Question 1

Which of the following does NOT contribute to an economy's long-run potential growth rate?

Accepted Answer

A)  the average rate of inflation 
B)  the level of technology 
C)  the number of workers 
D)  the level of investment 
A)  the average rate of inflation 
B)  the level of technology 
C)  the number of workers 
D)  the level of investment A

Question 2

Lower taxes represent a negative AD shock.

Accepted Answer

A) True 
 B)False  False

Question 3

An increase in inflation will cause the long-run aggregate supply curve to:

Accepted Answer

A)  shift inward. 
B)  shift outward. 
C)  not shift at all. 
D)  shift randomly. 
A)  shift inward. 
B)  shift outward. 
C)  not shift at all. 
D)  shift randomly. C

Question 4

In the AD-AS model,money is not neutral in the short run if:

Accepted Answer

A)  unexpected inflation turns into expected inflation. 
B)  wages and prices are sticky. 
C)  wages and prices are flexible. 
D)  the change in the money supply is fully anticipated. 
A)  unexpected inflation turns into expected inflation. 
B)  wages and prices are sticky. 
C)  wages and prices are flexible. 
D)  the change in the money supply is fully anticipated.

Question 5

A decrease in spending growth will cause the economy's aggregate demand curve to:

Accepted Answer

A)  shift to the right. 
B)  shift to the left. 
C)  become steeper. 
D)  become flatter. 
A)  shift to the right. 
B)  shift to the left. 
C)  become steeper. 
D)  become flatter.

Question 6

A 1% increase in real growth,ceteris paribus,_____ inflation by _____.

Accepted Answer

A)  increases;1% 
B)  increases;2% 
C)  decreases;1% 
D)  decreases;2% 
A)  increases;1% 
B)  increases;2% 
C)  decreases;1% 
D)  decreases;2%

Question 7

The long-run growth potential of an economy does not depend on the level of inflation.

Accepted Answer

A) True 
 B)False

Question 8

Politicians and especially the general public worry about recessions because of:

Accepted Answer

A)  high interest rates. 
B)  high inflation. 
C)  high unemployment. 
D)  lower wages. 
A)  high interest rates. 
B)  high inflation. 
C)  high unemployment. 
D)  lower wages.

Question 9

A temporary decrease in spending has no effect on inflation or real growth in the long run.

Accepted Answer

A) True 
 B)False

Question 10

Based on the discussion in the textbook,the Great Depression was caused by:

Accepted Answer

A)  only aggregate demand shocks. 
B)  only real shocks. 
C)  neither aggregate demand shocks nor real shocks. 
D)  both aggregate demand shocks and real shocks. 
A)  only aggregate demand shocks. 
B)  only real shocks. 
C)  neither aggregate demand shocks nor real shocks. 
D)  both aggregate demand shocks and real shocks.

Question 11

"Animal spirits" can cause a shock to $$\vec { C }$$ .

Accepted Answer

A) True 
 B)False

Question 12

Sticky wages will often help end a recession sooner.

Accepted Answer

A) True 
 B)False

Question 13

A major hurricane hitting the East Coast of the United States is an example of a:

Accepted Answer

A)  real shock. 
B)  geographic distress. 
C)  GDP deflator. 
D)  productivity neutralizing event. 
A)  real shock. 
B)  geographic distress. 
C)  GDP deflator. 
D)  productivity neutralizing event.

Question 14

The first major event of the Great Depression was:

Accepted Answer

A)  a series of bank failures. 
B)  a fall in investment spending. 
C)  a stock market crash. 
D)  the Smoot-Hartley tariffs. 
A)  a series of bank failures. 
B)  a fall in investment spending. 
C)  a stock market crash. 
D)  the Smoot-Hartley tariffs.

Question 15

A temporary decrease in consumer spending causes:

Accepted Answer

A)  a decrease in the economy's long-run potential growth rate. 
B)  an upward-shift of the SRAS curve. 
C)  a decrease in velocity growth (
$\vec { v }$ ). 
D)  an increase in money growth (
$\vec { M }$ ). 
A)  a decrease in the economy's long-run potential growth rate. 
B)  an upward-shift of the SRAS curve. 
C)  a decrease in velocity growth (
$\vec { v }$ ). 
D)  an increase in money growth (
$\vec { M }$ ).

Question 16

The "Solow" growth rate represents an economy's _____ growth rate.

Accepted Answer

A)  average 
B)  minimum 
C)  potential 
D)  projected 
A)  average 
B)  minimum 
C)  potential 
D)  projected

Question 17

Imagine that a government starts out with the budget surplus.If in the next period the government temporarily runs a budget deficit,what would you expect to happen to aggregate demand?

Accepted Answer

A)  AD would increase. 
B)  AD would lie on the Solow growth rate. 
C)  AD would stay the same. 
D)  AD would decrease. 
A)  AD would increase. 
B)  AD would lie on the Solow growth rate. 
C)  AD would stay the same. 
D)  AD would decrease.

Question 18

Economic growth is a smooth process.

Accepted Answer

A) True 
 B)False

Question 19

If spending grows by 3%,real GDP growth is 0%,and velocity is stable,then prices will be _____ at a rate of _____ according to the aggregate demand curve.

Accepted Answer

A)  falling;3% 
B)  falling;2% 
C)  rising;3% 
D)  rising 2% 
A)  falling;3% 
B)  falling;2% 
C)  rising;3% 
D)  rising 2%

Question 20

Prices are especially sticky in the:

Accepted Answer

A)  upward direction. 
B)  downward direction. 
C)  leftward direction. 
D)  rightward direction. 
A)  upward direction. 
B)  downward direction. 
C)  leftward direction. 
D)  rightward direction.

Exam 13: Business Fluctuations

Which of the following does NOT contribute to an economy's long-run potential growth rate?

Lower taxes represent a negative AD shock.

An increase in inflation will cause the long-run aggregate supply curve to:

In the AD-AS model,money is not neutral in the short run if:

A decrease in spending growth will cause the economy's aggregate demand curve to:

A 1% increase in real growth,ceteris paribus,_____ inflation by _____.

The long-run growth potential of an economy does not depend on the level of inflation.

Politicians and especially the general public worry about recessions because of:

A temporary decrease in spending has no effect on inflation or real growth in the long run.

Based on the discussion in the textbook,the Great Depression was caused by:

"Animal spirits" can cause a shock to C⃗\vec { C }C .

Sticky wages will often help end a recession sooner.

A major hurricane hitting the East Coast of the United States is an example of a:

The first major event of the Great Depression was:

A temporary decrease in consumer spending causes:

The "Solow" growth rate represents an economy's _____ growth rate.

Imagine that a government starts out with the budget surplus.If in the next period the government temporarily runs a budget deficit,what would you expect to happen to aggregate demand?

Economic growth is a smooth process.

If spending grows by 3%,real GDP growth is 0%,and velocity is stable,then prices will be _____ at a rate of _____ according to the aggregate demand curve.

Prices are especially sticky in the:

The Big Ideas

The Power of Trade

Supply and Demand

Equilibrium- How Supply and Demand

Price Ceilings and Floors

GDP and the Measurement of Progress

The Wealth of Nations and Economic Growth

Growth,capital Accumulation

Saving,investment,and the Financial System

Stock Markets and Personal Finance

Unemployment and Labor Force Participation

Inflation and the Quantity Theory of Money

Transmission and Amplification Mechanisms

The Federal Reserve System

Monetary Policy

The Federal Budget- Taxes and Spending

Fiscal Policy

International Trade

International Finance

Political Economy and Public Choice

Filters

A 1% increase in real growth,ceteris paribus,_ inflation by _.

"Animal spirits" can cause a shock to $\vec { C }$ .

If spending grows by 3%,real GDP growth is 0%,and velocity is stable,then prices will be _ at a rate of _ according to the aggregate demand curve.