1)Imagine that the economy begins in long-run equilibrium. Then, perhaps because
ID: 1223932 • Letter: 1
Question
1)Imagine that the economy begins in long-run equilibrium. Then, perhaps because of damaged international relations and diminished confidence in policy makers, people become more pessimistic about the future and stay this way for some time. In the short run, in the absence of any policy intervention, what happens to the price level and real GDP?
both the price level and real GDP rise.
the price level rises and real GDP falls.
both the price level and real GDP fall.
the price level falls and real GDP rises.
2)Imagine that the economy begins in long-run equilibrium. Then, perhaps because of improved international relations and increased confidence in policy makers, people become more optimistic about the future and stay this way for some time. In the long run, without any policy intervention, what happens to the expected price level and what's the result for wage bargaining?
The expected price level falls. Bargains are struck for higher wages.
The expected price level falls. Bargains are struck for lower wages.
The expected price level rises. Bargains are struck for higher wages.
The expected price level rises. Bargains are struck for lower wages.
3)Imagine that the economy begins in long-run equilibrium. Then, perhaps because of damaged international relations and diminished confidence in policy makers, people become more pessimistic about the future and stay this way for some time. In the long run, without any policy intervention, the change in price expectations created by pessimism shifts
short-run aggregate supply right.
long-run aggregate supply left.
short-run aggregate supply left.
long-run aggregate supply right.
4)Imagine that the economy begins in long-run equilibrium. Then a major hurricane hits an area with important oil refineries, causing gas prices to soar upwards. How is the new long-run equilibrium different from the original one if there is no fiscal or monetary intervention?
the price level is the same and GDP is lower.
the price level is lower and real GDP is the same.
both the price level and real GDP are the same.
the price level is higher and real GDP is the same.
5)If Congress cuts spending to balance the federal budget, the Fed can act to prevent unemployment and recession by
buying bonds to increase the money supply
buying bonds to decrease the money supply.
selling bonds to increase the money supply.
selling bonds to decrease the money supply.
6) If businesses and consumers become excessively excited and overly optimistic, the Federal Reserve can attempt to reduce the impact on the price level and real GDP by
increasing the money supply which raises interest rates.
decreasing the money supply which raises interest rates.
increasing the money supply which lowers interest rates.
decreasing the money supply which lowers interest rates.
Suppose for some reason aggregate demand shifts to the left and policymakers want to stabilize output and employment. What can they do?
repeal an investment tax credit or decrease the money supply
repeal an investment tax credit or increase the money supply
institute an investment tax credit or decrease the money supply
institute an investment tax credit or increase the money supply
Suppose that the Federal Reserve (the Fed) and the federal government are both concerned about the effects of a stock market crash caused by wide-sweeping global panic on the economy. What could they do?
The Fed could buy bonds to raise the interest rate and the government could spend more on infrastructure projects.
The Fed could buy bonds to lower the interest rate and the government could spend more on infrastructure projects.
The Fed could sell bonds to lower the interest rate and the government could spend less on infrastructure projects.
The Fed could sell bonds to raise the interest rate and the government could spend less on infrastructure projects.
The expected price level falls. Bargains are struck for higher wages.
The expected price level falls. Bargains are struck for lower wages.
The expected price level rises. Bargains are struck for higher wages.
The expected price level rises. Bargains are struck for lower wages.
Explanation / Answer
1. A
2.C
3.A
4.B
5.C
6.D
7.B
8.A
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.