Econ Chapter 10 Flashcards
Which of the following will reduce aggregate demand?
a. an increase in real wealth
b. lower real incomes in foreign economies with whom an economy trades
c. increased consumer and business optimism about the future
d. an increase in the expected rate of inflation
b.
An increase in the LRAS curve shifts
a. both LRAS and AD to the right
b. both LRAS and SRAS to the right
c. both LRAS and AD to the left
d. only LRAS to the right
b.
During recessions, interest rates tend to fall because
a. consumers attempt to borrow money to make up for their falling income
b. business borrowing for investment purposes tends to fall during recessions
c. lower real resource prices create profit opportunities for banks
d. recessions shift the economy LRAS curve to the left
b.
In the short run, equilibrium output in the goods and services market may be either above or below the full employment level but in the long run it
a. must be less than full employment output
b. must be greater than full employment output
c. must be equal to full employment output
d. depends on AD not just LRAS
c.
Which of the following is most likely to result from an unanticipated increase in SRAS due to favorable weather conditions in agricultural areas?
a. an increase in the inflation rate
b. an increase in the unemployment rate
c. a decrease in the price level
d. a decrease in the natural rate of unemployment
c.
Which of the following is most likely to accompany an unanticipated reduction in AD?
a. an increase in the price level
b. a decrease in unemployment
c. an increase in real GDP
d. an increase in the unemployment rate
d.
Which of the following is most likely to accompany an unanticipated increase in SRAS?
a. an increase in real GDP
b. a decrease in real GDP
c. an increase in the price level
d. an increase in the unemployment rate
a.
In the aggregate demand/aggregate supply model, an economy operating below its long-run potential capacity will experience.
a. falling real wages and resource prices that will increase SRAS moving the economy back toward full-employment
b. rising interest rates that will increase SRAS moving the economy back toward will employment
c. inflation that will stimulate additional spending and thereby restore full employment
d. a prolonged economic depression unless consumer optimism is increased.
a.
Good weather allows agricultural output to double
a. The AD curve would shift right
b. The AD curve would shift left
c. The SRAS curve would shift to the right
d. The SRAS curve would shift to the left
c.
There is an increase in the expected rate of inflation
a. The AD curve would shift to the right
b. The SRAS curve would shift to the left
c. The price level would rise and real GDP would remain the same
d. All of the above are correct
d.
Consumers and businesses all suddenly decide that the future looks much better than it previously had
a. The AD curve would shift to the right
b. The AD curve would shift the the left
c. The SRAS curve would shift to the right
d. The SRAS curve would shift the the left
a.
A major technological advance occurs
a. The AD curve would shift to the right
b. The AD curve would shift to the left
c. Both the SRAS and LRAS curves would shift to the right
d. Both the SRAS and LRAS curves would shift to the left
c.
Which of the following would not cause a shift in the ARAS curve
a. a major technological advance
b. a decrease in the real interest rate
c. a decrease in the expected rate of inflation
d. an increase in resource prices
b.
If an economy is in equilibrium at a given price level and a given output level, the AD/AS model indicates that an unanticipated decrease in AD will cause…
a. real output to decline
b. the price level to fall
c. unemployment to increase
d. all of the above
d.
Which of the following is most likely to accompany a fully anticipated reduction in SRAS?
a. an increase in the price level
b. a decrease in the price level
c. a decrease in real GDP
d. both a and c
a.
During the 1990s, a financial crisis spread throughout Asia causing those economies to drop into recessions. Other things constant, how would such a decrease in the income of foreign trading partners have influenced the price level and output of the United States?
a. Both real output and the price level would have fallen
b. Both real output and the price level would have risen
c. Real output would have fallen, and the price level would have risen.
d. Real output would have risen, and the price level would have fallen.
a.
Which of the following will most likely occur in the United States as the result of an unexpected rapid growth in real income in Japan and Europe?
a. a short-run increase in U.S. employment and output
b. a short-run decrease in U.S. employment and output
c. a short-run decline in the prices in the U.S.
d. a reduction in the natural rate of unemployment in the United States
a.
If there is an unanticipated increase in AD, which of the following is most likely to occur?
a. an increase in the price level (inflation)
b. an increase in the rate of unemployment
c. a reduction in the growth rate of real GDP
d. a decrease in LRAS to restore full-employment
a.
Which of the following will most likely increase the economy’s LRAS?
a. advances in technology
b. unfavorable weather conditions in agricultural areas
c. an increase in the expected inflation rate
d. a low rate of investment
a.
If improvements in education and training programs increased the productivity of persons in the labor force,
a. AD would decrease
b. SRAS would increase but LRAS would not change
c. LRAS would increase but SRAS would not change
d. Both SRAS and LRAS would increase
d.
If an economy was initially in long-run equilibrium, an unanticipated increase in AD will tend to cause
a. an increase in unemployment
b. a decrease in the price of resources
c. a reduction in real output that will spiral downward into a prolonged recession
d. a temporarily high level of output and employment that cannot be maintained
d.
When an economy is in a recession,
a. strong demand for investment funds will push interest rates upward
b. strong demand for resources will push the prices of resources upward
c. weak demand for investment funds will cause the real interest rate to decline
d. the unemployment rate will be less than its natural rate
c.
Which of the following statements is most consistent with the view that the economy has a self-corrective mechanism?
a. When the economy is in a recession, it will remain there until the government steps in to bring the economy out of the recession
b.When the economy is in a recession, falling resource prices and declining interest rates will direct the economy back to full employment
c. During economic booms, interest rates will fall, causing the economy to fall into a recession
d. In a market economy, resources prices, such as wages, can only increase; they can never decrease
b.
Which of the following factors contributed to the 2008 economic recession in the United States?
a. Housing wealth fell causing consumers to become more pessimistic about the economy
b. the stock market plummeted causing the real wealth of Americans to decrease
c. As the recession spread to other countries, falling incomes abroad depressed aggregate demand in the US even more
d. All of the above were contributing factors
d.
