MACROECONOMICS

Question 1

The __________ is the amount by which a change in autonomous expenditures is multiplied in order to determine the change in equilibrium expenditure that it generates.

A. marginal tax rate
B. marginal multiplier
C. expenditure reducer
D. expenditure multiplier

Question 2

Adjustments in __________ take the economy from the short-run equilibrium to the long-run equilibrium.

A. imports and exports
B. interest rates
C. wages and prices
D. the multiplier

Question 3

When the real wage rate changes, firms change the __________ and the level of production.

A. wage rate of employees
B. quality of goods or services produced
C. quantity of labor employed
D. production plans

Question 4

All other things remaining the same, the lower the price level, the __________ the quantity of real GDP demanded.

A. smaller
B. greater
C. more constant
D. less constant

Question 5

As long as aggregate planned expenditure exceeds real GDP, companies will __________ production in order to restore their inventories to their target level.

A. maintain
B. decrease
C. increase
D. not adjust

Question 6

If home prices are falling, consumers purchasing a home will find their purchasing power of money has increased. This benefit to consumers is called the __________.

A. inflation effect
B. wealth effect
C. home equity effect
D. multiplier effect

Question 7

How does an increase in potential GDP affect aggregate supply?

A. It decreases aggregate supply.
B. It increases aggregate supply.
C. It barely has any effect.
D. Since it applies to an "imaginary" market, it does not affect aggregate supply.

Question 8

The change in equilibrium expenditure also equals the change in __________.

A. the potential GDP
B. the real GDP
C. income taxes
D. interest rates

Question 9

Aggregate __________ is the sum of planned consumption expenditure, investment, government expenditure on goods and services, and exports minus imports.

A. planned expenditure
B. supply
C. demand
D. expenditure schedule

Question 10

When the real GDP increases, disposable income and consumption expenditure __________.

A. do not change
B. become inverted
C. decrease
D. increase

Question 11

All other things remaining the same, the higher the price level, the __________ the quantity of real GDP supplied.

A. smaller
B. greater
C. more constant
D. less constant

Question 12

What is the total amount of final goods and service that firms in a country plan to produce, depending on the labor, capital, technology, natural resources, and entrepreneurial talent in the market?

A. the supply-demand model
B. the quantity of real gross domestic product (GDP. supplied
C. the quantity of potential GDP
D. the quantity of real GDP demanded

Question 13

When governments change taxes, their transfer payments, and expenditure on goods and service, they influence aggregate demand through __________.

A. the world economy
B. consumer expectations
C. monetary policy
D. fiscal policy

Question 14

To determine the equilibrium price level and equilibrium level of real GDP, the aggregate demand and aggregate supply must __________.

A. be considered separately
B. intersect
C. be disregarded
D. be considered as a multiplier

Question 15

What are the two main influences that the world economy has on aggregate demand?

A. foreign exchange rate and foreign income
B. foreign investments and foreign profit
C. revenues from overseas and foreign exchange rate
D. foreign expenditures and international trade

Question 16

A rise in the price level __________ the buying power of money.
A. does not affect
B. increases
C. decreases
D. inverts

Question 17

When the price level increases, the real interest rate __________.

A. is not affected
B. falls
C. rises
D. will rise or fall depending on demand

Question 18

Why does the quantity of real GDP supplied change when the price level changes?

A. movement along the AS curve brings a change in the price of resources
B. movement along the AS curve brings a change in the potential GDP
C. movement along the AS curve brings a change in the GDP price index
D. movement along the AS curve brings a change in the real wage rate

Question 19

The marginal __________ is the fraction of a change in real GDP that is paid in income tax.

A. tax rate
B. income
C. GDP
D. tax revenue

Question 20

When the U.S. price level rises and other things remain the same, the prices in other countries __________.

A. rise
B. fall
C. do not change
D. will rise or fall depending on demand

Question 21

The short-run Phillips curve is another way at looking at the __________.

A. equilibrium expenditure
B. AD curve
C. aggregate supply (AS. curve
D. potential GDP

Question 22

The quantitative relationship between the unemployment rate and real gross domestic product (GDP. is called __________.

A. Occam's razor
B. the short-run Phillips curve
C. the long-run Phillips curve
D. Okun's law

Question 23

How does change in the expected inflation rate affect the short-run tradeoff between inflation and unemployment?

A. Immediately, because the money wage rate is sensitive to change in the expected inflation rate.
B. Immediately, because unemployment and job production respond quickly to change in the expected inflation rate.
C. Gradually, because the money wage rate responds only gradually to change in the expected inflation rate.
D. Gradually, because the natural unemployment rate rarely changes.

Question 24

A necessary condition for the classical model to work is that __________.

A. wages and prices are fully flexible
B. prices, but not wages, are fully flexible
C. wages and prices are not fully flexible
D. wages, but not prices, are fully flexible

Question 25

What is the difference between how GDP is determined in the short run and how it is determined in the long run?

A. In the short run, GDP is determined by current demand for goods and services in the economy. In the long run, GDP is determined by supply of labor, the stock of capital and technological progress.
B. In the short run, GDP is determined by future demand for goods and services in the economy. In the long run, GDP is determined by supply of labor, the stock of capital and technological progress.
C. In the long run, GDP is determined by current demand for goods and services in the economy. In the short run, GDP is determined by supply of labor, the stock of capital and technological progress.
D. In the long run, GDP is determined by future demand for goods and services in the economy. In the short run, GDP is determined by supply of labor, the stock of capital and technological progress.

Question 26

Classical economics refers to a body of work initially developed by __________.

A. Keynes
B. Malthus
C. Say
D. Smith

Question 27

The __________ shows the relationship between inflation and unemployment when the economy is at full employment.

A. AS curve
B. short-run Phillips curve
C. long-run Phillips curve
D. AE curve

Question 28

The Keynesian view that demand could fall short of production is more likely to hold true if __________.

A. wages and prices are fully flexible
B. prices, but not wages, are fully flexible
C. wages and prices are not fully flexible
D. wages, but not prices, are fully flexible

Question 29

Keynes expressed doubts that that the economy would __________.

A. ever return to full-employment
B. ever move away from full-employment
C. recover from a major recession without active policy
D. recover from the effects of higher prices

Question 30

Say's law from a classical economic perspective __________.

A. states that supply creates its own demand
B. explains the classical idea that the value of GDP will equal the demand for goods and services
C. supports economists belief that neither surplus nor shortage would ever exist when production and demand are equal for goods and services
D. all of the above

Question 31

At full employment, the unemployment rate equals the __________.

A. equilibrium expenditure
B. consumer price level
C. natural unemployment rate
D. inflation rate

Question 32

The trade-off between inflation and unemployment occurs when a lower unemployment rate brings a __________.

A. lower inflation rate
B. higher inflation rate
C. lower aggregate supply
D. higher aggregate supply

Question 33

In the short run, increases in the money supply increase the level of output because __________.

A. prices and wages are sticky
B. prices and wages are flexible
C. interest rates are sticky
D. demand is fixed

Question 34

In the long run, a decrease in the money supply __________.

A. has no effect on real interest rates, investment, or output
B. increases real interest rates, decreases investment, and decreases output
C. increases real interest rates, increases investment, and decreases output
D. decreases real interest rates, decreases investment, and decreases output

Question 35

What policy action by the Fed describes when people believe that the Fed will lower the inflation rate, and the expected inflation rate falls in order to slow the inflation rate without any accompanying loss of output or increase in unemployment?

A. rational reduction
B. surprise inflation reduction
C. credible announced inflation reduction
D. statistical model of reduction

Question 36

If the natural unemployment rate increases, the short-term Phillips curve __________ and the long-run Phillips curve __________.

A. shifts rightward; shifts rightward
B. shifts leftward; shifts leftward
C. shifts rightward; remains the same
D. shifts leftward; remains the same

Question 37

What is the proposition that when the inflation rate changes, the unemployment rate changes temporarily and then turns to the natural unemployment rate?

A. the trade-off theory
B. the natural rate hypothesis
C. Okun's law
D. Phillip's monetary policy

Question 38

In __________, monetary policy can change the level of output.

A. the long run only
B. both the short run and the long run
C. neither the short run nor the long run
D. the short run only

Question 39

What is the forecast for inflation that results from the analysis of all the relevant data and economic science?

A. rational expectation
B. surprise inflation expectation
C. credible announced inflation expectation
D. statistical model of expectation

Question 40

What is the name for the inflation rate that people forecast and use to set the money wage rate and other money prices?

A. the equilibrium inflation rate
B. the fixed-money inflation rate
C. the potential inflation rate
D. the expected inflation rate