Question 1 of 10 A. nominal output and velocity (liquidity preference) B. the mo

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Question 1 of 10

A. nominal output and velocity (liquidity preference)

B. the money supply and real output

C. real output and prices

D. the money supply and velocity (liquidity preference)

Question 2 of 10

A. greater; outward

B. lower;outward

C. greater; inward

D. lower; inward

Question 3 of 10

A. neither prices nor the level of output

B. both prices and the level of output

C. prices but not level of output

D. level of output but not prices

Question 4 of 10

A. increase by 1 percent

B. decrease by 1 percent

C. decrease by 4 percent

D. decrease by 2 percent

Question 5 of 10

A. high

B. greater than the expected price level

C. low

D. less than the expected price level

Question 6 of 10

A. aggregate demand equals long-run aggregate supply

B. short-run aggregate supply equals long-run aggregate supply

C. aggregate demand equals long-run and short-run aggregate supply

D. aggregate demand equals short-run aggregate supply

Question 7 of 10

A. short-run supply curve will shift upward

B. demand curve will shift rightward

C. short-run supply curve will shift downward

D. demand curve will shift leftward

Question 8 of 10

A. a drought that destroys agricultural crops

B. the introduction and greater availability of credit cards

C. a large oil-price increase

D. unions obtain a substantial wage increase

Question 9 of 10

A. environmental protection laws raise costs of production

B. the FED increases the money supply

C. unions push wages up

D. an oil cartel breaks up and oil prices fall

Question 10 of 10

A. more; less

B. less; less

C. more; more

D. less; more

Question 1 of 10

Along the aggregate demand curve, which of the following are held constant:

A. nominal output and velocity (liquidity preference)

B. the money supply and real output

C. real output and prices

D. the money supply and velocity (liquidity preference)

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Question 2 of 10

When the Federal Reserve increases the money supply, at a given price level the amount of output demanded is _________ and the aggregate demand curve shifts ________.

A. greater; outward

B. lower;outward

C. greater; inward

D. lower; inward

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Question 3 of 10

Because the long-run aggregate supply curve is vertical, changes in aggregate demand (in the long-run) affect

A. neither prices nor the level of output

B. both prices and the level of output

C. prices but not level of output

D. level of output but not prices

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Question 4 of 10

The version of Okun's law discussed in class implies that with no change in unemployment, real GDP growth is 3 percent. If the unemployment rate rose by 2 percentage points, Okun's law predicts that real GDP would:

A. increase by 1 percent

B. decrease by 1 percent

C. decrease by 4 percent

D. decrease by 2 percent

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Question 5 of 10

The short-run aggregate supply curve implies that real output exceeds its long-run level when the price level is:

A. high

B. greater than the expected price level

C. low

D. less than the expected price level

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Question 6 of 10

In the aggregate demand-supply model, a short-run equilibrium occurs at the combination of output and prices where

A. aggregate demand equals long-run aggregate supply

B. short-run aggregate supply equals long-run aggregate supply

C. aggregate demand equals long-run and short-run aggregate supply

D. aggregate demand equals short-run aggregate supply

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Question 7 of 10

In the short-run, if the price level is greater than the expected price level, then in the long run the aggregate

A. short-run supply curve will shift upward

B. demand curve will shift rightward

C. short-run supply curve will shift downward

D. demand curve will shift leftward

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Question 8 of 10

Which of the following is an example of a demand shock

A. a drought that destroys agricultural crops

B. the introduction and greater availability of credit cards

C. a large oil-price increase

D. unions obtain a substantial wage increase

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Question 9 of 10

A favorable supply shock occurs when:

A. environmental protection laws raise costs of production

B. the FED increases the money supply

C. unions push wages up

D. an oil cartel breaks up and oil prices fall

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Question 10 of 10

If the FED accommodates an adverse supply shock, then output falls __________, but prices rise ________.

A. more; less

B. less; less

C. more; more

D. less; more

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Explanation / Answer

1) Along the aggregate demand curve, which of the following are held constant:

Solution: the money supply and velocity (liquidity preference)

Explanation: Along the aggregate demand curve, the money supply and velocity are contant and interest rate is non-constant

2) When the Federal Reserve increases the money supply, at a given price level the amount of output demanded is _________ and the aggregate demand curve shifts

Solution: greater; outward

Explanation: With an increase in money, demand increases and thus curve shifts outward

3) Because the long-run aggregate supply curve is vertical, changes in aggregate demand (in the long-run) affect

Solution: prices but not level of output

Explanation: The long-run aggregate supply curve is vertical, as the changes in the price level will not affect output in the long run

4) The version of Okun's law discussed in class implies that with no change in unemployment, real GDP growth is 3 percent. If the unemployment rate rose by 2 percentage points, Okun's law predicts that real GDP would:

Solution: decrease by 1 percent

Explanation: =3% - 2%

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