MCQ

1.An increase in the minimum wage will tend to cause which of the following?

a.an upward shift in the WS curve

b.a downward shift in the WS curve

c.an upward shift in the PS curve

d.a downward shift in the PS curve

e.none of the above

2. Which of the following will cause the aggregate supply curve to shift down?

a. an increase in firms' markup over labor costs.

b. an increase in the expected price level.

c. an increase in unemployment benefits.

d. all of the above.

e. none of the above.

3. When the current price level is equal to the expected price level, we know that:

a. the unemployment rate is zero.

b. the goods market and financial markets are in equilibrium.

c. the output is equal to the natural level of output.

d. the money market is in equilibrium.

e. none of the above.

4. In the aggregate demand relation, an increase in the price level causes output to decrease because of its effect on:

a. government spending.

b. the money market and, subsequently, investment.

c. the nominal wage.

d. firms' markup over labor costs.

e. the expected price level.

5. The aggregate demand curve will shift to the right when which of the following occurs?

a. a reduction in the money supply.

b. a reduction in consumer confidence.

c. a rise in the price level.

d. a increase in taxes.

e. a decrease in the price level.

6. In the Phillips curve equation, which of the following will cause an increase in the current inflation rate?

a. an increase in the expected inflation rate.

b. a reduction in the unemployment rate.

c. an increase in the markup, m.

d. All of the above.

e. None of the above.

7. Assume that expected inflation is based on the following: p^e_t = qp_t-1.Ifq = 0, we know that:

a.a reduction in the unemployment rate will have no effect on inflation

b.low rates of unemployment will cause steadily increasing rates of inflation

c.high rates of unemployment will cause steadily declining rates of inflation

d.the Phillips curve illustrates the relationship between the level of inflation rate and the level of the unemployment rate

8. Which of the following will NOT cause an increase in the natural rate of unemployment?

a. an increase in m

b. an increase in z.

c. an increase in the expected inflation rate.

d. a reduction in a.

e. none of the above.

9. The Phillips curve relation is represented as:

a.gyt= gmt- pt

b.ut- ut-1= -b(gyt- 3%)

c.pt- pt-1= -a(un- ut)

d.none of the above

10. Suppose the central bank wants to reduce inflation by 10%, u_n = 6%, and a = 2.How many point-years of excess unemployment will be needed to reduce inflation by 10%?

a.2

b.5

c.20

d.30