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ENG Exam3 (Questions 1-11)

Terms in this set (10)

Suppose that the money supply increases. In the short run, this increases prices according to
a. both the short-run Phillips curve and the aggregate demand and aggregate supply model.
b. neither the short-run Phillips curve nor the aggregate demand and aggregate supply model.
c. the short-run Phillips curve, but not according to the aggregate demand and aggregate supply model.
d. the aggregate demand and aggregate supply model but not according to the short-run Phillips curve.
A
Your boss gives you an increase in the number of dollars you earn per hour. This increase in pay makes
a. your nominal wage increase. If your nominal wage rose by a greater percentage than the price level, then
your real wage also increased.
b. your nominal wage increase. If your nominal wage rose by a greater percentage than the price level, then
your real wage decreased.
c. your real wage increase. If your real wage rose by a greater percentage than the price level, then your
nominal wage also increased.
d. your real wage decrease. If your real wage rose by a greater percentage than the price level, then your
nominal wage decreased.
A
. Which of the following are costs incurred by people trying to protect themselves from the effects of inflation?
a. menu costs and shoeleather costs
b. menu costs but not shoeleather costs
c. shoeleather costs but not menu costs
d. menu costs but not shoeleather costs
A
. In a certain economy, when income is $1000, consumer spending is $800. The value of the multiplier for this
economy is 2.5. It follows that, when income is $1020, consumer spending is
a. $816. For this economy, an initial increase of $100 in consumer spending translates into a $250 increase
in aggregate demand.
b. $816. For this economy, an initial increase of $100 in consumer spending translates into a $400 increase
in aggregate demand.
c. $812. For this economy, an initial increase of $100 in consumer spending translates into a $250 increase
in aggregate demand.
d. $812. For this economy, an initial increase of $100 in consumer spending translates into an $800 increase
in aggregate demand.
C
. Suppose stock prices rise. To offset the resulting change in output the Federal Reserve could
a. increase the money supply. This increase would also move the price level closer to its value before the
rise in stock prices.
b. increase the money supply. However, this increase would move the price level farther from its value
before the rise in stock prices.
c. decrease the money supply. This decrease would also move the price level closer to its value before the
rise in stock prices.
d. decrease the money supply. However, this decrease would move the price level farther from its value
before the rise in stock prices.
C
When the money supply decreases
a. interest rates fall and so aggregate demand shifts right.
b. interest rates fall and so aggregate demand shifts left.
c. interest rates rise and so aggregate demand shifts right.
d. interest rates rise and so aggregate demand shifts left.
D
The money supply in Muckland is one hundred billion. Nominal GDP is eight hundred billion and real GDP is two hundred billion. What
are the price level and velocity in Muckland?
a. The price level and velocity are both eight.
b. The price level is two and velocity is eight.
c. The price level and velocity are both four.
d. The price level is four and velocity is eight.
D
The aggregate demand and aggregate supply graph has
a. the price level on the horizontal axis. The price level can be measured by the GDP deflator.
b. the price level on the horizontal axis. The price level can be measured by real GDP.
c. the price level on the vertical axis. The price level can be measured by the GDP deflator.
d. the price level on the vertical axis. The price level can be measured by GDP.
C
By about 1973, U.S. policymakers had learned that
a. there is no trade-off between inflation and unemployment in the short run.
b. there is no trade-off between inflation and unemployment in the long run.
c. Friedman's analysis of inflation and unemployment had been correct, and Phelps's analysis of inflation
and unemployment had been incorrect.
d. Phelps's analysis of inflation and unemployment had been correct, and Friedman's analysis of inflation
and unemployment had been incorrect.
B
In the late 1960s, economist Edmund Phelps published a paper that
a. argued that there was no long-run tradeoff between inflation and unemployment.
b. disproved Friedman's claim that monetary policy was effective in controlling inflation.
c. showed the optimal point on the Phillips curve was at an unemployment rate of 5 percent and an inflation
rate of 2 percent.
d. argued that the Phillips curve was stable and that it would not shift.
A
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