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Homework answers / question archive / 1
1.In a recession, real GDP falls and:
Group of answer choices
unemployment is unaffected
unemployment may rise or fall
unemployment rises
unemployment falls
2.Most economists believe that classical economic theory is a good description of the world:
Group of answer choices
in the long run, but not in the short run
in the short run, but not in the long run
in the nineteenth century, but not in the twentieth century
in the short run and in the long run
3.When the price level falls:
Group of answer choices
households don’t change their holdings of money
households try to reduce their holdings of money
households try to increase their holdings of money
none of the options
4.The aggregate-supply curve is vertical in the long run because:
Group of answer choices
of the classical dichotomy and money neutrality
aggregate demand is downward-sloping
overall output goes down when prices go up
overall output goes up when prices go up
5.In the long run, the level of output is:
Group of answer choices
determined by the quantity of goods and services demanded
none of the options
determined by the quantity and productivity of resources
determined by the level of interest rates
6.If the interest rate increases through monetary policy, the:
Group of answer choices
aggregate demand curve shifts to the left
aggregate supply curve shifts to the right
aggregate demand curve shifts to the right
aggregate supply curve shifts to the left
7.If there is a major increase in economic activity, an appropriate policy for government would be to:
Group of answer choices
all of the options
increase the budget surplus
encourage individuals to save more
tighten up fiscal policy
8.The equation by Friedman and Phelps of a relationship between the unemployment rate and its natural rate can be summarised as:
Group of answer choices
Unemployment rate = Natural rate of unemployment /(Actual inflation – Expected inflation)
Unemployment rate = Natural rate of unemployment – a(Actual inflation – Expected inflation)
Unemployment rate = Natural rate of unemployment – Actual inflation
Unemployment rate = Natural rate of unemployment – Expected inflation
9.The Phillips curve is:
Group of answer choices
a negative association between the inflation rate and the unemployment rate
a positive association between the inflation rate and the unemployment rate
a negative association between the interest rate and the unemployment rate
a positive association between the growth rate and the unemployment rate
10.Faced with an adverse supply shock, the economy experiences an aggregate-supply curve shift to the:
Group of answer choices
left, and this shift is associated with a shift in the short-run Phillips curve to the right
right, and this shift is associated with a shift in the short-run Phillips curve to the left
right, and this shift is associated with a shift in the short-run Phillips curve to the right
left, and this shift is associated with a shift in the short-run Phillips curve to the left
11.According to the theory of rational expectations, people:
Group of answer choices
always forecast inflation correctly
optimally use all information they have when forecasting future inflation rates
none of the options
use only past inflation rates when following expectations of future inflation rates
12.Automatic stabilisers:
Group of answer choices
all of the options
reduce the problems that lags cause in using fiscal policy as a stabilisation tool
are changes in fiscal policy that restrain aggregate demand automatically when the economy is growing too fast
are changes in fiscal policy that stimulate aggregate demand automatically when the economy goes into a recession
13.Suppose we observe that an increase in government spending of $10 billion raises the total aggregate demand by $40 billion. If there is no crowding-out effect, what would be the marginal propensity to consume?
Group of answer choices
0.75
0.25
4
0.4
14.If the long-run Phillips curve shifts to the right, the economy will have _____ for any given rate of money growth and inflation.
Group of answer choices
lower unemployment and higher output
higher unemployment and lower output
higher unemployment and higher output
lower unemployment and lower output
15.A group of economists offer the theory that the economy will reduce inflation without the cost of _____ if people are rational.
Group of answer choices
low unemployment and high output
low unemployment and low output
high unemployment and high output
high unemployment and low output
