Macro Quiz

Quiz: Practice Midterm
(2015-17)
# Correct Answers: 4 # Incorrect Answers: 4 # Blank Answ

QNo Question
1
Which of the following best describes the "wealth effect"?
I do not want to answer this Question
When the price level falls, the real value of household wealth falls.
When the price level falls, the nominal value of household wealth falls.
When the price level falls, the nominal value of household wealth rises.
When the price level falls, the real value of household wealth rises.
none of the above

Correct Answer: 4 Your Answer: 2 Points Awarded: -0.1
Which of the following is one explanation as to why the aggregate demand curve slopes downward?
Figure 1
Increases in the price level lower the interest rate and decrease consumption spending.
Increases in the price level lower the interest rate and decrease investment spending.
Increases in the U.S. price level relative to the price level in other countries lowers net exports.
Increases in the price level raise real wealth and lowers consumption spending.
All of the above

Refer to Figure 1. Suppose the economy is at point C. If government spending decreases in the economy, where will
none of the above

Correct Answer: 1 Your Answer: 0 Points Awarded: 0
Which of the following is considered a negative supply shock?
increasing investment in the economy causes the capital stock to rise
an unexpected increase in the price of natural gas
a decline in wages
an improvement in technology
all of the above

An increase in aggregate demand in the economy will have what effect on macroeconomic equilibrium in the long ru
The price level will fall, and the level of GDP will rise.
The price level will fall, and the level of GDP will fall.
The price level will rise, and the level of GDP will fall.
The price level will rise, and the level of GDP will be unaffected.
none of the above

Suppose the economy is at full employment and firms become more optimistic about the future profitability of new
Output will decline.
Prices will decline.
Unemployment will decline.
Aggregate demand will shift to the left.
none of the above

Why does the short-run aggregate supply curve shift to the right in the long run, following a decrease in aggregate d
Workers and firms adjust their expectations of wages and prices downward and they accept lower wa
Workers and firms adjust their expectations of wages and prices downward and they push for higher
Workers and firms adjust their expectations of wages and prices upward and they push for higher wa
Workers and firms adjust their expectations of wages and prices upward and they accept lower wage
none of the above

The automatic mechanism the price level in the case of and the price level in the case of .
raises; recession; lowers; expansion
raises; expansion raises; recession
lowers; expansion; lowers; recession
lowers; recession; raises; expansion
none of the above

A decrease in aggregate demand results in a(n) in the .
recession; long run
expansion; long run
expansion; short run
recession; short run
none of the above

10
There has been an increase in investment. As a result, real GDP will in the short run, and in the long run.
increase; increases further
increase; decrease to its initial value
decrease; decrease further
decrease; increase to its initial level
none of the above

11
If real GDP per capita measured in 2000 dollars was $6,000 in 1950 and $48,000 in 2010, we would say that in the ye
as the average American in 1950.
1/8
12
none of the above

12
If real GDP in a small country in 2005 is $8 billion and real GDP in the same country in 2006 is $8.3 billion, the growt
is 3.0%.
is 3.75%.
is 3.6%.
cannot be determined from the information given.
none of the above

13
If you invest $10,000 in a bond that earns 8% interest, how many years will it take to double your money?
1 year and 3 months
2 years and 6 months
8 years
8 years and 9 months
none of the above

14
If real GDP grows by 3% in 2005, 3.2% in 2006, and 2.5% in 2007, what is the average annual growth rate of real GDP
2.6%
2.9%
3.1%
4.2%
none of the above

15
Which of the following increases labor productivity?
an increase in the aggregate hours of work
decreases in the availability of computers and factory buildings
inventions of new machinery, equipment, or software
a decline in the health of the population
All of the above

16
The total amount of physical capital available in a country is know as the country's
labor productivity.
savings.
investment.
capital stock.
none of the above

17
Human capital refers to which of the following?
the quantity of goods and services that can be produced by one worker or by one hour of work
the accumulated knowledge and skills workers acquire from education and training or from their life
manufactured goods that are used to produce other goods and services
physical equipment that is made by human laborers, not machines
none of the above

18
Long-run economic growth requires all of the following except
technological change.
increases in capital per hour worked.
government provision of secure property rights.
political instability.
All of the above
19
Which of the following would contribute to a sustained high rate of economic growth in the long run in an economy
growth in capital per hour accompanied by technological change
increases in labor force participation rates as workers who are out of the labor force pursue rising wa
a shift of workers in the economy from the agricultural sector to the nonagricultural sector
an influx of immigrant labor into an economy without any accompanying technological change
none of the above

20
an influx of immigrant labor into an economy without any accompanying technological change
firms are producing below capacity.
firms are producing at capacity.
firms are producing above capacity.
inflation is rising.
none of the above

21
Which of the following was NOT true during the Great Depression?
Investment as a share of GDP was below 3 percent
Unemployment averaged about 18.8 percent
Prices dropped by one-fourth
Output fell by nearly 30 percent
Both B and C

22
The Keynesian aggregate supply curve implies that
The economy is always at the full-employment level of output
The price level is unaffected by current levels of GDP
Wages are perfectly flexible
Real money balances decrease as the AD-curve shifts to the right
An increase in nominal money supply will not affect the level of real GDP
23
Given the Keynesian AS-curve, expansionary monetary policy will
Increase the level of output but leave the price level unchanged
Increase the price level but leave the level of output unchanged
Increase both the level of output and the price level
Leave the level of output and the price level unchanged
Increase the level of output but decrease the price level

24
A decrease in real money supply caused by an increase in the price level is graphically represented by
A shift of the AD-curve to the right
A shift of the AD-curve to the left
Movement along the AD-curve to the right
Movement along the AD-curve to the left
A shift of the AS-curve to the right

25
To maintain a fixed level of aggregate demand, the Fed would have to respond to a tax increase by
Increasing reserve requirements
Increasing the discount rate
Buying bonds in the open market
Selling bonds in the open market
Urging banks to ration credit

26
If output is at its full-employment level, then
The actual unemployment rate is zero
The natural rate of unemployment is zero
There are no frictions in the labor market since wages have reached their market-clearing level
. There is still some positive level of unemployment due to frictions in the labor market
Nobody who is currently employed is looking for a new job

27
In a normal AD-AS diagram with an upward-sloping AS-curve, if the government wanted to maintain a fixed level of
Decreasing government expenditures
Increasing government transfer payments
Urging the Fed to sell bonds in the open market
Increasing income taxes
Decreasing taxes and government spending by the same amount

28
In an AD-AS diagram with an upward-sloping AS-curve, if a tax decrease is combined with money expansion,
Output will remain relatively unaffected but interest rates will decrease
Output will remain relatively unaffected but interest rates will definitely increase
Aggregate demand, the price level, and output will all decrease
Aggregate demand, the price level, and output will all increase
The price level will increase but we can't say what will happen to output or interest rates
29
. In the AD-AS model, fiscal or monetary policy cannot affect the level of output in
The medium run and the long run
The medium run and the short run
The short run only
The medium run only
The long run only

30
When we say that potential GDP is exogenous with respect to the price level, we refer to
The fact that changes in real money balances cause output to rise
The fact that the long-run AS-curve shifts to the right over time
The short-run AS-curve
The medium-run AS-curve
The Keynesian AS-curve

31
Expansionary monetary policy will increase nominal GDP
In the Keynesian case
In the classical case
In the medium run
All of the above
Only A and C

32
Expansionary fiscal policy is very effective in significantly increasing the level of output
If the AS-curve is totally price inelastic
In the classical case
If the economy is close to full employment
If the economy is in a recession
Both A and D

33
An increase in aggregate demand can be caused by
An increase in government expenditures
An increase in nominal money supply
A decrease in taxes
An increase in business and consumer confidence
All of the above

34
"Note that the percent change in the GDP deflator is being used as the measure of inflation rather than the more fa
paid by consumers." The blank should be
all prices, including imports
prices of all domestically-produced goods and services
prices of all domestically-produced goods and services except exports
prices of all domestically-produced goods and services except those produced by government
none of the above

35
"As best we can tell, responded the central bank governor, the center of the 2 percent inflation target, namely 1 per
sources of bias in the CPI are allowed for." An example of bias in the CPI measure is that it
ignores import prices
ignores investment goods
ignores most quality changes
values government output at cost
none of the above

36
That GDP tends to overstate a nation's economic well-being is illustrated by its treatment of which of the following
you buy a new generator for your barn
you decide to stay home to care for your children
you decide to work fewer hours to enjoy life more
the government spends millions cleaning up after an oil spill
none of the above

37
Which of the following raises measured GDP
you are hired by GM to shuffle paper uselessly for $200
a steel company sells some steel to an automobile manufacturer
you are hired by the government to shuffle paper uselessly for $200
both a) and c) above
none of the above

38
If a typical market basket of goods and services cost $120 in 1975, the base year, and $180 in 1985, the price index i
120
150
160
180
200

39
The level of GDP that corresponds to full employment in the labor market is called
Potential GDP
Real GDP
Nominal GDP
Natural GDP
GDP per capita

40
Most economists prior to Keynes thought that
Unemployment could be eliminated by active fiscal policies
The economy always adjusted to full employment
The economy always adjusted to a natural rate of inflation
Monetary policy could be employed to eliminate the business cycle
Government intervention was needed to avoid persistent unemployment

41
If the nominal interest rate is 10%, the expected rate of inflation is 7%, and the growth rate of the money su
0
-4%
-3%
3%
4%
9%

42
Changes in the composition of demand among industries or regions are called
fractional shirts.
sectoral shirts
structural shifts
temporary shifts
b and c

43
The idea of paying workers an efficiency wage is that
doing so is more efficient than paying them the market wage.
paying them less gives them the incentive to work harder.
workers and management gain at the expense of the stockholders of the company.
workers have the icentive to do high-quality work.
None of the above.

44
In a simple model with no government or foreign sector, the amount of involuntary inventory accumulation at equil
Dependent upon the amoutn fo consumption
Equal to output minus consumption
Zero
Always positive
Usually negative

Correct Answer: 3 Your Answer: 2 Points Awarded: -0

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Quiz: Practice Midterm

# Correct Answers: 4 # Incorrect Answers: 4 # Blank Answ

Which of the following best describes the "wealth effect"?

I do not want to answer this Question

none of the above

I do not want to answer this Question

All of the above

I do not want to answer this Question

none of the above

Correct Answer: 1 Your Answer: 0 Points Awarded: 0

Which of the following is considered a negative supply shock?

I do not want to answer this Question

increasing investment in the economy causes the capital stock to rise

an unexpected increase in the price of natural gas

all of the above

I do not want to answer this Question

none of the above

I do not want to answer this Question

Output will decline.

Prices will decline.

Unemployment will decline.

Aggregate demand will shift to the left.

none of the above

Correct Answer: 3 Your Answer: 0 Points Awarded: 0

I do not want to answer this Question

none of the above

Correct Answer: 1 Your Answer: 0 Points Awarded: 0

I do not want to answer this Question

raises; recession; lowers; expansion

raises; expansion raises; recession

lowers; expansion; lowers; recession

lowers; recession; raises; expansion

none of the above

Correct Answer: 4 Your Answer: 0 Points Awarded: 0

A decrease in aggregate demand results in a(n) in the .

I do not want to answer this Question

recession; long run

expansion; long run

expansion; short run

recession; short run

none of the above

Correct Answer: 4 Your Answer: 4 Points Awarded: 1

I do not want to answer this Question

increase; increases further

increase; decrease to its initial value

decrease; decrease further

decrease; increase to its initial level

none of the above

Correct Answer: 2 Your Answer: 0 Points Awarded: 0

I do not want to answer this Question

none of the above

Correct Answer: 3 Your Answer: 0 Points Awarded: 0

I do not want to answer this Question

cannot be determined from the information given.

none of the above

Correct Answer: 2 Your Answer: 0 Points Awarded: 0

I do not want to answer this Question

1 year and 3 months

2 years and 6 months

8 years and 9 months

none of the above

Correct Answer: 4 Your Answer: 0 Points Awarded: 0

I do not want to answer this Question

none of the above