1-Holding everything else constant, an increase in the growth rate of the money supply will cause the AD curve to
not shift at all.
shift outward.
shift randomly.
shift inward.
 
 
2-In the AD-AS model, which curve would be irrelevant if prices and wages were perfectly flexible?

1. Long-Run Aggregate Supply
2. Long-Run Aggregate Demand
3. Short-Run Aggregate Supply
4. Aggregate Demand

 
3-An increase in the expected inflation rate will cause the LRAS curve to:

1. do nothing.
2. shift right.
3. flatten out.
4. shift left.

 
4-When consumers suddenly become more pessimistic about the economy, the stock shifts the:

1. LRAS curve outward, reducing the real growth rate in the short run.
2. AD curve inward, reducing the real growth rate in the short run.
3. AD curve outward, reducing the real growth rate in the short run.
4. LRAS curve inward, reducing the real growth rate in the short run.

 
5-Which of the following would cause the AD curve to shift to the left?

1. lower growth rate of output
2. decreased government purchases
3. higher government budget deficits
4. lower taxes

6-A temporary decrease in consumer spending causes:

1. a decrease in the economy’s long-run potential growth rate
2. a decrease in velocity growth
3. an upward shift of the SRAS curve.
4. a decrease in money growth

 
7-Which of the following best describes the conditions of the Great Depression?

1. Real GDP growth was negative while inflation was very high.
2. Both real GDP growth and inflation were historically high.
3. Real GDP was high while inflation was negative.
4. Both real GDP growth and inflation were negative.

8- Menu costs are the costs associated with changing:

4. expected inflation.

 
9-A temporary positive shock to spending growth will lead to an increase in:

1. output and inflation in the short run, but no change in either in the long run.
2. output in both the short and long run.
3. both inflation and output in the short run, but only output in the long run.
4. both inflation and output in the short run, but only inflation in the long run.

 
10- Which of the following describes the process through which a major decline in the stock market leads to a change in Aggregate Demand?

1. Banking panics lead to a removal of deposit insurance and a negative AD shock.
2. A stock market bubble bursts, and this leads to a negative supply shock.
3. Reductions in consumer wealth produce a negative AD shock.
4. Increase in net exports produce a negative AD shock.

 
 
 
11-

1. 10%
2. 4%
3. 7%
4. 3%

 
12-

1. 3%
2. 7%
3. 4%
4. 10%

 
 
 
 
 
13-

1. -0.5%
2. 5%
3. 7%
4. 3%

14-

6. 5%
7. -0.5%
8. 5%
9. 2%

15-

1. Workers increase their inflationary expectations so that the economy moves to point A.
2. Workers decrease their inflationary expectations so that the economy moves to point C.
3. Workers increase their inflationary expectations so that the economy moves to point C.
4. Workers decrease their inflationary expectations so that the economy moves to point A.

 
16-In 2011 a major earthquake and tsunami destroyed much of the capital infrastructure in Japan. Those natural disasters were an example of:

1. negative shock to AD.
2. positive shock to LRAS.
3. positive shock to AD.
4. negative shock to LRAS.

17-In the basic model that includes the AD and LRAS only, increased spending growth causes:

1. a higher real growth rate, but no change in the inflation rate.a
2. a higher inflation rate, but no change in the growth rate.
3. a lower inflation rate, but no change in the real growth rate.
4. a lower real growth rate, but no change in the inflation rate.

18-In the basic model that includes the AD and LRAS curves only, a shock that reduces the velocity of money growth by two percentage points causes

1. a decrease in real growth by two percentage points, a decrease in inflation by two percentage points, or both.
2. a decrease in the inflation rate by two percentage points.
3. an increase in the inflation rate of less than two percentage points.
4. an increase in the inflation rate by two percentage points.

 
19-If nominal spending growth is 5%, velocity of money growth is 2%, and the economy is in recession at a -1% real growth rate, what is the inflation rate?

1. 8%
2. 4%
3. 6%
4. 3%

20-Business fluctuations are fluctuations in the:

1. growth rate of real GDP around its trend growth rate.
2. growth rate of nominal GDP around its trend growth rate.
3. level of nominal GDP around its long-term trend
4. level of real GDP around its long-term trend

 
21-The aggregate demand curve shows all the combinations of _______________ and _______________ that are consistent with a specified rate of _______________.

1. prices; real GDP; spending
2. prices; real GNP; money supply
3. inflation; real GDP growth; spending growth
4. inflation; nominal GDP growth; money supply

22-If π > Eπ

1. firm profits will increase.
2. money growth will cause the SRAS curve to shift to the right.
3. money growth will cause the SRAS curve to shift to the left.
4. there will be no change in real GDP growth because it is determined by real factors of production.

23-Why could high rates of inflation cause the velocity of money to increase?

1. The more money loses its value, the faster people try to spend it.
2. The more inflation there is, the more there is to purchase.
3. The more people earn the faster they spend it.
4. The more people earn, the faster prices rise.

24-Using a graph of AD and LRAS curves, the shock to oil prices in the 1970s caused:

1. real GDP growth to be unchanged and inflation to decrease.
2. real GDP growth to increase and inflation to decrease.
3. real GDP growth to be unchanged and inflation to increase.
4. real GDP growth to decrease and inflation to increase.

25-Because of sticky prices and wages, negative AD shocks lead to:

1. small changes in inflation but large changes in unemployment.
2. large changes in inflation but small changes in unemployment.
3. negligible changes in both inflation and unemployment.
4. significant changes in both inflation and unemployment