Question 1 In the short-run, an output gap occurs because Answer A. there is ins

Question

Question 1

In the short-run, an output gap occurs because
Answer
A. there is insufficient supply of goods and services.
B. wages and some prices have not adjusted sufficiently to maintain output at its potential level.
C. there is insufficient demand for goods and services.
D. wages and prices are fully flexible.

Question 3

To eliminate a recessionary gap, policy-makers may pursue
Answer
A. a non-intervention policy that leaves aggregate supply unaffected and increases aggregate demand.
B. an expansionary policy that increases aggregate demand.
C. an intervention policy that decreases aggregate supply and increases aggregate demand.
D. a contractionary policy that increases aggregate demand.

Question 4

The use central bank policies to influence the level of economic activity is called
Answer
A. monetary policy.
B. banking and finance policy.
C. financial market policy.
D. congressional policy.

Question 7

All of the following are held constant along a short-run aggregate supply curve except
Answer
A. nominal wages.
B. capital stock.
C. factor prices.
D. output prices.

Question 9

Which of the following will decrease the short-run aggregate supply?
Answer
A. a decrease in the personal income tax rates
B. an increase in the labor force
C. a decrease in net exports
D. an increase in wages

Question 10

What happens in the domestic economy when there is a decrease in foreign prices, all other things unchanged?
Answer
A. Net exports and aggregate demand increase.
B. Net exports fall and aggregate demand increases.
C. Net exports rise and aggregate demand falls.
D. Net exports and aggregate demand fall.

Question 12

Using the aggregate demand

Explanation / Answer

In the short-run, an output gap occurs because
Answer
A. there is insufficient supply of goods and services.
B. wages and some prices have not adjusted sufficiently to maintain output at its potential level.
C. there is insufficient demand for goods and services.
D. wages and prices are fully flexible.

Question 3

To eliminate a recessionary gap, policy-makers may pursue
Answer
A. a non-intervention policy that leaves aggregate supply unaffected and increases aggregate demand.
B. an expansionary policy that increases aggregate demand.
C. an intervention policy that decreases aggregate supply and increases aggregate demand.
D. a contractionary policy that increases aggregate demand.

Question 4

The use central bank policies to influence the level of economic activity is called
Answer
A. monetary policy.
B. banking and finance policy.
C. financial market policy.
D. congressional policy.

Question 7

All of the following are held constant along a short-run aggregate supply curve except
Answer
A. nominal wages.
B. capital stock.
C. factor prices.
D. output prices.

Question 9

Which of the following will decrease the short-run aggregate supply?
Answer
A. a decrease in the personal income tax rates
B. an increase in the labor force
C. a decrease in net exports
D. an increase in wages

Question 10

What happens in the domestic economy when there is a decrease in foreign prices, all other things unchanged?
Answer
A. Net exports and aggregate demand increase.
B. Net exports fall and aggregate demand increases.
C. Net exports rise and aggregate demand falls.
D. Net exports and aggregate demand fall.

Question 12

Using the aggregate demand%u2013aggregate supply model, predict what happens in the short run when the consumer confidence index falls as consumers become pessimistic about their economic prospects.
Answer
A. The aggregate demand curve shifts left; the aggregate supply curve is not affected; price level and real GDP decrease.
B. The aggregate demand curve shifts right; the aggregate supply curve is not affected; price level and real GDP increase.
C. The aggregate supply curve shifts right; the aggregate demand curve is not affected; price level decreases; real GDP increases.
D. The aggregate supply curve shifts left; the aggregate demand curve is not affected; price level increases; real GDP decreases.

Question 14

A graph that depicts the relationship between the total quantity of goods and services demanded and the price level is the
Answer
A. GDP curve.
B. circular flow model.
C. average price level.
D. aggregate demand curve.


Which of the following will increase the short-run aggregate supply?
Answer
A. an increase in consumption spending
B. a decrease in the price of capital
C. an increase in government spending on education
D. an increase in wages

Suppose investment rises by $50 billion at each price level. If the value of the multiplier is 1.5, what is the amount of change in real GDP demanded at each price level?
Answer
A. $50 billion
B. $125 billion
C. $75 billion
D. $150 billion

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