econ homework questions

What shifts the short run aggregate supply curve?

technological progress reduction in the price of a raw material a change in the money wage rate

When autonomous expenditure decreases, A) there is a movement down along the AE curve. B) the AE curve becomes less steep. C) the AE curve shifts upward. D) the AE curve shifts downward.

the AE curve shifts downward.

Suppose the equilibrium level of expenditure is $18 trillion. If real GDP is $17 trillion, then inventories are ________ their target levels and real GDP will ________. A) below; decrease B) above; decrease C) below; increase D) above; increase

below; increase

The start of a cost-push inflation results in A) falling GDP and rising unemployment rate. B) falling GDP and falling unemployment rate. C) raising GDP and rising unemployment rate. D) raising GDP and falling unemployment rate.

falling GDP and rising unemployment rate.

If the unemployment rate initially equals its natural rate, then if the inflation rate rises above its expected rate, the unemployment rate A) falls below its natural rate. B) equals the natural rate. C) rises above its natural rate. D) remains constant.

falls below its natural rate.

The marginal propensity to consume is the A) fraction of a change in saving spent on consumption expenditure. B) amount saving increases when consumption expenditure decreases. C) fraction of a change in consumption expenditure that is not saved. D) fraction of a change in disposable income spent on consumption expenditure.

fraction of a change in disposable income spent on consumption expenditure.

Because of the multiplier, a one-time change in expenditure will A) decrease saving and investment activity and thereby decrease future real GDP. B) generate more additional real GDP than the initial change in expenditure. C) expand real GDP by an infinite amount. D) have little secondary effect on real GDP.

generate more additional real GDP than the initial change in expenditure.

At the start of a cost-push inflation A) real GDP increases faster than the quantity of money. B) prices and unemployment are rising. C) productivity rises. D) the short-run aggregate supply curve shifts rightward.

prices and unemployment are rising.

The factor leading to business cycles according to the real business cycle theory is changes in A) investment caused by changes in business confidence. B) technological change caused by changes in productivity. C) productivity caused by changes in technology. D) the growth rate of the quantity of money.

productivity caused by changes in technology.

An increase in the expected inflation rate shifts the A) short-run Phillips curve downward. B) long-run Phillips curve downward. C) short-run Phillips curve upward. D) long-run Phillips curve upward.

short-run Phillips curve upward.

The long-run Phillips curve is A) the vertical sum of the short-run Phillips curves. B) vertical at the natural unemployment rate. C) the horizontal sum of the short-run Phillips curves. D) vertical at potential GDP.

vertical at the natural unemployment rate.

When the price level in France increases while the exchange rate and the price level in the United States remain the same, the result is that A) French citizens are more likely to buy U.S.-made goods. B) U.S. citizens are less likely to buy French-made goods. C) U.S.-made goods become relatively cheaper compared to French-made goods. D) All of the above answers are correct.

French citizens are more likely to buy U.S.-made goods. U.S. citizens are less likely to buy French-made goods. U.S.-made goods become relatively cheaper compared to French-made goods.

when real GDP exceeds aggregate planned expenditure A) GDP will decrease. B) the circular flow will increase. C) actual inventories decrease below their target. D) a higher level of equilibrium income will prevail.

GDP will decrease.

Which of the following occurs while moving along a short-run aggregate supply curve? A) Neither the price level nor the money wage rate changes. B) The money wage rate and the price level change by the same percentage. C) The price level changes and the money wage rate is constant. D) The money wage rate changes and the price level is constant.

The price level changes and the money wage rate is constant.

Which of the following does NOT shift the short-run aggregate supply curve? A) technological progress B) a reduction in the price of a raw material C) a change in the price level D) a change in the money wage rate

a change in the price level

Which of the following can start an inflation? A) a decrease in aggregate supply B) an increase in aggregate supply C) an increase in aggregate demand D) Both answers A and C are correct.

a decrease in aggregate supply an increase in aggregate demand

When the prices of U.S.-produced goods rise and the price of foreign-produced goods do not change, the result is- A) a decrease in exports. B) no change in imports or exports. C) an increase in exports. D) a decrease in imports.

a decrease in exports.

According to the real business cycle (RBC) theory, recessions are the result of A) an increase in the growth rate of the quantity of money. B) a decrease in the growth rate of the quantity of money. C) an increase in investment. D) a fall in the growth rate of productivity.

a fall in the growth rate of productivity.

Suppose consumers decrease their consumption expenditure because they worry about what their income will be in the future. There is A) a leftward shift of the aggregate demand curve. B) an upward movement along the aggregate demand curve. C) a rightward shift of the aggregate demand curve. D) a downward movement along the aggregate demand curve.

a leftward shift of the aggregate demand curve.

Moving along the short-run Phillips curve indicates A) that higher inflation leads to a higher unemployment rate. B) a tradeoff between inflation and unemployment so that higher inflation is related to lower unemployment. C) that the natural unemployment rate falls when the inflation rate rises. D) that higher unemployment leads to a higher inflation rate.

a tradeoff between inflation and unemployment so that higher inflation is related to lower unemployment.

If aggregate planned expenditure exceeds real GDP A) firms are not maximizing their profits B) planned consumption expenditure is less than actual consumption expenditure. C) actual inventories decrease below their target. D) planned investment is greater than planned saving.

actual inventories decrease below their target.

If planned expenditures equal $19 trillion when real GDP is $19.5 trillion, then A) there will be excess demand for most goods. B) the economy must have a trade surplus to sell the excess goods and services. C) inventories will decrease by $0.5 trillion. D) actual investment will exceed planned investment.

actual investment will exceed planned investment.

In the macroeconomic short run A) actual real GDP may be less than or more than potential GDP. B) actual real GDP always equals potential GDP. C) by definition, the economy is always moving away from full employment. D) the unemployment rate is zero.

actual real GDP may be less than or more than potential GDP.

Inflation occurs over time as a result of A) long-run aggregate supply increasing faster than short-run aggregate supply. B)long-run aggregate supply increasing faster than aggregate demand. C)decreases in aggregate demand. D)aggregate demand increasing faster than long-run aggregate supply.

aggregate demand increasing faster than long-run aggregate supply.

People expect that the El Niño effect will cause drought in Australia in coming years. If most Australian firms expect that their profits will fall during the next five years, Australia's ________ this year. A) short-run aggregate supply will increase B) long-run aggregate supply will increase C) aggregate demand will decrease D) aggregate demand will increase

aggregate demand will decrease

Your real wealth is measured as the A) amount of money you have. B) amount of assets you have in dollar terms. C) amount of goods you have divided by the price level. D) amount of goods and services your wealth will buy.

amount of goods and services your wealth will buy.

The multiplier effect on real GDP occurs because A) an autonomous change in expenditure causes an induced change in consumption expenditure. B) of income taxes. C) changes in price levels affect our willingness to invest, consume, import and export. D) of government stabilization policies.

an autonomous change in expenditure causes an induced change in consumption expenditure.

Demand-pull inflation starts with A) a decrease in aggregate demand. B) an increase in aggregate demand. C) an increase in short-run aggregate supply. D) a decrease in short-run aggregate supply.

an increase in aggregate demand.

Which of the following factors could start a demand-pull inflation? A) a decrease in government expenditure B) an increase in tax rates C) a decrease in wage rates D) an increase in exports

an increase in exports

Which of the following shifts the aggregate demand curve rightward? A) a decrease in investment B) an increase in the income tax rate C) an increase in government expenditure D) an increase in the price level

an increase in government expenditure

Which of the following shifts the aggregate demand curve rightward? A) an increase in imports B) an increase in the exchange rate C) an increase in government expenditure D) an increase in tax rates

an increase in government expenditure

An increase in the size of the multiplier can be caused by A) a decrease in induced expenditures. B) an increase in the marginal propensity to import. C) an increase in the MPS. D) an increase in the MPC.

an increase in the MPC.

When real GDP exceeds potential GDP, then the economy has A) a recessionary gap. B)an inflationary gap. C) a below-full-employment equilibrium. D) None of the above answers are correct.

an inflationary gap.

According to the intertemporal substitution effect, a fall in the price level will A) increase net exports, which causes the quantity of real GDP demanded to increase. B) decrease the real value of wealth, which increases the quantity of real GDP demanded. C) increase the real value of wealth, which raises the interest rate so that the quantity of real GDP demanded decreases. D) cause the interest rate to fall so that investment increases and the quantity of real GDP demanded increases.

cause the interest rate to fall so that investment increases and the quantity of real GDP demanded increases.

The AD curve shows the sum of A) the price level, employment, and real GDP. B) consumption expenditure, investment, the price level, and real GDP. C) consumption expenditure, investment, and real GDP. D) consumption expenditure, investment, government expenditures on goods and services, and net exports.

consumption expenditure, investment, government expenditures on goods and services, and net exports.

A decrease in foreign incomes A) decreases aggregate demand in the United States. B) decreases the aggregate quantity demanded in the United States. C) increases aggregate demand in the United States. D) increases the aggregate quantity demanded in the United States.

decreases aggregate demand in the United States.

Disposable income ________ when ________. A) increases; government expenditures decrease B) decreases; taxes increase C) decreases; transfer payments increase D) decreases; aggregate income increases

decreases; taxes increase

When the price level rises, the long-run aggregate supply curve A) shifts leftward. B) slopes upward. C) does not shift. D) shifts rightward.

does not shift.

If investment decreases, the AE curve shifts A) downward and the AD curve shifts leftward. B) upward and there is a movement along the AD curve. C) downward and there is a movement along the AD curve. D) upward and the AD curve shifts rightward.

downward and the AD curve shifts leftward.

The AD curve slopes A) downward due to the wealth and substitution effects. B) upward due to the price and substitution effects. C) downward due to the wealth and price effects. D) upward due to the wealth and substitution effects.

downward due to the wealth and substitution effects.

In 2008, when a recession started, the growth of government expenditures on goods and services doubled compared to its growth in 2007. According to the aggregate demand theories of the business cycle A) government expenditure was not a cause of the recession. B) government expenditure was at least a partial cause of the recession. C) government expenditure was definitely the cause of the recession. D) None of the above answers are correct because aggregate demand theories of the business cycle focus only on investment and consumption expenditure.

government expenditure was not a cause of the recession.

As the price level falls and other things remain the same, real wealth ________ and ________. A) increases; aggregate demand increases B) increases; the quantity of real GDP demanded increases C) decreases; the quantity of real GDP demanded decreases D) decreases; the short-run aggregate supply decreases

increases; the quantity of real GDP demanded increases

For a given level of anticipated inflation and natural unemployment rate, the short-run Phillips curve shows the relationship between A) potential GDP and real GDP. B) inflation and the unemployment rate. C) inflation and money growth. D) real GDP growth and the unemployment rate.

inflation and the unemployment rate.

A recessionary gap means that the level of real GDP at the short-run macroeconomic equilibrium A) is less than full-employment GDP. B) is more than full-employment GDP. C) equals full-employment GDP. D) may be less than, more than, or the same as full-employment GDP depending on the level ofpotential GDP.

is less than full-employment GDP.

Suppose that a shock causes the aggregate demand curve to shift rightward. If the Fed does nothing A) output initially will exceed potential GDP, but the economy will return to potential GDP with a higher price level. B) the short-run aggregate supply curve will not shift leftward and there will be continued inflation. C) eventually the short-run aggregate supply curve will shift leftward and there will be continued inflation. D) the economy will experience a temporary reduction in employment but will eventually return to full employment.

output initially will exceed potential GDP, but the economy will return to potential GDP with a higher price level.

The long-run aggregate supply curve is vertical because A) at full employment, prices are stable. B) potential GDP is independent of the price level. C) there is no cyclical inflation. D) the money wage rate increases faster than the price level.

potential GDP is independent of the price level.

Suppose that the economy is at full employment and aggregate demand increases by more than it is anticipated to increase. Other things remaining the same, A) real GDP remains at potential GDP. B) real GDP decreases below potential GDP. C) long-run aggregate supply decreases. D) real GDP increases above potential GDP.

real GDP increases above potential GDP.

The aggregate demand curve A) shifts rightward when foreign incomes decrease and shifts leftward when foreign incomes increase. B) shifts leftward when the price level increases and shifts rightward when the price level falls. C) shifts leftward when taxes are decreased. D) shifts rightward when taxes are decreased.

shifts rightward when taxes are decreased.

An individual holds $10,000 in a checking account and the price level rises significantly. Hence A) the INDIVIDUAL'S real wealth decreases but real NATIONAL wealth increases. B) there is no change in the individual's real wealth. C) the individual's real wealth increases. D) the individual's real wealth and consumption expenditure decrease.

the individual's real wealth and consumption expenditure decrease.

Based on the Keynesian theory of the business cycle, if the economy is at its full-employment equilibrium and aggregate demand increases then A) the price level and real GDP both increase. B) the price level and real GDP both decrease. C) real GDP decreases and the price level remains unchanged. D) the price level rises but real GDP remains unchanged.

the price level and real GDP both increase.

If the economy is in long run equilibrium and aggregate demand increases, then in the short run A) the price level increases in the short-run and decreases in the long run. B) ithe price level rises and real GDP increases.. C) there is a recessionary gap. D) there is an inflationary gap.

the price level rises and real GDP increases.

As the money wage rate rises A) the short-run aggregate supply curve shifts leftward. B) the long-run aggregate supply curve shifts rightward. C) both the long-run aggregate supply curve and the short-run aggregate supply curve shift leftward. D) the short-run aggregate supply curve shifts rightward.

the short-run aggregate supply curve shifts leftward.

If aggregate demand decreases and neither short-run nor long-run aggregate supply changes, then A) B) C) D)

there is a recessionary gap.

In the macroeconomic long run A) there is full employment with no unemployment. B) real GDP is always below potential GDP. C) output always is above potential GDP. D) there is full employment, and real GDP is equal to potential GDP.

there is full employment, and real GDP is equal to potential GDP.