Question 1

Productivity shocks were the primary cause of the Great Depression.

Accepted Answer

A) True 
 B)False

Question 2

Use the following to answer questions 
Figure: Aggregate Demand  
-(Figure: Three Aggregate Demand Curves) Figure: Three Aggregate Demand Curves   Consider the three aggregate demand curves shown in the graph.Movement from Point A to Point D represents:

Accepted Answer

A)  an increase in spending growth from 2% to 3%. 
B)  an increase in spending growth from 4% to 6%. 
C)  an increase in real GDP growth,but not spending growth. 
D)  an increase in inflation,but not spending growth. 
A)  an increase in spending growth from 2% to 3%. 
B)  an increase in spending growth from 4% to 6%. 
C)  an increase in real GDP growth,but not spending growth. 
D)  an increase in inflation,but not spending growth.

Question 3

The Smoot-Hawley Tariff of 1930 raised tariff rates on tens of thousands of imported goods,and the results were that:

Accepted Answer

A)  exports rose but imports fell,thereby increasing aggregate demand. 
B)  imports rose but exports fell,thereby reducing aggregate demand. 
C)  both exports and imports rose,thereby increasing aggregate demand. 
D)  both exports and productivity fell,thereby reducing aggregate demand and aggregate supply. 
A)  exports rose but imports fell,thereby increasing aggregate demand. 
B)  imports rose but exports fell,thereby reducing aggregate demand. 
C)  both exports and imports rose,thereby increasing aggregate demand. 
D)  both exports and productivity fell,thereby reducing aggregate demand and aggregate supply.

Question 4

In the graph of the AD-AS model,what is measured on the vertical axis?

Accepted Answer

A)  the average price level 
B)  real GDP 
C)  the inflation rate 
D)  real GDP growth 
A)  the average price level 
B)  real GDP 
C)  the inflation rate 
D)  real GDP growth

Question 5

The Great Depression would have been a lot less severe if monetary policy were better understood and managed at the time.

Accepted Answer

A) True 
 B)False

Question 6

The "Solow" growth rate is the rate of economic growth that occurs when:

Accepted Answer

A)  inflation is moderate. 
B)  prices and wages are sticky. 
C)  prices and wages are flexible. 
D)  the money supply is growing. 
A)  inflation is moderate. 
B)  prices and wages are sticky. 
C)  prices and wages are flexible. 
D)  the money supply is growing.

Question 7

The aggregate demand curve indicates that at a given spending growth rate,a higher inflation is related to a:

Accepted Answer

A)  lower real GDP growth rate. 
B)  higher money supply growth rate. 
C)  lower velocity growth rate. 
D)  higher unemployment rate. 
A)  lower real GDP growth rate. 
B)  higher money supply growth rate. 
C)  lower velocity growth rate. 
D)  higher unemployment rate.

Question 8

Stagflation is a situation in which increased unemployment and lower output growth is accompanied by an increase in inflation.Explain how a negative real shock can lead to stagflation.

Accepted Answer

A negative real shock decreases the prod

Question 9

An increase in expected inflation will cause the economy's aggregate demand curve to:

Accepted Answer

A)  shift outward. 
B)  shift inward. 
C)  become steeper. 
D)  remain unchanged. 
A)  shift outward. 
B)  shift inward. 
C)  become steeper. 
D)  remain unchanged.

Question 10

A positive real shock causes a shift to the right of the long-run aggregate supply curve.

Accepted Answer

A) True 
 B)False

Question 11

According to the inflation parable discussed in the text,a positive shock to spending:

Accepted Answer

A)  does not affect price and output at first,but in the long run both output and price increase. 
B)  increases both price and output at first but neither price nor output changes in the long run. 
C)  increases price at first but in the long run only increases output. 
D)  increases output at first but in the long run only increases price. 
A)  does not affect price and output at first,but in the long run both output and price increase. 
B)  increases both price and output at first but neither price nor output changes in the long run. 
C)  increases price at first but in the long run only increases output. 
D)  increases output at first but in the long run only increases price.

Question 12

Which of the following would cause the AD curve to shift to the left?

Accepted Answer

A)  higher government budget deficits 
B)  increased growth in imports 
C)  lower growth rate of output 
D)  lower taxes 
A)  higher government budget deficits 
B)  increased growth in imports 
C)  lower growth rate of output 
D)  lower taxes

Question 13

What types of shocks can be found in the AD-AS model? Why do these shocks not disappear immediately but rather tend to spread across sectors of an economy?

Accepted Answer

Real shocks are rapid changes in economi

Question 14

The Smoot-Hawley Tariff of 1930 delivered a:

Accepted Answer

A)  boost to aggregate demand in the form of higher velocity of money. 
B)  blow to aggregate demand in the form of lower money growth. 
C)  boost to aggregate demand in the form of new technology. 
D)  blow to aggregate demand by causing a collapse in world trade. 
A)  boost to aggregate demand in the form of higher velocity of money. 
B)  blow to aggregate demand in the form of lower money growth. 
C)  boost to aggregate demand in the form of new technology. 
D)  blow to aggregate demand by causing a collapse in world trade.

Question 15

Expected shocks are more difficult to deal with than unexpected shocks.

Accepted Answer

A) True 
 B)False

Question 16

A 2% 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 17

Which of the following causes a shift of the AD curve to the right?

Accepted Answer

A)  an increase in income taxes 
B)  an increase in consumer confidence 
C)  an increase in import growth 
D)  an increase in interest rates 
A)  an increase in income taxes 
B)  an increase in consumer confidence 
C)  an increase in import growth 
D)  an increase in interest rates

Question 18

In the AD-AS model,what happens to the economy in the short run when consumer spending decreases?

Accepted Answer

A)  Inflation is higher,and the real growth rate is higher. 
B)  Inflation is higher,and the real growth rate is lower. 
C)  Inflation is lower,and the real growth rate is higher. 
D)  Inflation is lower,and the real growth rate is lower. 
A)  Inflation is higher,and the real growth rate is higher. 
B)  Inflation is higher,and the real growth rate is lower. 
C)  Inflation is lower,and the real growth rate is higher. 
D)  Inflation is lower,and the real growth rate is lower.

Question 19

Which of the following would cause the AD curve to shift to the right?

Accepted Answer

A)  a decrease in consumer confidence 
B)  a decrease in the inflation rate 
C)  an increase in consumer wealth 
D)  an increase in the short-run aggregate supply curve 
A)  a decrease in consumer confidence 
B)  a decrease in the inflation rate 
C)  an increase in consumer wealth 
D)  an increase in the short-run aggregate supply curve

Question 20

If prices are completely flexible,then an increase in spending growth will lead to an immediate:

Accepted Answer

A)  increase in real output growth without any change in inflation. 
B)  decrease in real output growth without any change in inflation. 
C)  decrease in inflation without any change in real output growth. 
D)  increase in inflation without any change in real output growth. 
A)  increase in real output growth without any change in inflation. 
B)  decrease in real output growth without any change in inflation. 
C)  decrease in inflation without any change in real output growth. 
D)  increase in inflation without any change in real output growth.

Exam 13: Business Fluctuations

Productivity shocks were the primary cause of the Great Depression.

Use the following to answer questions Figure: Aggregate Demand -(Figure: Three Aggregate Demand Curves) Figure: Three Aggregate Demand Curves Consider the three aggregate demand curves shown in the graph.Movement from Point A to Point D represents:

The Smoot-Hawley Tariff of 1930 raised tariff rates on tens of thousands of imported goods,and the results were that:

In the graph of the AD-AS model,what is measured on the vertical axis?

The Great Depression would have been a lot less severe if monetary policy were better understood and managed at the time.

The "Solow" growth rate is the rate of economic growth that occurs when:

The aggregate demand curve indicates that at a given spending growth rate,a higher inflation is related to a:

Stagflation is a situation in which increased unemployment and lower output growth is accompanied by an increase in inflation.Explain how a negative real shock can lead to stagflation.

An increase in expected inflation will cause the economy's aggregate demand curve to:

A positive real shock causes a shift to the right of the long-run aggregate supply curve.

According to the inflation parable discussed in the text,a positive shock to spending:

Which of the following would cause the AD curve to shift to the left?

What types of shocks can be found in the AD-AS model? Why do these shocks not disappear immediately but rather tend to spread across sectors of an economy?

The Smoot-Hawley Tariff of 1930 delivered a:

Expected shocks are more difficult to deal with than unexpected shocks.

A 2% increase in real growth,ceteris paribus,_____ inflation by _____.

Which of the following causes a shift of the AD curve to the right?

In the AD-AS model,what happens to the economy in the short run when consumer spending decreases?

Which of the following would cause the AD curve to shift to the right?

If prices are completely flexible,then an increase in spending growth will lead to an immediate:

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 2% increase in real growth,ceteris paribus,_ inflation by _.