ECN QUIZ - Assignment Essays

question

If the economy is simultaneously in long-run and short-run equilibrium, which of the following is true?

a. Aggregate quantity supplied is greater than potential output.
b. The aggregate demand curve is horizontal at the potential output level.
c. Aggregate quantity demanded is equal to potential output.
d. Aggregate quantity demanded is less than potential output.

answer

Aggregate quantity demanded is equal to potential output.

question

Mr. and Mrs. Hernandez and their two children are a typical household. Which of the following would be most likely to cause them to purchase more goods and services during the current period?

a. The value of 500 shares of stock owned by the Hernandez family increases sharply.
b. Mr. Hernandez reads an article that states prices are expected to drop sharply in the next few months.
c. Mrs. Hernandez's boss informs her that she is being dismissed from her job.
d. The legislature enacts a law increasing the sales tax.

answer

The value of 500 shares of stock owned by the Hernandez family increases sharply.

question

Which of the following shifts both short-run and long-run aggregate supply to the left?

a. a drought in the Midwest agricultural areas.
b. a decrease in the expected rate of inflation
c. a decrease in the actual rate of inflation
d. a decrease in the capital stock

answer

a decrease in the capital stock

question

An increase in capital formation that expands long-run aggregate supply will

a. decrease output and increase prices.
b. increase output and decrease prices.
c. decrease both output and prices.
d. increase both output and prices.

answer

increase output and decrease prices.

question

If a currency appreciates, a country's net exports

a. fall and AD increases.
b. fall and AD decreases.
c. rise and AD increases.
d. rise and AD decreases.

answer

fall and AD decreases.

question

In the aggregate demand/aggregate supply model, an increase in a country's sustainable potential output is represented by an increase in

a. prices.
b. long-run aggregate supply.
c. an increase in the general level of prices.
d. aggregate demand.

answer

long-run aggregate supply.

question

An unanticipated economic event is a change that

a. was forecast by most economists.
b. catches most people by surprise.
c. was foreseen by most economic participants.
d. is the result of a steady long-term trend in an economic variable.

answer

catches most people by surprise.

question

Which of the following shifts short-run, but not long-run aggregate supply to the right?

a. a drought in the Midwest agricultural areas.
b. a decrease in the expected rate of inflation
c. a decrease in the actual rate of inflation
d. a decrease in the capital stock

answer

a decrease in the expected rate of inflation

question

When the U.S. dollar appreciates,

a. aggregate demand shifts leftward.
b. aggregate demand shifts rightward.
c. U.S. exports rise.
d. U.S. imports decline.

answer

aggregate demand shifts leftward.

question

A large grain crop resulting from favorable weather conditions would shift which of the following curves?

a. only aggregate demand
b. only short-run aggregate supply
c. only long-run aggregate supply
d. aggregate demand and short-run aggregate supply

answer

only short-run aggregate supply

question

Which of the following will most likely cause an increase in the long-run aggregate supply curve?

a. an increase in the general level of prices
b. an improvement in technology that substantially reduces the cost of generating energy
c. a reduction in the general level of prices
d. an increase in taxes that makes it more expensive for Americans to import crude oil

answer

an improvement in technology that substantially reduces the cost of generating energy

question

When output is less than the economy's long-run capacity, which of the following is most likely to occur?

a. a sharp increase in imports
b. an abnormally low rate of unemployment
c. reductions in real interest rates and real resource prices
d. a government budget surplus

answer

reductions in real interest rates and real resource prices

question

If the consumer sentiment index turns down sharply over a period of several months, which of the following is most likely to occur in the near future?

a. a reduction in aggregate demand and a contraction in real output
b. an increase in aggregate demand and a contraction in real output
c. an increase in aggregate demand and expansion in real output
d. a reduction in aggregate demand and expansion in real output

answer

a reduction in aggregate demand and a contraction in real output

question

Which of the following would be most likely to cause an increase in current aggregate demand in the United States?

a. an increase in the real interest rate
b. a reduction in the expected rate of inflation
c. increased fear that the U.S. economy was going into a recession
d. rapid growth of real income in Canada and Western Europe

answer

rapid growth of real income in Canada and Western Europe

question

Which of the following would be most likely to cause an increase in current aggregate demand in the United States?

a. an increase in the real interest rate
b. increased fear that the U.S. economy was going into a recession
c. a recession in Canada, Mexico, and Western Europe
d. sharp increase in the value of stocks owned by Americans

answer

sharp increase in the value of stocks owned by Americans

question

Within the AD/AS model, an increase in capital formation that permits the economy to achieve a larger output will

a. increase aggregate demand.
b. decrease aggregate demand.
c. increase long-run aggregate supply.
d. increase short-run aggregate supply, but long-run aggregate supply will be unaffected.

answer

increase long-run aggregate supply.

question

A recession abroad would

a. increase U.S. net exports and increase aggregate supply.
b. reduce U.S. net exports and increase aggregate demand.
c. reduce U.S. net exports and reduce aggregate demand.
d. increase U.S. net exports and increase aggregate demand.

answer

reduce U.S. net exports and reduce aggregate demand.

question

Which of the following will most likely result from an unanticipated decrease in aggregate supply due to unfavorable weather conditions in agricultural areas?

a. a decrease in unemployment
b. an increase in the general level of prices
c. an increase in the natural rate of unemployment
d. a decrease in inflation

answer

an increase in the general level of prices

question

Over the last 60 years, the average annual growth of real GDP in the United States has been approximately

a. 3 percent.
b. 9 percent.
c. 1 percent.
d. 5 percent.

answer

3 percent.

question

Within the framework of the AD/AS model, if consumers and investors become more pessimistic about the future direction of the economy, this will lead to a(n)

a. increase in long-run aggregate supply (LRAS shifts to the right).
b. increase in aggregate demand.
c. reduction in the natural rate of unemployment.
d. decrease in aggregate demand.

answer

decrease in aggregate demand.

question

Which of the following will lead to an increase in aggregate demand in the United States?

a. a higher price level
b. an increase in wealth due to a substantial appreciation in the value of stocks
c. a decrease in real income in Japan and Western Europe
d. an increase in the real interest rate

answer

an increase in wealth due to a substantial appreciation in the value of stocks

question

During the crisis of 2008 housing prices ________ and stock prices ________. (Fill in the blank)

a. rose sharply; rose sharply
b. rose sharply; fell sharply
c. fell sharply; rose sharply
d. fell sharply; fell sharply

answer

fell sharply; fell sharply

question

An abnormally large grain crop due to highly favorable weather conditions in the Midwest is an example of a(n)

a. technological improvement that will increase long-run aggregate supply.
b. unexpected development that will lead to excess supply and widespread unemployment.
c. supply shock that will increase short-run aggregate supply.
d. unexpected development that will reduce the natural rate of unemployment.

answer

supply shock that will increase short-run aggregate supply.

question

Keynes rejected the view that lower wages would direct a recessionary economy back to full employment because

a. market forces would quickly direct an economy back to full employment.
b. lower wages would stimulate inflation and thereby prolong the recession.
c. lower wages would cause the central bank to reduce the money supply and thereby prolong the recession.
d. powerful trade unions and large corporations made wages highly inflexible.

answer

powerful trade unions and large corporations made wages highly inflexible.

question

The primary tool of fiscal policy is

a. the stock market.
b. the federal budget.
c. regulation of the bond market.
d. the money supply.

answer

the federal budget.

question

According to the Keynesian view, the prolonged unemployment of the Great Depression

a. was surprising because Keynesians believed that wage rates would decline and direct the economy to full employment.
b. resulted because the total expenditures on goods and services were less than the full-employment rate of output.
c. resulted because the federal government ran large budget deficits during the 1930s.
d. was surprising because Keynesians believed that lower interest rates would direct the economy to full employment.

answer

resulted because the federal government ran large budget deficits during the 1930s.

question

If fiscal policy is going to exert a stabilizing impact on the economy, it must be
a. timed correctly.
b. instituted by the Federal Reserve system.
c. expansionary during an economic boom but restrictive during a recession.
d. passed by a three-fifths majority in Congress.

answer

timed correctly.

question

The Keynesian model provided an explanation for
a. the high inflation rates of the 1930s.
b. the prolonged unemployment of the 1930s.
c. the high unemployment rates of the 1970s.
d. the double-digit inflation rates of the 1970s.

answer

the prolonged unemployment of the 1930s.

question

The multiplier effect refers to the fact that a change in spending (aggregate demand) will

a. increase the money supply.
b. cause nominal output to rise by some multiple of the initial increase in spending.
c. reduce prices by some multiple of the increase in spending.
d. cause prices to rise by some multiple of the initial increase in spending.

answer

cause nominal output to rise by some multiple of the initial increase in spending.

question

Keynesian economists believed that the prolonged unemployment of the 1930s was the result of

a. the double-digit inflation of the 1930s.
b. the sharp reduction in the supply of money during 1929-1933 and another monetary contraction in 1938.
c. the high interest rates of the 1930s.
d. insufficient aggregate demand and the failure of market forces to direct the economy back to full employment.

answer

insufficient aggregate demand and the failure of market forces to direct the economy back to full employment.

question

The expenditure multiplier indicates that

a. the marginal propensity to consume is greater than one.
b. changes in investment, government, or consumption spending can trigger much larger changes in output.
c. a market economy will be more stable than classical economists thought.
d. an increase in saving will cause output to rise by a multiple of the additional saving.

answer

changes in investment, government, or consumption spending can trigger much larger changes in output.

question

The Great Depression provided support for Keynes' view that

government action was necessary to ensure interest rates remained at the equilibrium level.
b. prolonged periods of unemployment would be present when demand is deficient.
c. lower interest rates would quickly restore the full employment equilibrium of an economy.
d. falling resource prices would bring the economy out of a recession.

answer

prolonged periods of unemployment would be present when demand is deficient.

question

A major advantage of built-in or automatic stabilizers is that they

a. automatically produce surpluses during recessions and deficits during inflation.
b. require discretionary actions on the part of Congress before they exert an impact on output and employment.
c. guarantee the federal budget will be balanced over the course of the business cycle.
d. require no Congressional action to be effective.

answer

require discretionary actions on the part of Congress before they exert an impact on output and employment.

question

Prior to the time of John Maynard Keynes, most economists stressed that

a. market adjustments would automatically direct an economy to full employment within a relatively brief period of time.
b. low levels of aggregate demand would lead to prolonged periods of unemployment.
c. budget deficits and surpluses were necessary for the control of economic fluctuations.
d. market economies were inherently unstable because of fluctuating aggregate demand.

answer

market adjustments would automatically direct an economy to full employment within a relatively brief period of time.

question

The 1930s were a period of

a. depressed economic conditions and prolonged high rates of unemployment.
b. high rates of inflation coupled with a low rate of unemployment.
c. strong growth of real output even though the general level of prices was declining.
d. strong economic expansion and rapid growth of real output.

answer

depressed economic conditions and prolonged high rates of unemployment.

question

In the Keynesian view, equilibrium takes place when

a. the level of total spending in the economy is equal to current output.
b. the real and nominal interest rates are equal.
c. current output is equal to the economy's long-run potential.
d. the money supply is growing at a constant rate.

answer

the level of total spending in the economy is equal to current output.

question

Which of the following would a Keynesian economist be most likely to stress?

a. A dollar saved is a dollar earned; a high rate of saving is the key to prosperity.
b. You cannot spend your way out of a recession.
c. Businesses will not produce goods and services if they do not think people will buy them.
d. When the unemployment rate is high, wage rates will fall.
e. Supply creates its own demand.

answer

Businesses will not produce goods and services if they do not think people will buy them.

question

When aggregate demand exceeds current output, Keynesian analysis indicates that

a. unplanned inventory accumulation will cause output to fall
b. unplanned inventory reductions will cause output to rise.
c. unplanned inventory reductions will cause output to fall.
d. unplanned inventory accumulation will cause output to rise.

answer

unplanned inventory reductions will cause output to rise.

question

Unemployment compensation payments

a. rise during economic expansion and thereby help stimulate consumption.
b. rise during a recession and thereby retard consumption.
c. rise during a recession and thereby help stimulate consumption.
d. rise during economic expansion and thereby retard consumption.

answer

rise during a recession and thereby help stimulate consumption.

question

If Congress votes to increase government purchases and at the same time decrease personal income taxes, they

a. are trying to achieve a federal budget surplus.
b. have voted for the proper policy to counteract inflation and an economic boom.
c. have voted for the proper policy to counteract a recession.
d. have decided to balance the federal budget.

answer

have voted for the proper policy to counteract a recession.

question

Rather than seeking to balance the budget, Keynesian economists argue that the government's tax and spending policies should be determined by the

a. size and quality of the labor force.
b. need to expand or contract the supply of money.
c. demand for government-provided public goods.
d. level of aggregate demand required to achieve full employment of resources.

answer

level of aggregate demand required to achieve full employment of resources.

question

The prevailing budget philosophy prior to Keynes called for a balanced budget. Keynes argued that the government should not balance its budget but instead have budget deficits during

a. economic recessions.
b. during periods of peace but surpluses during periods of war.
c. periods of inflation.
d. economic booms.

answer

economic recessions

question

When the federal government is running a budget deficit,

a. government expenditures exceed government revenues.
b. government revenues exceed government expenditures.
c. the economy must be in an economic recession.
d. the size of the national debt will decline.

answer

government expenditures exceed government revenues.

question

The larger the marginal propensity to consume,

a. the larger the multiplier.
b. the smaller the change in income derived from a given change in government spending.
c. the higher the income level of the economy.
d. the larger the marginal propensity to save.

answer

the larger the multiplier.

question

When an economy is operating well below its full-employment capacity and the marginal propensity to consume is 3/4, a $10 billion increase in investment will cause the equilibrium income to rise by

a. $5 billion.
b. $20 billion.
c. $40 billion.
d. $10 billion.

answer

$40 billion.

question

Within the Keynesian model, if the marginal propensity to consume is 0.8, which of the following is true?

a. When investment increases by $1, saving increases by $5.
b. When investment increases by $1, income increases by $5.
c. When consumption increases by $1, saving increases by $5.
d. When consumption increases by $5, income increases by $1.

answer

When investment increases by $1, income increases by $5.

question

Federal budget deficits generally grow during recessions because

a. tax revenues decrease while transfer payments increase.
b. both tax revenues and transfer payments increase.
c. both tax revenues and transfer payments decrease.
d. tax revenues increase while transfer payments decrease.
e. tax revenues decrease but transfer payments are unchanged.

answer

tax revenues decrease while transfer payments increase.

question

As the marginal propensity to consume (MPC) decreases, the spending multiplier

a. increases.
b. becomes indefinable.
c. decreases.
d. remains constant.

answer

decreases.

question

A balanced budget is present when

a. the economy is at full employment.
b. public sector spending equals private sector spending.
c. the actual level of aggregate spending equals the planned level of spending.
d. government revenues equal government expenditures.

answer

the economy is at full employment.

question

The Keynesian analysis of fiscal policy implies that

a. fiscal policy should generally be restrictive except during inflationary booms.
b. the federal budget should be balanced annually except during war.
c. the federal budget should be used to maintain aggregate demand at a level consistent with full employment.
d. fiscal policy should generally be expansionary except during periods of economic recession.

answer

the federal budget should be used to maintain aggregate demand at a level consistent with full employment.

1 of 50

question

answer

Aggregate quantity demanded is equal to potential output.

question

answer

The value of 500 shares of stock owned by the Hernandez family increases sharply.

question

answer

a decrease in the capital stock

question

answer

increase output and decrease prices.

question

If a currency appreciates, a country's net exports

a. fall and AD increases.
b. fall and AD decreases.
c. rise and AD increases.
d. rise and AD decreases.

answer

fall and AD decreases.

question

answer

long-run aggregate supply.

question

answer

catches most people by surprise.

question

answer

a decrease in the expected rate of inflation

question

When the U.S. dollar appreciates,

a. aggregate demand shifts leftward.
b. aggregate demand shifts rightward.
c. U.S. exports rise.
d. U.S. imports decline.

answer

aggregate demand shifts leftward.

question

answer

only short-run aggregate supply

question

answer

an improvement in technology that substantially reduces the cost of generating energy

question

answer

reductions in real interest rates and real resource prices

question

answer

a reduction in aggregate demand and a contraction in real output

question

answer

rapid growth of real income in Canada and Western Europe

question

answer

sharp increase in the value of stocks owned by Americans

question

answer

increase long-run aggregate supply.

question

answer

reduce U.S. net exports and reduce aggregate demand.

question

answer

an increase in the general level of prices

question

Over the last 60 years, the average annual growth of real GDP in the United States has been approximately

a. 3 percent.
b. 9 percent.
c. 1 percent.
d. 5 percent.

answer

3 percent.

question

answer

decrease in aggregate demand.

question

answer

an increase in wealth due to a substantial appreciation in the value of stocks

question

answer

fell sharply; fell sharply

question

answer

supply shock that will increase short-run aggregate supply.

question

answer

powerful trade unions and large corporations made wages highly inflexible.

question

The primary tool of fiscal policy is

a. the stock market.
b. the federal budget.
c. regulation of the bond market.
d. the money supply.

answer

the federal budget.

question

answer

resulted because the federal government ran large budget deficits during the 1930s.

question

answer

timed correctly.

question

answer

the prolonged unemployment of the 1930s.

question

answer

cause nominal output to rise by some multiple of the initial increase in spending.

question

answer

insufficient aggregate demand and the failure of market forces to direct the economy back to full employment.

question

answer

changes in investment, government, or consumption spending can trigger much larger changes in output.

question

answer

prolonged periods of unemployment would be present when demand is deficient.

question

answer

require discretionary actions on the part of Congress before they exert an impact on output and employment.

question

answer

market adjustments would automatically direct an economy to full employment within a relatively brief period of time.

question

answer

depressed economic conditions and prolonged high rates of unemployment.

question

answer

the level of total spending in the economy is equal to current output.

question

answer

Businesses will not produce goods and services if they do not think people will buy them.

question

answer

unplanned inventory reductions will cause output to rise.

question

answer

rise during a recession and thereby help stimulate consumption.

question

answer

have voted for the proper policy to counteract a recession.

question

answer

level of aggregate demand required to achieve full employment of resources.

question

answer

economic recessions

question

answer

government expenditures exceed government revenues.

question

answer

the larger the multiplier.

question

answer

$40 billion.

question

answer

When investment increases by $1, income increases by $5.

question

answer

tax revenues decrease while transfer payments increase.

question

As the marginal propensity to consume (MPC) decreases, the spending multiplier

a. increases.
b. becomes indefinable.
c. decreases.
d. remains constant.

answer

decreases.

question

answer

the economy is at full employment.

question

answer

the federal budget should be used to maintain aggregate demand at a level consistent with full employment.

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