1 If Michael spends $53 50 on 1 pizza in 2020 and $50 00 on 1 pizza in 2019, then the growth rate of inflation between 2019 and 2020 is a 5 percent b 6 percent c 7 percent d 8 percent 2 A change in consumption (C) can cause a no change b the aggregate supply curve to shift to the left c the aggregate supply curve to shift to the right d the aggregate demand curve to shift to the right or left 3 Assume a machine which has a useful life of only one year costs $2,000 Assume, also, that net of such operating costs as power, taxes, and so forth, the additional revenue from the output of this machine is expected to be $2,300 The expected rate of return on this machine is a 7 5 percent b 10 percent c 15 percent d 20 percent 4 The real wealth effect indicates that a an increase in the price level will increase the demand for money, increase interest rates, and reduce consumption and investment spending b a lower price level will decrease the real value of many financial assets and therefore reduce spending c a higher price level will increase the real value of many financial assets and therefore increase spending d a higher price level will decrease the real value of many financial assets and therefore reduce spending 5 What is meant by cyclical unemployment a Unemployment that is caused by the fact that it takes time for people to find their first job or to move between jobs b Unemployment which results from structural changes in an economy's industries c Unemployment that occurs as a result of the recessionary phase of the business cycle d Unemployment that occurs because people do not think that there are any jobs available 6 Cost push inflation could be explained by a an increase in the level of consumer spending b a decrease in wage rates c a decline in per unit production costs d an increase in the per unit production cost 7 If a $500 billion increase in investment spending increases income by $500 billion in the first round of the multiplier process and by $450 in the second round, income will eventually increase by a $2500 billion b $3000 billion c $4000 billion d $5000 billion 8 Suppose that the slope of the consumption schedule is 0 90 The MPC is a 0 45 b 0 20 c 0 50 d 0 90 9 A rightward shift of the investment demand curve might be caused by a an increase in the price level b a decline in the real interest rate c a decline in the acquisition, maintenance and operating costs d an increase in business taxes 10 What is the real rate of interest if the nominal rate of interest is 10 and the rate of inflation is 4 a 40 b 14 c 6 d 2 5

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1. If Michael spends $53.50 on 1 pizza in 2020 and $50.00 on 1 pizza in 2019, then the growth rate of inflation between 2019

1. If Michael spends $53.50 on 1 pizza in 2020 and $50.00 on 1 pizza in 2019, then the growth rate of inflation between 2019 and 2020 is?

5 percent.

6 percent.

7 percent.

8 percent.

2. A change in consumption (C) can cause:

	a.	no change.
	b.	the aggregate supply curve to shift to the left.
	c.	the aggregate supply curve to shift to the right.
	d.	the aggregate demand curve to shift to the right or left.

3. Assume a machine which has a useful life of only one year costs $2,000. Assume, also, that net of such operating costs as power, taxes, and so forth, the additional revenue from the output of this machine is expected to be $2,300. The expected rate of return on this machine is:

7.5 percent.

10 percent.

15 percent.

20 percent.

4. The real-wealth effect indicates that:

an increase in the price level will increase the demand for money, increase interest rates, and reduce consumption and investment spending.

a lower price level will decrease the real value of many financial assets and therefore reduce spending.

a higher price level will increase the real value of many financial assets and therefore increase spending.

a higher price level will decrease the real value of many financial assets and therefore reduce spending.

5. What is meant by cyclical unemployment?

	a.	Unemployment that is caused by the fact that it takes time for people to find their first job or to move between jobs.
	b.	Unemployment which results from structural changes in an economy's industries.
	c.	Unemployment that occurs as a result of the recessionary phase of the business cycle.
	d.	Unemployment that occurs because people do not think that there are any jobs available.

6. Cost-push inflation could be explained by:

	a.	an increase in the level of consumer spending.
	b.	a decrease in wage rates.
	c.	a decline in per-unit production costs.
	d.	an increase in the per-unit production cost.

7. If a $500 billion increase in investment spending increases income by $500 billion in the first round of the multiplier process and by $450 in the second round, income will eventually increase by:

$2500 billion.

$3000 billion.

$4000 billion.

$5000 billion.

8. Suppose that the slope of the consumption schedule is 0.90. The MPC is:

0.45

0.20

0.50

0.90

9. A rightward shift of the investment-demand curve might be caused by:

	a.	an increase in the price level.
	b.	a decline in the real interest rate.
	c.	a decline in the acquisition, maintenance and operating costs.
	d.	an increase in business taxes.