1. When the expected inflation rate increases, it causes an increase in the nomi
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Question
1. When the expected inflation rate increases, it causes an increase in the nominal interest rate, with no change in the expected real interest rate. This Macroeconomics concept is called:
Inflation.
The Fisher Effect.
The crowding out effect.
The Walmart effect.
The (expenditure) multiplier.
2. Long-run economic growth requires
a. the imposition of bureaucratic restrictions on business and household activity.
b. political stability and respect for property rights.
c. extensive government intervention in markets in the form of import restrictions, government subsidies, and protection of firms from competitive economic pressures.
d. Answers (a), (b), and (c) are all correct.
3. Suppose that the Congress cuts transfer payment. The effect on the macro economy will be
a. an increase in AS
b. an decrease in AS
c. a budget deficit at the federal level
d. a decrease in AD
e. an increase in AD
4. The long-run aggregate supply curve is
a. a U-shaped curve
b. upward sloping reflecting the law of supply
c. downward sloping due to inferior goods
d. a horizontal line centered on the natural rate of inflation
e. a vertical line centered on potential output
5. Suppose that a person who graduated from high school last year decides to take a year off to work on his skateboarding skills. He is not working and is not actively looking for work. This person is
a. Unemployed
b. Self employed
c. Not in the labor force
d. Retired
e. Too young to work
Explanation / Answer
3) If transfer payments are cut, income levels come down, thus aggregate demand decreases.
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