ECO 1 Chapter 8

Suppose you have $1,000 in savings and the current price level is 100. Suppose deflation pushes the price level down by 10 percent. What is the real value of your savings? Multiple choice question. $1,111.11 $800 $1,000 $909.09

$1,111.11

During the 2008-2009 recession, the unemployment rate peaked at ______ percent. Multiple choice question. 5 33 25 10

10

Suppose you have $1000 in savings and the current price level is 100. Suppose inflation pushes the price level up by 10 percent, what is the real value of your savings? Multiple choice question. $1000 $800 $909.09 $1100.11

100 x 10% = 110 110/100 = 1.1 1000/1.1 =$909.09

recession

A period of decline in total real GDP for two or more consecutive quarters

growth recession

A period when the economy expands too slowly (0-2 percent).

Aggregate supply can be represented as a schedule or curve showing the relationship between the price level and the amount of real output that is produced in a given time period. (Enter one word for the blank.)

Aggregate supply

Aggregate supply reflects the various quantities of real output that firms are willing and able to produce at alternative price levels in a given period.

Aggregate supply

business cycle

Alternating periods of economic growth and contraction.

depression

An extremely deep and long recession

During World War II, ______. Multiple select question. GDP grew GDP fell unemployment increased the U.S. economy was in an expansion employment increased

GDP grew the U.S. economy was in an expansion employment increased

Which of the following are demand-side theories? Multiple select question. Keynesian Classical Monetarist

Keynesian Monetarist

The policy strategy for coping with recession that relies on markets self-adjusting is referred to as Multiple choice question. Laissez-faire. Semper fi. Carpe diem.

Laissez-faire.

Savings balance / (Price level at year-end / Price level at year-start) =

Real value of savings at year-end

Savings balance/ (price level at year-end / price level at year-start) =

Real value of savings at year-end

Which of the following will shift the aggregate supply in a manner that produces unemployment? Multiple select question. Resource shortages. Declining infrastructure. Consumer pessimism. Technological advances. Higher taxes.

Resource shortages. Declining infrastructure. Higher taxes.

Which is not one of the three strategy options for macro policy to cope with a recession? Multiple choice question. Shift the aggregate supply curve to the right Shift the aggregate demand curve to the right Laissez faire Shift the aggregate supply curve to the left

Shift the aggregate supply curve to the left

equilibrium (macro)

The combination of price level and real output that is compatible with both aggregate demand and aggregate supply.

laissez faire

The doctrine of "leave it alone," of nonintervention by government in the market mechanism.

aggregate demand (AD)

The total quantity of output (real GDP) demanded at alternative price levels in a given time period, ceteris paribus.

True or false: The Great Depression impacted many countries around the world.

True

An increased difficulty or outright inability of borrowers to obtain loans is referred to as Multiple choice question. a bank panic. a credit crisis. loan stickiness.

a credit crisis.

Aggregate demand is a schedule or curve that shows the total quantity of output (real GDP) demanded at alternative price levels in a given time period, ceteris paribus.

aggregate demand

A business cycle is ______. an alternation between economic upturns and downturns a very deep and prolonged economic downturn a period in which output and employment are falling a period in which output and employment are rising

an alternation between economic upturns and downturns

The downward-sloping aggregate demand curve indicates ______ relationship between the price level and real GDP. Multiple choice question. a direct a significant an inverse a positive

an inverse

The aggregate demand curve slopes downward because it reflects: Multiple choice question. an inverse relationship between the price level and the amount of real output demanded a direct relationship between the price level and the amount of of real output demanded

an inverse relationship between the price level and the amount of real output demanded

According to John Maynard Keynes, in the long run we are all _______. Multiple choice question. given short shrift by the economic system economically compromised profitable dead

dead

A higher price level (increases/decreases) the real value or purchasing power of the public's accumulated savings balances.

decreases

Keynesian and monetary theories of short-run macro instability emphasize the role of aggregate _____ shifts. Multiple choice question. demand employment supply

demand

Some explanations of macroeconomic instability are said to be eclectic because they Multiple choice question. draw from both sides of the market. continually change. are not grounded in economic theory.

draw from both sides of the market.

Theories of instability that draw from both sides (demand AND supply) of the market are referred to as _____ explanations. Multiple choice question. eclectic merged patchwork

eclectic

When the price level rises, the value of real GDP demanded will _____. Multiple choice question. fall rise stay the same

fall

The total market value of final goods and services that could be produced in a given time period at full employment is called ________. Multiple choice question. full-employment GDP equilibrium GDP inflationary GDP

full-employment GDP

If current production equals the economy's capacity production, then the economy has achieved Multiple choice question. a zero rate of unemployment. price stability. full-employment GDP.

full-employment GDP.

A main debate between the Classical economists and Keynesian economists was related to: Multiple choice question. measurement of unemployment government intervention the existence of business cycles

government intervention

When the economy grows at 2 percent or less, this is called a ______. Multiple choice question. depression full recovery recession growth recession

growth recession

Regulations imposed on firms by the government ______. Multiple choice question. increase per-unit production costs and shift the aggregate supply curve to the left decrease per-unit production costs and shift the aggregate supply curve to the right increase per-unit production costs and shift the aggregate supply curve to the right decrease per-unit production costs and shift the aggregate supply curve to the left

increase per-unit production costs and shift the aggregate supply curve to the left

World War II (increased/decreased) the demand for goods and services, causing GDP to increase and ending the Great Depression.

increased

Which of the following effects does not help explain why the aggregate demand curve is downward sloping? Multiple choice question. foreign trade effect inflation effect interest rate effect real balances effect

inflation effect

The two potential problems with macro equilibrium are ______. Multiple select question. instability undesirability disequilibrium inflation

instability undesirability

Which of the following effects help explain why the aggregate demand curve is downward sloping? Multiple select question. inflation effect interest rate effect foreign trade effect real balances effect

interest rate effect foreign trade effect real balances effect

laissez faire follows the doctrine of "leave it alone," of nonintervention by government in the market mechanism.

laissez faire

The combination of prices and real output that is compatible with both aggregate demand and aggregate supply is called the _______. Multiple choice question. micro equilibrium inflation constant equilibrium real GDP equilibrium macro equilibrium

macro equilibrium

The idea that small disturbances in output, prices, or unemployment were likely to be magnified, not muted, by the invisible hand of the marketplace is describing _______. Multiple choice question. laissez-faire market instability inflationary pressures

market instability

The intensity and duration of the decline in GDP during the Great Depression was ______ the more recent U.S. recessions. Multiple choice question. similar to more mild than more severe than

more severe than

Multiple Choice QuestionYour Answer correct Economic performance (as measured by real GDP) is at its maximum during a _______ and at a minimum during a _______. trough; peak trend; growth peak; trough growth; trend

peak; trough

If the long-run AS curve is vertical, then shifts in AD will only affect the level of _____ in the long run. Multiple choice question. prices employment output

prices

The ______ occurs when a higher price level reduces the purchasing power of the public's accumulated savings balances. Multiple choice question. real balances effect price level effect interest rate effect international trade effect

real balances effect

If the quantity of real GDP demanded is falling, then it must be the case that the price level is _____. Multiple choice question. falling rising unchanging

rising

If the quantity of real GDP demanded is falling, then it must be the case that the price level is _____. Multiple choice question. falling unchanging rising

rising

If the long-run AS curve is vertical and we observe a long-run decline in the price level, then it must be the case that AD has Multiple choice question. shifted rightward. flattened. shifted leftward. itself become vertical.

shifted leftward.

Two main debates between the Classical economists and Keynesian economists were related to: Multiple select question. the economy's self-adjustment. the existence of business cycles. government intervention. measurement of unemployment.

the economy's self-adjustment. government intervention.

The lowest point on the business cycle that immediately precedes an expansion is called a(n) trough.

trough

That the equilibrium price or output level may not satisfy our macroeconomic goals is the problem of undesirability.

undesirability

In the short run, the aggregate supply curve likely slopes _______. Multiple choice question. upward downward

upward