QUESTION 1

1. A purchasing power parity index would help you

		make international comparisons of living standards.
		estimate the growth rate of U.S. personal income.
		identify those goods and services that are becoming relatively more important in chain-weighted GDP.
		predict changes in U.S. real GDP.

2 points

QUESTION 2

1. A recessionary gap is the amount by which

		the short-run equilibrium level nominal GDP is above the short-run real GDP.
		the short-run equilibrium level nominal GDP is below the short-run real GDP.
		total planned real expenditures exceed total planned production in the long run.
		the short-run equilibrium level of real GDP is below the full-employment level of real GDP.

2 points

QUESTION 3

1. A recessionary gap results when

		aggregate demand is below the level consistent with full employment.
		aggregate demand is above the level consistent with full employment.
		aggregate supply and aggregate demand are not in short-run equilibrium.
		aggregate supply decreases.

2 points

QUESTION 4

1. A rightward shift of long-run aggregate supply without any change in aggregate demand

		increases the price level without any change in real GDP.
		will leave real GDP unchanged.
		results in a lower price level.
		increases the price level along with an increase in real GDP.

2 points

QUESTION 5

1. A rightward shift of the long-run aggregate supply curve is caused by

		an increase in the average duration of unemployment.
		an increase in the minimum wage.
		improvements in technology and resource endowments.
		an increase in the GDP deflator.

2 points

QUESTION 6

1. A severe and prolonged recession is called

		a stagnation.
		a trough.
		a depression.
		a slump.

2 points

QUESTION 7

1. A short-lived increase in oil prices caused by destruction of oil-producing and oil-refining facilities by a large hurricane will

		shift the SRAS curve to the left.
		shift the LRAS curve to the right.
		shift the SRAS curve to the right.
		shift the AD curve to the right.

2 points

QUESTION 8

1. A small increase in the annual rate of economic growth can lead to a larger increase in growth over time due to the effects of

		the money supply.
		averaging.
		regression towards the mean.
		compounding.

2 points

QUESTION 9

1. A subsidy to carrot farmers will

		decrease the quantity of carrots supplied.
		increase the quantity of carrots demanded.
		increase the supply of carrots.
		leave both the supply and demand of carrots unchanged.

2 points

QUESTION 10

1. A temporary embargo on oil from the Middle East going in to the United States would

		shift only the long-run aggregate supply curve to the left.
		shift the long-run aggregate supply curve to the right.
		shift both the short-run and long-run aggregate supply curves to the left.
		shift only the short-run aggregate supply curve to the left.

2 points

QUESTION 11

1. A temporary increase in the price of oil would

		increase both short-run and long-run aggregate supply.
		increase short-run aggregate supply and decrease long-run aggregate supply.
		decrease both short-run and long-run aggregate supply.
		decrease short-run aggregate supply and leave long-run aggregate supply unchanged.

2 points

QUESTION 12

1. A war in the Middle East that disrupts U.S. economic activity is known as

		an expansion.
		an external shock.
		a demand shock.
		an internal shock.

2 points

QUESTION 13

1. A weakening in consumer confidence causes a

		movement down along the aggregate demand curve.
		shift of the aggregate demand curve to the left.
		movement up along the aggregate demand curve.
		shift of the aggregate demand curve to the right.

2 points

QUESTION 14

1. According to Keynes, real saving and real consumption spending are functions of

		current educational attainment.
		an individual's future earning potential.
		economic expectations.
		current real disposable income.

2 points

QUESTION 15

1. According to Keynes, the "stickiness" of wage rates could best be explained by

		government interference.
		minimum wage laws.
		short-term labor contracts.
		unions and long-term labor contracts.

2 points

QUESTION 16

1. According to Keynes, the most important determinant of an individual's real saving is

		the level of investment.
		the foreign exchange rate.
		the individual's real disposable income.
		interest rates.

2 points

QUESTION 17

1. According to Keynesian economics, if there are unutilized resources in the economy and the aggregate demand decreases

		real GDP will rise and price level will remain constant.
		real GDP will rise and price level will rise.
		real GDP will rise and price level will fall.
		real GDP will fall and price level will remain constant.

2 points

QUESTION 18

1. According to Keynesian economics, if there are unutilized resources in the economy and the aggregate demand increases

		real GDP will rise and price level will remain constant.
		real GDP will rise and price level will fall.
		real GDP will rise and price level will rise.
		real GDP will fall and price level will remain constant.

2 points

QUESTION 19

1. According to Say's law

		demand creates supply.
		changes in supply create supply-side inflation.
		changes in demand create demand-side inflation.
		supply creates its own demand.

2 points

QUESTION 20

1. According to business activity charts for the last 100 years, the point of the highest business activity in the United States occurred

		during the Clinton administration.
		during the Vietnam War.
		during World War II.
		during the 1920s bull market boom.

2 points

QUESTION 21

1. According to classical economists

		prices and wages are flexible.
		prices and wages depend on the decisions made by the Federal Reserve Bank.
		prices and wages move downward easily, but are "sticky" upward.
		prices and wages must be set by government.

2 points

QUESTION 22

1. According to classical economists

		the natural rate of unemployment is zero.
		unemployment is temporary in the economy.
		unemployment only exists during periods of war in the economy.
		long-term unemployment is unavoidable in the economy.

2 points

QUESTION 23

1. According to classical economists, in equilibrium

		planned investment will equal government expenditures.
		desired investment will equal planned investment.
		desired investment will equal desired saving.
		desired investment will equal planned changes in aggregate supply.

2 points

QUESTION 24

1. According to classical economists, when aggregate demand decreases

		unemployment temporarily increases, the price level decreases, and equilibrium GDP is reached.
		unemployment temporarily increases, the price level increases, and equilibrium GDP is reached.
		unemployment is reduced, the price level increases, and equilibrium GDP is reached.
		unemployment is reduced, the price level decreases, and equilibrium GDP is reached.

2 points

QUESTION 25

1. According to many economists, as nations become wealthier, what happens to family sizes?

		They increase, but later in life.
		They decline.
		There is no effect.
		They increase.

2 points