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1 | |
As the price level falls in an economy, the real money supply increases. Therefore, the |
| | A) | LM curve is upward-sloping. |
| | B) | aggregate supply curve is upward-sloping. |
| | C) | IS curve is downward-sloping. |
| | D) | AD curve is downward-sloping. |
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2 | |
The notion that the when more labor is added, each additional worker contributes less to GDP than the previous worker is known as ________ and accounts for __________. |
| | A) | increasing marginal product of labor; the shape of the aggregate demand curve |
| | B) | diminishing marginal product of labor; the shape of the aggregate demand curve |
| | C) | increasing marginal product of labor; the shape of the aggregate supply curve |
| | D) | diminishing marginal product of labor; the shape of the aggregate supply curve |
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3 | |
The aggregate supply curve is upward-sloping because |
| | A) | lower price levels cause decreased demand for labor at a given wage rate, and the lower employment levels cause output to fall. |
| | B) | higher price levels cause increased demand for labor at a given wage rate, and the higher employment levels cause output to rise. |
| | C) | an increase in the price level causes a decrease in the real money supply. |
| | D) | all of the above. |
| | E) | a and b. |
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4 | |
The short run aggregate supply curve is __________, while the long run aggregate supply curve is __________. |
| | A) | upward-sloping; horizontal |
| | B) | vertical; upward-sloping |
| | C) | upward-sloping; vertical |
| | D) | horizontal; upward-sloping |
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5 | |
Under a fixed exchange rate system, an increase in the foreign price level will lead to a balance of payments |
| | A) | deficit and an increase in domestic GDP. |
| | B) | surplus and an increase in domestic GDP. |
| | C) | deficit and an decrease in domestic GDP. |
| | D) | surplus and an decrease in domestic GDP. |
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6 | |
A change in fiscal policy is least effective at changing the short run level of output when short-term capital is |
| | A) | relatively immobile and the exchange rate is fixed. |
| | B) | very immobile and the exchange rate is flexible. |
| | C) | very mobile and the exchange rate is fixed. |
| | D) | very mobile and the exchange rate is flexible. |
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7 | |
Under a fixed exchange rate system, monetary policy is |
| | A) | especially effective. |
| | B) | somewhat effective. |
| | C) | ineffective. |
| | D) | dependent on the relative mobility of short-term capital. |
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8 | |
Under a flexible exchange rate system, a decrease in the money supply will lead to lower |
| | A) | prices in the long run, but higher output levels in the long run. |
| | B) | output levels in both the short run and the long run. |
| | C) | output levels in the short run, but only lower price levels in the long run. |
| | D) | prices in the short run and lower output levels in the long run. |
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9 | |
Fiscal policy leads to higher prices but no change in output under |
| | A) | a fixed exchange rate system only. |
| | B) | a flexible exchange rate system only. |
| | C) | neither flexible nor fixed exchange rate systems. |
| | D) | both fixed and flexible exchange rate systems. |
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10 | |
The situation in which a country devalues its currency and output falls is known as |
| | A) | contractionary devaluation. |
| | B) | stagflation. |
| | C) | the Lucas critique. |
| | D) | contractionary inflation. |
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