Download 1. The model used to study - E-SGH

Macroeconomics I
110461-1792
Spring Semester 2014/2015
Introduction to Economic Fluctuations (ch. 10)
1. The model used to study business cycles is the:
a. labor model.
b. savings model.
c. growth model.
d. aggregate demand–aggregate supply model.
e. interest rate model.
2. The aggregate demand curve illustrates the:
a. positive relationship between the price level and the quantity demanded of real gross
domestic product (GDP).
b. positive relationship between the price level and the quantity demanded of nominal GDP.
c. inverse relationship between the price level and the quantity demanded of real GDP.
d. inverse relationship between the price level and the quantity demanded of nominal GDP.
e. positive relationship between the level of spending and the level of real GDP.
3. The value of one’s accumulated assets is best defined as:
a. money.
b. wealth.
c. income.
d. saving.
e. net worth.
4. When saving declines, the quantity of investment will __________, and therefore aggregate
demand will __________.
a. increase; increase
b. decrease; decrease
c. decrease; increase
d. increase; decrease
e. remain unchanged; decrease
5. If people expect higher income in the future, then spending today __________ and aggregate
demand __________.
a. increases; is unaffected
b. increases; increases
c. increases; decreases
d. decreases; decreases
e. is unaffected; is unaffected
6. Input prices are _________ in the short run and _________ in the long run.
a. sticky; sticky
b. flexible; flexible
c. increasing; increasing
d. flexible; sticky
e. sticky; flexible
7. Shifts in the short-run aggregate supply curve are caused by:
a. supply shocks.
b. menu costs.
c. money illusion.
d. changes in labor productivity.
e. changes in spending.
8. Short-run fluctuations in output and employment are called:
a. sectoral shifts.
b. the classical dichotomy.
c. business cycles.
d. productivity slowdowns.
9. Over the business cycle, investment spending ______ consumption spending.
a. is inversely correlated with
b. is more volatile than
c. has about the same volatility as
d. is less volatile than
10. Okun's law is the ______ relationship between real GDP and the ______.
a. negative; unemployment rate
b. negative; inflation rate
c. positive; unemployment rate
d. positive; inflation rate
11. Long-run growth in real GDP is determined primarily by ______, while short-run movements in
real GDP are associated with ______.
a. variations in labor-market utilization; technological progress
b. technological progress; variations in labor-market utilization
c. money supply growth rates; changes in velocity
d. changes in velocity; money supply growth rates
12. Leading economic indicators are:
a. the most popular economic statistics.
b. data that are used to construct the consumer price index and the unemployment rate.
c. variables that tend to fluctuate in advance of the overall economy.
d. standardized statistics compiled by the National Bureau of Economic Research.
13. Most economists believe that prices are:
a. flexible in the short run but many are sticky in the long run.
b. flexible in the long run but many are sticky in the short run.
c. sticky in both the short and long runs.
d. flexible in both the short and long runs.
14. On two occasions in the 1970s:
a. world oil prices rose rapidly, inflation was high, and the unemployment rate was high.
b. world oil prices rose rapidly, inflation was moderate, and the unemployment rate was high.
c. world oil prices rose rapidly, inflation was high, and the unemployment rate was moderate.
d. world oil prices rose rapidly, but the Fed used monetary policy to curb inflation.
15. Stagflation occurs when prices ______ and output ______.
a. fall; falls
b. fall; increases
c. rise; falls
d. rise; increases
16. In the short run an adverse supply shock causes:
a. both prices and output to rise.
b. prices to rise and output to fall.
c. prices to fall and output to rise.
d. both prices and output to fall.
17. A favorable supply shock occurs when:
a. environmental protection laws raise costs of production.
b. the Fed increases the money supply.
c. unions push wages up.
d. an oil cartel breaks up and oil prices fall.
18. A supply shock does not occur when:
a. a drought destroys crops.
b. unions push wages up.
c. the Fed increases the money supply.
d. an oil cartel increases world oil prices.
19. If a short-run equilibrium occurs at a level of output below the natural rate, then in the transition to
the long run prices will ______ and output will ______.
a. increase; increase
b. decrease; decrease
c. increase; decrease
d. decrease; increase
20. In the aggregate demand–aggregate supply model, long-run equilibrium occurs at the combination
of output and prices where:
a. aggregate demand is greater than long-run aggregate supply.
b. aggregate demand equals short-run aggregate supply.
c. aggregate demand equals short-run and long-run aggregate supply.
d. short-run aggregate supply equals long-run aggregate supply.
21. The short run refers to a period:
a. of several days.
b. during which prices are sticky and unemployment may occur.
c. during which capital and labor are fully employed.
d. during which there are no fluctuations.
22. The long run refers to a period:
a. of decades.
b. during which capital and labor are sometimes not fully employed.
c. during which prices are flexible.
d. during which output deviates from the full-employment level.
23. The natural level of output is:
a. affected by aggregate demand.
b. the level of output at which the unemployment rate is zero.
c. the level of output at which the unemployment rate is at its natural level.
d. permanent and unchangeable.
24. The statistical relationship between changes in real GDP and changes in the unemployment rate is
called:
a. the Phillips curve.
b. the Solow residual.
c. the Fisher effect.
d. Okun's law.
25. If a short-run equilibrium occurs at a level of output above the natural rate, then in the transition to
the long run prices will ______ and output will ______.
a. A)
increase; increase
b. B)
decrease; decrease
c. C)
increase; decrease
d. D)
decrease; increase