AP Econ Unit 5

81. Assume that the economy is at full-employment equilibrium in the diagram shown above. Which of the following would lead to stagflation? (A) A leftward shift of the short-run aggregate supply curve only (B) A rightward shift of the short-run aggregate supply curve only (C) A leftward shift of the aggregate demand curve only (D) A rightward shift of the aggregate demand curve only (E) A rightward shift in both the short-run aggregate supply curve and the aggregate demand curve

A

A reduction in inflation can best be achieved by which of the following combinations of fiscal and monetary policy? Fiscal Policy / Monetary Policy (A) Increase taxes / Sell government bonds (B) Decrease taxes / Buy government bonds (C) Decrease taxes / Lower margin requirements (D) Decrease government spending / Lower discount rate (E) Increase government spending / Raise discount rate

A

According to the monetarists, which of the following is true of expansionary fiscal policy? (A) It will cause interest rates to rise and crowd out private investment spending. (B) It should not be used so long as there is a national debt. (C) It should be used only when some resources are unemployed and the inflation rate is low. (D) it will decrease aggregate income. (E) It will increase aggregate income as long as the money supply is decreased at a slow, steady rate.

A

According to the short-run Philips Curve, lower inflation rates are associated with (A) higher unemployment rates (B) higher government spending (C) larger budget deficits (D) greater labor-force participation rates (E) smaller labor-force participation rates

A

An economy is in a short-run equilibrium at a level of Output that is less than full-employment output. If there were no fiscal or monetary policy interventions, which of the following changes in output and the price level would occur in the long run? Output Price Level (A) Increase Decrease (B) Increase increase (C) Decrease Decrease (D) Decrease increase (E) No change No change

A

An important assumption in Keynesian theory is that (A) prices are rigid downward and decreases in aggregate demand will lead to an increase in unemployment (B) price rigidity will cause downturns in the economy to self-correct (C) when aggregate demand is inadequate, prices will fall (D) when interest rates are high, many businesses borrow money (E) changes in the money supply are the major causes of changes in real output and price level

A

An increase in aggregate demand will cause which of the following? (A) A movement along a given short-run Phillips curve (B) The long-run Phillips Curve to become horizontal (C) The short-run Phillips curve to shift to the left (D) The long-run Phillips curve to shift to the right (E) The long-run Phillips curve to shift to the left

A

An increase in net investment leads to faster economic growth because capital per Worker and output per worker will change in which of the following ways? Capital per Worker / Output per Worker (A) Increase / Increase (B) Increase / Decrease (C) No change / Increase (D) Decrease / Increase (E) Decrease / Decrease

A

In the short run, which of the following will most likely result if wages in an economy rise faster than workers' productivity? (A) An increase in the price level (B) An increase in firms' profits (C) An increase in efficiency in labor-intensive industries (D) A larger increase in property income than in labor income (E) A decrease in import prices

A

The short-run aggregate supply curve would be vertical if (A) nominal wages adjust immediately to changes in the price level (B) nominal wages adjust slowly when there is unemployment (C) both nominal wages and prices adjust slowly to changes in aggregate demand (D) the spending multiplier is very low (E) investment demand is very responsive to changes in interest rates

A

The unemployment rate measures the percentage of (A) people in the labor force who do not have jobs (B) people in the labor force who have a part-time job but are looking for a full-time job (C) people who do not have jobs and have given up looking for work (D) people in the adult population who do not have jobs (E) people in the adult population who have temporary jobs

A

Which of the following best illustrates an improvement in a country's standard of living? (A) An increase in real per capita gross domestic product (B) An increase in nominal per capita gross domestic product (C) Price stability (D) A balanced budget (E) An increase in the consumer price index

A

Which of the following is true of supply shocks? (A) They tend to change both relative prices and the general price level in the economy (B) They affect only the general price level (C) They can be anticipated and offset with appropriate fiscal policy (D) They can be anticipated and offset with appropriate monetary policy (E) They make the aggregate supply curve vertical

A

Which of the following occurs as investment becomes more responsive to changes in the interest rate? (A) Monetary policy becomes more effective at changing real gross domestic product. (B) Fiscal policy becomes more effective at changing real gross domestic product. (C) Monetary policy becomes more effective at changing interest rates. (D) Fiscal policy becomes more effective at changing interest rates. (E) There is no change in the effectiveness of either monetary or fiscal policy.

A

Which of the following would cause both the aggregate demand and aggregate supply curves to shift to the right? (A) A decrease in corporate income taxes (B) A decrease in government spending (C) A decrease in natural resource prices (D) A decrease in the stock market prices (E) An increase in the international value of the domestic currency

A

Assume that the government implements a deficit-reduction policy that results in changes in aggregate income and output. Then the Federal Reserve engages in monetary policy actions that reverse the changes in income and output caused by fiscal policy action. Which of the following sets of changes in taxes, government spending, the required reserve ratio. and the discount rate is most consistent with these policies? Taxes/Government Spending/Required Reserve Ratio/ Discount Rate (A) Increase/increase/Decrease/Increase (B) Increase/Decrease/Decrease/No change (C) Increase/DecreaseIncrease/Decrease (D) Decrease/Increase/No change/increase (E) Decrease/Decrease/Decrease/increase

B

5. According to the graph above and starting with equilibrium point R, which of the following shifts identifies the short-run and the long-run impact of a demand-pull inflation? Short Run / LongRun (A) R to N / M to N (B) R to M /R to N (C) R to Q /Q to N (D) R to M / R to Q (E) R to N / N to Q

B

51. The graph above depicts an economy's aggregate demand and aggregate supply curves. If aggregate demand remains constant, the equilibrium price levels in the short run and in the long run will be which of the following? Short run / Long run (A) OA / OA (B) OB / OA (C) OB / OC (D) OC / OA (E) OC / DC

B

A discretionary fiscal policy action to reduce inflation in the short run would be to (A) increase transfer payments to those on fixed incomes (B) increase taxes or decrease government spending (C) decrease taxes or increase government spending (D) increase taxes and the money supply (E) decrease taxes and interest rates

B

A favorable supply shock, such as a decrease in energy prices, is most likely to have which of the following short-run effects on the price level and output? Price Level Output (A) Decrease No effect (B) Decrease Increase (C) Increase Increase (D) Increase Decrease (E) No effect No effect

B

An increase in which of the following would most likely cause the gross domestic product of a country to decrease in the short run? (A) Government spending (B) Imports (C) Money supply (D) Consumption spending by households (E) Investment spending by domestic firms

B

An inflationary gap can be eliminated by all of the following EXCEPT (A) an increase in personal income taxes (B) an increase in the money supply (C) an increase in interest rates (D) a decrease in government spending (E) a decrease in net exports

B

Compared to expansionary monetary policies adopted to counteract a recession, expansionary fiscal policies tend to result in (A) less public spending (B) higher interest rates (C) lower prices (D) a high rate of economic growth (E) decreased investment by foreign countries

B

Country A's growth rate in per capita real gross domestic product (GDP) has been consistently higher than that of Country B. Which of the following factors can account for these differences in the per capita GDP growth rates? (A) Country B's government gives more investment tax credits. (B) The labor force of Country A is becoming more skilled than the labor force of Country B. (C) The natural rate of unemployment is higher in Country A. (D) Country A's central bank is less effective at controlling the inflation rate. (E) Although the populations of Countries A and B are the same, Country A has twice as many people who are retired.

B

Following a decrease in exports, what fiscal policy would restore the economy to the original equilibrium? (A) An increase in the income tax rate (B) An increase in government transfer payments (C) A reduction in the government budget deficit (D) An open-market purchase of bonds by the central bank (E) An open-market sale of bonds by the central bank

B

Hyperinflation is typically caused by (A) high tax rates that discourage work effort (B) continuous expansion of the money supply to finance government budget deficits (C) trade surpluses that are caused by strong protectionist policies (D) bad harvests that lead to widespread shortages (E) a large decline in corporate profits that leads to a decrease in production

B

If economic agents perfectly anticipate policy changes and if all prices, including wages, are completely flexible, which of the following will be true in the long run? (A) The price level will be constant. (B) There will be no trade-off between inflation and unemployment (C) The unemployment rate will be less than the natural rate of unemployment. (D) The unemployment rate will be greater than the natural rate of unemployment. (E) Changes in the money supply will not lead to changes in the price level.

B

The long-run aggregate supply curve is likely to shift to the right when there is (A) an increase in the cost of productive resources (B) an increase in productivity (C) an increase in the federal budget deficit (D) a decrease in the money supply (E) a decrease in the labor force

B

To stimulate investment in new plant and equipment without increasing the level of real output, the best policy mix is to (A) decrease the money supply and increase government spending (B) increase the money supply and decrease government spending (C) decrease the money supply and increase income taxes (D) increase the money supply and decrease income taxes (E) decrease income taxes and increase government spending

B

What would be the effect of a large increase in labor productivity on the real gross domestic product and the price level? Real GDP / Price Level (A) Increase / Increase (B) increase / Decrease (C) No effect / Increase (D) Decrease / Increase (E) Decrease / Decrease

B

Which of the following could cause a movement along a country's short-run Phillips curve toward higher unemployment and lower inflation? (A) A significant reduction in energy prices (B) A recession in the economies of the nation's major trading partners (C) A decrease in savings by the country's consumers (D) A movement of the economy from the recovery phase to the expansionary phase of the business cycle (E) An improvement in technology

B

Which of the following is a basic tenet of classical economic analysis? (A) Saving is usually greater than investment (B) The economy is self-correcting to full employment (C) The economy may be in equilibrium at less than full employment (D) Inflation is not a serious economic problem (E) The prices of products tend to be inflexible

B

Which of the following is a cause of hyperinflation? (A) Rapid growth of real gross domestic product (B) Rapid growth of the money supply (C) Unanticipated decrease in aggregate demand (D) Unanticipated increase in aggregate supply (E) Unanticipated rise in real interest rates

B

Which of the following policies would a Keynesian recommend during a period of high unemployment and low inflation? (A) Decreasing the money supply to reduce aggregate demand (B) Decreasing taxes to stimulate aggregate demand (C) Decreasing government spending to stimulate aggregate supply (D) Balancing the budget to stimulate aggregate supply (E) Imposing wage and price controls to stimulate aggregate supply

B

Which of the following policy combinations could reduce a government deficit without changing aggregate demand? (A) An increase in taxes and a decrease in the money supply (B) An increase in taxes and an increase in the money supply (C) A decrease in taxes and a decrease in the money supply (D) A decrease in government spending and a decrease in the money supply (E) An increase in government spending and a decrease in the money supply

B

Which of the following relationships is illustrated by a short-run Phillips curve? (A) A decrease in the rate of inflation is accompanied by an increase in the rate of economic growth. (B) A decrease in the rate of inflation is accompanied by an increase in the rate of unemployment (C) An increase in the rate of inflation is accompanied by a decrease in the rate of economic growth (D) an increase in the rate of inflation is accompanied by an increase in the rate of unemployment (E) a decrease in the rate of economic growth is accompanied by a decrease in the rate of unemployment

B

A change in which of the following will cause the short-run aggregate supply curve to shift? I. The price level II. Government spending III. The cost of all inputs (A) I only (B) II only (C) III only (D) I and II only (E) I, II, and III

C

According to the theory of rational expectations, a fully anticipated expansionary monetary policy will (A) increase potential output (B) increase unemployment (C) have no impact on real output (D) promote the production of consumer goods over capital goods (E) result in deflation

C

An increase in personal income taxes will most likely cause aggregate demand and aggregate supply to change in which of the following ways in the short run? Aggregate Demand Aggregate Supply (A) Not change Decrease (B) Not change increase (C) Decrease Not change (D) Decrease increase (E) Increase Not change

C

An increase in which of the following is consistent with an outward shift of the production possibilities curve? (A) Transfer Payments (B) Aggregate demand (C) Long-run aggregate supply (D) Income tax rates (E) Exports

C

An increase in which of the following is most likely to increase the long-run growth rate of an economy's real per capita income? (A) Population growth (B) The proportion of gross domestic product consumed (C) The educational attainment of the population (D) The supply of money in circulation (E) Personal income taxes

C

An increase in which of the following is most likely to increase the long-run growth rate of an economy's real per capita income? (A) population growth (B) the proportion of gross domestic product consumed (C) the education attainment of the population (D) the supply of money in circulation (E) personal income taxes

C

An increase in which of the following will lead to lower inflation and lower unemployment? (A) Exports (B) Aggregate demand (C) Labor productivity (D) Government spending (E) The international value of domestic currency

C

An increase in which of the following will most likely increase productivity? (A) Population growth rate (B) Aggregate demand (C) Capital stock (D) Consumption (E) Employment

C

An increase in which of the following would be most likely to increase long-run growth? (A) Pension payments (B) Unemployment compensations (C) Subsidies to businesses for purchases of capital goods (D) Tariffs on imported capital goods (E) Tariffs on imported oil

C

Assume that the economy is at full employment. Policymakers wish to maintain the price level but want to encourage greater investment. Which of the following combinations of monetary and fiscal policies would best achieve this goal? Monetary Policy Fiscal Policy (A) No change Contractionary (B) Expansionary No change (C) Expansionary Contractionary (D) Expansionary Expansionary (E) Contractionary Expansionary

C

Assume that with a proportional tax system, the government always sets the tax rate at a level that yields a balanced budget at full employment. Which of the following is necessarily true? (A) The government budget will balance every year. (B) The government budget will be in deficit over the business cycle. (C) The national debt will increase in any year the economy operates below full employment. (D) Crowding out of private investment will occur whenever the economy operates at full employment. (E) The tax system will be destabilizing.

C

In an economy with a horizontal aggregate supply curve, an increase in govemment spending will cause output and the price level to change in which of the following ways? Output / Price Level (A) Decrease / increase (B) Increase / increase (C) Increase / No change (D) No change / Increase (E) No change / No change

C

In the long run, if aggregate demand decreases, real gross domestic product (GDP) and the price level will change in which of the following ways? Real GDP Price Level (A) Decrease Decrease (B) Decrease increase (C) No change Decrease (D) Increase Decrease (E) No change increase

C

The amount of money that the public wants to hold in the form of cash will (A) be unaffected by any change in interest rates or the price level (B) increase if interest rates increase (C) decrease if interest rates increase (D) increase if the price level decreases (E) decrease if the price level remains constant

C

The classical economists argued that involuntary unemployment would be eliminated by (A) increasing government spending to increase aggregate demand (B) increasing the money supply to stimulate investment spending (C) self-correcting market forces stemming from flexible prices and wages (D) maintaining the growth of the money supply at a constant rate (E) decreasing corporate income taxes to encourage investment

C

The long-run growth rate of an economy will be increased by an increase in all of the following EXCEPT (A) capital stock (B) labor supply (C) real interest rate (D) rate of technological change (E) spending on education and training

C

The natural rate of unemployment can be defined as the (A) unemployment rate consistent with accelerating inflation (B) unemployment rate of the least-skilled workers (C) economy's long-run equilibrium rate of unemployment (D) labor force participation rate plus the unemployment rate (E) labor force participation rate minus the unemployment rate

C

Under rational expectations, an announced expan-sion in the money supply will change nominal and real gross domestic products (GDP) in which of the following ways? Nominal GDP Real GDP (A) Increase Increase (B) Increase Decrease (C) Increase No change (D) No change Decrease (E) No change No change

C

When an economy is at full employment, which of the following will most likely create demand- pull inflation in the short run? (A) An increase in the discount rate (B) An increase in personal income taxes (C) A decrease in the real rate of interest (D) A decrease in government spending (E) A decrease in the money supply

C

Which of the following illustrates an inverse relationship between inflation and unemployment? (A) Aggregate demand curve (B) Long-run Phillips curve (C) Short-run Phillips curve (D) Long-run aggregate supply curve (E) Short-run aggregate supply curve

C

Which of the following is LEAST likely to promote economic growth? (A) Investment in tools and machines (B) Investment in training of labor (C) Increase in consumption of nondurable goods (D) Tax Credit for technology improvement (E) Increase in the labor force participation rate

C

Which of the following is true about changes in tax rates, changes in the level of government expenditures, and changes in the money supply? (A) They are automatic stabilizers. (B) They are tools of discretionary fiscal policy. (C) They have different lag times between implementation of a policy and its effects on aggregate demand. (D) They are favored equally by both classical and Keynesian economists to fine-tune the economy. (E) All are controlled by the Federal Reserve system.

C

Which of the following is true of the Phillips curve? (A) It is vertical in the short run, but is upward sloping in the long run. (B) It is upward sloping in the short run, but is downward sloping in the long run. (C) It is downward sloping in the short run, but is vertical in the long run. (D) It shows trade-offs between unemployment and inflation in the long run but not in the short run. (E) It is upward sloping both in the short run and in the long run if inflation is anticipated correctly.

C

Which of the following will most likely lead to a decrease in inflationary expectations? (A) A decrease in the marginal propensity to save (B) A decrease in imports (C) A decrease in the money supply (D) An increase in the government budget deficit (E) An increase in the prices of raw materials

C

With an upward-sloping short-run aggregate supply curve, an increase in government expenditure will most likely (A) reduce the price level (B) reduce the level of nominal gross domestic product (C) increase real gross domestic product (D) shift the short-run aggregate supply curve to the right (E) shift both the aggregate demand curve and the long-run aggregate supply curve to the left

C

82. If AD and AS represent aggregate demand and aggregate supply curves, respectively, and the arrows indicate the movement of the curves, which of the following graphs best illustrates long-run Economic growth? (A) A (B) B (C) C (D) D (E) E

D

A country's infrastructure refers to its (A) natural resources (B) private financial institutions (C) proportion of population with postsecondary education (D) public capital goods such as highways (E) internal, as opposed to external, debt

D

A rightward shift of the short-run Phillips curve is most likely due to (A) an increase in aggregate demand (B) a decrease in aggregate demand (C) a decrease in the expected rate of inflation (D) an increase in the expected rate of inflation (E) an increase in aggregate supply

D

According to the short-run Phillips Curve, there is a trade-off between (A) interest rates and inflation (B) the growth of the money supply and interest rates (C) unemployment and economic growth (D) inflation and unemployment (E) economic growth and interest rates

D

An increase in which of the following would cause the aggregate demand curve to shift to the left? (A) Consumer optimism (B) Population (C) Cost of resources (D) Income taxes (E) Net exports

D

An increase in which of the following would most likely result in an increase in aggregate supply? (A) The price level (B) Aggregate demand (C) Unemployment compensation (D) Labor-force participation rate (E) The minimum wage

D

An unanticipated decrease in aggregate demand when the economy is in equilibrium will result in (A) a decrease in voluntary unemployment (B) a decrease in the natural rate of unemployment (C) a decrease in aggregate supply (D) an increase in unplanned inventories (E) an increase in the rate of inflation

D

Assume that the aggregate supply curve is upward sloping. If both aggregate supply and aggregate demand increase, what will happen to the equilibrium output and price level? Output / Price Level (A) Decrease/Decrease (B) Decrease / Increase (C) Indeterminate / Increase (D) Increase / Indeterminate (E) Increase / Increase

D

If a contractionary fiscal policy is followed by an expansionary monetary policy, nominal interest rate and employment would most likely be affected in which of the following ways in the short run? Nominal interest Rate / Employment (A) Increase / Increase (B) Increase / Decrease (C) Decrease / Decrease (D) Decrease / Indeterminate (E) Indeterminate / Decrease

D

If a reduction in aggregate supply is followed by an increase in aggregate demand, which of the following will definitely occur? (A) Output will increase. (B) Output will decrease. (C) Output will not change. (D) The price level will increase. (E) The price level will decrease.

D

If an economy's aggregate supply curve is upward sloping, an increase in government spending will most likely result in a decrease in (A) real level of output (B) price level (C) interest rate (D) unemployment rate (E) government's budget deficit

D

If the government simultaneously engages in expansionary monetary and fiscal policies, which of the following is the likely effect on interest rates and underemployment? Interest Rates/Unemployment (A) increase/indeterminate (B) Increase/Decrease (C) Decrease/Decrease (D) indeterminate/Decrease (E) Indeterminate/Increase

D

If wages and prices are perfectly flexible and inflation is correctly anticipated, then an expansionary monetary policy will affect the real output and price level in which of the following ways? Real Output / Price Level (A) Increase / Increase (B) Increase/ Decrease (C) Increase / Not change (D) Not change / Increase (E) Not change/ Not Change

D

If wages are sticky, which of the following policies will be the most effective in raising real gross domestic product to the full employment level? (A) Doing nothing, since there are automatic stabilizers (B) The sale of bonds by the Federal Reserve (C) An increase in the income tax (D) An increase in government spending (E) An increase in the discount rate

D

Increases in the real per capita income of a country are most closely associated with increases in which of the following? (A) The labor force (B) The price level (C) The money supply (D) Productivity (E) Tax rates

D

Potential gross domestic product will decrease under which of the following conditions? (A) The growth rate of the population increases more rapidly than the growth rate of gross domestic product. (B) Nominal gross domestic product increases more than real gross domestic product. (C) The natural rate of unemployment decreases (D) The country's annual depreciation is greater than its annual gross investment. (E) The monetary authorities adopt an easy monetary policy.

D

Rational expectations theory suggests that people (A) do not estimate future inflation rates because it is impossible to do so (B) believe that current inflation should be the same as last year's (C) assume that current inflation will be the same for next year (D) use all available information in forming their expectations about future inflation (E) assume that current inflation will be equal to the average inflation of the past decade

D

Suppose that, from 1965 to 1986, unemployment fell from 7.2 to 7.0 percent and inflation fell from 3.8 percent to 1.1 percent. An explanation of these changes might be that the (A) aggregate demand curve shifted to the left (B) aggregate demand curve shifted to the right (C) aggregate supply curve shifted to the left (D) aggregate supply curve shifted to the right (E) short-run Phillips curve shifted to the right

D

When firms restructure their operations to decrease production costs, the aggregate supply curve, the price level, and real output will change in which of the following ways? Aggregate Supply Curve/Price Level/Real Output (A) Shift to the left/increase/increase (B) Shift to the left/Increase/No change (C) Shift to the right/increase/increase (D) Shift to the right/Decrease/Increase (E) Shift to the right/Decrease/Decrease

D

Which of the following is a key feature of Keynesian economics? (A) The level of saving depends mostly on interest rates (B) The level of government expenditure depends mostly on interest rates (C) Supply creates its own demand (D) Macroeconomic equilibrium can occur at less than full employment (E) Wages are more flexible than prices

D

Which of the following will most likely cause an increase in real output in the long run? (A) A decrease in the labor forts participation rate (B) An increase in the velocity of money (C) An open-market sale of government bonds by the central bank (D) An increase in immigration from abroad (E) An increase in the price level

D

Which of the following would be the initial impact on an economy if wages were to increase more than worker productivity? (A) There would be no initial impact, since neither the aggregate supply curve nor the aggregate demand curve would shift. (B) Employment would increase, causing a rightward shift in the aggregate demand curve. (C) The price level would increase, resulting in excess aggregate supply. (D) The short-run aggregate supply curve would shift to the left, increasing the price level. (E) The aggregate demand curve would shift to the left, increasing the price level.

D

61. According to the graph above, which of the following will necessarily result in a decrease in output? I. A rightward shift of the aggregate demand curve II. A leftward shift of the aggregate demand curve III. A rightward shift of the aggregate supply curve IV. A leftward shift of the aggregate supply curve (A) I only (B) II only (C) I and III only (D) II and III only (E) II and IV only

E

99. According to the graph above, which of the following is true about the long-run equilibrium of the economy depicted? (A) The economy is in long-run equilibrium. (B) The aggregate demand curve will shift to the left to restore long-run equilibrium. (C) The long-run aggregate supply curve will shift to the right to restore long-run equilibrium. (D) Without a fiscal policy stimulus, the economy will remain in a recession. (E) As wages increase, the short-run aggregate supply curve will shift to the left to restore long-run equilibrium.

E

A change in which of the following can affect the long-run economic growth of a country? I. The quantity and quality of a country's labor force II. Technology III. Spending on capital goods (A) I only (B) III only (C) I and II only (D) II and III only (E) I, II, and III

E

A decrease in business taxes would lead to an increase in national income by increasing which of the following? (A) The money supply (B) Unemployment (C) Aggregate demand only (D) Aggregate supply only (E) Both aggregate demand and aggregate supply

E

A decrease in labor productivity will shift the (A) aggregate demand curve to the right (B) aggregate demand curve to the left (C) long-run aggregate supply curve to the right (D) short-run aggregate supply curve to the right (E) short-run aggregate supply curve to the left

E

According to the long-run Phillips curve, which of the following is true? (A) Unemployment increases with an increase in inflation. (B) Unemployment decreases with an increase in inflation. (C) increased automation will lead to lower levels of structural unemployment in the long run. (D) Changes in the composition of the overall demand for labor tend to be deflationary in the long run. (E) The natural rate of unemployment is independent of monetary and fiscal policy changes that affect aggregate demand.

E

Advocates of a monetary rule recommend increasing the money supply at a rate that is equal to the rate of increase in which of the following? (A) Price level (B) Unemployment rate (C) Level of exports (D) Level of imports (E) Long-run real gross domestic product

E

An advance in technology will cause the (A) aggregate demand curve to shift to the right (B) aggregate demand curve to shift to the left (C) short-run aggregate supply curve to shift to the left (D) long-run aggregate supply curve to shift to the left (E) long-run aggregate supply curve to shift to the right

E

An increase in the labor force participation rate will (A) increase investment and decrease savings (B) increase savings and decrease investment (C) have no effect on unemployment (D) make it more easier to reduce unemployment (E) make it more difficult to reduce unemployment

E

An increase in which of the following is most likely to cause an improvement in the standard of living over time? (A) Size of the population (B) size of the labor force (C) number of banks (D) level of taxation (E) productivity of labor

E

An increase in which of the following would LEAST likely increase labor productivity? (A) Physical capital (B) Human capital (C) Technological improvements (D) Educational achievement (E) The labor force

E

Assume that an economy is currentiy in long-run equilibrium and the short-run aggregate supply curve is upward sloping. An adverse supply shock, such as a drought, will most likely cause which of the following to the economy in the short run? (A) A decrease in the price level and a decrease in the nominal wage (B) A decrease in the price level and an increase in the nominal wage (C) An increase in the price level and an increase in the nominal wage (D) An increase in the price level and an increase in the real wage (E) An increase in the price level and a decrease in the real wage

E

Changes in which of the following factors would affect the growth of an economy? I. Quantity and quality of human and natural resources II. Amount of capital goods available III. Technology (A) I only (B) I and II only (C) I and III only (D) II and III only (E) I, II, and III

E

Policy makers concerned about fostering long-run growth in an economy that is currently in a recession would most likely recommend which of the following combinations of monetary and fiscal policy actions? Monetary Policy/Fiscal Policy (A) Sell bonds/Reduce taxes (B) Sell bonds/raise taxes (C) No change/Raise taxes (D) Buy bonds/Reduce spending (E) Buy bonds/no change

E

The shifting of a country's production possibilities curve to the right will most likely cause (A) net exports to decline (B) inflation to increase (C) the aggregate demand curve to shift to the left (D) the long-run aggregate supply curve to shift to the left (E) the long-run aggregate supply curve to shift to the right

E

Which of the following would cause the short-run aggregate supply curve to shift to the right? (A) An increase in the wage rate (B) An increase in the interest rate (C) An increase in the natural rate of unemployment (D) A decrease in the capital stock (E) A decrease in the expected price level

E

Á simultaneous increase in inflation and unemployment could be explained by an increase in which of the following? (A) Consumer spending (B) The money supply (C) Labor productivity (D) Investment spending (E) Inflationary expectations

E