Question 1

Why is the long-run aggregate supply curve vertical in the AD-AS model?

Accepted Answer

The vertical nature of the LRAS curve sh...

Question 2

Compare two economies,one that is highly agricultural and another that is highly manufacturing-based.Discuss what types of shocks might be relevant to each of these economies.

Accepted Answer

Weather shocks and agricultural technolo...

Question 3

Since people will always come to expect the actual inflation rate in the long run,the expected inflation rate is found graphically where the:

Accepted Answer

A)   AD curve intersects the SRAS curve.
B)   AD curve intersects the LRAS curve.
C)   SRAS curve intersects the LRAS curve.
D)   LRAS intersects the horizontal axis.

Question 4

A recession is a significant,widespread decline in nominal income and employment.

Accepted Answer

A) True 
 B)False

Question 5

In the AD-AS model,a positive real shock drives up both inflation and the growth rate.

Accepted Answer

A) True 
 B)False

Question 6

When the United States experienced its first oil shock,employment shifted from Houston to Detroit.

Accepted Answer

A) True 
 B)False

Question 7

In the graph of the AD-AS model,what is measured on the horizontal axis?

Accepted Answer

A)   the average price level
B)   real GDP
C)   the inflation rate
D)   real GDP growth

Question 8

The Black Plague is an example of a real shock.

Accepted Answer

A) True 
 B)False

Question 9

In the equation  M⃗+v⃗=P⃗+Y⃗R\vec { M } + \vec { v } = \vec { P } + \vec { Y } _ { R }M+v=P+YR​  ,what does  M⃗\vec { M }M  stand for?

Accepted Answer

A)   the money supply
B)   growth in the money supply
C)   money velocity
D)   growth in money velocity

Question 10

Greater growth of government spending represents a negative AD shock.

Accepted Answer

A) True 
 B)False

Question 11

The short-run aggregate supply curve shows the _____ relationship between the inflation rate and real growth during the period when prices and wages are _____.

Accepted Answer

A)   positive;flexible
B)   positive;sticky
C)   negative;flexible
D)   negative;sticky

Question 12

When inflation is 4% and the real GDP growth rate is 2%,what is the spending growth rate?

Accepted Answer

A)   -2%
B)   2%
C)   6%
D)   8%

Question 13

Other things held constant,an increase in the velocity of money will cause the aggregate demand curve to:

Accepted Answer

A)   shift inward.
B)   shift outward.
C)   not shift at all.
D)   shift randomly.

Question 14

If prices are perfectly flexible,the economy will always be growing:

Accepted Answer

A)   at its potential rate.
B)   above its potential rate.
C)   below its potential rate.
D)   near its potential rate.

Question 15

On a given aggregate demand curve,if the rate of spending growth is 10% and the growth rate of the money supply is 2%,then the velocity of money must be growing at:

Accepted Answer

A)   5%.
B)   8%.
C)   12%.
D)   20%.

Question 16

During the Great Depression,the long-run aggregate supply curve:

Accepted Answer

A)   shifted outward.
B)   shifted inward.
C)   did not shift at all.
D)   became flatter.

Question 17

The Great Depression was due primarily to the:

Accepted Answer

A)   excessive amount of money supply.
B)   extensive underutilization of resources.
C)   great fall in aggregate demand.
D)   rising labor unions.

Question 18

Explain why sticky wages tend to amplify negative productivity shocks.

Accepted Answer

A negative productivity shock means that...

Question 19

In the AD-AS model,an unexpected decrease in the growth rate of the money supply causes:

Accepted Answer

A)   a rightward shift of the AD curve and then an upward shift of the SRAS curve.
B)   a rightward shift of the AD curve and then a downward shift of the SRAS curve.
C)   a leftward shift of the AD curve and then an upward shift of the SRAS curve.
D)   a leftward shift of the AD curve and then a downward shift of the SRAS curve.

Question 20

A slower money growth rate represents a positive AD shock.

Accepted Answer

A) True 
 B)False

Exam 13: Business Fluctuations

In the AD-AS model,a positive real shock drives up both inflation and the growth rate.

Correct AnswerverifiedShow Answer

If prices are perfectly flexible,the economy will always be growing:

Correct AnswerverifiedShow Answer

In the graph of the AD-AS model,what is measured on the horizontal axis?

Correct AnswerverifiedShow Answer

A recession is a significant,widespread decline in nominal income and employment.

Correct AnswerverifiedShow Answer

During the Great Depression,the long-run aggregate supply curve:

Correct AnswerverifiedShow Answer

The Black Plague is an example of a real shock.

Correct AnswerverifiedShow Answer

On a given aggregate demand curve,if the rate of spending growth is 10% and the growth rate of the money supply is 2%,then the velocity of money must be growing at:

Correct AnswerverifiedShow Answer

A slower money growth rate represents a positive AD shock.

Correct AnswerverifiedShow Answer

Other things held constant,an increase in the velocity of money will cause the aggregate demand curve to:

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Explain why sticky wages tend to amplify negative productivity shocks.

Correct AnswerverifiedA negative productivity shock means that...View AnswerShow Answer

The short-run aggregate supply curve shows the _____ relationship between the inflation rate and real growth during the period when prices and wages are _____.

Correct AnswerverifiedShow Answer

When inflation is 4% and the real GDP growth rate is 2%,what is the spending growth rate?

Correct AnswerverifiedShow Answer

In the equation M⃗+v⃗=P⃗+Y⃗R\vec { M } + \vec { v } = \vec { P } + \vec { Y } _ { R }M+v=P+YR​ ,what does M⃗\vec { M }M stand for?

Correct AnswerverifiedShow Answer

Compare two economies,one that is highly agricultural and another that is highly manufacturing-based.Discuss what types of shocks might be relevant to each of these economies.

Correct AnswerverifiedWeather shocks and agricultural technolo...View AnswerShow Answer

The Great Depression was due primarily to the:

Correct AnswerverifiedShow Answer

Greater growth of government spending represents a negative AD shock.

Correct AnswerverifiedShow Answer

In the AD-AS model,an unexpected decrease in the growth rate of the money supply causes:

Correct AnswerverifiedShow Answer

Why is the long-run aggregate supply curve vertical in the AD-AS model?

Correct AnswerverifiedThe vertical nature of the LRAS curve sh...View AnswerShow Answer

When the United States experienced its first oil shock,employment shifted from Houston to Detroit.

Correct AnswerverifiedShow Answer

Since people will always come to expect the actual inflation rate in the long run,the expected inflation rate is found graphically where the:

Correct AnswerverifiedShow Answer

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A negative productivity shock means that...
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The short-run aggregate supply curve shows the _ relationship between the inflation rate and real growth during the period when prices and wages are _.

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In the equation $\vec { M } + \vec { v } = \vec { P } + \vec { Y } _ { R }$ ,what does $\vec { M }$ stand for?

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Weather shocks and agricultural technolo...
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The vertical nature of the LRAS curve sh...
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