amount of Select one: a. foreign assets held by domestic residents and domestic assets held by foreign residents. b. foreign assets bought by domestic residents and the amount of domestic assets bought by foreigners. c. foreign assets bought by domestic residents and the amount of domestic goods and services sold to foreigners. d. None of the above is correct.

b

Net exports measures the difference between a country's Select one: a. income and expenditures. b. sale of goods and services abroad and purchase of foreign goods and services. c. sale of domestic assets abroad and purchase of foreign assets. d. All of the above are correct.

b

Nominal exchange rates Select one: a. vary little over time. b. vary substantially over time. c. appreciate over time for most countries. d. depreciate over time for most countries.

c

Of the following theories, which is consistent with a vertical long-run aggregate supply curve? Select one: a. the sticky-wage theory b. misperceptions theory c. both the sticky-wage and misperceptions theories. d. neither the sticky-wage nor the misperceptions theory.

c

Part of the explanation for why the aggregate-demand curve slopes downward is that a decrease in the price level Select one: a. decreases the real value of money. b. increases the real value of the dollar in foreign exchange markets. c. decreases the interest rate. d. All of the above are correct.

d

Proponents of rational expectations argued that the sacrifice ratio Select one: a. could be high because it was rational for people not to immediately change their expectations. b. could be high because people might adjust their expectations quickly if they found anti-inflation policy credible. c. could be low because it was rational for people not to immediately change their expectations. d. could be low because people might adjust their expectations quickly if they found anti-inflation policy credible.

b

Real GDP Select one: a. is the current dollar value of all goods produced by the citizens of an economy within a given time. b. measures economic activity and income. c. is used primarily to measure long-run changes rather than short-run fluctuations. d. All of the above are correct.

b

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 Select one: a. both the short run and the long run. b. the short run, but not the long run. c. the long run, but not the short run. d. neither the long run nor the short run.

a

Stagflation exists when prices Select one or more: a. rise and unemployment rises. b. rise and unemployment falls. c. fall and unemployment rises. d. rise and output rises.

c

Suppose a shift in aggregate demand creates an economic contraction. If policymakers can respond with sufficient speed and precision, they can offset the initial shift by shifting Select one: a. aggregate supply right. b. aggregate supply left. c. aggregate demand right. d. aggregate demand left.

a

Suppose a stock market boom makes people feel wealthier. The increase in wealth would cause people to desire Select one: a. increased consumption, which shifts the aggregate-demand curve right. b. increased consumption, which shifts the aggregate-demand curve left. c. decreased consumption, which shifts the aggregate-demand curve right. d. decreased consumption, which shifts the aggregate-demand curve left

d

Suppose the economy is in long-run equilibrium. If there is a sharp increase in the minimum wage as well as an increase in taxes, then in the short run, real GDP will Select one: a. rise and the price level might rise, fall, or stay the same. In the long run, the price level might rise, fall, or stay the same but real GDP will be unaffected. b. fall and the price level might rise, fall, or stay the same. In the long run, the price level might rise, fall, or stay the same but real GDP will be unaffected. c. rise and the price level might rise, fall, or stay the same. In the long run, the price level might rise, fall, or stay the same but real GDP will be lower. d. fall and the price level might rise, fall, or stay the same. In the long run, the price level might rise, fall, or stay the same but real GDP will be lower.

d

Suppose the economy is in long-run equilibrium. In a short span of time, there is a sharp increase in the supply of labor, a major new discovery of oil, and new environmental regulations that raise the cost of electricity production. In the short run Select one: a. the price level will rise and real GDP will fall. b. the price level will fall and real GDP will rise. c. the price level and real GDP will both stay the same. d. All of the above are possible.

b

The classical dichotomy and monetary neutrality are represented graphically by Select one: a. an upward-sloping long-run aggregate-supply curve. b. a vertical long-run aggregate-supply curve. c. an upward-sloping short-run aggregate-curve. d. a downward-sloping aggregate-demand curve.

b

The law of one price states that Select one: a. a good must sell at the price fixed by law. b. a good must sell at the same price at all locations. c. a good cannot sell for a price greater than the legal price ceiling. d. nominal exchange rates will not vary.

c

The long-run Phillips curve would shift to the left if Select one: a. the money supply growth rate increased or if effective job-training programs were implemented. b. the money supply growth rate increased, but not if effective job-training programs were implemented. c. effective job-training programs were implemented, but not if the money supply growth rate increased. d. None of the above is correct.

c

The misperceptions theory of the short-run aggregate supply curve says that if the price level is higher than people expected, then some firms believe that the relative price of what they produce has Select one: a. decreased, so they increase production. b. decreased, so they decrease production. c. increased, so they increase production. d. increased, so they decrease production

a

The model of short-run economic fluctuations focuses on Select one: a. the price level and real GDP. b. productivity and economic growth. c. the neutrality of money and inflation. d. None of the above is correct.

c

The nominal exchange rate is .80 euros per dollar and the real exchange rate is 4/3. Which of the following prices for a particular good are consistent with these exchange rates? Select one: a. $4 in the U.S. and 3 euros in Italy. b. $4 in the U.S. and 3.75 euros in Italy. c. $5 in the U.S. and 3 euros in Italy. d. $6 in the U.S. and 2.50 euros in Italy.

b

The position of the long-run Phillips curve and the long-run aggregate supply curve both depend on Select one: a. the natural rate of unemployment and monetary growth. b. the natural rate of unemployment, but not monetary growth. c. monetary growth, but not the natural rate of unemployment. d. neither monetary growth nor the natural rate of unemployment.

d

The price of a basket of goods and services in the U.S. is $600. In Canada the same basket of goods costs 700 Canadian dollars. If the nominal exchange rate were 1.2 Canadian dollars per U.S. dollar, what would be the real exchange rate? Select one: a. 700/600 b. 600/700 c. 700/720 d. None of the above is correct

c

The sacrifice ratio is the Select one: a. sum of the inflation and unemployment rates. b. inflation rate divided by the unemployment rate. c. number of percentage points annual output falls for each percentage point reduction in inflation. d. number of percentage points unemployment rises for each percentage point reduction in inflation.

d

The sticky-price theory implies that Select one: a. the short-run aggregate-supply curve is upward-sloping. b. an unexpected fall in the price level induces firms to reduce the quantity of goods and services they produce. c. menu costs influence the speed of adjustment of prices. d. All of the above are correct.

a

The theory by which people optimally use all available information when forecasting the future is known as Select one: a. rational expectations. b. perfect expectations. c. credible expectations. d. predictive expectations

a

When the Fed buys bonds Select one: a. the supply of money increases and so aggregate demand shifts right. b. the supply of money decreases and so aggregate demand shifts left. c. the supply of money decreases and so aggregate demand shifts right. d. the supply of money increases and so aggregate demand shifts left.

d

Which of the following is correct? Select one: a. Short run fluctuations in economic activity happen only in developing countries. b. During economic contractions most firms experience rising profits. c. Recessions come at irregular intervals and are easy to predict. d. When real GDP falls, the rate of unemployment rises.

b

Which of the following shifts short-run aggregate supply right? Select one: a. an increase in the minimum wage b. an increase in immigration from abroad c. an increase in the price of oil d. an increase in the actual price level

a

Which of the following shifts the long-run aggregate supply curve to the right? Select one: a. both an increase in the capital stock and technological improvements b. an increase in the capital stock but not technological improvements c. an increase in the capital stock but not technological improvements d. neither an increase in the capital stock nor an technological improvements

b

You are planning a graduation trip to Mexico. Other things the same, if the dollar depreciates relative to the peso, then Select one: a. the dollar buys fewer pesos. Your hotel room in Mexico will require fewer dollars. b. the dollar buys fewer pesos. Your hotel room in Mexico will require more dollars. c. the dollar buys more pesos. Your hotel room in Mexico will require fewer dollars. d. the dollar buys more pesos. Your hotel room in Mexico will require more dollars