Question 1

Which of the following models has as its central idea that workers and firms have rational expectations?

Accepted Answer

A)  Monetarist model 
B)  New classical model 
C)  Real business cycle model 
D)  New Keynesian model 
A)  Monetarist model 
B)  New classical model 
C)  Real business cycle model 
D)  New Keynesian model

Question 2

Briefly explain the schools of thought that dispute Keynesian or New Keynesian aggregate demand and aggregate supply modelling.
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

Supporters of the monetarist model argue

Question 3

Explain how the economy moves back to full employment after a recession.
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

When an economy enters a recession,sales

Question 4

According to the real business cycle model,increases in aggregate demand

Accepted Answer

A)  raise GDP. 
B)  lower GDP. 
C)  do not affect GDP. 
D)  lower the price level. 
A)  raise GDP. 
B)  lower GDP. 
C)  do not affect GDP. 
D)  lower the price level.

Question 5

Which of the following explains why the rate of unemployment continues to rise once a recession is over?

Accepted Answer

A)  Discouraged workers leave the labour force. 
B)  Wages rise faster than productivity increases so firms are reluctant to hire workers. 
C)  Firms are operating below capacity for some time after the recession is finished. 
D)  The unemployment rate does not continue to rise after a recession is over. 
A)  Discouraged workers leave the labour force. 
B)  Wages rise faster than productivity increases so firms are reluctant to hire workers. 
C)  Firms are operating below capacity for some time after the recession is finished. 
D)  The unemployment rate does not continue to rise after a recession is over.

Question 6

According to Karl Marx (1867),which of the following factors of production did not contribute anything of value to production?

Accepted Answer

A)  Labour 
B)  Capital 
C)  Natural resources 
D)  Entrepreneurship 
A)  Labour 
B)  Capital 
C)  Natural resources 
D)  Entrepreneurship

Question 7

The long-run aggregate supply curve shows the maximum output possible for an economy and,therefore,does not shift.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is true of the short-run aggregate supply curve?

Accepted Answer

A)  It has a negative slope 
B)  It has a vertical slope 
C)  It has a positive slope 
D)  It has a horizontal slope 
A)  It has a negative slope 
B)  It has a vertical slope 
C)  It has a positive slope 
D)  It has a horizontal slope

Question 9

What type of consumer good is most affected by the business cycle-durable goods or non-durable goods? Why?
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

Some workers lose income during an econo

Question 10

What is the result of an increase in the price level?

Accepted Answer

A)  It will shift the short-run aggregate supply curve to the left. 
B)  It will shift the short-run aggregate supply curve to the right. 
C)  It will move the economy down along a stationary short-run aggregate supply curve. 
D)  It will move the economy up along a stationary short-run aggregate supply curve. 
A)  It will shift the short-run aggregate supply curve to the left. 
B)  It will shift the short-run aggregate supply curve to the right. 
C)  It will move the economy down along a stationary short-run aggregate supply curve. 
D)  It will move the economy up along a stationary short-run aggregate supply curve.

Question 11

Workers and firms both expect that prices will be 4 per cent higher next year than they are this year.As a result

Accepted Answer

A)  workers will be willing to take lower wages next year. 
B)  the purchasing power of wages will rise if wages increase by 4 per cent. 
C)  the short-run aggregate supply curve will shift to the left as wages increase. 
D)  aggregate demand will increase by 4 per cent. 
A)  workers will be willing to take lower wages next year. 
B)  the purchasing power of wages will rise if wages increase by 4 per cent. 
C)  the short-run aggregate supply curve will shift to the left as wages increase. 
D)  aggregate demand will increase by 4 per cent.

Question 12

During the expansion phase of the business cycle,

Accepted Answer

A)  production increases. 
B)  employment decreases. 
C)  income decreases. 
D)  unemployment increases. 
A)  production increases. 
B)  employment decreases. 
C)  income decreases. 
D)  unemployment increases.

Question 13

Beginning at long-run equilibrium,(i)use the basic (static)aggregate demand and aggregate supply model to illustrate what happens in the short run when the economy suffers a supply shock,and (ii)use the basic (static)aggregate supply and demand model to illustrate what happens in the long run following this supply shock.
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

(i)In the following graph,the economy be

Question 14

'Stickiness' of wages and prices is considered unimportant in which of the following economic models?

Accepted Answer

A)  Keynesian supply and demand model 
B)  Monetarist model 
C)  New classical model 
D)  Real business cycle model 
A)  Keynesian supply and demand model 
B)  Monetarist model 
C)  New classical model 
D)  Real business cycle model

Question 15

When the price level rises,the interest rate effect states that wealth levels fall for all consumers as they have to withdraw more funds from banks to pay for their goods and services.

Accepted Answer

A) True 
 B)False

Question 16

The long-run aggregate supply curve shows the relationship between the ________ and ________.

Accepted Answer

A)  inflation rate; quantity of real GDP demanded 
B)  real interest rate; quantity of real GDP supplied 
C)  nominal interest rate; quantity of real GDP supplied 
D)  price level; quantity of real GDP supplied 
A)  inflation rate; quantity of real GDP demanded 
B)  real interest rate; quantity of real GDP supplied 
C)  nominal interest rate; quantity of real GDP supplied 
D)  price level; quantity of real GDP supplied

Question 17

The proponents of rational expectations and monetarism think that central banks should adopt

Accepted Answer

A)  an inflation target. 
B)  a monetary aggregate target. 
C)  a constant monetary growth rule. 
D)  an interest rate target. 
A)  an inflation target. 
B)  a monetary aggregate target. 
C)  a constant monetary growth rule. 
D)  an interest rate target.

Question 18

________ of unemployment during ________ make it easier for workers to ________ wages.

Accepted Answer

A)  High levels; a recession; accept lower 
B)  Low levels; an expansion; accept lower 
C)  Low levels; a recession; negotiate higher 
D)  High levels; an expansion; negotiate higher 
A)  High levels; a recession; accept lower 
B)  Low levels; an expansion; accept lower 
C)  Low levels; a recession; negotiate higher 
D)  High levels; an expansion; negotiate higher

Question 19

In the dynamic aggregate demand and aggregate supply model,the rate of inflation will increase if

Accepted Answer

A)  AD shifts faster than AS. 
B)  AD shifts slower than AS. 
C)  AS shifts faster than AD. 
D)  the price level rises. 
A)  AD shifts faster than AS. 
B)  AD shifts slower than AS. 
C)  AS shifts faster than AD. 
D)  the price level rises.

Question 20

When the price of oil rises unexpectedly,the price level ________ and the unemployment rate ________ in the short run.

Accepted Answer

A)  rises; falls 
B)  rises; rises 
C)  falls; falls 
D)  falls; rises 
A)  rises; falls 
B)  rises; rises 
C)  falls; falls 
D)  falls; rises

Which of the following models has as its central idea that workers and firms have rational expectations?

Briefly explain the schools of thought that dispute Keynesian or New Keynesian aggregate demand and aggregate supply modelling. _ _

Explain how the economy moves back to full employment after a recession. _ _

According to the real business cycle model,increases in aggregate demand

Which of the following explains why the rate of unemployment continues to rise once a recession is over?

According to Karl Marx (1867),which of the following factors of production did not contribute anything of value to production?

The long-run aggregate supply curve shows the maximum output possible for an economy and,therefore,does not shift.

Which of the following is true of the short-run aggregate supply curve?

What type of consumer good is most affected by the business cycle-durable goods or non-durable goods? Why? _ _

What is the result of an increase in the price level?

Workers and firms both expect that prices will be 4 per cent higher next year than they are this year.As a result

During the expansion phase of the business cycle,

'Stickiness' of wages and prices is considered unimportant in which of the following economic models?

When the price level rises,the interest rate effect states that wealth levels fall for all consumers as they have to withdraw more funds from banks to pay for their goods and services.

The long-run aggregate supply curve shows the relationship between the and .

The proponents of rational expectations and monetarism think that central banks should adopt

of unemployment during make it easier for workers to wages.

In the dynamic aggregate demand and aggregate supply model,the rate of inflation will increase if

When the price of oil rises unexpectedly,the price level and the unemployment rate in the short run.

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Where Prices Come From: the Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency,government Price Setting and Taxes

Technology,production and Costs

Firms in Perfectly Competitive Markets

Monopoly Markets

Monopolistic Competition and Oligopoly

The Markets for Labour and Other Factors of Production

Government Intervention in the Market

Social Policy and Inequality

Gdp: Measuring Total Production, income and Economic Growth

Unemployment and Inflation

Money,banks and the Reserve Bank of Australia

Monetary Policy

Fiscal Policy

Comparative Advantage and the Gains From International Trade

Macroeconomics in an Open Economy

Filters

Exam 15: Aggregate Demand and Aggregate Supply Analysis

Which of the following models has as its central idea that workers and firms have rational expectations?

Explain how the economy moves back to full employment after a recession. _____________________________________________________________________________________________ _____________________________________________________________________________________________

According to the real business cycle model,increases in aggregate demand

Which of the following explains why the rate of unemployment continues to rise once a recession is over?

According to Karl Marx (1867),which of the following factors of production did not contribute anything of value to production?

The long-run aggregate supply curve shows the maximum output possible for an economy and,therefore,does not shift.

Which of the following is true of the short-run aggregate supply curve?

What type of consumer good is most affected by the business cycle-durable goods or non-durable goods? Why? _____________________________________________________________________________________________ _____________________________________________________________________________________________

What is the result of an increase in the price level?

Workers and firms both expect that prices will be 4 per cent higher next year than they are this year.As a result

During the expansion phase of the business cycle,

'Stickiness' of wages and prices is considered unimportant in which of the following economic models?

When the price level rises,the interest rate effect states that wealth levels fall for all consumers as they have to withdraw more funds from banks to pay for their goods and services.

The long-run aggregate supply curve shows the relationship between the ________ and ________.

The proponents of rational expectations and monetarism think that central banks should adopt

________ of unemployment during ________ make it easier for workers to ________ wages.

In the dynamic aggregate demand and aggregate supply model,the rate of inflation will increase if

When the price of oil rises unexpectedly,the price level ________ and the unemployment rate ________ in the short run.

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Where Prices Come From: the Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency,government Price Setting and Taxes

Technology,production and Costs

Firms in Perfectly Competitive Markets

Monopoly Markets

Monopolistic Competition and Oligopoly

The Markets for Labour and Other Factors of Production

Government Intervention in the Market

Social Policy and Inequality

Gdp: Measuring Total Production, income and Economic Growth

Unemployment and Inflation

Money,banks and the Reserve Bank of Australia

Monetary Policy

Fiscal Policy

Comparative Advantage and the Gains From International Trade

Macroeconomics in an Open Economy

Filters

Explain how the economy moves back to full employment after a recession. _ _

What type of consumer good is most affected by the business cycle-durable goods or non-durable goods? Why? _ _

The long-run aggregate supply curve shows the relationship between the and .

of unemployment during make it easier for workers to wages.

When the price of oil rises unexpectedly,the price level and the unemployment rate in the short run.