Question 1

If u > un, we know with certainty that:

Accepted Answer

A)   P = Pe.
B)   Y > Yn.
C)   Y = Yn.
D)   P > Pe.
E)   P < Pe.

Question 2

Explain what the aggregate supply curve represents and why it is upward sloping.

Accepted Answer

The AS curve illustrates the effects of ...

Question 3

Results obtained from the Taylor model suggest that it takes roughly how long for the effects of money to become neutral?

Accepted Answer

A)   Ten years.
B)   Three months.
C)   One year.
D)   One month.
E)   Four years.

Question 4

Using the AS- AD model, which of the following would cause an increase in the natural level of output in the medium run?

Accepted Answer

A)   An increase in the money supply.
B)   An increase in government spending.
C)   A decrease in the oil price.
D)   An increase in the price target.
E)   A decrease in consumer confidence.

Question 5

The aggregate supply curve has its particular shape because of which of the following explanations?

Accepted Answer

A)   An increase in the nominal wage causes a decrease in the amount of output that firms are willing to produce.
B)   An increase in the aggregate price level will cause an increase in the interest rate and a decrease in output.
C)   An increase in output causes an increase in employment, a decrease in unemployment, an increase in the nominal wage and an increase in the price level.
D)   A decrease in output causes a decrease in employment, a decrease in unemployment, an increase in the nominal wage and an increase in the price level.
E)   A decrease in the aggregate price level causes a decrease in nominal money demand and a decrease in the interest rate.

Question 6

Assume that the economy is initially operating at the natural level of output. When the central bank controls the interest rate, an increase in the price target will cause:

Accepted Answer

A)   a decrease in the interest rate in the medium run.
B)   an increase in investment in the medium run.
C)   an increase in consumption in the medium run.
D)   no change in the nominal wage in the medium run.
E)   no change in the real wage in the medium run.

Question 7

Assume the economy is initially operating at the natural level of output. Now suppose a budget is passed that calls for a decrease in government spending. This fiscal contraction will, in the short run, cause a decrease in:

Accepted Answer

A)   the output level.
B)   the price level.
C)   the nominal wage.
D)   the interest rate.
E)   All of the above.

Question 8

Assume the economy is initially operating at the natural level of output. Suppose that individuals decide to increase their saving. We know that this increased desire to save will be "neutral" in:

Accepted Answer

A)   both the short run and the medium run.
B)   the short run, but not the medium run.
C)   the medium run and the long run.
D)   neither the medium run nor the short run.
E)   the medium run, but not the long run.

Question 9

If Y > Yn, we know with certainty that:

Accepted Answer

A)   P = Pe.
B)   P 
C)   u > un.
D)   P > Pe.
E)   u = un,.

Question 10

Based on your understanding of the AS- AD model and the IS- LM model, graphically illustrate and explain what effect a tax increase will have on the economy. In your graphs, clearly illustrate the short- run and medium- run equilibria.

Accepted Answer

A tax increase causes a decrease in cons...

Question 11

Suppose the economy is operating at a point where output is less than the natural level of output. Which of the following statements is correct given this information?

Accepted Answer

A)   The employment rate is greater than the natural employment rate.
B)   The price level will be higher next period than this period.
C)   The price level is less than the expected price level.
D)   Workers will revise upwards price expectations.
E)   The unemployment rate is less than the natural unemployment rate.

Question 12

Assume that the economy is initially operating at the natural level of output. When the central bank raises the price target, the subsequent one- time 20% increase in the nominal money supply will cause:

Accepted Answer

A)   a 20% increase in the interest rate in the medium run.
B)   a 20% increase in output in the medium run.
C)   a 20% increase in the real wage in the medium run.
D)   a 20% increase in the price level in the medium run.
E)   a 20% increase in the real money supply in the medium run.

Question 13

Assume the economy is initially operating at the natural level of output. Now suppose a budget is passed that calls for a decrease in government spending. This fiscal contraction will, in the medium run, have no effect on which of the following?

Accepted Answer

A)   Output and the interest rate.
B)   The price level and the interest rate.
C)   Output and consumption.
D)   Unemployment and investment.
E)   The interest rate and unemployment.

Question 14

At the current level of output, suppose the actual price level is greater than the price level that individuals expect. We know that:

Accepted Answer

A)   any subsequent decrease in the aggregate price level will cause an increase in the real money supply and a rightward shift in the aggregate demand curve.
B)   output is currently less than the natural level of output.
C)   the interest rate will tend to rise as the economy adjusts to this situation.
D)   the AS curve will tend to shift down over time.
E)   the nominal wage will tend to decrease as individuals revise their expectations of the price level.

Question 15

When output exceeds the natural level of output, explain what adjustments will occur in the labour market and discuss what effect they will have on output and the price level.

Accepted Answer

When output exceeds the natural level of...

Question 16

Analysis of the macroeconomic effects of changes in the money supply indicates that money is "neutral" in the medium run. Suppose there is an increase in government spending. Will this fiscal policy action also be neutral in the medium run? Explain.

Accepted Answer

Changes in government spending or taxes ...

Question 17

Assume that the economy is initially operating at the natural level of output. A decrease in consumer confidence will cause:

Accepted Answer

A)   an increase in investment in the short run.
B)   a decrease in investment in the short run.
C)   an increase in the interest rate in the medium run.
D)   an increase in investment in the medium run.
E)   a decrease in the real wage in the medium run.

Question 18

Explain what effect an increase in the price target has on the aggregate demand curve.

Accepted Answer

An increase in the price target, as dict...

Question 19

Which of the following represents the short- run effects of an increase in the price of oil?

Accepted Answer

A)   An increase in the interest rate.
B)   A decrease in output.
C)   An increase in the price level.
D)   An increase in unemployment.
E)   All of the above.

Question 20

As product markets become less competitive and the markup rises, we would expect which of the following to occur?

Accepted Answer

A)   A decrease in the interest rate in the medium run.
B)   An increase in the aggregate price level as output increases.
C)   A decrease in the real wage in the medium run.
D)   No change in the real wage in the medium run.
E)   No change in output in the medium run.

Exam 7: Putting All Markets Together: the Asad Model

Explain what the aggregate supply curve represents and why it is upward sloping.

Correct AnswerverifiedThe AS curve illustrates the effects of ...View AnswerShow Answer

Assume that the economy is initially operating at the natural level of output. A decrease in consumer confidence will cause:

Correct AnswerverifiedShow Answer

Based on your understanding of the AS- AD model and the IS- LM model, graphically illustrate and explain what effect a tax increase will have on the economy. In your graphs, clearly illustrate the short- run and medium- run equilibria.

Correct AnswerverifiedA tax increase causes a decrease in cons...View AnswerShow Answer

Using the AS- AD model, which of the following would cause an increase in the natural level of output in the medium run?

Correct AnswerverifiedShow Answer

When output exceeds the natural level of output, explain what adjustments will occur in the labour market and discuss what effect they will have on output and the price level.

Correct AnswerverifiedWhen output exceeds the natural level of...View AnswerShow Answer

At the current level of output, suppose the actual price level is greater than the price level that individuals expect. We know that:

Correct AnswerverifiedShow Answer

Analysis of the macroeconomic effects of changes in the money supply indicates that money is "neutral" in the medium run. Suppose there is an increase in government spending. Will this fiscal policy action also be neutral in the medium run? Explain.

Correct AnswerverifiedChanges in government spending or taxes ...View AnswerShow Answer

Explain what effect an increase in the price target has on the aggregate demand curve.

Correct AnswerverifiedAn increase in the price target, as dict...View AnswerShow Answer

Assume the economy is initially operating at the natural level of output. Now suppose a budget is passed that calls for a decrease in government spending. This fiscal contraction will, in the short run, cause a decrease in:

Correct AnswerverifiedShow Answer

Assume that the economy is initially operating at the natural level of output. When the central bank raises the price target, the subsequent one- time 20% increase in the nominal money supply will cause:

Correct AnswerverifiedShow Answer

Assume the economy is initially operating at the natural level of output. Suppose that individuals decide to increase their saving. We know that this increased desire to save will be "neutral" in:

Correct AnswerverifiedShow Answer

If u > un, we know with certainty that:

Correct AnswerverifiedShow Answer

If Y > Yn, we know with certainty that:

Correct AnswerverifiedShow Answer

Suppose the economy is operating at a point where output is less than the natural level of output. Which of the following statements is correct given this information?

Correct AnswerverifiedShow Answer

As product markets become less competitive and the markup rises, we would expect which of the following to occur?

Correct AnswerverifiedShow Answer

Which of the following represents the short- run effects of an increase in the price of oil?

Correct AnswerverifiedShow Answer

The aggregate supply curve has its particular shape because of which of the following explanations?

Correct AnswerverifiedShow Answer

Results obtained from the Taylor model suggest that it takes roughly how long for the effects of money to become neutral?

Correct AnswerverifiedShow Answer

Assume the economy is initially operating at the natural level of output. Now suppose a budget is passed that calls for a decrease in government spending. This fiscal contraction will, in the medium run, have no effect on which of the following?

Correct AnswerverifiedShow Answer

Assume that the economy is initially operating at the natural level of output. When the central bank controls the interest rate, an increase in the price target will cause:

Correct AnswerverifiedShow Answer

Correct Answer
verified
The AS curve illustrates the effects of ...
View Answer

Correct Answer
verified

Correct Answer
verified
A tax increase causes a decrease in cons...
View Answer

Correct Answer
verified

Correct Answer
verified
When output exceeds the natural level of...
View Answer

Correct Answer
verified

Correct Answer
verified
Changes in government spending or taxes ...
View Answer

Correct Answer
verified
An increase in the price target, as dict...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified