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Who recognized the need to develop tools to analyze the macroeconomy as a whole?


A) Adam Smith
B) Karl Marx
C) John Maynard Keynes
D) Milton Friedman

E) B) and C)
F) A) and D)

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In the short run, a decrease in market power (or monopolization) :


A) will increase the price level.
B) will decrease the price level.
C) will not affect the price level.
D) will not affect output.

E) B) and D)
F) A) and B)

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Cost-push inflation occurs when aggregate demand expands so much that equilibrium output exceeds full employment output.

A) True
B) False

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One reason the price level did not rise after the 2008-2009 stimulus policy actions is that it may not have shifted aggregate demand to the right.

A) True
B) False

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The _____ effect is a reason for the negative slope of the aggregate demand curve.


A) income
B) substitution
C) interest rate
D) multiplier

E) None of the above
F) A) and B)

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The Great Depression showed that the short-run aggregate supply and the aggregate demand curves:


A) must always intersect at full employment.
B) can intersect at output levels below full employment.
C) must intersect at output levels above full employment.
D) can never lead to deflation.

E) A) and B)
F) B) and D)

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An increase in productivity, a decrease in taxes, and reduced regulation all shift aggregate supply to the right.

A) True
B) False

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Aggregate supply increases when:


A) input prices rise.
B) subsidies are reduced.
C) there is a decrease in firms' market power.
D) business expectations tend toward the negative.

E) None of the above
F) All of the above

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When the price of a product falls, causing consumers to purchase more of that product and less of other products, this is known as the:


A) income effect.
B) substitution effect.
C) wealth effect.
D) interest rate effect.

E) A) and C)
F) All of the above

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When interest rates drop, investment will increase and the aggregate demand curve will shift to the right.

A) True
B) False

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The market does not necessarily clear in the long-run macroeconomic equilibrium.

A) True
B) False

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(Figure: Determining SRAS Shifts) Which statement is NOT correct? (Figure: Determining SRAS Shifts)  Which statement is NOT correct?   A)  Equilibrium output is $3,000 worth of goods and services. B)  An increase in aggregate demand would lead to deflation. C)  Full employment occurs when the economy produces $3,000 worth of goods and services. D)  In the short-run equilibrium, output can be greater than or less than $3,000.


A) Equilibrium output is $3,000 worth of goods and services.
B) An increase in aggregate demand would lead to deflation.
C) Full employment occurs when the economy produces $3,000 worth of goods and services.
D) In the short-run equilibrium, output can be greater than or less than $3,000.

E) A) and D)
F) B) and C)

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As the aggregate price level declines:


A) there is a movement down along the aggregate demand curve.
B) the aggregate demand curve shifts to the left.
C) there is a movement up along the aggregate demand curve.
D) the aggregate demand curve shifts to the right.

E) All of the above
F) A) and C)

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Ceteris paribus, the multiplier effect would be largest in which of the following situations?


A) when prices are fixed
B) when prices are flexible
C) when the government borrows from its citizens to cover increased deficit spending
D) when the government has a balanced budget

E) B) and C)
F) A) and D)

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The aggregate supply curve shows that the price level and real GDP are indirectly related.

A) True
B) False

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One reason the price level did not rise after the implementation of the 2008-2009 stimulus policy actions is that the U.S. capacity was fully utilized.

A) True
B) False

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In macroeconomics, the long run is:


A) a period long enough that participants in the economy will have enough time to gain all relevant information but not enough time to act correctly on that information.
B) the same period accountants use to measure long-term assets and liabilities.
C) a period long enough that participants in the economy will have enough time to gain all relevant information and enough time to act correctly on that information.
D) a period long enough that participants in the economy will have enough time to act correctly on all relevant information but not enough time to collect all of it.

E) B) and D)
F) A) and C)

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If the national incomes of foreign countries fall at the same time the dollar appreciates, then in the United States, the aggregate demand curve:


A) shifts to the right.
B) shifts to the left.
C) remains unchanged.
D) does not shift, but there is movement up along it.

E) B) and D)
F) C) and D)

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Which of the following will shift the short-run aggregate supply curve to the right?


A) an increase in the minimum wage
B) an increase in immigration from other countries
C) an increase in the price of oil
D) an increase in the actual price level

E) B) and C)
F) B) and D)

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The _____ measure(s) the proportion of additional income that consumers spend.


A) spending multiplier
B) marginal propensity to consume
C) marginal propensity to save
D) spending multiplier, the marginal propensity to consume, and the marginal propensity to save

E) None of the above
F) B) and C)

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