ECON 2020 Macro Final

*If a country has a population of 300 million, 135 million people employed and 15 million people looking for work, then its unemployment rate is 5%. 10%. 15%. 35%.

10%. 15/150= 0.10

With a cost shock, a small decrease in output relative to the increase in the price level would occur if the ________ curve is relatively ________. AD; flat AS; flat AS; steep AD; steep

AD; steep

The relationship between inflation and unemployment is depicted by the aggregate demand curve. Phillips curve. production possibility curve. aggregate supply curve.

Phillips curve.

When the aggregate supply curve is vertical, which of the following is NOT true? The economy is expanding quickly. Any increase in the price level will not cause an increase in aggregate output. The economy is producing the maximum sustainable level of output. The economy is at capacity.

The economy is expanding quickly.

An increase in net taxes at a given price level leads to an increase in aggregate demand. an increase in aggregate supply. a decrease in aggregate demand. no change in aggregate demand.

a decrease in aggregate demand.

*Which of the following will, unambiguously, decrease the price level? a decrease in government spending and a decrease in the Z factors a decrease in government spending and an increase in the Z factors an increase in government spending and an increase in the Z factors an increase in government spending and a decrease in the Z factors

a decrease in government spending and an increase in the Z factors

*If ________ equilibrium output ________, the price level decreases. actual; is below potential aggregate output actual; exceeds potential aggregate output potential; is equal to actual aggregate output potential; is below actual aggregate output

actual; is below potential aggregate output

A decrease in government purchases shifts the ________ curve to the ________. aggregate demand; right aggregate supply; right aggregate supply; left aggregate demand; left

aggregate demand; left

*Employment tends to fall when unemployment rises. aggregate output falls. labor productivity falls. aggregate output rises.

aggregate output falls.

When analyzing the effects of ________, what primarily matters is the shape of the AS curve. net taxes government spending the Z factors all of the above

all of the above

The aggregate supply curve shows the relationship between the aggregate quantity of output supplied by ________ and ________. the government; aggregate demand the world; the money supply all the firms in an economy; the overall price level domestically owned firms in the economy; the interest rate

all the firms in an economy; the overall price level

*A decrease in the Z factors represents an easing of monetary policy. a tightening of monetary policy. an expansionary fiscal policy. a contractionary fiscal policy.

an easing of monetary policy.

*Each point on the IS curve represents ________ in the goods market for the given interest rate. a positive relationship between the price level and aggregate output maximum investment minimum pricing an equilibrium point

an equilibrium point

Which of the following causes a movement along the aggregate demand curve? an increase in prices an increase in government spending a decrease in taxes a fall in wages

an increase in prices

An intended goal of expansionary fiscal policy and an easing of monetary policy is the equalization of the distribution of income. an increase in the level of aggregate output. an increase in the price level. an increase in interest rates.

an increase in the level of aggregate output.

The long-run aggregate supply curve reflects the idea that in the long run, output is determined only by the factors of production. given technology. aggregate demand. both A and B

both A and B

*When the AD curve is relatively flat, only fiscal policy can be used to increase output. only monetary policy can be used to increase output. both fiscal policy and monetary policy can be used to increase output. neither fiscal policy nor monetary policy can be used to increase output.

both fiscal policy and monetary policy can be used to increase output.

In a binding situation, only changes in the Z factors change the interest rate. only changes in the price level change the interest rate. changes in neither the price level nor in the Z factors change the interest rate. the interest rate is always negative.

changes in neither the price level nor in the Z factors change the interest rate.

If you hear a person saying "I lost my job at the Hewlett-Packard plant because computer manufacturing is slow due to a slowdown in the economy," you should conclude that this person is ________ unemployed. structurally seasonally cyclically frictionally

cyclically

Other things equal, an increase in the Z factors will ________ the equilibrium price level and ________ equilibrium output. decrease; increase decrease; decrease increase; increase increase; decrease

decrease; decrease

*Other things equal, a decrease in government spending ________ the equilibrium interest rate and ________ equilibrium output. increases; increases decreases; increases decreases; decreases increases; decreases

decreases; decreases

A sudden increase in aggregate demand causes a ________ inflation and ________ output. cost-push; lower demand-pull; lower cost-push; higher demand-pull; higher

demand-pull; higher

The quantity of output supplied at ________ is represented by the aggregate supply curve. various levels of GDP a constant money supply varying interest rates different price levels

different price levels

Which of the following sequence of events follows an open market sale by the Fed? r↑ I↑ AE↓ Y↑ r↑ I↓ AE↓ Y↓ r↓ I↓ AE↓ Y↓ r↓ I↑ AE↑ Y↑

r↑ I↓ AE↓ Y↓

* A decrease in the Z factors shifts the ________ to the ________. IS curve; right IS curve; left Fed rule; left Fed rule; right

Fed rule; right

*A decrease in the price level shifts the ________ to the ________. Fed rule; left IS curve; right IS curve; left Fed rule; right

Fed rule; right

The slope of the ________ is negative and the slope of the ________ is positive. AS curve; IS curve AS curve; AD curve Fed rule; AD curve IS curve; Fed rule

IS curve; Fed rule

* A decrease in government spending shifts the ________ to the ________. Fed rule; left Fed rule; right IS curve; left IS curve; right

IS curve; left

Fiscal policy affects the ________ market through changes in taxes and government spending. federal funds goods money bond

goods

If the economy is on the steep portion of the AS curve and government spending increases, ________ crowds out ________. planned investment; consumption planned investment; government spending government spending; planned investment consumption; planned investment

government spending; planned investment

Stagflation is an economic condition characterized by ________ unemployment and ________ inflation. low; low high; high low; high high; low

high; high

*The level of aggregate output demanded rises when the price level falls, because the resulting decrease in the interest rate will lead to higher investment spending and lower consumption spending. higher investment spending and higher consumption spending. lower investment spending and lower consumption spending. lower investment spending and higher consumption spending.

higher investment spending and higher consumption spending.

What determines the slope of the aggregate supply curve is how much more the economy can produce without any change in the price level. how fast the price of factors of production respond to changes in the price level. how fast the output level changes after a technological advance. none of the above

how fast the price of factors of production respond to changes in the price level.

To decrease the price level the government could adopt policies that decrease aggregate supply and aggregate demand. decrease aggregate supply and increase aggregate demand. increase aggregate supply and decrease aggregate demand. increase aggregate supply and aggregate demand.

increase aggregate supply and decrease aggregate demand.

To increase output the government could increase government spending and discourage technological advancement. increase government spending and encourage immigration. decrease government spending and discourage immigration. decrease government spending and encourage technological advancement.

increase government spending and encourage immigration.

Suppose the equilibrium price level is 110. An increase in the supply of oil would probably increase the equilibrium output and decrease the price level. increase both the equilibrium output and the price level. decrease both the equilibrium output and the price level. decrease the equilibrium output and increase the price level.

increase the equilibrium output and decrease the price level.

If aggregate demand increases while aggregate supply is stable, aggregate output will ________ and the unemployment rate will ________. increase; increase decrease; decrease decrease; increase increase; decrease

increase; decrease

As a result of an increase in the price level, the equilibrium interest rate ________ and the equilibrium output level ________. decreases; increases increases; increases increases; decreases decreases; decreases

increases; decreases

Potential output is the level of aggregate output that can be sustained in the long run without inflation. unemployment. taxes. government regulation.

inflation.

Structural unemployment is due to changes in the structure of the economy. is due to seasonal changes. arises from the time it takes employers to find appropriate employees. arises from recessions.

is due to changes in the structure of the economy.

*The level of output determined by the intersection of the short-run aggregate supply curve and the aggregate demand curve is always below full-employment output. always corresponds to full-employment output. is always above full-employment output. may be above, below, or equal to full-employment output.

may be above, below, or equal to full-employment output.

The ________ unemployment rate can be pushed below the ________ rate, but only in the short run and not without inflation. measured; natural natural; cyclical cyclical; frictional frictional; structural

measured; natural

If the long-run aggregate supply curve is vertical, the ________ a change in net taxes on aggregate output in the long run is zero. additional tax revenue resulting from change in government spending based on multiplier effect of absolute value of

multiplier effect of

In a binding situation, planned investment decreases when the price level increases. output decreases when the price level increases. planned investment and output both decrease when the price level increases. neither planned investment nor output change when the price level decreases.

neither planned investment nor output change when the price level decreases.

In a binding situation, there is ________ crowding out of planned investment when net taxes decrease. no complete negative partial

no

If the AD curve is vertical, a positive cost shock will cause ________ in output and ________ in the price level. no change; no change a decrease; an increase a decrease; no change no change; an increase

no change; an increase

If an increase in net taxes in the United States resulted in a very large decrease in aggregate output and a very small decrease in the price level, then the U.S. economy must have been on the very flat part of the short-run aggregate demand curve. on the very steep part of the short-run aggregate demand curve. on the very steep part of the short-run aggregate supply curve. on the very flat part of the short-run aggregate supply curve.

on the very flat part of the short-run aggregate supply curve.

If the economy is operating on the relatively vertical segment of the aggregate supply curve, an increase in aggregate demand causes a small change in the ________ and a big change in ________. output; price level aggregate demand; aggregate supply price level; output aggregate supply; aggregate demand

output; price level

If the economy is operating way below capacity, an increase in aggregate demand causes a big change in the ________ and small change in ________. aggregate supply; aggregate demand aggregate demand; aggregate supply output; price level price level; output

output; price level

Long-run aggregate supply is equal to potential output. short-run aggregate demand. inflation minus unemployment. short-run aggregate supply.

potential output.

For an economy to experience both economic growth and inflation at the same time the aggregate supply curve must shift to the left. the aggregate demand curve must shift to the left. the aggregate demand curve must shift to the right. the aggregate supply curve must shift to the right.

the aggregate demand curve must shift to the right.

If wages adjust fully to price increases in the long run, the full effect of fiscal policy is on output. the price level. both output and the price level. neither output nor the price level.

the price level.

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

the short-run aggregate supply curve to shift to the left.

Natural gas is used as a source of energy in many manufacturing processes. Assume a long strike by natural gas workers reduced the supply of natural gas and increased the price of natural gas. This would cause the short-run aggregate supply curve to become nearly vertical at all levels of output. the short-run aggregate supply curve to shift to the left. the short-run aggregate supply curve to become flatter. the short-run aggregate supply curve to shift to the right.

the short-run aggregate supply curve to shift to the left.

A decrease in the price level is likely to decrease the aggregate amount of output supplied in the short run because interest rate is high in the short run. wages change in the short run. wages are sticky in the short run. the aggregate supply curve is vertical in the short run.

wages are sticky in the short run.