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1. For a closed economy, the IS curve describes short-run movements in an economy via which of the following?

a. Interest rate Investment Output
b. Interest rate Investment Output
c. Tax rate Consumption Output
d. Interest rate Investment Output
e. Tax rate Government expenditure Output

2. A key difference between the long run and short-run models is the assumption _____________ in the short run

a. of zero inflation
b. of perfect price flexibility
c. that unemployment always equals its natural rate
d. that the economy never deviates from its long-run equilibrium
e. of sticky inflation (inflexible prices)

3. If prices are sticky and the Fed raises the nominal interest rate (ceteris paribus), __________ and __________ in the short run.

a. the real interest rate remains constant; real output remains at potential
b. the real interest rate falls; short-run real output falls
c. the unemployment rate rises; short-run real output rises
d. the real interest rate rises; short-run real output falls
e. the real interest rate falls; current real output falls

4. According to the Phillips curve, if the current output is above potential output (a boom),

a. inflation rises.
b. inflation falls.
c. unemployment rises.
d. inflation is constant.
e. prices fall.

5. According to the Phillips curve, in general during a recession

a. inflation rises.
b. prices fall.
c. unemployment falls.
d. inflation is constant.
e. inflation falls.

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Yusra AneesLv10
28 Sep 2019
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Related questions

1) As the unemployment rate rises:

A) the separation rate decreases.

B) the young and unskilled experience lower-than-average increases in unemployment.

C) the young and skilled experience larger-than-average increases in unemployment.

D) the young and unskilled experience larger-than-average increases in unemployment.

E) the proportion of the unemployed finding a job increases.

2) The natural level of employment will increase when which of the following occurs?

A) a decrease in the markup of prices over costs

B) an increase in the natural level of output

C) an increase in the actual unemployment rate

D) an increase in unemployment benefits

E) an increase in the markup of prices over costs

3) Suppose workers and firms expect the overall price level to increase by 4%. Given this information, we would expect that:

A) the real wage will decrease by 4%.

B) the real wage will increase by 4%.

C) the nominal wage will increase by less than 4%.

D) the nominal wage will increase by more than 4%.

E) the nominal wage will increase by exactly 4%.

4) An increase in the minimum wage will cause:

A) a reduction in the equilibrium real wage.

B) an increase in the natural rate of unemployment.

C) an increase in the equilibrium real wage.
D) a decrease in the natural rate of unemployment.

E) no change in the natural rate of unemployment.

5) In the aggregate demand relation, a reduction in the price level causes output to increase because of its effect on:

A) firms' markup over labor costs.

B) the nominal wage.

C) the interest rate.

D) the expected price level.

E) government spending.

6) The short-run aggregate supply curve (AS) is upward sloping because:

A) an increase in output causes an increase in employment, a reduction in unemployment, an increase in the nominal wage, and an increase in the price level.

B) a reduction in the aggregate price level causes a reduction in nominal money demand and a reduction in the interest rate.

C) a reduction in the aggregate price level (P) will cause a reduction in the interest rate and an increase in output.

D) an increase in the aggregate price level will cause an increase in the interest rate and a reduction in output.

E) an increase in the nominal wage causes a reduction in the amount of output that firms are willing to produce.

7) Assume that the economy is initially operating at the natural level of output. A simultaneous expansionary monetary policy and an increase in oil prices will cause which of the following?

A) an increase in output and a reduction in the interest rate in the short run

B) a reduction in output and an increase in the interest rate in the short run

C) a reduction in output and a reduction in the interest rate in the short run

D) an ambiguous effect in output and an increase in the price level in the short run

E) an ambiguous effect in output and a reduction in the price level in the short run

8) Assume that the economy is initially operating at the natural level of output. A one-time 4% reduction in the nominal money supply will cause:

A) a 4% increase in the price level in the medium run.

B) a 4% reduction in the price level in the medium run.

C) a 4% increase in the real money supply in the medium run.

D) a 4% increase in the interest rate (i) in the medium run.

E) a 4% reduction in investment in the medium run.

9) The original Phillips curve implied that:

A) the markup over labor costs is zero.

B) the expected inflation rate is equal to last year's inflation rate.

C) a lower rate of unemployment causes an increase in the rate of inflation.

D) the inflation is always zero.

E) the expected inflation is always zero.

10) In the Phillips curve equation, which of the following will NOT cause a rise in the current inflation rate?

A) a rise in the minimum wage

B) a rise in the expected inflation rate

C) a rise in the employment insurance

D) a drop in the markup

E) a fall in the unemployment rate

2. Using the AS and AD, WS and PS, and IS-LM graphs, illustrate and explain the short run and medium run effects of less stringent enforcement of existing antitrust legislation (Monopolist market power increased) . Explain what happens to P, Y, I, W/P, I and u.

2. If workers become more productive, which of the following would happen in the labor market?

a. Labor supply would increase.

b. Labor supply would decrease.

c.Labor demand would increase and labor supply would decrease.

d.Labor demand would decrease and so would labor supply.

5.Since a long run consists of many short runs, the classical model is

a. incorrect every time we look at output data

b.accurate during the short run

c. paradoxically quite accurate in the long run; however, it is not very accurate in the short run

d. our best guide to fluctuations in the economy

e. paradoxically quite accurate in the short run; however, it is not very accurate in the long run

18.The difference between the number of workers employed if the economy was operating at full employment and the number of workers currently employed given aggregate expenditures is known as

a. cyclical unemployment

b. frictional unemployment

c. structural unemployment

d. unemployment is not possible in the short run macro model

22. From the perspective of the classical model, many economists would NOT consider one of these to be an automatic de-stabilizer

a. Stock prices

b. Wealth

c. Housing prices

d. Investment spending

e. None of the above

25. We expect a rise in transfer payments when

a. the needs of the poor receive more publicity

b. taxes rise

c. GDP rises and inflation soars

d. the retirement age remains unchanged over time

e. recessions occur

1. According to the Solow model, an increase in the capital-labor ratio will a. always increase steady state consumption per worker b. reduce steady state consumption per worker if the capital-labor ratio is below the Golden rule capital stock c. always reduce steady state consumption per worker d. increase steady state consumption per worker if the capital-labor ratio is below the Golden rule capital stock

2. In a steady state a. capital and labor, by definition, are inversely related to one another b. both consumption per worker and the capital-labor ratio are constant c. consumption per worker can change, but the capital-labor ratio is constant d. consumption per worker is constant, but the capital-labor ratio can change

3. Which of the following changes would lead, according to the Solow model, to a higher level of long-run output per worker? a. An increase in the saving rate b. A lower level of capital per worker c. A decrease in productivity d. A rise in the rate of population growth

4. In the long run, a reduction in productivity will cause a. an increase in the capital-labor ratio and a decrease in consumption per worker b. a decrease in the capital-labor ratio and a decrease in consumption per worker c. a decrease in the capital-labor ratio and an increase in consumption per worker d. an increase in the capital-labor ratio and an increase in consumption per worker

5. An increase in the growth rate of population in a steady-state economy would cause a. a pivot down and to the right in the investment line b. a parallel shift downward in the investment line c. a pivot up and to the left in the investment line d. a parallel shift upward in the investment line 1 2

6. In the efficiency wage model, an increase in productivity would a. have no effect on either output or the real wage b. increase output but have no effect on the real wage c. decrease the real wage but have no effect on output d. increase output but decrease the real wage

7. Keynesian economists believe that in the short run, a. money neutrality does not exist and prices adjust rapidly b. money neutrality does not exist and prices do not adjust rapidly c. money neutrality exists and prices adjust rapidly d. money neutrality exists and prices do not adjust rapidly

8. If the expected inflation rate is unchanged, a fall in the natural rate of unemployment would a. not shift the Phillips curve b. shift the Phillips curve to the left c. shift the Phillips curve to the right d. shift the Phillips curve to the left and shift the long-run Phillips curve to the right

9. Classical economists believe that in the short run, a. money neutrality does not exist and prices adjust rapidly b. money neutrality does not exist and prices do not adjust rapidly c. money neutrality exists and prices do not adjust rapidly d. money neutrality exists and prices adjust rapidly

10. The fact that the long-run Phillips curve is vertical implies that a. money can’t affect inflation in the long run b. money is neutral in the long run c. monetary policy can’t affect unemployment d. there is a natural rate of inflation

1. Briefly explain the shape of the per-worker production curve in the Solow model. If investment per worker initially exceeds saving per worker, how is the steady state capital-labor ratio achieved?

2. Describe the effects of a rise in the domestic real interest rate on the exchange rate and on both domestic and foreign net exports.

3. For each of the following changes, what happens to the real interest rate and output in the short run, before the price level has adjusted to restore general equilibrium? a. Wealth declines b. Money supply declines c. The future marginal productivity of capital declines d. Expected inflation rises e. Future income rises

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