Question 1

As a result of a positive shock to $\vec { C }$ :

Accepted Answer

A)  inflation and output growth increase in the short run,but in the long run they return to the rates before the shock. 
B)  inflation and output growth decrease in the short run,but in the long run they return to the rates before the shock. 
C)  inflation increases and output growth decreases in the short run,but in the long run they return to the rates before the shock. 
D)  inflation and output growth increase in both the short run and the long run. 
A)  inflation and output growth increase in the short run,but in the long run they return to the rates before the shock. 
B)  inflation and output growth decrease in the short run,but in the long run they return to the rates before the shock. 
C)  inflation increases and output growth decreases in the short run,but in the long run they return to the rates before the shock. 
D)  inflation and output growth increase in both the short run and the long run.

Question 2

An unexpected increase in money growth increases inflation but not real growth in the long run.

Accepted Answer

A) True 
 B)False

Question 3

The unemployment rate is expected to _____ during a recession.

Accepted Answer

A)  decrease 
B)  remain the same 
C)  increase 
D)  change indeterminately 
A)  decrease 
B)  remain the same 
C)  increase 
D)  change indeterminately

Question 4

Which of the following most likely causes a shift of the long-run aggregate supply curve to the right?

Accepted Answer

A)  an increase in the money supply 
B)  a decrease in tax revenues 
C)  an increase in crop production due to more rainfall 
D)  an increase in oil prices due to a fire in a major oil refinery 
A)  an increase in the money supply 
B)  a decrease in tax revenues 
C)  an increase in crop production due to more rainfall 
D)  an increase in oil prices due to a fire in a major oil refinery

Question 5

Large increases in oil prices are positive shocks to aggregate demand.

Accepted Answer

A) True 
 B)False

Question 6

Since changes in $$\vec { C }$$ , $$\vec { I }$$ , $$\vec G$$ ,or $$\overrightarrow { N X }$$ do not change the rate of inflation in the long run,sustained inflation requires ongoing increases in the money supply.

Accepted Answer

A) True 
 B)False

Question 7

If stock prices go up and people feel richer,aggregate demand will:

Accepted Answer

A)  increase. 
B)  decrease. 
C)  stay the same because there have been no changes to the underlying assets. 
D)  be unpredictable. 
A)  increase. 
B)  decrease. 
C)  stay the same because there have been no changes to the underlying assets. 
D)  be unpredictable.

Question 8

If spending in an economy increases by 3% and real GDP increases by 1%,the result will be:

Accepted Answer

A)  a recession. 
B)  inflation. 
C)  a positive supply shock. 
D)  war. 
A)  a recession. 
B)  inflation. 
C)  a positive supply shock. 
D)  war.

Question 9

What happened to the U.S.money supply during the early years of the Great Depression?

Accepted Answer

Money growth initially contracted at the

Question 10

In a typical year,bad shocks outweigh good shocks,and the economy grows.

Accepted Answer

A) True 
 B)False

Question 11

If spending grows by 3%,real GDP grows by 5%,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 12

If spending grows by 2%,real GDP growth is 5%,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 13

An aggregate demand shock is a:

Accepted Answer

A)  slow and expected shift in spending. 
B)  slow and unexpected shift in spending. 
C)  rapid and expected shift in spending. 
D)  rapid and unexpected shift in spending. 
A)  slow and expected shift in spending. 
B)  slow and unexpected shift in spending. 
C)  rapid and expected shift in spending. 
D)  rapid and unexpected shift in spending.

Question 14

The AD-AS model consists of the:

Accepted Answer

A)  aggregate demand (A
D) curve only. 
B)  short-run aggregate supply (SRAS)curve only. 
C)  long-run aggregate supply (LRAS)curve only. 
D)  AD,SRAS,and LRAS curves. 
A)  aggregate demand (A
D) curve only. 
B)  short-run aggregate supply (SRAS)curve only. 
C)  long-run aggregate supply (LRAS)curve only. 
D)  AD,SRAS,and LRAS curves.

Question 15

Money is always neutral in the long run in the AD-AS model.

Accepted Answer

A) True 
 B)False

Question 16

According to the quantity theory of money,if both the growth rate of the money supply and the velocity of money are fixed,then a higher inflation rate means:

Accepted Answer

A)  a higher real growth rate. 
B)  no change in the real growth rate. 
C)  a lower real growth rate. 
D)  a higher or lower real growth rate,depending on the specific growth rate of the money supply. 
A)  a higher real growth rate. 
B)  no change in the real growth rate. 
C)  a lower real growth rate. 
D)  a higher or lower real growth rate,depending on the specific growth rate of the money supply.

Question 17

Which of the following is an explanation for why prices may be sticky in the short run?

Accepted Answer

A)  menu costs 
B)  price expectations 
C)  a vertical long-run aggregate supply curve 
D)  money illusion 
A)  menu costs 
B)  price expectations 
C)  a vertical long-run aggregate supply curve 
D)  money illusion

Question 18

Money is neutral in both the short run and long run in the AD-AS model when prices and wages are completely flexible.

Accepted Answer

A) True 
 B)False

Question 19

For a given aggregate demand curve,the specified rate of spending growth is the growth rate of money:

Accepted Answer

A)  supply plus the growth in velocity. 
B)  demand plus the growth in velocity. 
C)  supply minus the rate of growth in velocity. 
D)  demand minus the rate of growth in velocity. 
A)  supply plus the growth in velocity. 
B)  demand plus the growth in velocity. 
C)  supply minus the rate of growth in velocity. 
D)  demand minus the rate of growth in velocity.

Question 20

An increase in expected inflation will cause the economy's short-run aggregate supply curve to:

Accepted Answer

A)  shift outward. 
B)  shift inward. 
C)  become steeper. 
D)  become flatter. 
A)  shift outward. 
B)  shift inward. 
C)  become steeper. 
D)  become flatter.

Exam 13: Business Fluctuations

As a result of a positive shock to C⃗\vec { C }C :

An unexpected increase in money growth increases inflation but not real growth in the long run.

The unemployment rate is expected to _____ during a recession.

Which of the following most likely causes a shift of the long-run aggregate supply curve to the right?

Large increases in oil prices are positive shocks to aggregate demand.

Since changes in C⃗\vec { C }C , I⃗\vec { I }I , G⃗\vec GG ,or NX→\overrightarrow { N X }NX do not change the rate of inflation in the long run,sustained inflation requires ongoing increases in the money supply.

If stock prices go up and people feel richer,aggregate demand will:

If spending in an economy increases by 3% and real GDP increases by 1%,the result will be:

What happened to the U.S.money supply during the early years of the Great Depression?

In a typical year,bad shocks outweigh good shocks,and the economy grows.

If spending grows by 3%,real GDP grows by 5%,and velocity is stable,then prices will be _____ at a rate of _____ according to the aggregate demand curve.

If spending grows by 2%,real GDP growth is 5%,and velocity is stable,then prices will be _____ at a rate of _____ according to the aggregate demand curve.

An aggregate demand shock is a:

The AD-AS model consists of the:

Money is always neutral in the long run in the AD-AS model.

According to the quantity theory of money,if both the growth rate of the money supply and the velocity of money are fixed,then a higher inflation rate means:

Which of the following is an explanation for why prices may be sticky in the short run?

Money is neutral in both the short run and long run in the AD-AS model when prices and wages are completely flexible.

For a given aggregate demand curve,the specified rate of spending growth is the growth rate of money:

An increase in expected inflation will cause the economy's short-run aggregate supply curve to:

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

As a result of a positive shock to $\vec { C }$ :

Since changes in $\vec { C }$ , $\vec { I }$ , $\vec G$ ,or $\overrightarrow { N X }$ do not change the rate of inflation in the long run,sustained inflation requires ongoing increases in the money supply.

If spending grows by 3%,real GDP grows by 5%,and velocity is stable,then prices will be _ at a rate of _ according to the aggregate demand curve.

If spending grows by 2%,real GDP growth is 5%,and velocity is stable,then prices will be _ at a rate of _ according to the aggregate demand curve.