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20 Cards in this Set
- Front
- Back
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Economic variables we are most interested in are A. real variables, but we usually observe nominal variables. B. nominal variables, but we usually observe real variables. C. nominal variables, which we usually observe. D. real variables, which we usually observe. |
A. real variables, but we usually observe nominal variables. |
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Other things the same, when the price level rises, interest rates A. fall, which means consumers will want to spend less on homebuilding. B. fall, which means consumers will want to spend more on homebuilding. C. rise, which means consumers will want to spend less on homebuilding. D. rise, which means consumers will want to spend more on homebuilding. |
C. rise, which means consumers will want to spend less on homebuilding. |
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Imagine that in 2015 the economy is in long-run equilibrium. Then stock prices rise more than expected and stay high for some time. 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 |
A. aggregate demand shifts right |
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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 rises. C. Recessions come at irregular intervals and are easy to predict. D. During economic contractions most firms experience rising profits. |
B. When real GDP falls, the rate of unemployment rises. |
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Most economists believe that money neutrality A. holds in the short run and the long run. B. does not hold in the long run. C. does not hold in either the short run or long run. D. does not hold in the short run. |
A. holds in the short run and the long run. |
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If aggregate demand shifts left, then in the short run A. the price and real GDP both fall. B. the price level and real GDP both rise. C. the price level falls and real GDP rises. D. the price level rises and real GDP falls. |
A. the price and real GDP both fall. |
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The sticky-wage theory of the short-run aggregate supply curve says that when the price level rises more than expected, A. production is more profitable and employment rises. B. production is less profitable and employment rises. C. production is more profitable and employment falls. D. production is less profitable and employment falls. |
A. production is more profitable and employment rises. |
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From 1995 to 1999 there was a dramatic rise in stock prices. If this rise made people feel wealthier, then it would have shifted A. aggregate demand left. B. aggregate supply left. C. aggregate supply right. D. aggregate demand right. |
D. aggregate demand right. |
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Other things the same, as the price level decreases it induces greater spending on A. investment but not net exports. B. net exports but not investment. C. both net exports and investment. D. neither net exports nor investment. |
C. both net exports and investment. |
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Which of the following is correct? A. During recessions employment rises. B. Over the business cycle investment fluctuates more than consumption. C. Because of government policy the U.S. had zero recessions in the last 25 years. D. Economic fluctuations are easy to predict. |
B. Over the business cycle investment fluctuates more than consumption. |
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A decrease in the expected price level shifts A. only the long-run aggregate supply curve right. B. both the short-run and the long-run aggregate supply curve right. C. only the short-run aggregate supply curve right. D. Neither the short-run nor the long-run aggregate supply curve right. |
C. only the short-run aggregate supply curve right. |
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Imagine that in 2015 the economy is in long-run equilibrium. Then stock prices rise more than expected and stay high for some time. How is the new long-run equilibrium different from the original one? A. the price level and real GDP are higher B. the price level and real GDP are lower. C. the price level is the same and real GDP is higher. D. the price level is higher and real GDP is the same. |
D. the price level is higher and real GDP is the same. |
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Which of the following shifts the short-run aggregate supply curve to the right? A. a decrease in the expected price level B. an increase in the price level C. an increase in the money supply D. All of the above are correct. |
A. a decrease in the expected price level |
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The initial impact of an increase in an investment tax credit is to shift A. aggregate demand right. B. aggregate demand left. C. aggregate supply left. D. aggregate supply right. |
A. aggregate demand right. |
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According to the liquidity preference theory, an increase in the overall price level of 10 percent A. decreases the quantity of money demanded by 10 percent, leaving the interest rate and the quantity of goods and services demanded unchanged. B. increases the quantity of money supplied by 10 percent, leaving the interest rate and the quantity of goods and services demanded unchanged. C. increases the equilibrium interest rate, which in turn decreases the quantity of goods and services demanded. D. decreases the equilibrium interest rate, which in turn increases the quantity of goods and services demanded. |
C. increases the equilibrium interest rate, which in turn decreases the quantity of goods and services demanded. |
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According to liquidity preference theory, a decrease in money demand for some reason other than a change in the price level causes A. the interest rate to rise, so aggregate demand shifts right. B. the interest rate to fall, so aggregate demand shifts left. C. the interest rate to fall, so aggregate demand shifts right. D. the interest rate to rise, so aggregate demand shifts left. |
C. the interest rate to fall, so aggregate demand shifts right. |
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An increase in government spending initially and primarily shifts A. aggregate demand to the left. B. aggregate supply to the right. C. neither aggregate demand nor aggregate supply in either direction. D. aggregate demand to the right. |
D. aggregate demand to the right. |
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If the inflation rate is zero, then A. the real interest rate can fall below zero, but the nominal interest rate cannot fall below zero. B. neither the nominal interest rate nor the real interest rate can fall below zero. C. both the nominal interest rate and the real interest rate can fall below zero. D. the nominal interest rate can fall below zero, but the real interest rate cannot fall below zero. |
B. neither the nominal interest rate nor the real interest rate can fall below zero. |
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Keynes argued that aggregate demand is A. unstable, because waves of pessimism and optimism create fluctuations in aggregate demand. B. stable, because changes in consumption are mostly offset by changes in investment and vice versa. C. unstable, because of long and variable policy lags that worsen economic fluctuations. D. stable, because the economy tends to return to its long-run equilibrium quickly after any disturbance to aggregate demand. |
A. unstable, because waves of pessimism and optimism create fluctuations in aggregate demand. |
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Critics of stabilization policy argue that A. active monetary policy is necessary for steady economic growth. B. active fiscal policy is required for steady economic growth. C. the lag problem ends up being a cause of economic fluctuations. D. "animal spirits" must be offset by active monetary policy. |
C. the lag problem ends up being a cause of economic fluctuations. |
