Multiple Choice Identify the
choice that best completes the statement or answers the question.
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1.
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World War I (the 'Great War') in 1914-1918 destroyed much of
France's infrastructure and killed 1 in 7 working-age males in the country. As a
result:
a. | France's long-run aggregate supply curve shifted outward (to the
right). | b. | France's long-run aggregate supply curve shifted inward (to the
left). | c. | there was a movement up along France's long-run aggregate supply curve, but the
curve did not shift. | d. | there was a movement down along France fs
long-run aggregate supply curve, but the curve did not shift. |
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2.
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Which of the following events is likely to cause both an decrease in real GDP
and an increase in the price level? (Hint: Sketch a graph of the Aggregate Supply - Aggregate
Demand model.)
a. | A decision by the Fed to lower interest rates causes businesses to increase their
investment spending. | b. | The value of the dollar in terms of other
countries' currencies goes up, causing a fall in exports. | c. | A business tax cut
improves businesses profitability and increases the supply of goods. | d. | An unexpected war
interupts the supply of imported oil and raises it fs price
significantly. |
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3.
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If the SRAS curve intersects the AD curve to the left of full employment GDP
(potential output), the economy is
a. | in a recessionary gap. | b. | at full employment. | c. | in an inflationary
gap. | d. | in an expansionary gap.. |
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4.
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If actual Real GDP is less than full employment (potential) Real GDP, then the
(actual) unemployment rate is
a. | less than the natural unemployment rate. | b. | equal to the natural
unemployment rate. | c. | greater than the natural unemployment
rate. | d. | equal to full employment. | e. | b and d |
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5.
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If Real GDP is greater than potential GDP (full employment GDP), the economy is
in a(n)
a. | frictional gap. | b. | structural gap. | c. | recessionary
gap. | d. | inflationary (expansionary) gap. | e. | impossibility |
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6.
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The long-run aggregate supply (LRAS) curve is
a. | horizontal and shows the potential of the economy to produce long-run, given
it’s resources and technology. | b. | vertical and shows the potential of the economy
to produce long-run, given it’s resources and technology. | c. | positively sloped
and shows how firms change output in response to price level changes | d. | negatively sloped
and shows how firms change output in response to price level changes. |
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Exhibit 8-1
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7.
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Refer to Exhibit 8-1. The economy is currently producing Q1. At this
level of Real GDP, the economy is in a(n)
a. | inflationary gap. | b. | recessionary gap. | c. | unemployment
gap. | d. | high Real GDP gap. | e. | none of the
above |
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Exhibit 8-2
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8.
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Refer to Exhibit 8-2. The economy is currently producing Q1. At this
level of Real GDP, the economy is in a(n)
a. | inflationary or expansionary gap. | b. | recessionary gap. | c. | unemployment
gap. | d. | high Real GDP gap. | e. | none of the
above |
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Exhibit 8-3
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9.
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Refer to Exhibit 8-3. The economy is at an equilibrium with full employment at
point
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Exhibit 8-6
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10.
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Refer to Exhibit 8-6. If the economy is currently at point 1, it follows
that
a. | there is a surplus of labor in the labor market. | b. | the economy is
currently producing to the capacity of it’s resources. | c. | the economy is
currently in an inflationary gap. | d. | the labor market is in
equilibrium. | e. | the actual unemployment rate is below the natural unemployment
rate. |
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Exhibit 7-005
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11.
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Refer to Exhibit 7-005. Then choose which of the following labels is not
correctly identified:
a. | Unemployment | d. | long-run aggregate supply curve | b. | Price Level (price
index) | e. | short-run aggregate
supply curve | c. | aggregate demand curve |
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12.
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Which of the following will cause the AD curve to shift to the left?
a. | household become more cautious/fearful for future and try to increase savings as a
precautionary measure | c. | firms reduce their expectation of future economic growth and
therefore reduce investment spending | b. | government reduces it’s spending without
an equal reduction in taxes (reduces the defict) | d. | all of the above will shift AD to the
left |
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13.
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Which of the following will cause the SRAS curve to shift to the right?
a. | lower real wages paid to workers (assuming same prices for output) | c. | lower real prices
for widely used inputs like oil | b. | improvements in
productivity | d. | all of the
above will shift SRAS to the right |
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14.
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Which of the following will cause the LRAS curve to shift to the left?
a. | a war which destroys factories, capital, and kill many working-age
males | c. | a natural disaster such as a massive earthquake | b. | an aging population
where each year more older workers retire and leave the workforce than new, young people enter the
workforce | d. | all of the above
will shift LRAS to the left |
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