Download practice 32 - Brunswick City Schools

practice 32
Multiple Choice
Identify the choice that best completes the statement or answers the question.
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1. Monetary neutrality implies that in the long run:
A. monetary policy does not affect the level of economic activity.
B. aggregate supply is independent from monetary policy.
C. changing the money supply does not have any effect on the aggregate price level.
D. aggregate demand is independent from monetary policy.
E. monetary policy is effective at increasing long-run aggregate supply.
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2. If the money supply increases by 10%, in the long run:
A. unemployment drops by 10%.
B. the price level increases by 10%.
C. real GDP increases by 10%.
D. unemployment drops by 20%.
E. the interest rate falls by 10%.
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3. If the money supply decreases by 5%, in the long run:
A. interest rates rise by 5%.
B. the unemployment rate rises by 10%.
C. the price level drops by 5%.
D. real GDP drops by 5%.
E. the interest rate rises by 5%.
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4. If the Fed conducts an open market purchase, holding everything else constant:
A. in the long run, there will be an increase in the aggregate price level.
B. in the long run, there will be an increase in the aggregate output level.
C. in the long run, there will be a decrease in unemployment.
D. in the long run, there will be no effects on output, unemployment, or the price level.
E. in the long run, there will be a decrease in potential GDP.
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5. Which of the following would be the BEST explanation for an upward-sloping short-run aggregate supply
curve?
A. Prices are perfectly flexible.
B. Wages are perfectly flexible.
C. Wages and prices are sticky in the short run but flexible in the long run.
D. Wages and prices are flexible in the short run but sticky in the long run.
E. Wages are flexible in the long run, but prices are sticky in the short run.
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6. During periods of high inflation, the short-run aggregate supply curve is:
A. vertical.
B. horizontal.
C. upward sloping.
D. downward sloping.
E. backward bending.
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7. In the long run, any given percentage increase in the money supply:
A. decreases real GDP.
B. leads to an equal percentage increase in the overall price level.
C. increases real GDP.
D. leads to an equal percentage decrease in the unemployment rate.
E. leads to a smaller percentage increase in the overall price level.
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8. In economies that are experiencing persistently high inflation, an increase in the money supply will have:
A. a positive effect on the real quantity of money in the long run.
B. a negative effect on the real quantity of money, as aggregate price level increases by more
than the money supply.
C. a positive effect on the aggregate real output in the long run.
D. no effect on the real quantity of money, making money neutral in the long run.
E. a negative effect on the aggregate real output in the long run.
Figure 32-3: AD–AS
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9. Use the “AD–AS” Figure 32-3. Refer to the AD–AS diagram. Suppose the economy is initially at E1, and then
moves to E2 where AD2 intersects SRAS1. Now, suppose that the SRAS1 shifts to SRAS2, because:
A. real wages rise in the long run.
B. nominal wages rise in the long run.
C. the real money supply rises in the long run.
D. aggregate real output rises in the long run.
E. nominal wages fall in the long run.
____ 10. Use the “AD–AS” Figure 32-3. Refer to the AD–AS diagram. Suppose the economy is initially at E1, and then
moves to E2 where AD2 intersects SRAS1. Finally the economy moves to E3. The classical model of price level:
A. assumes that the economy moves from E1 to E3 and ignores E2; thus, only inflation
increases but real GDP remains the same.
B. assumes that the economy moves from E2 to E3 and ignores E1; thus, only real GDP
increases but inflation remains the same.
C. assumes that the economy moves from E2 to E3; thus, only inflation decreases but real
GDP remains the same.
D. assumes that the economy moves from E1 to E2 and ignores E3; thus, both inflation and
real GDP remain the same.
E. assumes that the economy moves from E1 to E3 and ignores E2; thus, only real GDP
increases but inflation remains the same.
practice 32
Answer Section
MULTIPLE CHOICE
1. ANS:
SKL:
2. ANS:
SKL:
3. ANS:
SKL:
4. ANS:
SKL:
5. ANS:
SKL:
6. ANS:
SKL:
7. ANS:
SKL:
8. ANS:
SKL:
9. ANS:
SKL:
10. ANS:
SKL:
A
PTS:
Concept-Based
B
PTS:
Critical Thinking
C
PTS:
Critical Thinking
A
PTS:
Critical Thinking
C
PTS:
Critical Thinking
A
PTS:
Fact-Based
B
PTS:
Concept-Based
D
PTS:
Critical Thinking
B
PTS:
Critical Thinking
A
PTS:
Analytical Thinking
1
DIF: M
REF: Module 32
1
DIF: M
REF: Module 32
1
DIF: M
REF: Module 32
1
DIF: M
REF: Module 32
1
DIF: M
REF: Module 32
1
DIF: M
REF: Module 32
1
DIF: M
REF: Module 32
1
DIF: M
REF: Module 32
1
DIF: M
REF: Module 32
1
DIF: D
REF: Module 32