Question 1

The Keynesian aggregate expenditure model best describes the economy in the ________ run when prices are ________.

Accepted Answer

A)  long; fixed 
B)  short; variable 
C)  long; variable 
D)  short; fixed 
A)  long; fixed 
B)  short; variable 
C)  long; variable 
D)  short; fixed D

Question 2

Keynesian economists believe that

Accepted Answer

A)  the economy automatically adjusts towards full employment. 
B)  monetary policy causes business cycles. 
C)  there are no business cycles. 
D)  activist government policy is needed to get the economy to full employment. 
A)  the economy automatically adjusts towards full employment. 
B)  monetary policy causes business cycles. 
C)  there are no business cycles. 
D)  activist government policy is needed to get the economy to full employment. D

Question 3

Suppose that a severe shock that decreases investment demand hits the United States.Which of the following can we expect to occur according to the real business cycle model?

Accepted Answer

A)  The Fed will lower the federal funds rate. 
B)  The structural deficit will increase. 
C)  The real wage rate will rise. 
D)  The real interest rate will fall. 
A)  The Fed will lower the federal funds rate. 
B)  The structural deficit will increase. 
C)  The real wage rate will rise. 
D)  The real interest rate will fall. D

Question 4

The Keynesian aggregate expenditure model focuses on changes in

Accepted Answer

A)  the price level. 
B)  real GDP. 
C)  potential GDP. 
D)  the SAS curve. 
A)  the price level. 
B)  real GDP. 
C)  potential GDP. 
D)  the SAS curve.

Question 5

Suppose disposable income increases from $11 trillion to $12 trillion.At the same time,consumption expenditure increases from $4.2 trillion to ________.Thus the MPC must equal ________.

Accepted Answer

A)  $5.0 trillion; 0.50 
B)  $5.0 trillion; 0.80 
C)  $4.4 trillion; 0.40 
D)  $5.5 trillion; 0.50 
A)  $5.0 trillion; 0.50 
B)  $5.0 trillion; 0.80 
C)  $4.4 trillion; 0.40 
D)  $5.5 trillion; 0.50

Question 6

At potential GDP

Accepted Answer

A)  there is no unemployment but there is not necessarily full employment. 
B)  there is no unemployment and there is full employment. 
C)  unemployment is at its natural rate. 
D)  None of the above is correct. 
A)  there is no unemployment but there is not necessarily full employment. 
B)  there is no unemployment and there is full employment. 
C)  unemployment is at its natural rate. 
D)  None of the above is correct.

Question 7

The level of potential GDP

Accepted Answer

A)  increases when the inflation rate rises. 
B)  rises and falls with the business cycle. 
C)  determines the location of the long-run aggregate supply curve. 
D)  changes when cyclical unemployment changes. 
A)  increases when the inflation rate rises. 
B)  rises and falls with the business cycle. 
C)  determines the location of the long-run aggregate supply curve. 
D)  changes when cyclical unemployment changes.

Question 8

Which of the following is true?

Accepted Answer

A)  The structural deficit changes over the business cycle. 
B)  MPS + MPC = 1. 
C)  At equilibrium expenditure, unplanned changes in inventory must be positive. 
D)  In the real business cycle model, there is no AD curve. 
A)  The structural deficit changes over the business cycle. 
B)  MPS + MPC = 1. 
C)  At equilibrium expenditure, unplanned changes in inventory must be positive. 
D)  In the real business cycle model, there is no AD curve.

Question 9

The marginal propensity to consume measures

Accepted Answer

A)  the cyclical deficit. 
B)  the structural deficit. 
C)  how much consumption expenditure occurs at the equilibrium level of income. 
D)  how much of a change in consumption expenditure results from a change in disposable income. 
A)  the cyclical deficit. 
B)  the structural deficit. 
C)  how much consumption expenditure occurs at the equilibrium level of income. 
D)  how much of a change in consumption expenditure results from a change in disposable income.

Question 10

The impulse leading to business cycles in the Keynesian model is changes in

Accepted Answer

A)  the structural deficit. 
B)  open market operations. 
C)  business confidence. 
D)  the expected future price level. 
A)  the structural deficit. 
B)  open market operations. 
C)  business confidence. 
D)  the expected future price level.

Question 11

Keynesians and monetarists believe that economic fluctuations are caused

Accepted Answer

A)  by shifts in both the AS and AD curves. 
B)  largely by shifts in the AD curve. 
C)  changes in the structural deficit. 
D)  by fiscal policy. 
A)  by shifts in both the AS and AD curves. 
B)  largely by shifts in the AD curve. 
C)  changes in the structural deficit. 
D)  by fiscal policy.

Question 12

The growth rate of productivity is a major feature of

Accepted Answer

A)  Keynesian and monetarist economists. 
B)  monetarist economists. 
C)  real business cycle economists. 
D)  why the marginal propensity to consume is less than 1.0. 
A)  Keynesian and monetarist economists. 
B)  monetarist economists. 
C)  real business cycle economists. 
D)  why the marginal propensity to consume is less than 1.0.

Question 13

If the Fed increases the quantity of money,________ economists believe that the ________.

Accepted Answer

A)  Keynesian; aggregate supply curve shifts rightward 
B)  Keynesian; structural deficit increases 
C)  monetarist; cyclical deficit increases 
D)  monetarist; aggregate demand curve shifts rightward 
A)  Keynesian; aggregate supply curve shifts rightward 
B)  Keynesian; structural deficit increases 
C)  monetarist; cyclical deficit increases 
D)  monetarist; aggregate demand curve shifts rightward

Question 14

Classical economists believe that the economy

Accepted Answer

A)  requires activist government intervention to reach its potential level of GDP. 
B)  is self-regulating and does not require government intervention. 
C)  can be affected by only monetary policy. 
D)  is persistently below its potential level of GDP. 
A)  requires activist government intervention to reach its potential level of GDP. 
B)  is self-regulating and does not require government intervention. 
C)  can be affected by only monetary policy. 
D)  is persistently below its potential level of GDP.

Question 15

The presence of imports ________ the size of the ________.

Accepted Answer

A)  increases; government budget deficit 
B)  increases; multiplier 
C)  decreases; multiplier 
D)  decreases; government budget deficit 
A)  increases; government budget deficit 
B)  increases; multiplier 
C)  decreases; multiplier 
D)  decreases; government budget deficit

Question 16

The multiplier effect

Accepted Answer

A)  is nonexistent in the Keynesian model. 
B)  has no effect if the cyclical deficit is positive. 
C)  magnifies small changes in spending into larger changes in output and income. 
D)  increases the MPC. 
A)  is nonexistent in the Keynesian model. 
B)  has no effect if the cyclical deficit is positive. 
C)  magnifies small changes in spending into larger changes in output and income. 
D)  increases the MPC.

Question 17

Business cycles result when

Accepted Answer

A)  aggregate demand grows faster than potential GDP. 
B)  the labor force participation rate changes. 
C)  aggregate supply and aggregate demand change at an uneven pace. 
D)  real GDP equals potential GDP. 
A)  aggregate demand grows faster than potential GDP. 
B)  the labor force participation rate changes. 
C)  aggregate supply and aggregate demand change at an uneven pace. 
D)  real GDP equals potential GDP.

Question 18

A recessionary gap occurs when

Accepted Answer

A)  the short-run aggregate supply curve shifts rightward. 
B)  real GDP is less than potential GDP. 
C)  the economy is at its long-run equilibrium. 
D)  government interferes with the economy. 
A)  the short-run aggregate supply curve shifts rightward. 
B)  real GDP is less than potential GDP. 
C)  the economy is at its long-run equilibrium. 
D)  government interferes with the economy.

Question 19

If the economy is at the natural unemployment rate,

Accepted Answer

A) real GDP > potential GDP. B) real GDP < potential GDP. C) real GDP = potential GDP. D) All of the above can occur when the economy is at the natural unemployment rate. A) real GDP > potential GDP. B) real GDP < potential GDP. C) real GDP = potential GDP. D) All of the above can occur when the economy is at the natural unemployment rate.

Question 20

Which of the following leads to an rightward shift in the short-run Phillips curve?
I. a reduction in inflationary expectations.
II. an increase in the natural rate of unemployment.
III. an increase in the velocity of circulation

Accepted Answer

A)  I only 
B)  II only 
C)  I and II 
D)  I and III 
A)  I only 
B)  II only 
C)  I and II 
D)  I and III

The Keynesian aggregate expenditure model best describes the economy in the run when prices are .

Keynesian economists believe that

Suppose that a severe shock that decreases investment demand hits the United States.Which of the following can we expect to occur according to the real business cycle model?

The Keynesian aggregate expenditure model focuses on changes in

Suppose disposable income increases from $11 trillion to $12 trillion.At the same time,consumption expenditure increases from $4.2 trillion to .Thus the MPC must equal .

At potential GDP

The level of potential GDP

Which of the following is true?

The marginal propensity to consume measures

The impulse leading to business cycles in the Keynesian model is changes in

Keynesians and monetarists believe that economic fluctuations are caused

The growth rate of productivity is a major feature of

If the Fed increases the quantity of money, economists believe that the .

Classical economists believe that the economy

The presence of imports the size of the .

The multiplier effect

Business cycles result when

A recessionary gap occurs when

If the economy is at the natural unemployment rate,

Which of the following leads to an rightward shift in the short-run Phillips curve? I. a reduction in inflationary expectations. II. an increase in the natural rate of unemployment. III. an increase in the velocity of circulation

What Is Economics

The Economic Problem

Demand and Supply

Measuring GDP and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, The Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers

Inflation, Jobs, and the Business Cycle

Fiscal Policy

Monetary Policy

International Trade Policy

Introduction

Monitoring Macroeconomic Performance

Macroeconomic Trends

Macroeconomic Policy

Filters

Exam 19: Macroeconomic Fluctuations

The Keynesian aggregate expenditure model best describes the economy in the ________ run when prices are ________.

Keynesian economists believe that

Suppose that a severe shock that decreases investment demand hits the United States.Which of the following can we expect to occur according to the real business cycle model?

The Keynesian aggregate expenditure model focuses on changes in

Suppose disposable income increases from $11 trillion to $12 trillion.At the same time,consumption expenditure increases from $4.2 trillion to ________.Thus the MPC must equal ________.

At potential GDP

The level of potential GDP

Which of the following is true?

The marginal propensity to consume measures

The impulse leading to business cycles in the Keynesian model is changes in

Keynesians and monetarists believe that economic fluctuations are caused

The growth rate of productivity is a major feature of

If the Fed increases the quantity of money,________ economists believe that the ________.

Classical economists believe that the economy

The presence of imports ________ the size of the ________.

The multiplier effect

Business cycles result when

A recessionary gap occurs when

If the economy is at the natural unemployment rate,

Which of the following leads to an rightward shift in the short-run Phillips curve? I. a reduction in inflationary expectations. II. an increase in the natural rate of unemployment. III. an increase in the velocity of circulation

What Is Economics

The Economic Problem

Demand and Supply

Measuring GDP and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, The Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers

Inflation, Jobs, and the Business Cycle

Fiscal Policy

Monetary Policy

International Trade Policy

Introduction

Monitoring Macroeconomic Performance

Macroeconomic Trends

Macroeconomic Policy

Filters

The Keynesian aggregate expenditure model best describes the economy in the run when prices are .

Suppose disposable income increases from $11 trillion to $12 trillion.At the same time,consumption expenditure increases from $4.2 trillion to .Thus the MPC must equal .

If the Fed increases the quantity of money, economists believe that the .

The presence of imports the size of the .