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| 1 | |
If the economy is initially at a point on its long-run aggregate supply curve, a decrease in aggregate demand will: |
| | A) | permanently increase unemployment |
| | B) | temporarily increase unemployment |
| | C) | permanently increase inflation |
| | D) | temporarily increase inflation |
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| 2 | |
Because nominal wages do not fully adjust to price level changes in the short run: |
| | A) | the short-run aggregate supply curve is vertical |
| | B) | the short-run aggregate demand curve is downward sloping |
| | C) | the short-run aggregate supply curve is upward sloping |
| | D) | the long-run aggregate demand curve is horizontal |
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| 3 | |
In a hypothetical economy, suppose that from 2004 to 2006 the annual rate of inflation decreased from 8% to 6% to 4%. This economy is experiencing: |
| | A) | stagflation |
| | B) | disinflation |
| | C) | deflation |
| | D) | accelerating deflation |
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| 4 | |
An adverse supply shock will: |
| | A) | move the economy upward and to the left along a fixed Phillips curve |
| | B) | move the economy downward and to the right along a fixed Phillips curve |
| | C) | reduce the misery index |
| | D) | increase both the rate of inflation and the unemployment rate |
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| 5 | |
In the long run: |
| | A) | both the aggregate supply curve and the Phillips curve are vertical |
| | B) | the aggregate supply curve is vertical and the Phillips curve is horizontal |
| | C) | government can permanently reduce the unemployment rate below its natural level |
| | D) | government can permanently reduce the inflation rate below its natural level |
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| 6 | |
Use the following diagram to answer the next question.
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Refer to the diagram. Assume the economy is initially at point a. A movement to point b might be caused by: |
| | A) | a decrease in aggregate supply |
| | B) | an increase in aggregate supply |
| | C) | a decrease in aggregate demand |
| | D) | an increase in aggregate demand |
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| 7 | |
Use the following diagram to answer the next question.
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Refer to the diagram. Suppose the economy is initially at point b, where unemployment is at its natural rate of 6%. If the government institutes an expansionary monetary policy: |
| | A) | the curve will immediately shift up and to the right, but will eventually return to this position |
| | B) | the curve will immediately shift down and to the left, but will eventually return to this position |
| | C) | the economy will move from point b towards point a and remain there |
| | D) | the economy will move from point b towards point a, but unemployment will gradually increase |
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| 8 | |
In order to temporarily reduce the unemployment rate below its natural rate, the government could: |
| | A) | decrease the rate of inflation below peoples' expectations |
| | B) | reduce both the trade deficit and the budget deficit |
| | C) | raise marginal tax rates and cut wasteful government spending |
| | D) | increase the rate of inflation above peoples' expectations |
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| 9 | |
Use the following diagram to answer the next question.
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Refer to the diagram. If the economy's tax rate is set at c, a decrease in the tax rate to b will: |
| | A) | shift the curve to the right |
| | B) | increase total tax revenue |
| | C) | increase the size of the deficit |
| | D) | shift the aggregate supply curve to the left |
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| 10 | |
Use the following diagram to answer the next question.
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Refer to the diagram. Suppose the economy is initially at the full-employment output and price level represented by point d. Which of the following paths best represents the economy's response to an expansionary monetary policy? Point d to: |
| | A) | point c to point b |
| | B) | point b to point d |
| | C) | point c to point a |
| | D) | point c to point b to point a |
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