5 Written questions
5 Matching questions
- If firms reduce investment spending and the economy slumps into a recession, which of the following
contributes to the adjustment that causes the economy to return to its long-run equilibrium?
a. the eventual agreement by workers to accept lower wages
b. the decision by firms to charge higher prices
c. both of the above
d. none of the above
- Describe the interest rate effect.
- Which of the following will cause the short-run aggregate supply curve to shift to the right?
a. a higher expected future price level
b. an increase in the actual (or current) price level
c. a technological change
d. all of the above
- The long-run aggregate supply curve
a. is positively sloped.
b. shifts to the right as technological change occurs.
c. is negatively sloped.
d. shifts to the left as the capital stock of the country grows.
- The aggregate demand and aggregate supply model explains
a. the effect of changes in the inflation rate on the nominal interest rate.
b. short-run fluctuations in real GDP and the price level.
c. the effect of long-run economic growth on the standard of living.
d. the effect of changes in the interest rate on investment spending.
- a b. short-run fluctuations in real GDP and the price level.
- b a. the eventual agreement by workers to accept lower wages
- c c. a technological change
- d b. shifts to the right as technological change occurs.
- e A higher price level will tend to increase interest rates. Higher
interest rates will reduce investment spending by firms as borrowing costs rise. Additionally,
higher interest rates will also reduce consumption spending.
5 Multiple choice questions
- a. when the price level falls, the real value of household wealth rises, and so will consumption.
- involves the
actions the Federal Reserve takes to manage the money supply and interest rates to pursue
macroeconomic policy objectives
- 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
- b. Steel demand and steel prices begin to rise rapidly, but the price of coal—an input into the
production of steel—remains fixed by contract.
- because a decrease in the price level increases the quantity of real GDP demanded
5 True/False questions
Describe fiscal policy. → involves changes in federal taxes and purchases that are intended to achieve macroeconomic policy
If real GDP in the United States increases faster than real GDP in other countries, U.S. imports will
__________ faster than U.S. exports, and net exports will ___________.
a. increase; rise
b. increase; fall
c. decrease; rise
d. decrease; fall → 1. changes in government policies
2. changes in expectations of households
3. changes in foreign variables
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 → b. monetary policy
Which component of GDP does not change as price level changes? → government purchases
. 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. → B) GDP = potential GDP