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5 Written questions

5 Matching questions

  1. . In the long run,
    A) LRAS and SRAS lie on the same line.
    B) GDP = potential GDP
    C) Unemployment is below its natural rate.
    D) Unemployment is above its natural rate.
  2. Describe the wealth effect.
  3. . Which of the following is considered a negative supply shock?
    A) increasing investment in the economy causes the capital stock to rise
    B) an improvement in technology
    C) a decline in wages
    D) an unexpected increase in the price of natural gas
  4. Which of the following government policies affects the economy through intended changes in the
    money supply and interest rates?
    a. fiscal policy
    b. monetary policy
    c. both fiscal and monetary policies
    d. neither fiscal nor monetary policies
  5. If oil prices rise unexpectedly,
    a. there will be a movement up and to the right along a stationary aggregate supply curve.
    b. there will be a movement down and to the left along a stationary aggregate supply curve.
    c. the short-run aggregate supply curve will shift to the left.
    d. the short-run aggregate supply curve will shift to the right
  1. a D) an unexpected increase in the price of natural gas
  2. b c. the short-run aggregate supply curve will shift to the left.
  3. c b. monetary policy
  4. d B) GDP = potential GDP
  5. e As the price level increases, the real value of household wealth falls, and
    so will consumption. In contrast, if the price level declines, real household wealth rises and so
    does consumption.

5 Multiple choice questions

  1. a. a fall in the price level
  2. a. a change in the price level
  3. d. the same as the long-run aggregate supply curve.
  4. c. In the long run, changes in the price level do not affect the level of real GDP
  5. A) High levels; a recession; accept lower

5 True/False questions

  1. Why does the failure of workers and firms to accurately predict the price level result in an upwardsloping
    aggregate supply curve?
    a. because contracts make some wages and prices "sticky"
    b. because firms are often slow to adjust wages
    c. because menu costs make some prices "sticky"
    d. all of the above
    d. all of the above

          

  2. Stagflation is often a result of
    A) a decrease in aggregate demand.
    B) an increase in aggregate demand.
    C) a negative supply shock.
    D) an increase in aggregate supply.
    C) decrease aggregate demand.

          

  3. . Why does the short run aggregate supply curve shift to the right in the long run, following a decrease in
    aggregate demand?
    A) Workers and firms adjust their expectations of wages and prices downward and they accept lower wages
    and prices.
    B) Workers and firms adjust their expectations of wages and prices downward and they push for higher
    wages and prices.
    C) Workers and firms adjust their expectations of wages and prices upward and they accept lower wages and
    prices.
    D) Workers and firms adjust their expectations of wages and prices upward and they push for higher wages
    and prices
    C) GDP will be below potential GDP

          

  4. The international-trade effect refers to the fact that an increase in the price level will result in
    a. an increase in exports and a decrease in imports.
    b. a decrease in exports and an increase in imports.
    c. an increase in exports and an increase in imports.
    d. a decrease in exports and a decrease in imports.
    b. a decrease in exports and an increase in imports

          

  5. What are the three factors that cause the AD curve to shift?consumption
    (C), investment (I), government purchases (G), and net exports (NX)

          

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