Econ Ch. 10 Quiz

greater, outward

When the Fed Reserve increases the money supply, at a given price level the amt of output demanded is --and the AD curve shifts -- A) greater, inward B) greater, outward C) lower, inward D) lower, outward

the intro and greater availability of credit cards

Which of the following is an example of a demand shock? A) unions obtain a substantial wage increase B) a drought that destroys agricultural crops C) the intro and greater availability of credit cards D) a large oil price increase

slowdown, slowdown

A decline in the Index of Supplier Deliveries is typically an indicator of a future _____ in economic production, and a narrowing of the interest rate spread between the 10-year Treasury note and 3-month Treasury bill is typically an indicator of a future _____ in economic production. A) increase; slowdown B) increase; increase C) slowdown; increase D) slowdown; slowdown

demand can affect output and employment in the SR, whereas supply is the ruling force in the LR

A difference between the economic LR and SR is that A) demand can affect output and employment in the short run, whereas supply is the ruling force in the long run B) prices and wages are sticky in the long run only. C) the classical dichotomy holds in the short run but not in the long run. D) monetary and fiscal policy affect output only in the long run

higher, lower

According to the quantity theory of money, if output is higher, -- real balances are required, and for fixed M this means -- P A) lower, higher B) higher, lower C) lower, lower D) higher, higher

output, prices

Assume that the economy starts from long-run equilibrium. If the Federal Reserve increases the money supply, then ______ increase(s) in the short run and ______ increase(s) in the long run. A) prices; prices B) prices; output C) output; output D) output; prices

both central bank a and b should increase the quantity of money

If Central Bank A cares only about keeping the price level stable and Central Bank B cares only about keeping output at its natural level, then in response to an exogenous decrease in the velocity of money: A) Central Bank A should increase the quantity of money whereas Central Bank B should keep it stable. B) both Central Bank A and Central Bank B should increase the quantity of money. C) Central Bank A should keep the quantity of money stable whereas Central Bank B should increase it. D) both Central Bank A and Central Bank B should keep the quantity of money stable.

increase the demand for money

If a change in government regulations allows banks to start paying interest on checking accounts, this will A) increase the demand for money B) have no effect on the demand for money C) decrease the demand for money D) increase the demand for currency but decrease the demand for checking accounts

higher, lower

If the short-run aggregate supply curve is horizontal, an increase in union aggressiveness that pushes wages and prices up will result in ______ prices and ______ output in the short run. A) higher; lower B) higher; higher C) lower; lower D) lower; higher

prices to rise and output to fall

In the SR an adverse supply shock causes A) both prices and output to rise B) prices to rise and output to fall C) both prices and output to fall D) prices to fall and output to rise

weaker, stronger

Measures of average workweeks and of supplier deliveries (vendor performance) are included in the index of leading indicators, because shorter workweeks tend to indicate -- future economic activity and slower deliveries tend to indicate -- future economic activity A) weaker, weaker B) weaker, stronger C) stronger, weaker D) stronger, stronger

is more volatile than

Over the business cycle, investment spending -- consumption spending A) is more volatile than B) has about the same volatility as C) is less volatile than D) is inversely correlated with

during which prices are flexible

The LR refers to a period A) during which capital and labor are sometimes not fully employed B) during which prices are flexbile C) of decades D) during which output deviates from the full-employment level

combinations of P and Y for a given value of M

The aggregate demand curve tells us possible A) combos of M and Y for a given value of P B) combos of M and P for a given value of Y C) combos of P and Y for a given value of M D) results if the Fed reduces the money supply

below

The price level decreases and output increases in the transition from the SR to the LR when the SR equilibrium is -- the natural rate of output in the SR A) above B) either above or below C) equal to D) below

increase by 5 percent

The version of Okun's law studied in Chapter 10 assumes that with no change in unemployment, real GDP normally grows by 3 percent over a year. If the unemployment rate fell by 1 percentage point over a year, Okun's law predicts that real GDP would: A) increase by 5 percent. B) decrease by 2 percent. C) increase by 4 percent. D) decrease by 1 percent

money supply

The vertical LRAS satisfies the classical dichotomy because the natural rate of output does not depend on A) the labor supply B) technology C) the money supply D) the supply of capital