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Chapter 20  Multiple Choice  10Q

 

            1.   Most economists use the aggregate demand and aggregate supply model primarily to analyze

a.

short-run fluctuations in the economy.

b.

the effects of macroeconomic policy on the prices of individual goods.

c.

the long-run effects of international trade policies.

d.

productivity and economic growth.

 

 

            2.   The model of aggregate demand and aggregate supply explains the relationship between

a.

the price and quantity of a particular good.

b.

unemployment and output.

c.

wages and employment.

d.

real GDP and the price level.

 

 

            3.   If people want to save more for retirement

a.

or if the government raises taxes, aggregate demand shifts right.

b.

or if the government raises taxes, aggregate demand shifts left.

c.

aggregate demand shifts right. If the government raises taxes, aggregate demand shifts left.

d.

aggregate demand shifts left. If the government raises taxes, aggregate demand shifts right.

 

 

            4.   Which of the following shifts short-run, but not long-run aggregate supply right?

a.

a decrease in the price level

b.

a decrease in the expected price level

c.

a decrease in the capital stock

d.

an increase in the money supply

 

 

            5.   Suppose the economy is initially in long-run equilibrium and aggregate demand rises. In the long run prices

a.

and output are higher.

b.

and output are lower.

c.

are higher and output is the same.

d.

are the same and output is lower.

 

 

            6.   The economic boom of the early 1940s resulted mostly from

a.

increased government expenditures.

b.

falling prices of oil and other natural resources.

c.

an increase in the growth rate of the money supply.

d.

rapid developments in transportation, electronics, and communication.

 

 

            7.   Stagflation would exist when prices

a.

and output rise.

b.

rise and output falls.

c.

fall and output rises.

d.

and output fall.

 

 

            8.   Suppose the economy is in long-run equilibrium. If there is a sharp increase in the minimum wage as well as an increase in pessimism about future business conditions, then we would expect that in the short-run,

a.

real GDP will rise and the price level might rise, fall, or stay the same.

b.

real GDP will fall and the price level might rise, fall, or stay the same.

c.

the price level will rise, and real GDP might rise, fall, or stay the same.

d.

the price level will fall, and real GDP might rise, fall, or stay the same.

 

 

True/False

 

            9.   An increase in the money supply raises output in the long run. 

 

          10.   John Maynard Keynes advocated policies that would increase aggregate demand as a way to decrease unemployment caused by recessions.   

 

 

 

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