A. Number of unemployed

B. Unemployment rate

C. Labor force

D. Labor-force participation rate

25. The government is running a budget deficit if
A. government spending is greater than tax revenue.
B. tax revenue is greater than government spending.
C. tax revenue is greater than consumption spending.
D. tax revenue is greater than investment spending.

13. The AS/AD model with sticky prices predicts that, in the long run, a reduction of the money supply results in
A. lower prices and lower output.
B. lower prices and no change in output.
C. no change in prices and lower output.
D. no change in prices or output.

15. The occurrence of falling output combined with rising prices is called
A. inflation.
B. recession.
C. depression.
D. stagflation.

9. The LRAS curve of the classical model is
A. vertical.
B. upward sloping.
C. horizontal.
D. downward sloping.

6. The quantity equation MV = PY implies that the AD curve is
A. vertical.
B. upward sloping.
C. horizontal.
D. downward sloping.

11. The effect of a change in aggregate demand on income and prices depends crucially on
A. the time horizon.
B. monetary policy.
C. fiscal policy.
D. the slope of the AD curve.

27. The supply of loanable funds, or "national saving," is equal to
A. income - consumption.
B. income - consumption - taxes.
C. income - consumption - government spending.
D. income - consumption - government spending - taxes.

14. The quantity theory of money states that if the money supply doubles and output is constant, prices will
A. fall by half.
B. remain the same.
C. double.
D. fall only if velocity rises.

5. The relationship between interest rates and the level of income that arises in the market for goods and services is called the
A. LM curve.
B. IS curve.
C. aggregate demand curve.
D. aggregate supply curve.

6. The investment function and the IS curve slope
A. upward because higher interest rates induce more investment.
B. upward because higher interest rates induce less investment.
C. downward because higher interest rates induce more investment.
D. downward because higher interest rates induce less investment.

7. The slope of the IS curve depends on
A. the sensitivity of investment to the interest rate.
B. the level of government expenditures.
C. the sensitivity of the demand for real money balances to the interest rate.
D. none of the above.

8. The IS curve is drawn for a given
A. fiscal policy.
B. monetary policy.
C. interest rate.
D. level of income.

12. The LM curve is drawn for a given
A. real income.
B. nominal income.
C. money supply.
D. interest rate.

13. The quantity of real money balances demanded depends on the
A. nominal interest rate.
B. rate of inflation.
C. nominal money supply.
D. price level.

14. The quantity of real money balances demanded depends on
A. consumption.
B. real income.
C. nominal income.
D. the price level.

15. The relationship between the interest rate and the level of income that arises in the market for money balances is called the
A. LM curve.
B. IS curve.
C. aggregate demand curve.
D. aggregate supply curve.

16. The theory of liquidity preference assumes that the supply of real money balances, plotted against the interest rate, is
A. upward sloping.
B. downward sloping.
C. horizontal.
D. vertical.

17. The theory of liquidity preference postulates that the demand for real money balances, plotted against the interest rate, is
A. upward sloping.
B. downward sloping.
C. horizontal.
D. vertical.

15. The difference between the nominal interest rate and the real interest rate is
A. inflation.
B. taxes.
C. seignorage.
D. hyperinflation.

16. The Fisher equation states that a 1 percent rise in the rate of inflation causes a 1 percent rise in the
A. real interest rate.
B. nominal interest rate.
C. money supply.
D. number of transactions.

20. The expected rate of inflation does not influence the
A. demand for real money balances.
B. ex post real interest rate.
C. nominal interest rate.
D. current price level.

24. The cost of holding money is determined by the
A. inflation rate.
B. real interest rate.
C. growth rate of the money supply.
D. nominal interest rate.

26. The expected future money supply does not have an effect on
A. expected future inflation.
B. the current price level.
C. the current nominal money supply.
D. the future price level.

1. The inside lag is the
A. time between a shock to the economy and the policy action responding to that shock.
B. time between a policy action and its influence on the economy.
C. time between a shock to the economy and the influence on the economy of a policy action.
D. difference between the time it takes to implement monetary policy and the time it takes to implement fiscal policy.

2. The outside lag is the
A. time between a shock to the economy and the policy action responding to that shock.
B. time between a policy action and its influence on the economy.
C. time between a shock to the economy and the influence on the economy of a policy action.
D. difference between the time it takes to implement monetary policy and the time it takes to implement fiscal policy.

7. The Lucas critique is based on
A. the inside lag of economic policy.
B. the Phillips curve.
C. automatic stabilizers.
D. the fact that people's expectations are rational.

14. The monetary-policy rule that monetarists advocate is
A. an unemployment target rule.
B. a steady rate of growth of the money supply.
C. nominal GDP targeting.
D. price level targeting.

19. Taylor's rule for the federal funds rate implies that the central bank is concerned with
A. only the GDP gap.
B. only inflation.
C. both GDP gap and inflation.
D. neither the GDP gap or inflation.

17. The ex ante real interest rate differs from the ex post real interest rate only when
A. the money supply grows at a constant rate.
B. the money supply remains the same.
C. the money supply falls at a constant rate.
D. actual inflation differs from expected inflation.

14. Structural unemployment results when
A. the minimum wage is set to increase in the near future.
B. there is generous unemployment insurance.
C. workers are temporarily laid off due to weather conditions.
D. the real wage is above its market-clearing level.

22. Suppose that the price level has risen but the government has not collected any seignorage. Which of the following might have happened?
A. V rose, M and Y were constant
B. Y rose, M and V were constant
C. M rose, Y and V were constant
D. M rose, Y fell, V was constant

30. Suppose that there is a positive shock to investment demand: that is, at every interest rate, the desired amount of investment rises. In a closed economy with the national saving fixed, the real interest rate will
A. fall.
B. remain constant.
C. rise.
D. first fall and then rise.

26. Suppose that the size of the labor force is 100 million and that the unemployment rate is 5 percent. Which of the following actions would reduce the unemployment rate the most?

A. 1 million unemployed people get jobs.

B. 2 million unemployed people leave the labor force.

C. 3 million people join the labor force and they all get jobs.

D. 10 million people join the labor force and half of them get jobs.

8. Suppose that output per worker is 10, the production function is y = sqrt(k) [that is, output per worker is equal to the square root of capital per worker] and the total capital stock is 1,000. How large is the labor force?
A. 1
B. 10
C. 100
D. 1,000

9. Suppose that the production function is y = sqrt(k) [that is, output per worker is equal to the square root of capital per worker], s = 0.40, and delta [the depreciation rate] = 0.10. What is the steady-state level of capital?
A. 2
B. 4
C. 10
D. 16

10. Suppose that the production function is y = sqrt(k) [that is, output per worker is equal to the square root of capital per worker], s = 0.40, and delta [the depreciation rate] = 0.10. What level saving will lead to the highest possible level of output in the steady state?
A. 25 percent
B. 50 percent
C. 75 percent
D. 100 percent

13. Suppose that a major natural disaster destroys a large part of a country's capital stock but miraculously does not cause anybody bodily harm. What will happen to the real wage rate?
A. It will not change.
B. It will rise.
C. It will fall.
D. It could rise or fall.

17. Suppose that a consumer has a marginal propensity to consume of 0.7. If this consumer earns an extra $2, her consumption spending would be expected to increase by
A. $0.60.
B. $0.70.
C. $1.40.
D. $1.70.

18. Suppose that a consumer has a marginal propensity to consume of 0.8. If this consumer receives and extra $2 of disposable income, her saving would be expected to increase by
A. $0.40.
B. $0.80.
C. $1.20.
D. $1.60.

20. Suppose that Jones builds a new house, then she sells it to Smith, and then Smith sells it to Williams. The total net investment from these transactions is
A. zero.
B. 1 house.
C. 2 houses.
D. 3 houses.

22. Suppose that 130 people are unemployed for part of a given year; 120 are unemployed for 1 month, 10 are unemployed throughout the year; what percentage of total months of unemployment is attributable to the long-term unemployed?
A. 7.7 percent
B. 10 percent
C. 13 percent
D. 50 percent

28. Suppose that a Canadian citizen crosses the border each day to work in the United States. Her income from this job would be counted in

A. U.S. GNP and Canadian GNP.

B. U.S. GNP and Canadian GDP.

Date: 2015-12-11; view: 1001