Tutorial 7 Flashcards

1
Q
  1. [B] The potential level of output is the level of output

a) which is determined by the Reserve Bank of Australia
b) which is determined by the government
c) towards which the economy tends to gravitate rather slowly in the long run
d) towards which the economy tends to gravitate fairly quickly in the short run

A

C

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2
Q

[B] When real GDP declines:

a) unemployment tends to rise
b) unemployment tends to fall
c) unemployment is usually unaffected
d) it is equally likely that unemployment will rise or fall

A

A

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3
Q

If the economy is stronger than usual, we would normally expect:

a) output is above its trend (called potential output)
b) inflation rate is above its trend
c) unemployment rate is below its trend (called natural unemployment rate)
d) all of the above

A

D

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4
Q

If unemployment is above the “natural” rate of unemployment, which of the following would we be most likely to see

a) actual GDP is below potential GDP
b) there is over-full employment, i.e. actual GDP is above potential GDP
c) inflation rate is higher than usual, or rising
d) wages are rising rapidly but profits are falling
e) none of the above

A

A

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5
Q

If the economy is experiencing stagflation we will probably see

a) increases in output and higher prices
b) decreases in output and lower prices
c) increases in output and lower prices
d) decreases in output and higher prices

A

D

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6
Q

If the inflation rate is higher than the growth rate of nominal wages, we can conclude that

a) real wages decreases
b) the real interest rate is negative
c) wage earners’ purchasing power increases
d) wage earners were able to anticipate inflation

A

A

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7
Q
  1. [B] Fluctuations in the economy are called:

a) vicious cycles
b) business cycles
c) motor cycles
d) recessions
e) life cycles

A

B

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8
Q

[B] Business conditions are generally described as good when:

a) real GDP is increasing and profits are increasing
b) real GDP is decreasing and profits are decreasing
c) employment and wages are falling but the share of profits in national income is rising
d) inflation is decreasing

A

A

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9
Q

[B] The short-run aggregate supply curve shows

a) an inverse relationship between the quantity supplied by firms and the overall inflation rate
b) an inverse relationship between the quantity demanded by households, investors, the government, and the rest of the world, and the overall inflation rate
c) a direct relationship between the quantity supplied by firms and the overall inflation rate
d) a direct relationship between the quantity demanded by households, investors, the government, and the rest of the world, and the overall inflation rate

A

C

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10
Q

[B] The downward slope of the AD curve shows that

a) a fall in the inflation rate reduces the overall quantity of goods and services demanded
b) a rise in the inflation rate increases the overall quantity of goods and services demanded
c) a fall in the inflation rate has no effect on the overall quantity of goods and services demanded
d) a fall in the inflation rate increases the overall quantity of goods and services demanded

A

D

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11
Q

B] A change in a determinant of aggregate demand, other than the inflation rate, will cause

a) a movement along the aggregate demand curve
b) a shift of the aggregate demand curve
c) a shift of the aggregate supply curve
d) no change in aggregate demand

A

B

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12
Q

[B] When changes occur in factors, other than the price level, which affect the quantity of goods and services supplied:

a) the aggregate supply curve shifts
b) the aggregate supply curve is not affected
c) the aggregate supply becomes vertical
d) the aggregate supply curve becomes horizontal
e) the aggregate demand curve shifts

A

A

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13
Q
  1. Frictional unemployment refers to:

a) year-to-year fluctuations of the unemployment rate around its trend
b) the amount of unemployment caused by the fact that, at any point in time, some people are in between jobs
c) the amount of unemployment caused by the friction between the federal and state governments
d) the amount of unemployment caused by the friction between employers and trade unions
e) none of the above

A

B

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14
Q

If the AD and AS curves intersect at a level of output which exceeds potential GDP, we would expect to see the following

a) the price level is rising faster than normal
b) the unemployment rate is higher than normal, i.e., higher than the “natural” rate of unemployment
c) the unemployment rate is lower than normal, i.e., lower than the “natural” rate of unemployment
d) both (a) and (c)

A

D

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15
Q

[E] If actual output is below potential output, which of the following is most likely to occur in the real world?

a) inflation is lower than usual, or falling
b) unemployment is relatively low, possibly even lower than the “natural” rate of unemployment
c) the CPI is falling, ie. there is deflation
d) wages are falling but profits are rising
e) none of the above

A

A

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16
Q

If unemployment is below the “natural” rate of unemployment, which of the following would we be likely to see

a) actual GDP is below potential GDP
b) there is over-full employment, i.e. actual GDP is above potential GDP
c) inflation is lower than usual, or falling
d) wages are rising but profits are falling
e) none of the above

A

B

17
Q

We would describe the economy as experiencing deflation if we see

a) real GDP falls in two or more successive quarters
b) the price level falls
c) the inflation rate falls but remains positive
d) unemployment rises and employment falls

A

B

18
Q

Suppose the price index was 120 in the year 2007, and 126 in 2008. What was the inflation rate?

a) 26 percent
b) 6 percent
c) 5 percent
d) the inflation rate is impossible to determine without knowing the base year

A

C

19
Q

[B] Over time, inflation

a) increases the purchasing power of a unit of money
b) reduces the purchasing power of a unit of money
c) has no effect on the purchasing power of a unit of money
d) may increase or decrease the purchasing power of a unit of money

A

B

20
Q

Unexpected inflation redistributes wealth from _______ to _______

a) debtors, creditors
b) owners of real property, owners of financial assets
c) creditors, debtors
d) the government, fixed income recipients

A

C