The aggregate demand (AD) curve is the graphical representation of production in the
short run.
a. True
b. False
When the current state of the economy is such that Real GDP is less than Natural Real
GDP, the economy is in a(n) ____________________ gap.In this situation, the (actual)
unemployment rate is ___________ than the natural unemployment rate, and there is a
________________ in the labor market.
a. recessionary; greater; shortage
b. inflationary; less; shortage
c. inflationary; greater; surplus
d. recessionary; greater; surplus
e. recessionary; less; shortage
The difference between the new classical theory and the new Keynesian theory is the
assumption of
a. rational expectations.
b. adaptive expectations.
c. complete flexibility of wages and prices in the short run.
d. a and c
e. b and c
Positive economics is concerned with
a. value judgments.
b. cause-effect relationships.
c. observations that cannot be proved.
d. both b and c
Elite colleges and universities use standardized test scores (such as SAT and ACT
scores) and high school grades as
a. a means to raise student utility.
b. a means to turn a university education from a “good” to a “bad.”
c. rationing devices.
d. none of the above
Exhibit 16-2
Suppose the economy starts out at point A. Next, the public anticipates that the Fed will
use expansionary monetary policy to shift the AD curve from AD1 to AD2. What
happens, instead, is that the Fed does not raise aggregate demand as much as the public
expects (bias upward).Instead the Fed pushes the AD curve from AD1 to AD3. As a
result, according to new classical theory in the long run point _____________ best
represents the new state of the economy.
a. A
b. B
c. C
d. D
e. E
Here is a consumption function: C = C0 + MPC(Yd). If consumption is $3,300, MPC
=0.85, and disposable income is $2,100, what does autonomous consumption equal?
a. $899.15
b. $450
c. $1,515
d. $4,785
e. none of the above
A rise in net exports shifts the
a. AD curve leftward.
b. AD curve rightward.
c. SRAS curve leftward.
d. SRAS curve rightward.
To deal with the financial crisis of 2007-2009, the Fed extended its lender of last resort
function to include institutions other than banks.
a. True
b. False
Exhibit 7-3
GDP is equal to
a. $13,050.
b. $11,550.
c. $8,600.
d. $11,450.
e. $14,000.
Exhibit 10-9
What is the value of the marginal propensity to consume (MPC) that would correctly
fill in blank (G) and the value of the multiplier that would correctly fill in blank (H)?
a. 0.80; 20
b. 0.80; 5
c. 0.20; 0.80
d. 0.50; 0.50
e. There is not enough information given to answer this question.
When the government institutes a target price,
a. a surplus is created.
b. consumers must pay the target price.
c. the farmer receives a deficiency payment if the market price is below the target price.
d. the farmer receives a deficiency payment if the market price is above the target price.
e. all of the above