macro final

Which of the following would shift the aggregate demand curve from AD2 to AD1? A. a tax cut B. an increase in interest rates C. an improvement in consumer expectations about the future D. an increase in government purchases

b

Equilibrium output is _____ units and the equilibrium price level is _____. A. 100; $3,000 B. 2,000; $130 C. 3,000; $100 D. 5,000; $160

c

If there are advances in technology, the short-run aggregate supply curve will shift from SRAS0 to _____ and the price level will shift to _____. A. SRAS2; P2 B. SRAS2; P1 C. SRAS1; P1 D. SRAS1; P0

c

Price stickiness refers to: A. when firms raise their prices as soon as they hear bad news. B. when prices of goods and services respond to the stock market. C. when prices are slow to adjust to economic shocks. D. when prices are controlled by government regulations.

c

A temporary rise in the price of agricultural crops due to a drought is likely to cause a(n): A. increase in the short-run aggregate supply. B. decrease in the long-run aggregate supply. C. increase in the long-run aggregate supply. D. decrease in the short-run aggregate supply.

d

Assume the economy depicted in the figure above is in long-run equilibrium, where the aggregate demand curve is AD0 and the short-run aggregate supply curve is SRAS0. If there is a supply shock, such as a drastic increase in the price of oil, this will cause a _____ and a movement to a short-run equilibrium at point _____. Answers: A. rightward shift in AD1; c B. rightward shift in SRAS2; c C. leftward shift in AD1; a D. leftward shift in SRAS2; a

d

Expansionary fiscal policies could: A. move the economy away from full employment. B. lead to a lower price level and lower unemployment. C. lead to a lower price level. D. move the economy to full employment.

d

If there is a decrease in input prices, the short-run aggregate supply curve will shift from SRAS0 to _____ and the price level will shift to _____. A. SRAS2; P2 B. SRAS2; P1 C. SRAS1; P0 D. SRAS1; P1

d

The _____ is the sum of past _____. A. public debt; national debts B. budget deficit; public debts C. budget deficit; national debts D. public debt; budget deficits

d

Contractionary fiscal policies could: A. move the economy to full employment. B. lead to a higher price level and lower employment. C. lead to a higher price level. D. move the economy away from full employment.

a

If the economy starts below full employment, an expansionary fiscal policy will shift the aggregate demand curve from _____ to _____, and equilibrium will move from point _____ to A. AD0; AD1; a; b B. AD1; AD0; b; a C. AD0; AD1; b; a D. AD1; AD0; a; b

a

Suppose the economy is in a recession. To increase demand using discretionary fiscal policy, the government can: A. increase government spending or reduce taxes. B. reduce interest rates. C. raise interest rates. D. raise taxes or reduce government spending.

a

Which of the following would most likely cause aggregate demand to decrease? A. Income taxes rise to reduce the deficit. B. There is a new housing boom. C. Government reduces regulations on businesses. D. The price of lumber increases.

a

Which of the following would shift the aggregate demand curve from AD1 to AD2? A. a decrease in interest rates B. a decrease in government purchases C. a tax increase D. a worsening of consumer expectations about the future

a

If AD shifts right as the economy booms, and then SRAS shifts left, what happens to inflation? A. It falls to zero. B. It increases. C. It stays the same, D. It decreases.

b

If business expectations become less favorable, what will likely happen to the AD curve? A. AD shifts right. B. AD shifts left. C. AD decreases to zero. D. AD does not shift.

b

If the economy is above long-run equilibrium output, what will happen in the long run if SRAS adjusts? A. Prices rise and output increases. B. Prices rise and output decreases. C. Prices fall and output increases. D. Prices fall and output decreases.

b

Suppose policymakers wish to use fiscal policy to fight inflation. Which statement, then, is MOST accurate? A. Policymakers should use an expansionary policy because job creation is more important than inflation. B. Essentially, the way to lower the inflation rate is to decrease aggregate demand, causing a rise in unemployment. C. Using fiscal policy, the government can have the best of both worlds in the form of low inflation and economic growth. D. They should not use fiscal policy because in the long run the economy will always go back to equilibrium.

b

This graph shows: A. demand-side fiscal policies. B. supply-side fiscal policies. C. a combination of supply-side and demand-side fiscal policies. D. None of the answers is correct.

b