Question 1

The profit effect occurs because,in the short run,resource costs typically do not increase as rapidly as the price of goods and services.
Some costs,like labor contracts or rents,do not immediately increase when the price level rises.

Accepted Answer

A) True 
 B)False

Question 2

In which of the following situations is the percentage change in real GDP always positive?

Accepted Answer

A)  Depression.
B)  Inflation.
C)  Recession.
D)  Growth recession.E) A) and B)
F) B) and C)

Question 3

The unique situation in which the behavior of buyers and sellers is compatible is referred to as

Accepted Answer

A)  Full-employment GDP.
B)  Macro equilibrium.
C)  Micro equilibrium.
D)  Labor market balance.E) B) and D)
F) A) and D)

Question 4

Assume you have $2,000 in a savings account at the beginning of the year and the price level is equal to 100.If the price level is equal to 120 at the end of the year,the real value of your savings is closest to

Accepted Answer

A)  $1,667.
B)  $1,880.
C)  $2,120.
D)  $2,400.E) B) and C)
F) None of the above

Question 5

1 and AS1.Which curve would have shifted,and in what direction would it have shifted,if a new equilibrium were to occur at an output level of $300 billion and a price level of P3 in Figure 8.3? A) Aggregate supply would have shifted to the left. B) Aggregate supply would have shifted to the right. C) Aggregate demand would have shifted to the left. D) Aggregate demand would have shifted to the right." class="answers-bank-image d-inline" rel="preload" > Assume the economy is initially in equilibrium on AD1 and AS1.Which curve would have shifted,and in what direction would it have shifted,if a new equilibrium were to occur at an output level of $300 billion and a price level of P3 in Figure 8.3?

Accepted Answer

A)  Aggregate supply would have shifted to the left.
B)  Aggregate supply would have shifted to the right.
C)  Aggregate demand would have shifted to the left.
D)  Aggregate demand would have shifted to the right.E) B) and D)
F) A) and D)

Question 6

1 and AS1 in Figure 8.3,the classical approach to achieving full employment at an output of $300 billion would be to A) Increase taxes and increase government spending to shift AD1 to AD2. B) Increase the growth of the money supply to shift AD1 to AD2. C) Do nothing and wait for  natural  market forces to achieve full employment. D) Use all available supply-side options." class="answers-bank-image d-inline" rel="preload" > Given AD1 and AS1 in Figure 8.3,the classical approach to achieving full employment at an output of $300 billion would be to

Accepted Answer

A)  Increase taxes and increase government spending to shift AD1 to AD2.
B)  Increase the growth of the money supply to shift AD1 to AD2.
C)  Do nothing and wait for "natural" market forces to achieve full employment.
D)  Use all available supply-side options.E) All of the above
F) B) and D)

Question 7

One World View article is titled "Global Depression." The countries that experienced the Depression

Accepted Answer

A)  Experienced GDP growth but at a rate below the long-term trend.
B)  Experienced higher employment levels than previously recorded.
C)  Suffered substantial losses of output and employment.
D)  Experienced high unemployment but an increase in output.E) All of the above
F) B) and C)

Question 8

1 and AS1 in Figure 8.3,the Keynesian approach to achieving a higher level of output would be to A) Impose price controls. B) Increase the growth of the money supply to shift AS1 to AS2. C) Do nothing. D) Employ an expansionary fiscal policy." class="answers-bank-image d-inline" rel="preload" > Given AD1 and AS1 in Figure 8.3,the Keynesian approach to achieving a higher level of output would be to

Accepted Answer

A)  Impose price controls.
B)  Increase the growth of the money supply to shift AS1 to AS2.
C)  Do nothing.
D)  Employ an expansionary fiscal policy.E) None of the above
F) All of the above

Question 9

Which of the following caused a recession in the years immediately following World War II?

Accepted Answer

A)  A surge in investment spending.
B)  Pent-up demand for consumer goods.
C)  Cutbacks in defense production.
D)  Technological advances.E) C) and D)
F) B) and C)

Question 10

Keynesian levers include

Accepted Answer

A)  Deregulation.
B)  Fiscal policy.
C)  Monetary policy.
D)  Aggregate supply.E) A) and B)
F) All of the above

Question 11

Which of the following is generally considered a desirable outcome of government intervention?

Accepted Answer

A)  More jobs.
B)  A higher price level.
C)  Higher unemployment rates.
D)  Greater deficits.E) A) and C)
F) B) and C)

Question 12

The laissez faire view of government involvement in the economy is most consistent with the

Accepted Answer

A)  Classical theory.
B)  Keynesian theory.
C)  Monetary theory.
D)  Supply-side theory.E) C) and D)
F) B) and D)

Question 13

Which of the following is a potential problem at macro equilibrium?

Accepted Answer

A)  It is inconsistent with the macroeconomic goals.
B)  A surplus of goods exists.
C)  A shortage of goods exists.
D)  The economy is permanently stuck there.E) C) and D)
F) A) and D)

Question 14

Ceteris paribus,if average prices in the U.S.economy fall,then the

Accepted Answer

A)  Real balances effect will lead to a lower quantity of U.S.output demanded.
B)  Foreign trade effect will lead to a lower quantity of U.S.output demanded.
C)  Interest rate effect will lead to a higher quantity of U.S.output demanded.
D)  Cost effect will lead to a higher quantity of U.S.output demandeD.As the price level falls,interest rates fall,so spending on interest-sensitive items such as cars and plasma TVs increases.Even with a constant quantity of nominal money,interest rates fall because a decrease in the price level causes an increase in the supply of real money in a lending institution.E) A) and B)
F) A) and C)

Question 15

Which of the following is true about business cycles in the United States?

Accepted Answer

A)  They are remarkably similar in length but vary greatly in intensity.
B)  They vary greatly in length,frequency,and intensity.
C)  They are similar in frequency and intensity but not in length.
D)  They are similar in length,frequency,and intensity.E) B) and D)
F) B) and C)

Question 16

Both Keynesian and monetarist theories emphasize the potential of aggregate demand shifts to alter macro outcomes.
By altering spending,taxes,or the money supply,we can manipulate the AD curve.

Accepted Answer

A) True 
 B)False

Question 17

1 and full-employment real output is Q2,an appropriate monetarist policy lever would be to increase A) AD by decreasing income taxes. B) AS by increasing the money supply. C) AD by reducing interest rates. D) AD by reducing government regulations." class="answers-bank-image d-inline" rel="preload" > In Figure 8.5,if equilibrium real output is Q1 and full-employment real output is Q2,an appropriate monetarist policy lever would be to increase

Accepted Answer

A)  AD by decreasing income taxes.
B)  AS by increasing the money supply.
C)  AD by reducing interest rates.
D)  AD by reducing government regulations.E) B) and C)
F) All of the above

Question 18

Before the year 2000,the most prolonged departure from the long-term growth path for the United States occurred during

Accepted Answer

A)  The 1980s.
B)  The Great Depression.
C)  World War II.
D)  The years following World War II.E) A) and D)
F) B) and C)

Question 19

All of the following can be used to measure macroeconomic performance except for the

Accepted Answer

A)  Total real value of goods and services produced.
B)  Average price level of goods and services.
C)  International value of the dollar.
D)  Growth rate of the population.E) None of the above
F) A) and B)

Question 20

The government can "prime the pump" by doing all of the following except

Accepted Answer

A)  Buying more output.
B)  Employing more people.
C)  Making more money available.
D)  Raising taxes.E) B) and C)
F) A) and D)

Exam 8: The Business Cycle

Before the year 2000,the most prolonged departure from the long-term growth path for the United States occurred during

Correct AnswerverifiedShow Answer

Assume the economy is initially in equilibrium on AD1 and AS1.Which curve would have shifted,and in what direction would it have shifted,if a new equilibrium were to occur at an output level of $300 billion and a price level of P3 in Figure 8.3?

Correct AnswerverifiedShow Answer

Which of the following is a potential problem at macro equilibrium?

Correct AnswerverifiedShow Answer

Both Keynesian and monetarist theories emphasize the potential of aggregate demand shifts to alter macro outcomes. By altering spending,taxes,or the money supply,we can manipulate the AD curve.

Correct AnswerverifiedShow Answer

Given AD1 and AS1 in Figure 8.3,the Keynesian approach to achieving a higher level of output would be to

Correct AnswerverifiedShow Answer

The profit effect occurs because,in the short run,resource costs typically do not increase as rapidly as the price of goods and services. Some costs,like labor contracts or rents,do not immediately increase when the price level rises.

Correct AnswerverifiedShow Answer

In which of the following situations is the percentage change in real GDP always positive?

Correct AnswerverifiedShow Answer

All of the following can be used to measure macroeconomic performance except for the

Correct AnswerverifiedShow Answer

One World View article is titled "Global Depression." The countries that experienced the Depression

Correct AnswerverifiedShow Answer

Assume you have $2,000 in a savings account at the beginning of the year and the price level is equal to 100.If the price level is equal to 120 at the end of the year,the real value of your savings is closest to

Correct AnswerverifiedShow Answer

Which of the following is true about business cycles in the United States?

Correct AnswerverifiedShow Answer

Which of the following is generally considered a desirable outcome of government intervention?

Correct AnswerverifiedShow Answer

The unique situation in which the behavior of buyers and sellers is compatible is referred to as

Correct AnswerverifiedShow Answer

Keynesian levers include

Correct AnswerverifiedShow Answer

The laissez faire view of government involvement in the economy is most consistent with the

Correct AnswerverifiedShow Answer

Which of the following caused a recession in the years immediately following World War II?

Correct AnswerverifiedShow Answer

In Figure 8.5,if equilibrium real output is Q1 and full-employment real output is Q2,an appropriate monetarist policy lever would be to increase

Correct AnswerverifiedShow Answer

Given AD1 and AS1 in Figure 8.3,the classical approach to achieving full employment at an output of $300 billion would be to

Correct AnswerverifiedShow Answer

Ceteris paribus,if average prices in the U.S.economy fall,then the

Correct AnswerverifiedShow Answer

The government can "prime the pump" by doing all of the following except

Correct AnswerverifiedShow Answer

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Assume the economy is initially in equilibrium on AD₁ and AS₁.Which curve would have shifted,and in what direction would it have shifted,if a new equilibrium were to occur at an output level of $300 billion and a price level of P₃ in Figure 8.3?

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Given AD₁ and AS₁ in Figure 8.3,the Keynesian approach to achieving a higher level of output would be to

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In Figure 8.5,if equilibrium real output is Q₁ and full-employment real output is Q₂,an appropriate monetarist policy lever would be to increase

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Given AD₁ and AS₁ in Figure 8.3,the classical approach to achieving full employment at an output of $300 billion would be to

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