C11 Lesson 6 & 7 Exam SCORE 92.5 PERCENT

Question 1

2.5   / 2.5 points

The __________ is the amount by which a change in autonomous expenditures is multiplied in order to determine the change in equilibrium expenditure that it generates.

Question options:

marginal tax rate

marginal multiplier

expenditure reducer

expenditure   multiplier

Question 2

2.5   / 2.5 points

When the Federal Reserve changes the quantity of money and the interest rate, it influences aggregate demand by using __________.

Question options:

the world economy

consumer expectations

monetary policy

fiscal policy

Question 3

2.5   / 2.5 points

The change in equilibrium expenditure also equals the change in __________.

Question options:

the potential GDP

the real GDP

income taxes

interest rates

Question 4

0   / 2.5 points

What represents the relationship between the quantity of real GDP supplied and the price level when all other influences on production plans remain the same?

Question options:

aggregate demand

aggregate supply

the money wage rate

the money price index

Question 5

2.5   / 2.5 points

When the real GDP increases, disposable income and consumption expenditure __________.

Question options:

do not change

become inverted

decrease

increase

Question 6

2.5   / 2.5 points

All other things remaining the same, the lower the price level, the __________ the quantity of real GDP demanded.

Question options:

smaller

greater

more constant

less constant

Question 7

2.5   / 2.5 points

When the price level increases, the real interest rate __________.

Question options:

is not affected

falls

rises

will rise or fall depending on demand

Question 8

2.5   / 2.5 points

If the price level from the GDP price index falls, what happens to the quantity of real GDP supplied?

Question options:

it remains constant

it increases

it decreases

it barely changes

Question 9

2.5   / 2.5 points

What represents the relationship between the quantity of real GDP demanded and the price level when all other influences on expenditure plans remain the same?

Question options:

aggregate demand

aggregate supply

the money wage rate

the money price index

Question 10

2.5   / 2.5 points

All other things remaining the same, the higher the price level, the __________ the quantity of real GDP supplied.

Question options:

smaller

greater

more constant

less constant

Question 11

2.5   / 2.5 points

What are the two main influences that the world economy has on aggregate demand?

Question options:

foreign exchange   rate and foreign income

foreign investments and foreign profit

revenues from overseas and foreign exchange rate

foreign expenditures and international trade

Question 12

2.5   / 2.5 points

Which of the following would cause an increase in aggregate demand in the short run?

Question options:

an increase in the   supply of money

a decrease in the price level

an increase in taxes

a crop failure

Question 13

2.5   / 2.5 points

The marginal __________ is the fraction of a change in real GDP that is paid in income tax.

Question options:

tax rate

income

GDP

tax revenue

Question 14

2.5   / 2.5 points

__________ occurs when aggregate planned expenditure equals real GDP.

Question options:

Price-fixing

Stable economic leveling

Unplanned inventory change

Equilibrium   expenditure

Question 15

2.5   / 2.5 points

Which of the following does NOT decrease aggregate demand in the United States?

Question options:

a decrease in the   price of oil

a decrease in GDP in Germany

a decrease in government spending

a decrease in the supply of money

Question 16

2.5   / 2.5 points

How does an increase in potential GDP affect aggregate supply?

Question options:

It decreases aggregate supply.

It increases   aggregate supply.

It barely has any effect.

Since it applies to an “imaginary” market, it does not   affect aggregate supply.

Question 17

2.5   / 2.5 points

To determine the equilibrium price level and equilibrium level of real GDP, the aggregate demand and aggregate supply must __________.

Question options:

be considered separately

intersect

be disregarded

be considered as a multiplier

Question 18

2.5   / 2.5 points

The __________ curve summarizes the relationship between aggregate planned expenditure and the real GDP.

Question options:

AES

AE

AD

APE

Question 19

2.5   / 2.5 points

A rise in the price level __________ the buying power of money.

Question options:

does not affect

increases

decreases

inverts

Question 20

2.5   / 2.5 points

What is the total amount of final goods and service produced in a country that people, businesses, governments, and foreigners plan to buy?

Question options:

the supply-demand model

the quantity of real GDP supplied

the quantity of potential GDP

the quantity of real   GDP demanded

Lesson   7

Question 21

0   / 2.5 points

Since the long-run Phillips curve is vertical at the natural unemployment rate, what type of trade-off is there between employment and inflation?

Question options:

There is no   trade-off between employment and inflation.

There   is a constant trade-off between employment and inflation.

There   is a linear trade-off between employment and inflation.

Employment   and inflation are indirectly proportional (the one goes up, the other goes   down..

Question 22

2.5   / 2.5 points

In the short run, increases in the money supply increase the level of output because __________.

Question options:

prices and wages are   sticky

prices and wages are flexible

interest rates are sticky

demand is fixed

Question 23

2.5   / 2.5 points

Say’s law from a classical economic perspective __________.

Question options:

states that supply creates its own demand

explains the classical idea that the value of GDP will   equal the demand for goods and services

supports economists belief that neither surplus nor   shortage would ever exist when production and demand are equal for goods and   services

all of the above

Question 24

2.5   / 2.5 points

What policy action by the Fed describes an unexpected rise in interest rates and deceleration in money growth in order to slow inflation at the cost of recession?

Question options:

rational reduction

surprise inflation   reduction

credible announced inflation reduction

statistical model of reduction

Question 25

2.5   / 2.5 points

Classical economics refers to a body of work initially developed by __________.

Question options:

Keynes

Malthus

Say

Smith

Question 26

2.5   / 2.5 points

To lower the expected inflation rate, the Fed must take actions that will __________ the actual inflation rate.

Question options:

decelerate

accelerate

increase

decrease

Question 27

2.5   / 2.5 points

In __________, monetary policy can change the level of output.

Question options:

the long run only

both the short run and the long run

neither the short run nor the long run

the short run only

Question 28

2.5   / 2.5 points

What is the difference between how GDP is determined in the short run and how it is determined in the long run?

Question options:

In the short run,   GDP is determined by current demand for goods and services in the economy. In   the long run, GDP is determined by supply of labor, the stock of capital and   technological progress.

In the short run, GDP is determined by future demand for   goods and services in the economy. In the long run, GDP is determined by   supply of labor, the stock of capital and technological progress.

In the long run, GDP is determined by current demand for   goods and services in the economy. In the short run, GDP is determined by   supply of labor, the stock of capital and technological progress.

In the long run, GDP is determined by future demand for   goods and services in the economy. In the short run, GDP is determined by   supply of labor, the stock of capital and technological progress.

Question 29

2.5   / 2.5 points

If the natural unemployment rate increases, the short-term Phillips curve __________ and the long-run Phillips curve __________.

Question options:

shifts rightward;   shifts rightward

shifts leftward; shifts leftward

shifts rightward; remains the same

shifts leftward; remains the same

Question 30

2.5   / 2.5 points

A decrease in aggregate demand that brings a movement down along the aggregate supply curve lowers the price level and __________ real GDP.

Question options:

does not affect

decreases

increases

varies with

Question 31

2.5   / 2.5 points

What policy action by the Fed describes when people believe that the Fed will lower the inflation rate, and the expected inflation rate falls in order to slow the inflation rate without any accompanying loss of output or increase in unemployment?

Question options:

rational reduction

surprise inflation reduction

credible announced   inflation reduction

statistical model of reduction

Question 32

2.5   / 2.5 points

What is the proposition that when the inflation rate changes, the unemployment rate changes temporarily and then turns to the natural unemployment rate?

Question options:

the trade-off theory

the natural rate   hypothesis

Okun’s law

Phillip’s monetary policy

Question 33

2.5   / 2.5 points

The doctrine that states that "supply creates its own demand" is called __________ law.

Question options:

Keynes's

Smith's

Say's

Malthus's

Question 34

0   / 2.5 points

How does change in the expected inflation rate affect the short-run tradeoff between inflation and unemployment?

Question options:

Immediately, because the money wage rate is sensitive to   change in the expected inflation rate.

Immediately, because unemployment and job production   respond quickly to change in the expected inflation rate.

Gradually, because the money wage rate responds only   gradually to change in the expected inflation rate.

Gradually, because   the natural unemployment rate rarely changes.

Question 35

2.5   / 2.5 points

Suppose that the unemployment rate is __________ the natural rate. We would expect prices to fall, money demand to fall, interest rates to fall, and total demand to __________.

Question options:

above; rise

above; fall

below; rise

below; fall

Question 36

2.5   / 2.5 points

In the long run, a decrease in the money supply __________.

Question options:

has no effect on   real interest rates, investment, or output

increases real interest rates, decreases investment, and   decreases output

increases real interest rates, increases investment, and   decreases output

decreases real interest rates, decreases investment, and   decreases output

Question 37

2.5   / 2.5 points

The Keynesian view that demand could fall short of production is more likely to hold true if __________.

Question options:

wages and prices are fully flexible

prices, but not wages, are fully flexible

wages and prices are   not fully flexible

wages, but not prices, are fully flexible

Question 38

2.5   / 2.5 points

The trade-off between inflation and unemployment occurs when a lower unemployment rate brings a __________.

Question options:

lower inflation rate

higher inflation   rate

lower aggregate supply

higher aggregate supply

Question 39

2.5   / 2.5 points

The short-run Phillips curve is another way at looking at the __________.

Question options:

equilibrium expenditure

AD curve

aggregate supply   (AS. curve

potential GDP

Question 40

2.5   / 2.5 points

Keynes expressed doubts that that the economy would __________.

Question options:

ever return to full-employment

ever move away from full-employment

recover from a major   recession without active policy

recover from the effects of higher prices