Download Mods 17-18-19 Practice

Mods 17-18-19 Practice
Multiple Choice
Identify the choice that best completes the statement or answers the question.
____
1. The aggregate demand curve shows the relationship between the aggregate price level and:
A. aggregate productivity.
B. the aggregate unemployment rate.
C. the aggregate quantity of output demanded by households, businesses, the government,
and the rest of the world.
D. the aggregate quantity of output demanded by businesses only.
E. the aggregate quantity of goods and services consumed by households.
____
2. The _____ curve shows the negative relationship between the aggregate price level and the quantity of
aggregate output demanded in the economy.
A. aggregate demand
B. short-run aggregate supply
C. long-run aggregate supply
D. investment demand
E. Phillips curve
____
3. The aggregate demand curve:
A. slopes downward for the same reasons that an ordinary demand curve does.
B. slopes downward in part because when the price level falls the real wealth of the public
falls, and this induces people to change their consumption.
C. slopes downward in part because as the price level falls the ability of households and firms
to borrow cheaply increases.
D. slopes upward, unlike an ordinary demand curve.
E. is vertical, unlike an ordinary demand cure.
____
4. According to the interest rate effect, an increase in the price level causes people to:
A. increase their money holdings, which increases interest rates and decreases investment
spending.
B. decrease their money holdings, which increases interest rates and decreases investment
spending.
C. to increase their money holdings, which decreases interest rates and decreases investment
spending.
D. to decrease their money holdings, which decreases interest rates and increases investment
spending.
E. to decrease their money holdings, which decreases interest rates and decreases investment
spending.
____
5. Increasing the quantity of money in circulation shifts the:
A. aggregate demand curve to the left.
B. long-run aggregate supply curve to the right.
C. aggregate demand curve to the right.
D. short-run aggregate supply curve to the right.
E. short-run aggregate supply curve to the left.
____
6. The only government policy that has a DIRECT effect on the aggregate demand curve is:
A. changing the quantity of money.
B.
C.
D.
E.
changing the tax rate.
changing the level of government purchases of final goods and services.
changing the level of government transfers.
changing the interest rate.
____
7. Aggregate demand will decrease if:
A. the aggregate price level falls.
B. net exports rises.
C. productivity declines.
D. the money supply increases.
E. the government raises the tax rate.
____
8. An increase in aggregate demand is seen as a(n):
A. shift to the right in the aggregate demand curve.
B. downward movement along the aggregate demand curve.
C. upward movement along the aggregate demand curve.
D. shift to the left in the aggregate demand curve.
E. movement from a horizontal to a vertical aggregate demand curve.
____
9. A decrease in aggregate demand is seen as a(n):
A. downward movement along the aggregate demand curve.
B. upward movement along the aggregate demand curve.
C. shift to the left in the aggregate demand curve.
D. shift to the right in the aggregate demand curve.
E. movement from a vertical to a horizontal aggregate demand curve.
____ 10. Changes in aggregate demand can be caused by changes in:
A. production technology.
B. business costs.
C. raw materials costs.
D. worker productivity.
E. government spending.
____ 11. A rise in labor productivity is most likely to result in:
A. an increase in aggregate demand.
B. a decrease in aggregate demand.
C. a decrease in short-run aggregate supply.
D. a decrease in long-run aggregate supply.
E. an increase in short-run aggregate supply.
____ 12. Nominal wages are “sticky” because:
A. in the short run these payments are slow to rise when there are labor shortages and slow to
fall even when there is significant level of unemployment.
B. in the long run these payments remain fixed thereby increasing the profitability of the
firms.
C. in the short run these payments are slow to fall when there are labor shortages and slow to
rise even when there is significant level of unemployment.
D. in the long run all wages become adjusted for inflation.
E. workers will never ask for increases to their wages.
____ 13. Stagflation is a combination of:
A. increasing unemployment and increasing inflation.
B. decreasing unemployment and decreasing inflation.
C. increasing unemployment and decreasing inflation.
D. decreasing unemployment and increasing inflation.
E. increasing unemployment and deflation.
Figure 19-2: Macroeconomics Equilibrium
____ 14. Use the “Macroeconomics Equilibrium” Figure 19-2. In the accompanying figure, curve 1 refers to _____,
curve 2 refers to _____, and curve 3 refers to _____.
A. long-run aggregate supply; short-run aggregate supply; aggregate demand
B. aggregate demand; short-run aggregate supply; long-run aggregate supply
C. short-run aggregate supply; long-run aggregate supply; aggregate demand
D. aggregate demand; long-run aggregate supply; short-run aggregate supply
E. short-run aggregate supply; aggregate demand; long-run aggregate supply
____ 15. The intersection of the economy's aggregate demand and long-run aggregate supply curves:
A. determines its equilibrium real GDP in both the long run and the short run.
B. determines its equilibrium price level in both the long run and the short run.
C. occurs at the economy's potential output.
D. occurs at high levels of cyclical unemployment.
E. occurs at the level of output that corresponds to an unemployment rate of 0%.
Figure 19-3: Inflationary and Recessionary Gaps
____ 16. Use the “Inflationary and Recessionary Gaps” Figure 19-3. In Panel (a), the intersection of SRAS with AD
indicates:
A. an economy experiencing a recessionary gap.
B. an economy experiencing an inflationary gap.
C. that the economy is in long-run equilibrium.
D. that the economy has an unusually low unemployment rate.
E. that the economy is operating at potential output.
Figure 19-4: An Increase in Aggregate Demand
____ 17. Use the “An Increase in Aggregate Demand” Figure 19-4. Because of the pressures existing at the
short-run equilibrium at Y2 and P2:
A. the SRAS curve will shift to the right.
B. the SRAS curve will shift to the left.
C. unemployment will decrease.
D. LRAS will shift to the right.
E. the price level will decrease.
Figure 19-5: Policy Alternatives
____ 18. Use the “Policy Alternatives” Figure 19-5. In Panel (a), suppose that the initial equilibrium is at real GDP
level Y1 and price level P2. At real GDP level Y1 there is:
A.
B.
C.
D.
E.
an inflationary gap.
a recessionary gap.
No cyclical unemployment.
long-run equilibrium.
full employment.
____ 19. A self-correcting inflationary gap results in:
A. short-run aggregate supply that gradually increases.
B. short-run aggregate supply that gradually decreases.
C. aggregate demand that gradually increases.
D. aggregate demand that gradually decreases.
E. long-run aggregate supply that gradually decreases.
____ 20. If government decides to increase spending, in the short run, this will:
A. increase aggregate output and aggregate price levels.
B. increase aggregate output, but lead to a decrease in aggregate price levels.
C. decrease both aggregate output and aggregate price levels.
D. decrease aggregate output, but increase aggregate price level.
E. increase aggregate output with no impact on the aggregate price level.
Mods 17-18-19 Practice
Answer Section
MULTIPLE CHOICE
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C
PTS:
Definitional
A
PTS:
Definitional
C
PTS:
Concept-Based
A
PTS:
Concept-Based
C
PTS:
Concept-Based
C
PTS:
Critical Thinking
E
PTS:
Critical Thinking
A
PTS:
Concept-Based
C
PTS:
Concept-Based
E
PTS:
Fact-Based
E
PTS:
Concept-Based
A
PTS:
Critical Thinking
A
PTS:
Definitional
D
PTS:
Concept-Based
C
PTS:
Concept-Based
A
PTS:
Critical Thinking
B
PTS:
Analytical Thinking
B
PTS:
Critical Thinking
B
PTS:
Concept-Based
A
PTS:
Critical Thinking
1
DIF: M
REF: Module 17
1
DIF: E
REF: Module 17
1
DIF: M
REF: Module 17
1
DIF: M
REF: Module 17
1
DIF: E
REF: Module 17
1
DIF: M
REF: Module 17
1
DIF: M
REF: Module 17
1
DIF: M
REF: Module 17
1
DIF: M
REF: Module 17
1
DIF: M
REF: Module 17
1
DIF: M
REF: Module 18
1
DIF: M
REF: Module 18
1
DIF: E
REF: Module 19
1
DIF: E
REF: Module 19
1
DIF: M
REF: Module 19
1
DIF: M
REF: Module 19
1
DIF: D
REF: Module 19
1
DIF: E
REF: Module 19
1
DIF: M
REF: Module 19
1
DIF: M
REF: Module 19