Q1) Which statement best describes differences between the short-run and long-ru

Question

Q1) Which statement best describes differences between the short-run and long-run economy?
a. Monetary neutrality holds in the short run, but not in the long run
b. A change in the money supply affects real GDP and unemployment in the short run, but not in the long run.
c. The value of real variables is determined by changes in nominal variables in the long run, but not in the short run
d. Unemployment exists in the long run, but not in the short run

Q2) Which of the following best describes the effect of changes in the money supply on real gross domestic product (GDP)?
Changes in the money supply:
a. Can affect real GDP in the short run, but not the long run
b. Can affect real GDP in the long run, but not the short run
c. Can affect real GDP in both the short run and the long run
d. Have no impact on real GDP in either the short run or the long run

Q3) Which of the following is NOT a determinant of the long-run supply of goods and services?
a. Natural resources b.Technology c.Inflation d. Quantity of labor

Q4) Which of following theories of the upward sloping short-run aggregate supply curve best describes what is happening in the manufacturing of bicycles?

A manufacturer of bicycles notices that the price of bicycles is going up and therefore increases the number of bicycles produced. But the manufacturer has failed to notice that all prices are increasing, including wages and the price of other inputs used in the production of bicycles
a. The sticky-wage theory
b. The sticky-price theory
c. The misperceptions theory
d. Non of these choices

Q5) Which of the following events would bring the economy back to the natural rate of unemployment and long-run equilibrium?
a. The government raises Social Security taxes.
b. Businesses increase investment in expectation of a stronger economy
c. The Federal Reserve buys bonds on the open market
d. Consumer confidence in the economy rises, sparking higher levels of consumption

Q6) In the short run, the decrease in consumption spending associated with the increase in saving shifts the (AD or AS which one?) curve to the (right or left?), causing the inflation rate to (fall below or rise above?) the iniflation rate people expected and the quantity of output to (fall below or rise above?) the natural rate of output. The sharp increase in saving will cause the unemployment rate to (rise above or fall below?) the natural rate of unemployment in the short run.

Q7) During the transition from the short run to the long run, inflation rate expectations will (adjust downard or remain the same or adjust upward?), and the (short-run aggregate supply or aggregate demand?) curve will shift to the (right or left?). In the long run, as a result of the sharp increase in saving, the inflation rate (increases, decreases, same?), the quantity of output (falls below, returnsto, rises above?) the natural rate of output, and the unemployment rate (returns to, rises above, falls below) the natural rate of unemployment.

Explanation / Answer

1) b. A change in the money supply affects real GDP and unemployment in the short run, but not in the long run.

2) a. Can affect real GDP in the short run, but not the long run

3) a. Natural resources

4) b. The sticky-price theory

5) d. Consumer confidence in the economy rises, sparking higher levels of consumption

6) AD, right, rise above, fall below, rise above

7) adjust upward, short-run aggregate supply , decreases, rises above

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