1.Inflation is likely to result when:

Select one:

a.aggregate demand declines.

b.aggregate supply increases.

c.incomes rise faster than outputs.

d.outputs rise faster than incomes.

2.Monetarists argue that increases in the money supply simply translate into higher:

Select one:

a.real GDP.

b.price levels.

c.interest rates.

d.business investment expenditures.

3.In order to be considered or counted as unemployed, workers must:

Select one:

a.be without a job but be seeking a job.

b.exclude themselves from the labor force.

c.be without a job and not be seeking a job.

d.repay an amount they earned by way of unemployment compensation.

4.Which of the following statements best summarizes the Classical view of employment?

Select one:

a.In the long run, markets reach equilibrium and full employment results.

b.In the short run, markets reach equilibrium and full employment results.

c.In the long run, markets reach equilibrium and partial employment results.

d.In the short run, markets reach equilibrium and partial employment results.

5.What is the formula with which to calculate the official unemployment rate?

Select one:

a.The number in the labor force divided by the population

b.The number of discouraged workers divided by the number of civilian workers

c.The number of people seeking work divided by the number quitting their jobs

d.The number of unemployed workers divided by the sum of employed and unemployed workers

6.Which of the following statements correctly states the relationship between inflation and deflation?

Select one:

a.Both inflation and deflation involve a fall in the overall price level.

b.Both inflation and deflation involve a rise in the overall price level.

c.Inflation is a rise in the overall price level, whereas deflation is a fall in the overall price level.

d.Inflation is a fall in the overall price level, whereas deflation is a rise in the overall price level.

7.A contraction in the business cycle is likely to result in which form of unemployment?

Select one:

a.Cyclical

b.Seasonal

c.Functional

d.Structural

8.A reduction in government regulations that firms face would result in a ______ shift of the short run aggregate supply curve, as the costs of conducting business would _____.

Select one:

a.leftward; decrease

b.leftward; increase

c.rightward; decrease

d.rightward; increase

9.An accurate interpretation of the long-run aggregate supply curve acknowledges both that real GDP does not vary with the price level and:

Select one:

a.the amount of total unemployment is zero.

b.the amount of cyclical unemployment is zero.

c.the amount of frictional unemployment is zero.

d.the amount of structural unemployment is zero.

10.An increase in the income tax will ________ consumption expenditures, which will lead to a ________ in aggregate demand.

Select one:

a.decrease; decrease

b.decrease; increase

c.increase; decrease

d.increase; increase

11.Which of the following best characterizes the short-run aggregate supply curve?

Select one:

a.The short-run aggregate supply curve depicts a negative relationship between price level and GDP.

b.The short-run aggregate supply curve depicts a positive relationship between price level and GDP.

c.The short-run aggregate supply curve depicts a negative relationship between consumer spending and GDP.

d.The short-run aggregate supply curve depicts a positive relationship between consumer spending and GDP.

12.Real GDP exceeds the point at which the natural rate of unemployment occurs because of:

Select one:

a.an increase in the sum of cyclical and frictional unemployment.

b.an increase in the sum of cyclical and structural unemployment.

c.a decrease in the sum of frictional and structural unemployment.

d.an increase in the sum of frictional and structural unemployment.

13.Which of the following accurately contrasts short-run and long-run equilibrium?

Select one:

a.In short-run equilibrium, the aggregate demand curve intersects the long-run aggregate supply curve; in long-run equilibrium, the aggregate demand curve intersects the short-run aggregate supply curve.

b.In short-run equilibrium, the aggregate demand curve intersects the short-run aggregate supply curve; in the long-run equilibrium, the aggregate demand curve intersects the long-run aggregate supply curve.

c.In short-run equilibrium, the aggregate demand curve intersects the short-run aggregate supply curve; in the long-run equilibrium, the aggregate demand curve intersects the long-run aggregate expenditures curve.

d.In short-run equilibrium, the aggregate demand curve intersects the short-run aggregate supply curve; in long-run equilibrium, the aggregate demand curve intersects both the short-run and the long-run aggregate supply curves.

14.Holding all else constant, if GDP increased by $50 million as a direct result of a $10 million increase in government spending, what is the government's balanced budget spending multiplier?

Select one:

a.0.2

b.0.5

c.2

d.5

15.Holding all else constant, what is the balanced budget multiplier given increases of $100 million each in government expenditures and in government taxes when the marginal propensity to consume (MPC) is 0.80?

Select one:

a.0.1

b.0.2

c.1

d.2