Chapters 11 and 12

An intended goal of contractionary fiscal policy and a tightening of monetary policy is A) a decrease in the level of aggregate output B) a decrease in the unemployment rate C) an increase in interest rates D) an increase in the price level

A

If the economy is operating at capacity, an increase in government spending will ___ investment A) completely crowd out B) have no crowding out effect on C) minimally crowd out D) partially crowd out

A

If the economy is operating on the relatively vertical segment of the aggregate supply curve, an increase in aggregate demand causes a ____ change in the price level and a ____ change in output A) big;small B) small;big C) small; small D) big; big

A

Since 1970, the United States experienced stagflation A) only during the first two recessionary periods B) during none of the five recessionary periods C) only during the most recent recessionary period D) during all five recessionary periods

A

The Fed generally had high interest rates _____ as it fought inflation A) in the 1970s and early 1980s B) in the 1980s and 1990s C) in the 2000s D) in the late-1990s

A

The aggregate demand curve slopes downward because at higher price levels A) the purchasing power of consumers assets declines and consumption decreases B) producers can get more for what they produce, and they increase production C) the purchasing power of consumers assets declines and consumption increases D) the purchasing power of consumers assets declines and consumption increases

A

The aggregate demand curve would shift to the left it A) net taxes were increased B) the money supply were increased C) the cost of energy were to decrease D) government spending were increased

A

A decrease in the required reserve ratio A) will not change the money supply B) will increase the money supply C) will decrease the discount rate D) will decrease the money supply

B

An economic condition characterized by high unemployment and excessive inflation is called A) expansionary growth B) stagflation C) recessionary downturn D) depression

B

If the Fed has a strong preference for stable prices relative to output, it responds to a price ________ with a ________ increase in the interest rate. A) decrease; large B) increase; large C) decrease; small D) increase; small

B

If the United States were to pass legislation that would make it easier for people to emigrate to the United States, this would cause A) the short-run aggregate supply curve to become flatter B) the short-run aggregate supply curve to shift to the right C) the short-run aggregate supply curve to shift to the left D) the short-run aggregate supply curve to become nearly vertical at all levels of output

B

The aggregate demand curve shows that, ceteris paribus A) at higher price levels, total quantity of output demanded is higher B) at lower price levels, total quantity of output demanded is higher C) at higher price levels, total quantity of output supplied is lower D) at lower price levels, total quantity of output supplied is lower

B

The long-run aggregate supply curve is vertical if A) the Fed follows optimal monetary policy B) wages and other costs fully adjust to changes in prices in the long-run C) technology is fixed D) the government follows optimal fiscal policy

B

All of the following shift the short-run aggregate supply curve except A) a change in the price of oil B) a change in wages as a result of a labor strike C) a change in the new price level D) a change in the price of raw material

C

An increase in inflationary expectations that causes firms to increase their prices shifts the A) aggregate demand curve to the right B) aggregate demand curve to the left C) aggregate supply curve to the left D) aggregate supply curve to the right

C

For an economy to experience both a recession and inflation at the same time A) the AD curve must shift left B) the AD curve must shift right C) the AS curve must shift left D) the AS curve must shift right

C

If the Fed sells government securities, then there is A) an increase in the required reserve ratio B) a decrease in the discount rate C) a decrease in the supply of money D) an increase in the supply of money

C

When the aggregate supply curve is relatively flat, A) only fiscal policy can be used to increase output B) only monetary policy can be used to increase output C) both fiscal policy and monetary policy can be used to increase output D) neither fiscal policy nor monetary policy can be used to increase output

C

When the general price level rises A) consumption increases as a result of the multiplier effect B) investment rises as a result of the real wealth effect C) consumption falls as a result of the real wealth effect D) investment rises as a result of the multiplier effect

C

A binding situation occurred during the recession of A) 1974-1975 B) 1980-1982 C) 1990-1991 D) 2008-2009

D

For an economy to experience both economic growth and inflation at the same time A) the AD must shift right D) the AD must shift left C) the AS must shift left D) the AS must shift right

D

The discount rate is A) the interest rate commercial banks charge each other for borrowing funds B) the interest rate commercial banks charge their most creditworthy customers C) the interest rate commercial banks charge their new customers D) the interest rate the Fed charges commercial banks for borrowing funds

D

Decreasing government spending and an oil embargo will both have an effect towards increasing the price level true or false

false

A cost shock, such as natural disaster, shifts the aggregate supply curve to the left True or False

true