Macroncon sem 1

Suppose that the prices of labor and inputs to production are fixed in the short run but not in the long run. What is a consequence of this flexibility in the long run?

The long-run aggregate supply curve is vertical and there is no trade-off between inflation and unemployment in the long run.

Which of the following is illustrated by the long-run aggregate supply (LRAS) curve and the production possibilities curve (PPC)?

The maximum sustainable capacity

When an economy is at the trough of the business cycle, which of the following is then true about the state of the economy?

There is a recessionary gap.

The government of Euroland is considering increasing government spending to avoid a recession. What is the most likely effect on aggregate demand (AD) in Euroland?

There will be a rightward shift in the AD curve.

In an economy where wages and prices are sticky, which of the following will happen as a result of an increase in the price level?

There will be an upward movement along the short-run aggregate supply curve and real output will increase.

How will automatic stabilizers affect the economy during a recession?

They will shift the aggregate demand curve to the right, increasing real output.

Which of the following will happen when the actual inflation rate exceeds the expected inflation rate? Responses

This will harm lenders with fixed-interest rate loans.

Which of the following describes scarcity?

Wants exceed resources.

Suppose Miguel wants to know the value of real gross domestic product (GDP) for 2011 in terms of the base year 1984 dollars. In 1984 nominal GDP was $10 billion. In 2011 nominal GDP was $15 billion and the price deflator was 200. Real GDP in 1984 dollars would be equal to which of the following?

7.5 billion

Which of the following represents an appropriate fiscal policy for the given economic conditions?

A contractionary fiscal policy is appropriate to reduce inflation when there is an inflationary gap.

According to the expenditure multiplier, if the marginal propensity to consume is greater than zero, a one-dollar change in autonomous expenditures will result in which of the following?

A greater-than-one-dollar increase in aggregate demand for goods and services

Which of the following explains the relationship between the price level and real output along the aggregate demand curve?

At a lower price level, domestic goods will become less expensive compared to foreign goods, which causes an increase in spending on domestic goods.

Which of the following terms describes a slowdown in the rate of increase in the consumer price index?

Disinflation

Which of the following is true about the equilibrium real output in the aggregate demand-aggregate supply (AD-AS) model in the short run?

Equilibrium real output is always above full employment.

Suppose a nation opened its borders to the free flow of workers from other nations. How would this event likely affect the long-run aggregate supply (LRAS) curve and the production possibilities curve of the nation?

Both curves would shift to the right.

Assume that stock prices and home values have increased, raising household wealth. At the same time, productivity increased due to new technology. What is the likely short-run impact on the economy?

Both the aggregate demand (AD) and the short-run aggregate supply (SRAS) curves shift right, resulting in a higher real output level and indeterminate price level.

Which of the following is true about gross domestic product (GDP)?

Calculations of GDP include the unsold inventories of goods produced within the borders of the country.

Which of the following is an example of a factor of production?

Capital

If the natural rate of unemployment exceeds the actual rate of unemployment, which of the following will occur in the long run in the absence of government intervention?

If the natural rate of unemployment exceeds the actual rate of unemployment, which of the following will occur in the long run in the absence of government intervention?

Suppose an economy is operating above full employment. Which of the following fiscal policy actions and resulting changes in aggregate demand will move the economy back towards full employment?

Increasing taxes, which will shift the AD curve leftward

Which of the following describes a limitation of gross domestic product (GDP)?

It does not account for the distribution of income in a nation or income inequality.

Which of the following best describes the aggregate demand curve?

It is a curve that shows the level of spending by consumers, businesses, the government, and the foreign sector at different price levels.

What is an automatic stabilizer?

It is a program or policy that counteracts the business cycle without any new government action required.

An increase in taxes on businesses in the United States will likely have what impact on the short-run aggregate supply SRAS curve in the United States?

It will cause the SRAS curve to shift leftward.

Jan works a 30-hour week for a minimum wage of $10 per hour. Suppose that last year is the base year for the Consumer Price Index (CPI). Which of the following is true about Jan's real wage if at the end of this year the CPI is 125 ?

Jan's real wage is $8 per hour at the end of the year.

Assume an economy is currently at full employment. Which of the following best describes the long-run adjustments that will occur in the economy following a negative aggregate demand shock with no government intervention?

Nominal wages will decrease and short-run aggregate supply will increase until full employment is restored in the long run.

Which of the following is the correct calculation of Real Gross Domestic Product (GDP)?

Real GDP=(Nominal GDP/GDP deflator)×100

Assume the marginal propensity to consume is 0.75. What will happen if government spending increases by $100 billion?

Real output will increase by a maximum of $400 billion.

All societies face a trade-off for every decision for which of the following reasons?

Resources are scarce.

Which of the following is classified as a discouraged worker?

Sara has been unable to find a job and abandoned her job search.

Which statement is true about the approaches used to measure the value of a nation's gross domestic product (GDP) ?

The expenditures approach to calculating GDP sums consumption spending, investment spending, government spending, and net exports.

Assume the economy of Country A is in long-run equilibrium. Which of the following will happen in the short run in Country A if one of its major trading partners, Country B, experiences a recession?

Aggregate demand will decrease and the price level will decrease.

If nominal wages are fixed by labor contracts, then which of the following explains why the aggregate supply curve is upward sloping?

An increase in the price level will increase profits and production

The government of Olympia is considering a fiscal policy action to slow the economy and curb inflation. If the marginal propensity to consume is 0.8, which of the following responses correctly identifies a policy action that would help the government achieve its goals and the impact of that action on Olympia's real gross domestic product (GDP)?

Decreasing government spending by $10 billion decreases real GDP by a maximum of $50 billion.

Last year, Myron purchased a $10,000 certificate of deposit with a fixed 3% interest rate from his bank. The government reported that prices, on average, have fallen by 5% during the current year. Which of the following can be concluded as a result of this transaction?

Myron loses, while the bank gains.

Which of the following describes a difference between nominal gross domestic product (GDP) and real GDP?

Nominal GDP uses current prices to measure the value of final output, while real GDP uses constant prices.

What type of unemployment describes the situation of factory workers displaced by automation?

Structural

Which of the following best explains how income taxes can moderate a business cycle during an expansion?

Tax revenues decrease automatically as GDP falls, which dampens consumption spending.

Country X is currently in long-run macroeconomic equilibrium. If the country's economy experiences a significant increase in the price of energy, a major input in production, which of the following will occur in the short run?

The aggregate demand curve will shift to the left, and the actual rate of unemployment will exceed the natural rate of unemployment.

As a measure of economic performance, the United States gross domestic product (GDP) accounts for which of the following?

The cleanup of an oil spill

The output gap is measured by which of the following?

The difference between actual and potential GDP.

Labor unions negotiated a 3-year contract with employers in the automobile industry. They agreed to a 3 percent per year increase in pay over the 3 years. How would each group be affected by an actual inflation rate of 4% next year?

Workers would be worse off, and the employers would be better off.