QUESTION 2

As the aggregate demand curve shifts leftward along a given aggregate supply curve,

               a. unemployment is higher and inflation is lower.

               b. unemployment is lower and inflation is higher.

               c. unemployment and inflation are higher.

               d. unemployment and inflation are lower.

 

QUESTION 3

If there is an adverse supply shock and the Federal Reserve responds by increasing the growth rate of the money supply, then in the short run the Federal Reserveâs action

a.      lowers both inflation and unemployment.

b.     lowers inflation but raises unemployment.

c.      raises inflation but lowers unemployment.

d.     raises both inflation and unemployment.

 

QUESTION 4

A policy that results in slow and steady growth of the money supply is an example of

               a. a âpracticalâ monetary policy.

               b. a âpassiveâ monetary policy.

               c. an âactiveâ monetary policy.

               d. an âeasyâ monetary policy.

 

QUESTION 6

According to liquidity preference theory, a decrease in money demand for some reason other than a change in the price level causes

               a.           the interest rate to fall, so aggregate demand shifts left.

               b.           the interest rate to rise, so aggregate demand shifts right.

               c.            he interest rate to rise, so aggregate demand shifts left.

               d.           the interest rate to fall, so aggregate demand shifts right.

 

QUESTION 7

A shock increases the costs of production. Given the effects of this shock, if the central bank wants to return the unemployment rate towards its previous level it would

               a.           decrease the rate at which the money supply increases. This will also move inflation closer to its original rate

               b.           decrease the rate at which the money supply increases. However, this will make higher than its previous rate.

               c.            increase the rate at which the money supply increases. This will also move inflation closer to its previous rate..

               d.           increase the rate at which the money supply increases. However, this will make inflation higher than its previous rate

 

QUESTION 10

As real GDP falls,

               a.           money demand rises, so the interest rate falls

               b.           money demand falls, so the interest rate falls.

               c.            money demand rises, so the interest rate rises.

               d.           money demand falls, so the interest rate rises.

 

QUESTION 14

An example of an automatic stabilizer is

               a.           a lowering of interest rates by the Fed.

               b.           unemployment benefits.

               c.            a decrease in money demand.

               d.           a decrease in tax rates in response to a recession.

 

QUESTION 17

Initially, the economy is in long-run equilibrium. Aggregate demand then shifts leftward by $50 billion. The government wants to increase its spending in order to avoid a recession. If the crowding-out effect is always one-third as strong as the multiplier effect, and if the MPC equals 0.6, then by how much do government purchases have to increase in order to offset the $50 billion leftward shift?

               a.           by $90 billion

               b.           by $30 billion

               c.            by $60 billion

               d.           by $20 billion

 

QUESTION 19

A policy change that changes the natural rate of unemployment changes

               a.           both the long-run Phillips curve and the long-run aggregate supply curve.

               b.           the long-run aggregate supply curve, but not the long-run Phillips curve.

               c.            the long-run Phillips curve, but not the long-run aggregate supply curve.

               d.           neither the long-run Phillips curve nor the long-run aggregate supply curve.

 

QUESTION 20

If taxes rise, then aggregate demand shifts

               a.           left, making unemployment lower than otherwise.

               b.           right, making unemployment lower than otherwise.

               c.            left, making unemployment higher than otherwise.

               d.           right, making unemployment higher than otherwise.

 

 

QUESTION 28

A significant example of a temporary tax cut was the one announced in 1992 by President George H. W. Bush. The effect of that tax cut on consumer spending and aggregate demand was

               a.           zero.

               b.           likely larger than if the cut had been permanent.

               c.            likely about the same as if the cut had been permanent.

               d.           likely smaller than if the cut had been permanent.

 

QUESTION 30

Consider two countries: Eastland and Westland. Eastlandâs long-run Phillips curve sits further to the right than does Westlandâs long-run Phillips curve. Eastland and Westland are identical in all other ways. In particular, they have the same money supply growth rates. In the long run, compared to Westland, which of the following will we observe in Eastland?

               a.           higher unemployment and higher inflation.

               b.           higher unemployment and the same rate of inflation.

               c.            lower unemployment and higher inflation.

               d.           None of the above is correct

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Status NEW Posted 03 May 2017 03:05 AM My Price 20.00

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