Macroeconomics Exam 2

When an economy is in long run equilibrium,

the actual and natural rates of unemployment will be equal.

Which of the following would cause prices and real GDP to rise in the short run?

Aggregate demand shifts right.

Which of the following adjustments will most likely occur when output exceeds the economy's long-run capacity?

Higher resource prices and costs will reduce short-run aggregate supply until output falls to the economy's long-run capacity.

Why is GDP not a perfect measure of welfare?

It treats a dollar spent on candy bars the same as a dollar spent on education

Which statement represents most correctly the relationship between nominal GDP and real GDP?

Nominal GDP measures current production using current prices, whereas real GDP measures current production using base-year prices.

Suppose the dollar value of GDP increased approximately 2 percent between October 2007 and August 2008, but real GDP fell 1 percent during the period. Which of the following best explains these data?

Prices increased approximately 3 percent during period.

Which of the following statements about real GDP per person is true?

Real GDP per person provides more meaningful comparisons across time and countries than real GDP.

Which of the following is the most accurate statement about real and nominal interest rates?

Real interest rates can be either positive or negative, but nominal interest rates must be positive.

Within the AD/AS model, how does an economy adjust from an output beyond its long-run capacity as a result of an unanticipated increase in aggregate demand?

Resource prices and real interest rates will rise causing output to fall back to its long-run sustainable rate.

If an economy operates at a short-run equilibrium output that exceeds its long-run capacity, which of the following will be most likely to direct the economy toward full employment?

Resource prices will increase, causing the SRAS curve to shift to the left

Which of the following is true when an economy is operating at its full employment rate of output?

The actual rate of unemployment will equal the natural rate.

Which of the following is true if the actual price level is lower than the expected price level reflected in long-term contracts?

The actual rate of unemployment will exceed the natural rate of unemployment.

If the quantity supplied of euro were greater than the quantity demanded, which of the following would occur?

The price of the euro would fall.

Which of the following is true of high and variable rates of inflation?

When such rates are present, it will be difficult for people to accurately forecast next year's rate of inflation.

When is the economy considered to be at full employment?

When the rate of cyclical unemployment is zero.

For an oil-importing country such as the United States, the immediate effect of a supply shock caused by an increase in the price of imported oil would tend to be

a decrease in real output and an increase in the general level of prices.

If the dollar price of the English pound goes from $1.75 to $1.50, the dollar has

appreciated, and Americans will find English goods cheaper.

If Sam Jackson voluntarily quits one job, possesses marketable skills, and expects to find a new job in a few weeks, then Mr. Jackson is considered

frictionally unemployed.

During a recession, the actual rate of unemployment will be

greater than the natural rate of unemployment.

If an unanticipated increase in aggregate demand results in an output beyond the economy's long-run capacity, long-run equilibrium will eventually be restored by

higher resource prices and a decrease in SRAS.

U.S. exports are

included in U.S. GDP because they are produced domestically

Tom loses his job and immediately begins looking for another. Other things the same, the unemployment rate

increases, and the labor-force participation rate is unaffected.

The expansionary phase of the business cycle is characterized by

increasing real output and declining unemployment.

When the actual rate of unemployment is less than the natural rate of unemployment, the economy

operates at an output greater than its long-run potential.

If net exports are positive, then

there will be net capital outflow, so foreign assets bought by Americans are greater than American assets bought by foreigners.