Question 1

Gordon suggests that the Japanese deflation is bad because it is caused by

Accepted Answer

A)   too high a rate of technological progress.
B)   a downward shift in the short-run aggregates supply schedule.
C)   a contraction in aggregate demand.
D)   B and CE) A) and D)
F) C) and D)

Question 2

A bad deflation such as that experienced by Japan over the past decade poses problems

Accepted Answer

A)   for monetary policy because it lowers the real interest rate below the nominal interest rate.
B)   for fiscal policy because it raises the ratio of public debt to nominal GDP even if public debt is fixed.
C)   for monetary and fiscal policy because it makes it impossible to use these together to shift the IS and LM curves rightward at the same time.
D)   for monetary and fiscal policy because it makes it impossible to use these together to shift the IS and LM curves leftward at the same time.E) A) and B)
F) All of the above

Question 3

In the short-run with fixed wages, the SAS curve is positively sloped because

Accepted Answer

A)   the marginal product of labor declines, marginal costs rise.
B)   the marginal product of labor increases, marginal costs rise.
C)   marginal cost equals price and marginal costs decline.
D)   None of the above.E) A) and C)
F) C) and D)

Question 4

John Maynard Keynes revolutionized macroeconomics with the 1936 publication of his book

Accepted Answer

A)   Macro-Economics.
B)   The Wealth of Nations.
C)   The General Theory of Employment, Interest, and Money.
D)   Aggregate Economic Analysis.E) A) and B)
F) None of the above

Question 5

Consider an initial IS-LM equilibrium point which corresponds to a point labeled "A" on the current AD curve.
-Refer to the information above. If government spending increases with no change in the price level, the resulting IS-LM equilibrium corresponds to a point in the AD diagram

Accepted Answer

A)   which has moved downward along the same AD curve.
B)   straight above A on a new AD curve.
C)   straight below A on a new AD curve.
D)   directly to the right of A on a new AD curve.
E)   directly to the left of A on a new AD curve.F) D) and E)
G) All of the above

Question 6

The AD curve will shift to the

Accepted Answer

A)   right if the price level falls and the quantity of money is held constant.
B)   right if the price level rises and the quantity of money is held constant.
C)   right if the price level is held constant and the quantity of money rises.
D)   right if the price level is held constant and the quantity of money falls.E) None of the above
F) A) and B)

Question 7

If the Pigou effect characterizes the economy then the slope

Accepted Answer

A)   of the aggregate demand curve is zero; the aggregate supply curve is vertical
B)   of the aggregate supply curve is zero; the aggregate demand curve is vertical
C)   of both the AD and SAS curves are vertical
D)   of the AD cannot be vertical; the aggregate supply curve is unaffectedE) None of the above
F) All of the above

Question 8

Because of ________ marginal product of labor, the labor demand curve slopes ________.

Accepted Answer

A)   rising, upward
B)   rising, downward
C)   diminishing, downward
D)   diminishing, upwardE) C) and D)
F) All of the above

Question 9

The SAS curve is positively sloped because workers, in the short-run, will supply the labor required by

Accepted Answer

A)   households at the fixed real wage.
B)   business firms at the fixed real wage.
C)   business firms at the fixed nominal wage.
D)   A and B.E) A) and B)
F) A) and C)

Question 10

The long-run buildup of an economy's capital stock ________ the marginal product of labor thus shifting the labor demand curve to the ________, which then causes ________.

Accepted Answer

A)   increases, right, SAS to shift to the right
B)   increases, right, movement up the SAS curve
C)   increases, left, SAS to shift to the left
D)   decreases, right, SAS to shift to the left
E)   decreases, left, movement down the SAS curveF) All of the above
G) A) and C)

Question 11

When the nominal wage rate rises by x percent we

Accepted Answer

A)   move upward along the SAS curve by x percent.
B)   move downward along the SAS curve by x percent.
C)   shift SAS upward by x percent.
D)   shift SAS downward by x percent.E) C) and D)
F) B) and C)

Question 12

As firms hire more labor

Accepted Answer

A)   the supply of labor increases.
B)   each additional worker hired produces an additional amount of output but at a diminishing rate.
C)   each additional worker hired produces an additional amount of output but at an increasing rate.
D)   the marginal labor cost of output decreases.E) A) and D)
F) A) and C)

Question 13

If the price level were to rise, the short-run aggregate supply curve in the next period will

Accepted Answer

A)   shift upward.
B)   shift downward.
C)   become steeper.
D)   None of the above is correct.E) B) and C)
F) None of the above

Question 14

With a falling price level, we move ________ along the demand for labor curve and thus trace ________ along the short-run aggregate supply curve.

Accepted Answer

A)   upward, upward
B)   upward, downward
C)   downward, upward
D)   downward, downwardE) None of the above
F) A) and D)

Question 15

Suppose that the nominal wage falls by x percent, and a certain change in the price level maintains the same real wage as before. In the SAS diagram these events cause

Accepted Answer

A)   no change at all, as they offset each other.
B)   a downward movement along the SAS curve.
C)   an upward movement along the SAS curve.
D)   a downward shift of the SAS curve.
E)   an upward shift of the SAS curve.F) B) and D)
G) A) and B)

Question 16

Keynes' argued that monetary policy would be impotent during the Great Depression, because

Accepted Answer

A)   both the IS and the LM curve were vertical.
B)   IS curve was continuously shifting, while the LM curve was stable.
C)   IS curve was vertical and stuck at a low level of Y.
D)   none of the aboveE) B) and D)
F) B) and C)

Question 17

If money demand relative to the level of real output is constant then, the slope of the AD curve is

Accepted Answer

A)   steeper the steeper the slope of the LM curve.
B)   flatter the flatter the slope of the LM curve.
C)   steeper the flatter the slope of the LM curve.
D)   horizontal if the LM curve is vertical.E) B) and D)
F) B) and C)

Question 18

The labor supply curve may be shifted if

Accepted Answer

A)   jobs are scarce.
B)   jobs are plentiful.
C)   real wages change.
D)   immigration increases.E) B) and D)
F) B) and C)

Question 19

Keynes held out the possibility of "monetary impotence" causing the aggregate demand curve to be ________ below the natural real GDP, which results in an economy with ________ self-correction.

Accepted Answer

A)   vertical, instant
B)   vertical, no
C)   horizontal, instant
D)   horizontal, noE) A) and B)
F) All of the above

Question 20

Consider an initial IS-LM equilibrium point which corresponds to a point labeled "A" on the current AD curve.
-Refer to the information above. If the nominal money supply falls by 4 percent, accompanied by a 4 percent fall in the price level, the resulting IS-LM equilibrium corresponds to a point in the AD diagram

Accepted Answer

A)   which is exactly point A again.
B)   4 percent straight above A on a new AD curve.
C)   4 percent straight below A on a new AD curve.
D)   directly to the right of A on a new AD curve.
E)   directly to the left of A on a new AD curve.F) A) and D)
G) None of the above

Exam 7: Aggregate Demand, Aggregate Supply, and the Self-Correcting Economy

Because of marginal product of labor, the labor demand curve slopes .

Correct Answer
verified

When the nominal wage rate rises by x percent we

Correct Answer
verified

The SAS curve is positively sloped because workers, in the short-run, will supply the labor required by

Correct Answer
verified

The AD curve will shift to the

Correct Answer
verified

A bad deflation such as that experienced by Japan over the past decade poses problems

Correct Answer
verified

Consider an initial IS-LM equilibrium point which corresponds to a point labeled "A" on the current AD curve. -Refer to the information above. If government spending increases with no change in the price level, the resulting IS-LM equilibrium corresponds to a point in the AD diagram

Correct Answer
verified

The labor supply curve may be shifted if

Correct Answer
verified

Keynes held out the possibility of "monetary impotence" causing the aggregate demand curve to be below the natural real GDP, which results in an economy with self-correction.

Correct Answer
verified

If the Pigou effect characterizes the economy then the slope

Correct Answer
verified

If money demand relative to the level of real output is constant then, the slope of the AD curve is

Correct Answer
verified

In the short-run with fixed wages, the SAS curve is positively sloped because

Correct Answer
verified

The long-run buildup of an economy's capital stock the marginal product of labor thus shifting the labor demand curve to the , which then causes .

Correct Answer
verified

John Maynard Keynes revolutionized macroeconomics with the 1936 publication of his book

Correct Answer
verified

If the price level were to rise, the short-run aggregate supply curve in the next period will

Correct Answer
verified

Correct Answer
verified

Keynes' argued that monetary policy would be impotent during the Great Depression, because

Correct Answer
verified

Gordon suggests that the Japanese deflation is bad because it is caused by

Correct Answer
verified

As firms hire more labor

Correct Answer
verified

With a falling price level, we move along the demand for labor curve and thus trace along the short-run aggregate supply curve.

Correct Answer
verified

Suppose that the nominal wage falls by x percent, and a certain change in the price level maintains the same real wage as before. In the SAS diagram these events cause

Correct Answer
verified

Exam 7: Aggregate Demand, Aggregate Supply, and the Self-Correcting Economy

Because of ________ marginal product of labor, the labor demand curve slopes ________.

Correct AnswerverifiedShow Answer

When the nominal wage rate rises by x percent we

Correct AnswerverifiedShow Answer

The SAS curve is positively sloped because workers, in the short-run, will supply the labor required by

Correct AnswerverifiedShow Answer

The AD curve will shift to the

Correct AnswerverifiedShow Answer

A bad deflation such as that experienced by Japan over the past decade poses problems

Correct AnswerverifiedShow Answer

Consider an initial IS-LM equilibrium point which corresponds to a point labeled "A" on the current AD curve. -Refer to the information above. If government spending increases with no change in the price level, the resulting IS-LM equilibrium corresponds to a point in the AD diagram

Correct AnswerverifiedShow Answer

The labor supply curve may be shifted if

Correct AnswerverifiedShow Answer

Keynes held out the possibility of "monetary impotence" causing the aggregate demand curve to be ________ below the natural real GDP, which results in an economy with ________ self-correction.

Correct AnswerverifiedShow Answer

If the Pigou effect characterizes the economy then the slope

Correct AnswerverifiedShow Answer

If money demand relative to the level of real output is constant then, the slope of the AD curve is

Correct AnswerverifiedShow Answer

In the short-run with fixed wages, the SAS curve is positively sloped because

Correct AnswerverifiedShow Answer

The long-run buildup of an economy's capital stock ________ the marginal product of labor thus shifting the labor demand curve to the ________, which then causes ________.

Correct AnswerverifiedShow Answer

John Maynard Keynes revolutionized macroeconomics with the 1936 publication of his book

Correct AnswerverifiedShow Answer

If the price level were to rise, the short-run aggregate supply curve in the next period will

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Keynes' argued that monetary policy would be impotent during the Great Depression, because

Correct AnswerverifiedShow Answer

Gordon suggests that the Japanese deflation is bad because it is caused by

Correct AnswerverifiedShow Answer

As firms hire more labor

Correct AnswerverifiedShow Answer

With a falling price level, we move ________ along the demand for labor curve and thus trace ________ along the short-run aggregate supply curve.

Correct AnswerverifiedShow Answer

Suppose that the nominal wage falls by x percent, and a certain change in the price level maintains the same real wage as before. In the SAS diagram these events cause

Correct AnswerverifiedShow Answer

Because of marginal product of labor, the labor demand curve slopes .

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Keynes held out the possibility of "monetary impotence" causing the aggregate demand curve to be below the natural real GDP, which results in an economy with self-correction.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

The long-run buildup of an economy's capital stock the marginal product of labor thus shifting the labor demand curve to the , which then causes .

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

With a falling price level, we move along the demand for labor curve and thus trace along the short-run aggregate supply curve.

Correct Answer
verified

Correct Answer
verified