1) The self-correcting mechanism would be expected to be very rapid in an economy with

a. large multiplier

b. flexible prices

c. rigid wages

2) Aggregated Quantity demanded Aggregate Quantity supplies Price Level

3500 2900 65

3400 3000 75

3350 3150 90

3250 3250 110

3100 3400 130

In the table, if full employment occurs at 3400 then

a) The economy experiences a recessionary gap of 300

b) The economy experiences an inflationary gap of 75

c) The economy experience an inflationary gap of 300

3) Recessionary gaps are most likely to be accompanied by

a) Inflation b) unemployment c) expanding output

4) A level of GDP cannot be at equilibrium when aggregate demand exceeds output because firms will notice that

a) inventory stocks are being depleted b) their profits are negative c)many of their workers have little to do

5) Assume a single macroeconomic model. When inventories rise unexpectedly

A) Income is above equilibrium value B) income will rise until it reaches its equilibrium value c)total spending is higher than total output

6) Aggregate quaintly demanded aggregate quantity supplied price level

3500 2900 65

3400 3000 75

3350 3150 90

3250 3250 110

3100 3400 130

In the table if full employment accurse at 3100 then

a) the economy experiences a recessionary gap of 130 B) the economy experiences a recessionary gap of 3000 c) the economy experiences an inflationary gap of 130

7) Inventory reductions are signal indicating that

a) the economy is close to disaster b) the dow jones industrial average wil fall c)manufactures need to increase production

8) What does inflation do to the value of the oversimplified multiplier?

a) Inflation increases the value of the multiplier about the value of the oversimplified formula b) inflation decreases the value of the multiplier below the value of the oversimplified formula c) inflation increase the value of the multiplier unless the level of unemployment also rises

9) Equilibrium GDP will not exist where outputs exceeds aggregate demand because businesses will notice that

a) Inventory stocks are building up b) inventory stocks are being depleted c) their level of depreciation is rising

10) if an economy at the equilibrium level of gdp experiences an increase in the amount of investment spending, then inventories will be