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• Question 1 text Question 1 2 points Save Which of the following is correct? Question 1 answers Over the business cycle consumption fluctuates more than investment. Economic fluctuations are easy to predict. During recessions sales and profits tend to fall. Because of government policy the U.S. has suffered no recessions in the last 25 years. Question 2 text Question 2 2 points Save Suppose a stock market crash makes people feel poorer. This decrease in wealth would induce people to Question 2 answers decrease consumption, which shifts aggregate supply left. decrease consumption, which shifts aggregate demand left. increase consumption, which shifts aggregate supply right. increase consumption, which shifts aggregate demand right. Question 3 text Question 3 2 points Save An increase in which of the following, other things the same, shifts aggregate demand to the right? Question 3 answers consumption investment government expenditures All of the above are correct. Question 4 text Question 4 2 points Save When the dollar depreciates, U.S. Question 4 answers exports and imports increase. exports increase, while imports decrease. exports decrease, while imports increase. exports and imports decrease. Question 5 text Question 5 2 points Save If people want to save more for retirement Question 5 answers or if the government raises taxes, aggregate demand shifts right. or if the government raises taxes, aggregate demand shifts left. aggregate demand shifts right. If the government raises taxes, aggregate demand shifts left. aggregate demand shifts left. If the government raises taxes, aggregate demand shifts right. Question 6 text Question 6 2 points Save The long-run aggregate supply curve shows that by itself a permanent change in aggregate demand would lead to a long-run change Question 6 answers in the price level and real GDP. in the price level, but not real GDP. in real GDP, but not the price level. in neither the price level nor real GDP. Question 7 text Question 7 2 points Save Other things the same, the aggregate quantity of output supplied will decrease if the price level Question 7 answers is lower than expected so that firms believe the relative price of their output has increased. is lower than expected so that firms believe the relative price of their output has decreased. is higher than expected so that firms believe the relative price of their output has increased. is higher than expected so that firms believe the relative price of their output has decreased. Question 8 text Question 8 2 points Save Other things the same, if the price level falls, households Question 8 answers increase foreign bond purchases, so the supply of dollars in the market for foreign-currency exchange increases. increase foreign bond purchases, so the supply of dollars in the market for foreign-currency exchange decreases. decrease foreign bond purchases, so the supply of dollars in market for foreign-currency exchange increases. decrease foreign bond purchases, so the supply of dollars in the market for foreign-currency exchange decreases. Question 9 text Question 9 2 points Save An increase in the price level causes the interest rate to Question 9 answers increase, the dollar to depreciate, and net exports to increase. increase, the dollar to appreciate, and net exports to decrease. decrease, the dollar to depreciate, and net exports to increase. decrease, the dollar to appreciate, and net exports to decrease. Question 10 text Question 10 2 points Save If speculators gained greater confidence so that they wanted to buy more assets of foreign countries and fewer U.S. bonds, Question 10 answers the dollar would appreciate which would cause aggregate demand to shift right. the dollar would appreciate which would cause aggregate demand to shift left. the dollar would depreciate which would cause aggregate demand to shift right. the dollar would depreciate which would cause aggregate demand to shift left. Question 11 text Question 11 2 points Save Since the end of World War II, the U.S. has almost always had rising prices and an upward trend in real GDP. To explain this Question 11 answers it is only necessary that long-run aggregate supply shifts right over time. it is only necessary that aggregate demand shifts right over time. both aggregate demand and long-run aggregate supply must be shifting right and aggregate demand must shift farther. None of the above cases would produce rising prices and growing real GDP over time. Question 12 text Question 12 2 points Save Other things the same, if the money supply rises by 2% and people were expecting it to rise by 5%, then some firms have Question 12 answers higher than desired prices which increases their sales. higher than desired prices which depresses their sales. lower than desired prices which increases their sales. lower than desired prices which depresses their sales. Question 13 text Question 13 2 points Save Suppose a shift in aggregate demand creates an economic contraction. If policymakers can respond with sufficient speed and precision, they can offset the initial shift by shifting Question 13 answers aggregate supply right. aggregate supply left. aggregate demand right. aggregate demand left. Question 14 text Question 14 2 points Save Consider the exhibit below for the following questions. Figure 33-1 nar001-1.jpg Refer to Figure 33-1. If the economy is at A and there is a fall in aggregate demand, in the short run the economy Question 14 answers stays at A. moves to B. moves to C. moves to D. Question 15 text Question 15 2 points Save Which of the following will cause stagflation? Question 15 answers an increase in the money supply an increase in oil prices a decrease in the money supply technical progress Question 16 text Question 16 2 points Save Which of the following would cause prices and real GDP to rise in the short run? Question 16 answers Short-run aggregate supply shifts right. Short-run aggregate supply shifts left. Aggregate demand shifts right. Aggregate demand shifts left. Question 17 text Question 17 2 points Save An economic contraction caused by a shift in aggregate demand remedies itself over time as the expected price level Question 17 answers rises, shifting aggregate demand right. rises, shifting aggregate demand left. falls, shifting aggregate supply right. falls, shifting aggregate supply left. Question 18 text Question 18 2 points Save The Stock Market Boom of 2010 Imagine that in 2010 the economy is in long-run equilibrium. Then stock prices rise more than expected and stay high for some time. Refer to Stock Market Boom 2010. What happens to the expected price level and what impact does this have on wage bargaining? Question 18 answers The expected price level falls. Bargains are struck for higher wages. The expected price level falls. Bargains are struck for lower wages. The expected price level rises. Bargains are struck for higher wages. The expected price level rises. Bargains are struck for lower wages. Question 19 text Question 19 2 points Save Optimism Imagine that the economy is in long-run equilibrium. Then, perhaps because of improved international relations and increased confidence in policy makers, people become more optimistic about the future and stay this way for some time. Refer to Optimism. In the long run, the change in price expectations created by optimism shifts Question 19 answers long-run aggregate supply right. long-run aggregate supply left. short-run aggregate supply right. short-run aggregate supply left. Question 20 text Question 20 2 points Save Optimism Imagine that the economy is in long-run equilibrium. Then, perhaps because of improved international relations and increased confidence in policy makers, people become more optimistic about the future and stay this way for some time. Refer to Optimism. Which curve shifts and in which direction? Question 20 answers aggregate demand shifts right aggregate demand shifts left aggregate supply shifts right. aggregate supply shifts left. Question 21 text Question 21 2 points Save Imagine the U.S. economy is in long-run equilibrium. Then suppose the value of the U.S. dollar increases. At the same time, people in the U.S. revise their expectations so that the expected price level falls. We would expect that in the short-run Question 21 answers real GDP will rise and the price level might rise, fall, or stay the same. real GDP will fall and the price level might rise, fall, or stay the same. the price level will rise, and real GDP might rise, fall, or stay the same. the price level will fall, and real GDP might rise, fall, or stay the same. Question 22 text Question 22 2 points Save 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 we would expect Question 22 answers real GDP will rise and the price level might rise, fall, or stay the same. real GDP will fall and the price level might rise, fall, or stay the same. the price level will rise, and real GDP might rise, fall, or stay the same. the price level will fall, and real GDP might rise, fall, or stay the same. Question 23 text Question 23 2 points Save Suppose the economy is in long-run equilibrium. In a short span of time, there is a sharp decline in the stock market, a tax cut, an increase in the money supply and a decline in the value of the dollar. In the short run, we would expect Question 23 answers the price level and real GDP both to rise. the price level and real GDP both to fall. the price level and real GDP both to stay the same. All of the above are possible. Question 24 text Question 24 2 points Save Suppose the economy is in long-run equilibrium. In a short span of time, there is a large influx of skilled immigrants, a major new discovery of oil, and a major new technological advance in electricity production. In the short run, we would expect Question 24 answers the price level to rise and real GDP to fall. the price level to fall and real GDP to rise. the price level and real GDP both to stay the same. All of the above are possible. Question 25 text Question 25 2 points Save Which of the following tends to make aggregate demand shift right farther than the amount government expenditures increase? Question 25 answers the crowding-out effect the multiplier effect the wealth effect the interest-rate effect Question 26 text Question 26 2 points Save Critics of stabilization policy argue that Question 26 answers there is a lag between the time policy is passed and the time policy has an impact on the economy. the impact of policy may last longer than the problem it was designed to offset. policy can be a source of, instead of a cure for, economic fluctuations. All of the above are correct. Question 27 text Question 27 2 points Save According to the theory of liquidity preference, the money supply Question 27 answers and money demand are positively related to the interest rate. and money demand are negatively related to the interest rate. is negatively related to the interest rate while money demand is positively related to the interest rate. is independent of the interest rate, while money demand is negatively related to the interest rate. Question 28 text Question 28 2 points Save Monetary policy Question 28 answers can be implemented quickly and most of its impact on aggregate demand occurs very soon after policy is implemented. can be implemented quickly, but most of its impact on aggregate demand occurs months after policy is implemented. cannot be implemented quickly, but once implemented most of its impact on aggregate demand occurs very soon after policy is implemented. cannot be implemented quickly and most of its impact on aggregate demand occurs months after policy is implemented. Question 29 text Question 29 2 points Save In the long run, the level of output Question 29 answers depends on the money supply. depends on the price level. is determined by supply-side factors. All of the above are correct. Question 30 text Question 30 2 points Save If the Fed conducts open-market sales, which of the following three increase: interest rates, prices, investment spending? Question 30 answers interest rates, prices, investment spending interest rates and prices, not investment spending interest rates and investment, not prices interest rates, not investment or prices Question 31 text Question 31 2 points Save If the Fed conducts open-market purchases which of these there increases in the short run: interest rates, prices, and investment spending? Question 31 answers interest rates, prices, and investment spending interest rates and prices, not investment spending prices and investment spending, not interest rates interest rates, not prices nor investment spending Question 32 text Question 32 2 points Save The economy is in long-run equilibrium. Aggregate demand then shifts left $50 billion. The government wants to change its spending in order to avoid a recession. If the crowding-out effect is always half as strong as the multiplier effect, and if the MPC equals 0.9, by how much does government purchases have to change? Question 32 answers increase $10 billion increase $50 billion increase $100 billion None of the above is correct. Question 33 text Question 33 2 points Save Suppose the MPC is .75. There are no crowding out or investment accelerator effects. If the government increases expenditures by $200 billion how far does aggregate demand shift? If the government decreases taxes by $200 billion how far does aggregate demand shift? Question 33 answers $800 billion and $800 billion $800 billion and $600 billion $600 billion and $600 billion $600 billion and $450 billion Question 34 text Question 34 2 points Save A tax cut shifts the aggregate demand curve the farthest if Question 34 answers the MPC is large because the tax cut is permanent. the MPC is large because the tax cut is temporary. the MPC is small because the tax cut is permanent. the MPC is small because the tax cut is temporary. Question 35 text Question 35 2 points Save One determinant of the long-run average unemployment rate is the Question 35 answers market power of unions, while the inflation rate depends primarily upon government spending. minimum wage, while the inflation rate depends primarily upon the money supply growth rate. rate of growth of the money supply, while the inflation rate depends primarily upon the market power of unions. existence of efficiency wages, while the inflation rate depends primarily upon the extent to which firms are competitive. Question 36 text Question 36 2 points Save According to Friedman and Phelps, the unemployment rate is above the natural rate when actual inflation Question 36 answers is greater than expected inflation. is less than expected inflation. equals expected inflation. low whether its greater than or less than expected. Question 37 text Question 37 2 points Save More flexible labor markets will shift Question 37 answers both the long-run Phillips curve and the long-run aggregate supply curve to the right. both the long-run Phillips curve and the long-run aggregate supply curve to the left. the long-run Phillips curve to the right and the long-run aggregate supply curve to the left. the long-run Phillips curve to the left and the long-run aggregate supply curve to the right. Question 38 text Question 38 2 points Save If the sacrifice ratio is 2, reducing the inflation rate from 4 percent to 2 percent would Question 38 answers cost 1 percent of annual output. cost 4 percent of annual output. imply that unemployment would rise by 1%. imply that unemployment would rise by 4%. Question 39 text Question 39 2 points Save Over the long run the Volcker disinflation Question 39 answers shifted the short-run and long-run Phillips curves left. shifted the short-run, but not the long-run Phillips curve left. shifted the long-run, but not the short-run Phillips curve left. None of the above is correct. Question 40 text Question 40 2 points Save Figure 35-4 nar004-1.jpg Refer to figure 35-4. If the economy starts at 5% unemployment and 5% inflation then if the Federal Reserve pursues a contractionary monetary policy, in the short run the economy moves to Question 40 answers 3% unemployment and 5% inflation. In the long run the economy moves to 5% unemployment and 5% inflation. 3% unemployment and 5% inflation. In the long run the economy moves to 5% unemployment and 3% inflation. 7% unemployment and 3% inflation. In the long run the economy moves to 5% unemployment and 5% inflation. 7% unemployment and 3% inflation. In the long run the economy moves to 5% unemployment and 3% inflation. Question 41 text Question 41 2 points Save Suppose that monetary policymakers announced that they were going to make a serious effort to fight inflation. A few years later the inflation rate has been reduced, but there had also been a serious recession. We could conclude with certainty that Question 41 answers the rational expectations hypothesis is false. the rational expectations hypothesis is true. the policymakers lacked credibility. None of the above is certain. Question 42 text Question 42 2 points Save Which of the following describes the Volcker disinflation most accurately? Question 42 answers Almost all of the public believed that the Fed would keep money growth low, so unemployment rose less than it would have otherwise. Almost all of the public believed that the Fed would keep money growth low, so unemployment rose more than it would have otherwise. Much of the public did not believe that the Fed would keep money growth low, so unemployment rose less than it would have otherwise. Much of the public did not believe that the Fed would keep money growth low, so unemployment rose more than it would have otherwise. Question 43 text Question 43 2 points Save Monetary Policy in Hyperion In Hyperion the Department of Finance is responsible for monetary policy. Hyperion has had an inflation rate of 25% for many years. Refer to Monetary Policy in Hyperion. Suppose that the Hyperion Department of Finance has run a public relations campaign claiming it will reduce inflation to 12.5% and that it actually reduces inflation to that level. Suppose that the public was very skeptical and in fact thought the Hyperion Department of Finance was going to raise inflation to 30% so it could increase its expenditures. Then Question 43 answers unemployment falls, but it would have fallen less if people had been expecting 25% inflation. unemployment falls, but it would have fallen less if people had been expecting 35% inflation. unemployment rises, but it would have risen less if people had been expecting 25% inflation. unemployment rises, but it would have risen less if people had been expecting 35% inflation. Question 44 text Question 44 2 points Save Monetary Policy in Hyperion In Hyperion the Department of Finance is responsible for monetary policy. Hyperion has had an inflation rate of 25% for many years. Refer to Monetary Policy in Hyperion. Suppose the Hyperion Department of Finance has run a public relations campaign claiming it will reduce inflation to 12.5% and actually reduces inflation to that level. Suppose at first that the public thought inflation would only drop to 18%, but eventually become convinced that the inflation rate will stay at 12.5%. Question 44 answers unemployment rises in the short run, and remains higher than it’s original value in the long run. unemployment rises in the short run, and is the same as it’s original value in the long run. unemployment falls in the short run, and is lower than it’s original value in the long run. unemployment falls in the short run, and is the same as it’s original value in the long run. Question 45 text Question 45 2 points Save Those who desire that policymakers stabilize the economy would advocate which of the following when aggregate demand is insufficient to ensure full employment? Question 45 answers decrease the money supply decrease taxes decrease government expenditures None of the above is correct. Question 46 text Question 46 2 points Save In fiscal year 2001, the U.S. government ran a surplus of about $127 billion. In fiscal year 2002, the government ran a deficit of $159 billion. This change would be expected to have Question 46 answers decreased interest rates and investment. decreased interest rates and increased investment. increased interest rates and investment. increased interest rates and decreased investment. Question 47 text Question 47 2 points Save How long have studies shown it takes for interest rate changes to lead to significant changes in spending? Question 47 answers A few days. A few weeks. A few months. A few years. Question 48 text Question 48 2 points Save The principal lag for monetary policy Question 48 answers and fiscal policy is the time it takes to implement policy. and fiscal policy is the time it takes for policy to change spending. is the time it takes to implement policy. The principal lag for fiscal policy is the time it takes for policy to change spending. is the time it takes for policy to change spending. The principal lag for fiscal policy is the time it takes to implement it. Question 49 text Question 49 2 points Save Edward Prescott and Finn Kydland won the Nobel Prize in Economics in 2004. One of their contributions was to argue that if a central bank could convince people to expect zero inflation, then the Fed would be tempted to raise output by increasing inflation. This possibility is known as Question 49 answers inflation targeting. the monetary policy reaction lag. the time inconsistency of policy. the sacrifice ratio dilemma. Question 50 text Question 50 2 points Save If a central bank had to give ups its discretion and follow a rule that required it to keep inflation low, Question 50 answers the short-run Phillips curve would shift up. the short-run Phillips curve would shift down. the long-run Phillips curve would shift right. the long-run Phillips curve would shift left. Question 51 text Question 51 2 points Save Suppose that the central bank is required to follow a monetary policy rule to stabilize prices. If the economy starts at long-run equilibrium and then aggregate supply shifts right the central bank would have to Question 51 answers increase the money supply, which causes output to move closer to its long-run equilibrium. increase the money supply, which causes output to move farther from long-run equilibrium. decrease the money supply, which causes output to move closer to its long-run equilibrium. decrease the money supply, which causes output to move farther from long-run equilibrium. Question 52 text Question 52 2 points Save Consider the following rule for monetary policy: r = 2 percent + p + 1/2(y - y*)/y* + 1/2(p - p*), where r is the nominal interest rate, y is real GDP, y* is an estimate of the natural rate of output, p is the inflation rate, and p* is the inflation target. Which of the following statements is not correct? Question 52 answers If aggregate demand shifts right from long-run equilibrium, this rule unambiguously implies that the Fed increases the nominal interest rate. If aggregate supply shifts right from long-run equilibrium at the inflation target, we cannot tell without more information whether the Fed should increase or decrease the nominal interest rate. If output is at its natural level, but inflation is above its target, the Fed must increase the nominal interest rate. If inflation is at its targeted level, but output is above its natural rate, the Fed must decrease the federal funds rate. Question 53 text Question 53 2 points Save If a central bank were required to target inflation at zero, then when there was a negative aggregate supply shock the central bank Question 53 answers would have to increase the money supply. This would move unemployment closer to the natural rate. would have to increase the money supply. This would move unemployment further from the natural rate. would have to decrease the money supply. This would move unemployment closer to the natural rate. would have to decrease the money supply. This would move unemployment further from the natural rate. Question 54 text Question 54 2 points Save At the end of 2003, the government had a debt of about $3,924 billion. During 2004, real GDP grew by about 4.2 percent and inflation was about 2.6 percent. About what is the largest deficit the government could have run without raising the debt-to-GDP ratio? Question 54 answers about $63 billion about $267 billion about $429 billion None of the above is within a few billion dollars of the largest deficit the government could have run without raising the debt to GDP ratio.

• Answer:

  .#1. c. During recessions sales and profits tend to fall. .#2. b. decrease consumption, which shifts aggregate demand left. ... The rest doesn't fit my screen, split by 2 question please ;)