ECO121_Part8

B

QN=316 (18040) Refer to Figure 33-1. If the economy is in long-run equilibrium, then an adverse shift in aggregate supply would move the economy from a. A to B. b. C to D. c. B to A. d. D to C.

A

QN=339 (18053) In the long run, changes in the money supply affect a. (i) prices. b. (ii) output. c. (iii) unemployment rates. d. All of (i), (ii), and (iii).

A

QN=301 (18044) Other things the same, if the price level falls, people a. increase foreign bond purchases, so the supply of dollars in the market for foreign-currency exchange increases. b. increase foreign bond purchases, so the supply of dollars in the market for foreign-currency exchange decreases. c. decrease foreign bond purchases, so the supply of dollars in market for foreign-currency exchange increases. d. decrease foreign bond purchases, so the supply of dollars in the market for foreign-currency exchange decreases.

D

QN=302 (18029) Suppose the economy is in long-run equilibrium. If there is a sharp decline in the stock market combined with a significant increase in immigration of skilled workers, then in the short run, a. real GDP will rise and the price level might rise, fall, or stay the same. In the long-run, real GDP will rise and the price level might rise, fall, or stay the same. b. the price level will fall, and real GDP might rise, fall, or stay the same. In the long-run, real GDP and the price level will be unaffected. c. the price level will rise, and real GDP might rise, fall, or stay the same. In the long run, real GDP will rise and the price level will fall. d. the price level will fall, and real GDP might rise, fall, or stay the same. In the long run, real GDP will rise and the price level will fall.

B

QN=303 (18024) Other things the same, when the price level rises, interest rates a. rise, which means consumers will want to spend more on homebuilding. b. rise, which means consumers will want to spend less on homebuilding. c. fall, which means consumers will want to spend more on homebuilding. d. fall, which means consumers will want to spend less on homebuilding.

D

QN=304 (18035) Changes in the price of oil a. can only lead to recessions. b. have not contributed much to output fluctuations in the United States. c. change the economy principally by changing aggregate demand. d. created both inflation and recession in the United States in the 1970s.

D

QN=305 (18036) The classical dichotomy refers to the separation of a. variables that move with the business cycle and variables that do not. b. changes in money and changes in government expenditures. c. decisions made by the public and decisions made by the government. d. real and nominal variables.

A

QN=306 (18032) Suppose the economy is in long-run equilibrium. If there is a tax cut at the same time that major new sources of oil are discovered in the country, then in the short-run a. real GDP will rise and the price level might rise, fall, or stay the same. b. real GDP will fall and the price level might rise, fall, or stay the same. c. the price level will rise, and real GDP might rise, fall, or stay the same. d. the price level will fall, and real GDP might rise, fall, or stay the same.

A

QN=307 (18041) From 2001 to 2005 there was a dramatic rise in the price of houses. If this made people feel wealthier, then it would shift a. aggregate demand right. b. aggregate demand left. c. aggregate supply right. d. aggregate supply left.

C

QN=308 (18023) The aggregate-demand curve a. (i) has a slope that is explained in the same way as the slope of the demand curve for a particular product. b. (ii) is vertical in the long run. c. (iii) shows an inverse relation between the price level and the quantity of all goods and services demanded. d. All of (i), (ii), and (iii) are correct.

A

QN=309 (18017) The model of short-run economic fluctuations focuses on the price level and a. (i) real GDP. b. (ii) economic growth. c. (iii) the neutrality of money. d. None of (i), (ii), and (iii) is correct.

C

QN=310 (18034) The long-run aggregate supply curve would shift right if immigration from abroad a. increased or Congress made a substantial increase in the minimum wage. b. decreased or Congress abolished the minimum wage. c. increased or Congress abolished the minimum wage. d. decreased or Congress made a substantial increase in the minimum wage.

A

QN=311 (18026) Other things the same, as the price level decreases it induces greater spending on a. both net exports and investment. b. net exports but not investment. c. investment but not net exports. d. neither net exports nor investment.

C

QN=312 (18033) Which of the following shifts both the short-run and long-run aggregate supply right? a. (i) an increase in the actual price level b. (ii) an increase in the expected price level c. (iii) an increase in the capital stock d. None of (i), (ii), and (iii) is correct.

C

QN=313 (18037) As the price level rises, a. the real exchange rate falls, so net exports fall. b. the real exchange rate falls, so net exports rise. c. the real exchange rate rises, so net exports fall. d. the real exchange rate rises, so net exports rise.

A

QN=314 (18025) In which case can we be sure aggregate demand shifts left overall? a. people want to save more for retirement and the government raises taxes b. people want to save more for retirement and the government cuts taxes c. people want to save less for retirement and the government raises taxes d. people want to save less for retirement and the government cuts taxes

A

QN=315 (18030) Refer to Figure 33-1. If the economy starts at C, an increase in the money supply moves the economy [figure_33_01.jpg] a. to A in the long run. b. to B in the long run. c. back to C in the long run. d. to D in the long run.

A

QN=317 (18042) The sticky-wage theory of the short-run aggregate supply curve says that the quantity of output firms supply will increase if a. the price level is higher than expected making production more profitable. b. the price level is higher than expected making production less profitable. c. the price level is lower than expected making production more profitable. d. the price level is lower than expected making production less profitable.

A

QN=318 (18028) Which of the following can explain the upward slope of the short-run aggregate supply curve? a. nominal wages are slow to adjust to changing economic conditions b. as the price level falls, the exchange rate falls c. an increase in the money supply lowers the interest rate d. an increase in the interest rate increases investment spending

C

QN=319 (18043) The effects of a higher than expected price level are shown by a. shifting the short-run aggregate supply curve right. b. shifting the short-run aggregate supply curve left. c. moving to the right along a given aggregate supply curve. d. moving to the left along a given aggregate supply curve.

C

QN=320 (18020) Which of the following shifts both the short-run and long-run aggregate supply right? a. (i) people flee to other countries as a civil war breaks out b. (ii) an increase in the actual price level c. (iii) an improvement in overall production technology d. None of (i), (ii), and (iii) is correct.

C

QN=321 (18022) The aggregate demand and aggregate supply graph has a. the price level on the horizontal axis. The price level can be measured by the GDP deflator. b. the price level on the horizontal axis. The price level can be measured by real GDP. c. the price level on the vertical axis. The price level can be measured by the GDP deflator. d. the price level on the vertical axis. The price level can be measured by GDP.

A

QN=322 (18039) Which of the following can explain the upward slope of the short-run aggregate supply curve? a. nominal wages are slow to adjust to changing economic conditions b. as the price level falls, the exchange rate falls c. an increase in the money supply lowers the interest rate d. an increase in the interest rate increases investment spending

C

QN=323 (18038) If speculators gained greater confidence in foreign economies so that they wanted to buy more assets of foreign countries and fewer U.S. bonds, a. the dollar would appreciate which would cause aggregate demand to shift right. b. the dollar would appreciate which would cause aggregate demand to shift left. c. the dollar would depreciate which would cause aggregate demand to shift right. d. the dollar would depreciate which would cause aggregate demand to shift left.

B

QN=324 (18018) The aggregate quantity of goods and service demanded changes as the price level falls because a. real wealth rises, interest rates rise, and the dollar appreciates. b. real wealth rises, interest rates fall, and the dollar depreciates. c. real wealth falls, interest rates rise, and the dollar appreciates. d. real wealth falls, interest rates fall, and the dollar depreciates.

B

QN=325 (18021) Recessions in China and India would cause a. the U.S. price level and real GDP to rise. b. the U.S. price level and real GDP to fall. c. the U.S. price level to rise and real GDP to fall. d. the U.S. price level to fall and real GDP to rise.

B

QN=326 (18031) Which of the following will both make people spend more? a. wealth and interest rates rise. b. wealth rises and interest rates fall. c. wealth falls and interest rates rise. d. wealth falls and interest rates fall.

B

QN=327 (18019) The classical dichotomy and monetary neutrality are represented graphically by 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

QN=328 (18068) According to liquidity preference theory, equilibrium in the money market is achieved by adjustments in a. the price level. b. the interest rate. c. the exchange rate. d. real wealth.

A

QN=329 (18058) Permanent tax cuts shift the AD curve a. farther to the right than do temporary tax cuts. b. not as far to the right as do temporary tax cuts. c. farther to the left than do temporary tax cuts. d. not as far to the left as do temporary tax cuts.

D

QN=330 (18050) During periods of expansion, automatic stabilizers cause government expenditures a. and taxes to fall. b. and taxes to rise. c. to rise and taxes to fall. d. to fall and taxes to rise.

D

QN=331 (18054) Which of the following properly describes the interest-rate effect that helps explain the slope of the aggregate-demand curve? a. As the money supply increases, the interest rate falls, so spending rises. b. As the money supply increases, the interest rate rises, so spending falls. c. As the price level increases, the interest rate falls, so spending rises. d. As the price level increases, the interest rate rises, so spending falls.

D

QN=332 (18056) The theory of liquidity preference assumes that the nominal supply of money is determined by the a. level of real output only. b. interest rate only. c. level of real output and by the interest rate. d. Federal Reserve.

C

QN=333 (18060) Other things the same, automatic stabilizers tend to a. raise expenditures during expansions and recessions. b. lower expenditures during expansions and recessions. c. raise expenditures during recessions and lower expenditures during expansions. d. raise expenditures during expansions and lower expenditures during recessions.

B

QN=334 (18064) Assume the MPC is 0.75. Assuming only the multiplier effect matters, a decrease in government purchases of $100 billion will shift the aggregate demand curve to the a. (i) left by $200 billion. b. (ii) left by $400 billion. c. (iii) right by $800 billion. d. None of (i), (ii), and (iii) is correct.

D

QN=335 (18059) A reduction in U.S net exports would shift U.S. aggregate demand a. rightward. In an attempt to stabilize the economy, the government could raise taxes. b. rightward. In an attempt to stabilize the economy, the government could cut taxes. c. leftward. In an attempt to stabilize the economy, the government could raise taxes. d. leftward. In an attempt to stabilize the economy, the government could cut taxes.

D

QN=336 (18070) People are likely to want to hold more money if the interest rate a. increases, making the opportunity cost of holding money rise. b. increases, making the opportunity cost of holding money fall. c. decreases, making the opportunity cost of holding money rise. d. decreases, making the opportunity cost of holding money fall.

A

QN=337 (18067) Using the liquidity-preference model, when the Federal Reserve increases the money supply, a. the equilibrium interest rate decreases. b. the aggregate-demand curve shifts to the left. c. the quantity of goods and services demanded is unchanged for a given price level. d. the long-run aggregate-supply curve shifts to the right.

C

QN=338 (18045) In the long run, fiscal policy primarily affects a. aggregate demand. In the short run, it affects primarily aggregate supply. b. aggregate supply. In the short run, it affects primarily saving, investment, and growth. c. saving, investment, and growth. In the short run, it affects primarily aggregate demand. d. saving, investment, and growth. In the short run, it affects primarily aggregate supply.

D

QN=340 (18048) Suppose there were a large increase in net exports. If the Fed wanted to stabilize output, it could a. buy bonds to increase the money supply. b. buy bonds to decrease the money supply. c. sell bonds to increase the money supply. d. sell bonds to decrease the money supply.

B

QN=341 (18055) The economy is in long-run equilibrium. Suppose that automatic teller machines become cheaper and more convenient to use, and as a result the demand for money falls. Other things equal, we would expect that, in the short run, a. the price level and real GDP would rise, but in the long run they would both be unaffected. b. the price level and real GDP would rise, but in the long run the price level would rise and real GDP would be unaffected. c. the price level and real GDP would fall, but in the long run they would both be unaffected. d. the price level and real GDP would fall, but in the long run the price level would fall and real GDP would be unaffected.

A

QN=342 (18051) According to liquidity preference theory, the opportunity cost of holding money is a. the interest rate on bonds. b. the inflation rate. c. the cost of converting bonds to a medium of exchange. d. the difference between the inflation rate and the interest rate on bonds.

A

QN=343 (18046) In the long run, changes in the money supply affect a. (i) prices. b. (ii) output. c. (iii) unemployment rates. d. All of (i), (ii), and (iii).

B

QN=344 (18062) According to the liquidity preference theory, which of the following events would shift money demand to the left? a. an increase in the price level b. a decrease in the price level c. an increase in the interest rate d. a decrease in the interest rate

C

QN=345 (18066) According to the theory of liquidity preference, a. (i) if the interest rate is below the equilibrium level, then the quantity of money people want to hold is less than the quantity of money the Fed has created. b. (ii) if the interest rate is above the equilibrium level, then the quantity of money people want to hold is greater than the quantity of money the Fed has created. c. (iii) the demand for money is represented by a downward-sloping line on a supply-and-demand graph. d. All of (i), (ii), and (iii) are correct.

C

QN=346 (18061) According to liquidity preference theory, the money-supply curve is a. upward sloping. b. downward sloping. c. vertical. d. horizontal.

C

QN=347 (18047) Assume the MPC is 0.75. Assume there is a multiplier effect and that the total crowding-out effect is $6 billion. An increase in government purchases of $10 billion will shift aggregate demand to the a. left by $24 billion. b. left by $36 billion. c. right by $34 billion. d. right by $36 billion.

D

QN=348 (18069) According to liquidity preference theory, the money-supply curve would shift if the Fed a. (i) engaged in open-market transactions. b. (ii) changed the discount rate. c. (iii) changed the reserve requirement. d. did any of (i), (ii), or (iii).

A

QN=349 (18065) Initially, the economy is in long-run equilibrium. The aggregate demand curve then shifts $80 billion to the left. The government wants to change spending to offset this decrease in demand. The MPC is 0.75. Suppose the effect on aggregate demand of a tax change is 3/4 as strong as the effect of a change in government expenditure. There is no crowding out and no accelerator effect. What should the government do if it wants to offset the decrease in real GDP? a. Raise both taxes and expenditures by $80 billion dollars. b. Raise both taxes and expenditures by $10 billion dollars. c. Reduce both taxes and expenditures by $80 billion dollars. d. Reduce both taxes and expenditures by $10 billion dollars.

C

QN=350 (18063) The term crowding-out effect refers to a. the reduction in aggregate supply that results when a monetary expansion causes the interest rate to decrease. b. the reduction in aggregate demand that results when a monetary expansion causes the interest rate to decrease. c. the reduction in aggregate demand that results when a fiscal expansion causes the interest rate to increase. d. the reduction in aggregate demand that results when a decrease in government spending or an increase in taxes causes the interest rate to increase.

A

QN=351 (18057) To reduce the effects of crowding out caused by an increase in government expenditures, the Federal Reserve could a. increase the money supply by buying bonds. b. increase the money supply by selling bonds. c. decrease the money supply by buying bonds. d. decrease the money supply by selling bonds.

B

QN=352 (18049) Suppose the MPC is 0.75. There are no crowding out or investment accelerator effects. If the government increases its expenditures by $200 billion, then by how much does aggregate demand shift to the right? If the government decreases taxes by $200 billion, then by how far does aggregate demand shift to the right? a. $800 billion and $800 billion b. $800 billion and $600 billion c. $600 billion and $600 billion d. $600 billion and $450 billion

C

QN=353 (18052) Fiscal policy affects the economy a. only in the short run. b. only in the long run. c. in both the short and long run. d. in neither the short nor the long run.