FREE ECONOMICS AND STUDY GAMES ABOUT EC

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FREE ECONOMICS AND STUDY GAMES ABOUT EC

305-EXAM1-CH5

Actual Qs and Ans Expert-Verified Explanation

This Exam contains:

-Guarantee passing score -50 Questions and Answers -format set of multiple-choice -Expert-Verified Explanation

Question 1: Most economists prior to Keynes thought that

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the economy always adjusted rapidly to full employment Question 2: The Keynesian AS-curve differs from the classical AS-curve, since Keynes

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thought that nominal wages were rigid even when there was unemployment

Question 3: A large decrease in the income tax rate will most likely cause

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-a fairly large increase in aggregate demand -a fairly small increase in aggregate supply -an increase in the price level D)all of the above Question 4: To maintain a fixed level of aggregate demand, the Fed would have to respond to a tax increase by

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buying bonds in the open market

Question 5: The slope of the AS-curve becomes steeper

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-as nominal wages become more flexible -as the economy approaches full employment E)both

• and D)

Question 6: An increase in government purchases will not increase the level of output if

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wages and prices are completely flexible

Question 7: In the Keynesian aggregate supply curve case,

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firms will always supply the amount of goods demanded at the existing price level Question 8: If restrictive monetary policy leads to a lower price level but leaves real output, employment, and real interest rates unchanged, then

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-real money balances must be unchanged -money is said to be neutral E)both

• and D)

Question 9: The AS-curve is horizontal or very flat if

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additional resources (especially labor) can be hired to produce additional output with little or no increase in existing prices Question 10: If government purchases and taxes are both increased by the same lump sum, we

can expect the following in the medium run:

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output, prices, and interest rates will all increase Question 11: Which of the following is NOT reflected in a shift of the AD-curve?

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a change in real money balances due to a change in the price level

Question 12: If factor markets were perfectly competitive, then full employment would be the normal condition and

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the AS-curve would be vertical Question 13: In the medium run, if government purchases are decreased and nominal money supply is increased, then we can expect that

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interest rates will decrease, while output and prices may increase, decrease, or remain the same Question 14: Assume investment is very interest sensitive and wages always adjust immediately to maintain an equilibrium in the labor market. Which of the following would be most effective in significantly increasing the level of output?

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none of the above policies would succeed in significantly increasing the level of output

Question 15: An increase in aggregate demand can be caused by

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-an increase in government expenditures -an increase in nominal money supply -a decrease in taxes -an increase in business and consumer confidence E)all of the above

Question 16: The Keynesian aggregate supply curve implies that

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the price level is unaffected by current levels of GDP Question 17: If nominal GDP is $12,600 billion and nominal money supply is $6,300 billion, then the income velocity of money is

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V = 2 Question 18: The income velocity of money can be calculated using the following formula

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V = (PY)/M

Question 19: A decrease in nominal money supply will be reflected in

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a shift of the AD-curve to the left

Question 20: Cutting income tax rates will most likely cause

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a large shift in the AD-curve but a small shift in the AS-curve

Question 21: A shift of the AD-curve to the right could be caused by

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a decrease in taxes

Question 22: Frictional unemployment is defined as

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unemployment resulting from people shifting between jobs and looking for new jobs

Question 23: Which of the following is FALSE?

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the AS-curve is more price elastic in the long run than in the short run Question 24: When we say that potential GDP is exogenous with respect to the price level, we refer to

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the fact that the long-run AS-curve shifts to the right over time

Question 25: A shift of the AD-curve to the left can be caused by

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a decrease in government transfer payments Question 26: A decrease in real money supply caused by an increase in the price level is graphically represented by

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movement along the AD-curve to the left