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ECON 3312 Macroeconomics
Practice Exam 3
Name___________________________________
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
1) Assuming the economy is starting at the natural rate of output and everything else held constant,
the effect of ________ in aggregate ________ is a rise in both inflation and output in the short -run,
but in the long-run the only effect is a rise in inflation.
A) a decrease; supply
B) an increase; supply
C) an increase; demand
D) a decrease; demand
1)
2) When the aggregate demand curve shifts rightward, the price level ________ and the
unemployment rate ________.
A) increases; increases
B) does not change; does not change
C) decreases; increases
D) increases; decreases
E) decreases; decreases
2)
3) According to the traditional interest-rate channel, expansionary monetary policy lowers the real
interest rate, thereby raising expenditure on
A) consumer nondurables.
B) government expenditure.
C) business fixed investment.
D) net exports.
3)
4) Adaptive expectations assumes that individuals
A) use all available information in predicting the future.
B) base predictions on past observations of the variable being forecast.
C) can accurately predict the future.
D) form their predictions of macroeconomic variables randomly.
E) none of the above
4)
5) The long-run aggregate supply curve is a vertical line passing through
A) the natural rate of output.
B) the natural-rate price level.
C) the actual rate of unemployment.
D) the expected rate of inflation.
5)
6) The short-run Phillips curve shows ________ between the unemployment rate and the inflation
rate and the long-run Phillips curve shows ________ between the unemployment rate and the
inflation rate.
A) a negative relationship; a positive relationship
B) no relationship; no relationship
C) a positive relationship; a negative relationship
D) a negative relationship; no relationship
E) no relationship; a negative relationship
6)
7) If the ________ curve is relatively more unstable than the ________ curve, a money supply target is
preferred.
A) LM; LM
B) IS; IS
C) IS; LM
D) LM; IS
7)
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8) If the economy is on its short-run Phillips curve at the natural unemployment rate, then in the
AS-AD model, real GDP is definitely
A) decreasing.
B) equal to potential GDP.
C) greater than potential GDP.
D) increasing.
E) less than potential GDP.
8)
9) The rate of output at which the price level has no tendency to rise or fall is called the
B) efficient level of output.
A) bliss point.
C) potential level of income.
D) natural rate of output.
9)
10) Suppose the economy is producing at the natural rate of output. An open market sale of bonds by
the Fed will cause ________ in real GDP in the short run and ________ in inflation in the short run,
everything else held constant.
A) no change; a decrease
B) a decrease; a decrease
C) no change; an increase
D) an increase; an increase
10)
11) In the figure above, the natural unemployment rate is
A) 6 percent.
B) 8 percent.
C) 4 percent.
11)
D) 0 percent.
12) Which of the following changes aggregate supply and shifts the AS curve?
i. a change in the price of a major resource
ii. increases in the amount of capital iii. a change in the money income of consumers
A) iii only
B) i, ii, and iii
C) ii only
D) i only
13) An increase in potential GDP ________ aggregate supply and ________.
A) decreases; shifts the AS curve rightward
B) increases; shifts the AS curve leftward
C) decreases; shifts the AS curve leftward
D) increases; shifts the AS curve rightward
E) has no effect on; does not shift the AS curve
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E) 2 percent.
12)
E) i and ii
13)
14) The long-run Phillips curve shows the relationship between
A) real GDP and the natural unemployment rate.
B) real GDP and potential GDP.
C) the inflation rate and the unemployment rate.
D) the nominal interest rate and real interest rate.
E) the inflation rate and the natural unemployment rate.
14)
15) The short-run Phillips curve is another way of looking at
A) aggregate demand.
B) potential GDP.
C) Okunʹs law as applied to aggregate demand.
D) the natural rate of unemployment.
E) short-run aggregate supply.
15)
16) The expectations-augmented Phillips curve implies that as expected inflation increases, nominal
wages ________ to prevent real wages from ________.
A) fall; rising
B) fall; falling
C) rise; rising
D) rise; falling
16)
17) Everything else held constant, an increase in net taxes will cause the IS curve to shift to the
________ and aggregate demand will ________.
A) left; increase
B) right; decrease
C) right; increase
D) left; decrease
17)
Figure 4-6
18) In Figure 4-6 above, with IS0 shifting to IS 1 against the upward-sloping LM curve, at point 1
A) the demand for output is below Y 1 .
C) there is an excess demand for money.
B) the demand for output exceeds Y 1 .
D) there is an excess supply of money.
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18)
Figure 4-10
19) In Figure 4-10 above, preferring the ʺeasy fiscal, tight moneyʺ policy mix at a certain income is
why we are at
A) point A rather than point C.
B) point D rather than point B.
C) point B rather than point D.
D) point C rather than point A.
19)
20) Assume the economy is initially operating at the natural level of output. Now suppose a budget is
passed that calls for an increase in government spending. This increase in government spending
will, in the short run, cause an increase in
A) the nominal wage.
B) the price level.
C) the interest rate.
D) all of the above
E) none of the above
20)
21) Moving along the upward sloping AS curve, when the price level increases, the
A) real wage rate rises, and there is an increase in the quantity of real GDP supplied.
B) nominal wage rate falls, and there is an increase in the quantity of real GDP supplied.
C) nominal wage rate rises, and there is a decrease in the quantity of real GDP supplied.
D) real wage rate falls, and there is an increase in the quantity of real GDP supplied.
E) real wage rate rises, and there is a decrease in the quantity of real GDP supplied.
21)
22) The short-run Phillips curve shows
A) potential GDP.
B) a tradeoff between real GDP and unemployment.
C) the natural unemployment rate.
D) the expected inflation rate.
E) a tradeoff between the unemployment rate and the inflation rate.
22)
23) Moving along the short-run Phillips curve, a ________ unemployment rate can only be achieved
by paying the cost of ________.
A) lower; a lower inflation rate
B) lower; a higher inflation rate
C) lower; a higher expected inflation rate
D) higher; a higher inflation rate
E) lower; a lower price level
23)
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24) The curve shown in the figure above is the
A) demand for money curve.
B) aggregate demand curve.
C) aggregate supply curve.
D) potential GDP curve.
E) Phillips curve.
24)
25) According to the AS-AD model, when real GDP exceeds potential GDP, the unemployment rate is
definitely
A) greater than the natural unemployment rate.
B) rising.
C) less than the natural unemployment rate.
D) falling.
E) equal to the natural unemployment rate.
25)
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Answer Key
Testname: ECON3312_EXAM3_REVIEW
1) C
2) D
3) C
4) B
5) A
6) D
7) C
8) B
9) D
10) B
11) A
12) E
13) D
14) E
15) E
16) D
17) D
18) C
19) C
20) D
21) D
22) E
23) B
24) E
25) C
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