ECON2200 CH33

Keynes explained that recessions and depressions occur because of a) inadequate aggregate demand. b) excess aggregate demand and inadequate aggregate supply. c) excess aggregate demand. d) inadequate aggregate supply. e) excess aggregate supply.

Which of the following alone can explain the change in the price level and output during World War II? a) short-run aggregate supply shifted left b) aggregate demand shifted left c) aggregate demand shifted right d) short-run aggregate supply shifted right e) long-run aggregate supply shifted right.

Refer to Figure 33-2. Starting from point B and assuming that aggregate demand is held constant, in the long run the economy is likely to experience a) a rising price level and a rising level of output. b) a falling price level and a rising level of output. c) a rising price level and a falling level of output. d) a falling price level and a falling level of output. e) a falling price level and a rising level of unemployment.

In the last half of 1999, the U.S. unemployment rate was about 4 percent. Historical experience suggests that this is a) above the natural rate, so real GDP growth was likely low. b) at the natural rate, so real GDP growth was likely normal. c) above the natural rate, so real GDP growth was likely high. d) below the natural rate, so real GDP growth was likely low. e) below the natural rate, so real GDP growth was likely high.

Suppose that the economy is at long-run equilibrium. If there is a sharp decline in the stock market combined with a significant increase in immigration of skilled workers, then in the short run a) the price level will fall, and real GDP will fall. b) real GDP will fall and the price level might rise, fall, or stay the same. c) real GDP will rise and the price level might rise, fall, or stay the same. d) the price level will fall, and real GDP might rise, fall, or stay the same. e) the price level will rise, and real GDP might rise, fall, or stay the same.

An increase in the price level and a reduction in output would result from a) a fall in stock prices. b) natural disasters such as hurricanes, floods, and droughts.. c) tax rebates. d) declining government expenditures. e) tax increases.

A relatively mild period of falling incomes and rising unemployment is called a a) expansion. b) business cycle. c) inflation. d) recession. e) depression.

Refer to Stock Market Boom 2014. How is the new long-run equilibrium different from the original one? a) the price level and real GDP are lower. b) the price level is the same and real GDP is higher. c) the price level and real GDP are higher d) the price level is higher and real GDP is lower. e) the price level is higher and real GDP is the same.

Which of the following would increase output in the short run? a) an increase in stock prices makes people feel wealthier. b) firms chose to purchase more investment goods. c) foreigners buy more American goods. d) government spending increases. e) All of the above are correct.

Refer to Figure 33-2. The appearance of the long-run aggregate-supply (LRAS) curve a) is consistent with the idea that point A represents a long-run equilibrium but not a short-run equilibrium when the relevant short-run aggregate-supply curve is AS1. b) is inconsistent with the concept of monetary neutrality. c) indicates that Y1 + Y2 is the natural rate of output. d) indicates that Y2 is the natural rate of output. e) indicates that Y1 is the natural rate of output.

Refer to Figure 33-1. If the economy starts at A and there is a fall in aggregate demand, the economy moves a) to D in the long run. b) to C in the long run. c) to either A or C in the long run. d) to B in the long run. e) back to A in the long run.

Refer to Stock Market Boom 2014. Which curve shifts and in which direction? a) aggregate demand shifts right. b) aggregate demand shifts left. c) aggregate supply shifts left. d) aggregate supply shifts right. e) aggregate supply shifts left and aggregate demand shifts left.

Refer to Stock Market Boom 2014. In the long run, the change in price expectations created by the stock market boom shifts a) long-run aggregate supply left. b) short-run aggregate supply left. c) short-run aggregate supply right. d) long-run aggregate supply right. e) short-run aggregate supply right and long-run aggregate supply right..

Refer to Optimism. In the short run what happens to the price level and real GDP? a) the price level rises and real GDP falls. b) the price level falls and real GDP remains the same. c) both the price level and real GDP fall. d) the price level falls and real GDP rises. e) both the price level and real GDP rise.

Refer to Stock Market Boom 2014. What happens to the expected price level and what impact does this have on wage bargaining? a) The expected price level falls. Bargains are struck for lower wages. b) The expected price level falls. Bargains are struck for higher wages. c) The expected price level rises. Bargains are struck for higher wages. d) The expected price level falls. Bargains are struck for lower prices. e) The expected price level rises. Bargains are struck for lower wages.

Refer to Optimism. In the short run what happens to the price level and real GDP? a) the price level rises and real GDP falls. b) the price level falls and real GDP remains the same. c) both the price level and real GDP fall. d) the price level falls and real GDP rises. e) both the price level and real GDP rise.

Most economists use the aggregate demand and aggregate supply model primarily to analyze a) long-run fluctuations in the economy. b) productivity and economic growth. c) the effects of macroeconomic policy on the prices of individual goods. d) short-run fluctuations in the economy. e) the long-run effects of international trade policies.

Refer to Optimism. In the long run, the change in price expectations created by optimism shifts a) long-run aggregate supply right. b) short-run aggregate supply left. c) short-run aggregate supply left and long-run aggregate supply right. d) long-run aggregate supply left. e) short-run aggregate supply right.

Which of the following is correct? a) Short run fluctuations in economic activity happen only in developing countries. b) When real GDP falls, the rate of unemployment falls. c) Recessions come at regular intervals and are easy to predict. d) When real GDP falls, the rate of unemployment rises. e) During economic contractions most firms experience rising sales.

Which of the following would cause stagflation? a) aggregate demand shifts left b) aggregate demand shifts right c) short-run aggregate supply shifts right d) short-run aggregate supply shifts left e) long-run aggregate supply shifts right

Refer to Pessimism. How is the new long-run equilibrium different from the original one? a) the price level is the same and GDP is lower. b) the price level is the same and GDP is higher. c) both price and real GDP are lower. d) the price level is lower and real GDP is the same. e) both price and real GDP are higher.

When production costs rise, a) the long-run aggregate supply curve shifts to the right. b) the aggregate demand curve shifts to the left. c) the aggregate demand curve shifts to the right. d) the short-run aggregate supply curve shifts to the left. e) the short-run aggregate supply curve shifts to the right.

Refer to Optimism. What happens to the expected price level and what's the result for wage bargaining? a) The expected price level falls. Bargains are struck for lower prices. b) The expected price level rises. Bargains are struck for higher wages. c) The expected price level rises. Bargains are struck for lower wages. d) The expected price level falls. Bargains are struck for higher wages. e) The expected price level falls. Bargains are struck for lower wages.

Which of the following has been suggested as a cause of the Great Depression? a) a decrease in stock prices b) a decline in the money supply c) the collapse of the banking system d) None of the above are correct. e) All of the above are correct.

During recessions which type of spending falls? a) consumption and government b) consumption, investment, and government c) consumption but not investment d) investment but not consumption e) consumption and investment

Aggregate demand includes a) only the quantity of goods and services households want to buy. b) the quantity of goods and services households, firms, the government, and customers abroad want to buy. c) only the quantity of goods and services households and firms want to buy. d) the quantity of goods households, firms, the government want to buy. e) only the quantity of goods and services households, firms, and the government want to buy.

Keynes believed that economies experiencing high unemployment should adopt policies to a) reduce the money supply. b) increase aggregate supply. c) reduce government expenditures. d) increase aggregate demand.

Stagflation exists when prices a) and output rise. b) fall and output remains the same. c) rise and output falls. d) fall and output rises. e) and output fall.

Historical evidence for the U.S. economy indicates that a) changes in real GDP over the business cycle are largely attributable to changes in investment over the business cycle. b) recessions have occurred roughly once every six years since the 1960s. c) the unemployment rate usually decreases during a recession and increases shortly after the recession ends. d) real GDP usually remains roughly constant during a recession and decreases shortly after the recession ends. e) changes in real GDP over the business cycle are largely attributable to changes in government spending over the business cycle.

The long-run effect of an increase in government spending is to a) raise real output and leave the price level unchanged. b) raise both real output and the price level. c) raise the price level and leave real output unchanged. d) lower the price level and raise real output. e) raise real output and lower the price level.

During a recession the economy experiences a) rising employment and falling income. b) rising employment and income. c) rising income and falling employment. d) falling unemployment and rising income. e) falling employment and income.

In the mid-1970s the price of oil rose dramatically. This a) caused U.S. prices to fall. b) shifted aggregate supply right. c) was the consequence of OPEC increasing oil production. d) shifted aggregate demand right. e) shifted aggregate supply left.

Suppose the economy is in long-run equilibrium. If there is a tax cut at the same time that major new sources of oil are discovered in the country, then in the short-run a) the price level will fall, and real GDP might rise, fall, or stay the same. b) real GDP will fall and the price level might rise, fall, or stay the same. c) the price level will fall, and real GDP will rise. d) the price level will rise, and real GDP might rise, fall, or stay the same. e) real GDP will rise and the price level might rise, fall, or stay the same.

Which of the following will reduce the price level and real output in the short run? a) an increase in oil prices b) an increase in government spending c) technical progress d) an increase in the money supply e) a decrease in the money supply

In the short-run an increase in the costs of production makes a) output fall and prices rise. b) output remain the same but prices rise. c) output rise and prices fall. d) output and prices rise. e) output and prices fall.

Refer to Pessimism. What happens to the expected price level and what's the result for wage bargaining? a) The expected price level falls. Bargains are struck for higher wages. b) The expected price level rises. Bargains are struck for lower prices. c) The expected price level rises. Bargains are struck for lower wages. d) The expected price level rises. Bargains are struck for higher wages. e) The expected price level falls. Bargains are struck for lower wages.

Refer to Stock Market Boom 2014. In the short run what happens to the price level and real GDP? a) the price level falls and real GDP rises. b) both the price level and real GDP fall. c) the price level rises and real GDP falls. d) the price level falls and real GDP remains the same. e) both the price level and real GDP rise.

Refer to Pessimism. In the short run what happens to the price level and real GDP? a) Both the price level and real GDP rise. b) The price level rises and real GDP remains the same. c) The price level falls and real GDP rises. d) Both the price level and real GDP fall. e) The price level rises and real GDP falls.

Refer to Figure 33-1. If the economy starts at C, an increase in the money supply moves the economy a) back to C in the long run. b) to A in the long run. c) to B in the long run. d) to D in the long run. e) to either A or C in the long run.

Refer to Pessimism. In the long run, the change in price expectations created by pessimism shifts a) long-run aggregate supply left. b) long-run aggregate supply right. c) short-run aggregate supply left and long-run aggregate supply left. d) short-run aggregate supply right. e) short-run aggregate supply left.

Refer to Optimism. How is the new long-run equilibrium different from the original one? a) both price and real GDP are lower. b) the price level is higher and real GDP is lower. c) the price level is the same and GDP is higher. d) both price and real GDP are higher e) the price level is higher and real GDP is the same.

Suppose the economy is in long-run equilibrium. Concerns about pollution cause the government to significantly restrict the production of electricity. At the same time, the value of the dollar falls. In the short-run a) real GDP will rise and the price level might rise, fall, or stay the same. b) the price level will fall, and real GDP will fall. c) the price level will rise, and real GDP might rise, fall, or stay the same. d) the price level will fall, and real GDP might rise, fall, or stay the same. e) real GDP will fall and the price level might rise, fall, or stay the same.

Refer to Optimism. Which curve shifts and in which direction? a) aggregate supply shifts left and aggregate demand shifts left. b) aggregate supply shifts right. c) aggregate demand shifts left. d) aggregate demand shifts right. e) aggregate supply shifts left.

Below are pairs of GDP growth rates and unemployment rates. Economists would be shocked to see most of these pairs in the U. S. Which pair of GDP growth rates and unemployment rates is realistic? a) -2 percent, 4 percent b) 5 percent, 7 percent c) 3 percent, 5 percent d) -1 percent, 3 percent e) 5 percent, 1 percent