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Macroeconomics > Test 3 HW/Review > Flashcards

Test 3 HW/Review Flashcards

1
Q

The long-run aggregate supply curve is determined by ______.

A

The full-employment level of real output.

HW 7 (CH10)

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2
Q

Why is the long-run aggregate supply curve always drawn vertically?

A

To show that the price level has no impact on real GDP.

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3
Q

Which of the following would cause an increase in long-run aggregate supply?

  1. An increase in wealth
  2. An increase in the labor force
  3. An increase in the price level
  4. An increase in the number of consumers in the market.
  5. All the above.
A
  1. An increase in the labor force.

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4
Q

According to the real balance effect, an increase in the price level:

  1. Does not affect the real value of cash balances in the long run.
  2. Does not affect the real value of cash balances in the short run.
  3. Increases an individual’s expenditures due to an increase in the real value of cash balances.
  4. Reduces an individual’s expenditures due to a decrease in the real value of cash balances.
A
  1. Reduces an individual’s expenditures due to a decrease in the real value of cash balances.

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5
Q

According to the interest-rate effect, an increase in price level:

  1. Increases nominal interest rates.
  2. Reduces borrowing and spending.
  3. Reduces the aggregate supply of goods and services demanded.
  4. All the above
A
  1. All the above

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6
Q

All of the following would cause the aggregate demand curve to shift except:

  1. A decrease in taxes
  2. Decreased confidence about security and jobs in the future.
  3. Deterioration in economic conditions in other countries.
  4. Price level changes.
A
  1. Price level changes

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7
Q

The model of long-run equilibrium is the same as ______.

A

The classical model.

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8
Q

In the classical model, a decrease in aggregate demand will result in _____.

A

A decrease in the price level and no change in output.

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9
Q

What did Keynes mean when he said that prices are “Sticky?”

A

Prices, especially the price of labor are inflexible downward.

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10
Q

If prices are very sticky, the SRAS curve will be ____.

A

Horizontal

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11
Q

True or False
An important difference between the Classical model and the Keynesian model is that prices adjust to bring about equilibrium in the classical modal and output adjust to bring about an equilibrium in the Keynesian model.

A

True

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12
Q

True or False
One of the main conclusions of Say’s Law was that if people supply goods in order to then demand goods, there can be no overproduction in a market economy and low employment will be the normal state of affairs.

A

False. The normal state of affairs will be full employment.

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13
Q

Say’s law best fits the _____ theory.

A

Classical

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14
Q

Classical theory puts great importance on _____ to determine ______.

A

Aggregate supply
Level of output

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15
Q

Suppose that aggregate demand were to decrease due to a stronger dollar. Which of the following would result?

  1. Inflation only
  2. An increase in real GDP and deflation
  3. An increase in real GDP and inflation
  4. Deflation only
A
  1. Deflation only.

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16
Q

From Keynesian theory, the nominal wage is deemed inflexible, therefore a decrease in aggregate demand causes firms to _______.

A

Reduce their workforce.

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17
Q

According to the Keynesian model, full employment is _______.

A

Possible but not guaranteed.

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18
Q

The long-run aggregate supply curve will not shift if there is a change in ______.

A

The price level.

HW 8 (CH 11)

19
Q

Demand-pull inflation arises due to:

  1. A decrease in the aggregate demand.
  2. A higher price level
  3. An increase in the money supply
  4. A decrease in the short-run aggregate supply.
A
  1. An increase in the money supply.

HW 8 (CH 11)

20
Q

Which of the following would create demand-pull inflation?

  1. A decrease in wages paid to workers
  2. Increased international trade barriers
  3. An increase in household income
  4. An increase in the real rate of interest
A

An increase in household income.

HW 8 (CH 11)

21
Q

Persistent inflation arises due to _____.

A

the aggregate demand curve increasing by a larger proportion than the LRAS curve.

HW 8 (CH 11)

22
Q

Which of the following statements best characterizes demand-pull and cost-push inflation?

  1. Both are short-run types of inflation.
  2. Demand-pull is a short-run type while cost-push is a long-term type of inflation.
  3. Both cause prices to rise and output to fall.
  4. Both cause prices and output to increase.
A
  1. Both are short-run types of inflation

HW 8 (CH 11)

Macroeconomics (17 decks)

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