Question 1:

The term "full employment GDP" is synonymous with which of the following?

Question 1 options:

a) potential GDP

b) Keynesian zone

c) aggregate GDP

d) macroeconomic equilibrium

Question 2:

Whether the economy is in a recession is illustrated in the AD/AS model by how close the _____________________ is to the potential GDP line.

options:

a) AS and AD curve

b) equilibrium

c) AD curve

d) AS curve

Question 3

The __________________ in an AD/AS diagram is most relevant to Keynes's Law.

a) AD curve

b) AS curve

c) steep portion of the AS curve

d) flat portion of the AS curve

Question 4

Changes in the price level of the different components of aggregate demand are reflected in the AD/ASAD/AS macroeconomic model by a ________________________.

a) shorter distance to equilibrium point

b) longer distance to equilibrium point

c) flatter top portion of AD curve

d) downward sloping AD curve

Question 5

Why is productivity growth considered to be the most important factor in the AD/ASAD/AS model?

a) it shifts the AD curve in the short-term

b) it shifts the AS curve in the long-term

c) it shifts the AS curve in the short-term

d) it shifts the AD curve in the long-term

Question 6

_______________________ are economists who generally emphasize the importance of aggregate supply in determining the size of the macroeconomy over the _____________.

a) Keynesian economists; long run

b) Neoclassical economists; short run

c) Keynesian economists; short run

d) Neoclassical economists; long run

Question 7

Potential GDP in the U.S. will be unaffected by ____________________.

a) the unemployment rate

b) the amount of capital available

c) government institutions

d) technology

Question 8

As the aggregate price level in an economy decreases,

a) interest rates decrease.

b) imports decrease.

c) consumer demand decreases.

d) investment decreases.

Question 9

The ____________ describes a situation where sufficient credit is available, but the economy experiences a reduction in consumption and investment.

a) interest rate effect

b) inflation rate effect

c) price effect

d) wealth effect

Question 10

The ____________________ in an AD/AS diagram is most relevant to Say's Law.

a) steep portion of the AS curve

b) AD curve

c) AS curve

d) flat portion of the AS curve

11.

a) an increase in economic growth

b) an increase in input prices

c) less inflationary pressures

d) a decrease in the natural unemployment rate

Question 12

Refer to the graph above. A government creating economic policy in these circumstances should be most concerned about:

unemployment but not inflation.

inflation but not unemployment.

inflation and unemployment.

neither inflation nor unemployment.

Question 13

The sum of all the income received for contributing resources to GDP is called ___________________.

a) marginal income (X)

b) national revenue (Y)

c) national income (Y)

d) marginal revenue (X)

Question 14

According to the Keynesian framework, ________________ in __________________ may cause inflation, but not a recession.

a) decrease; interest rates

b) an increase; domestic investment

c) an increase; a major trading partner's economy

d) a decrease; a major trading partner's export prices

Question 15

If a Phillips curve shows that unemployment is high and inflation is low in the economy, then that economy:

a) is producing at its potential GDP.

b) is producing at its equilibrium point.

c) is producing at a point where output is less than potential GDP.

d) is producing at a point where output is more than potential GDP.

Question 16

In a Keynesian cross diagram, what name is given to the distance between an output level that is below potential GDP and the level of potential GDP?

a) national income (Y)

b) expenditure-output

c) inflationary gap

d) recessionary gap

Question 17

Which of the following will cause the multiplier to be smaller and cause changes in investor confidence to have a smaller effect in an economy?

a) decreased trade

b) bigger leakages

c) increased trade

d) smaller leakages

Question 18

Aggregate demand is more likely to _________________ than aggregate supply in the short run.

a) increase slightly

b) . decrease substantially

c) shift substantially

d) remain unchanged

Question 19

Keynesian economics focuses on explaining why recessions and depressions occur, as well as offering a ______________________ for minimizing their effects.

a) policy prescription

b) set of menu costs

c) pricing strategy

d) macro-economic model

Question 20

Which of the following is a distinguishing characteristic of a Keynesian cross diagram?

a) 45-degree line

b) real GDP on the horizontal axis

c) a flat line

d) several different Phillips curves

Question 21

Which of the following data would be analyzed to determine whether any shift in the MPI has occurred over the course of the past 5 year period?

a) interest rates

b) exchange rates

c) MPS

d) foreign income

Question 22:

According to the _____________________ argument, a market-oriented economy has no obvious way to implement a plan of systematic wage reductions.

a) sticky wage

b) sticky wage and price

c) coordination

d) Keynesian

Question 23:

Refer to the graph shown below. At point B:

a) economic growth it low or even negative.

b) unemployment is very low.

c) output is expanding.

d) businesses may raise prices.

Question 24

When the economy is in a recession, the government will want to increase output. If the multiplier equals 2.5 and the government increases spending by 200, how much will output increase by?

a) 500

b) 900

c) 100

d) 300

Question 25

Suppose that out of the original 100 increase in government spending, 33 will be recycled back into purchases of domestically produced goods and services in the second round and 10.89 is spent in the third round. Following this multiplier effect, what value would be recycled in the fourth round of this cycle?

a) 9.89

b) 3.37

c) 5.23

d) 3.59