1. The decline in home prices during the 2006-07 housing bust eliminated a large fraction of many households' home equity. The most likely outcome of this large decrease in the value of households' assets is:

a. a rightward shift in the aggregate supply curve

b. a rightward shift in the aggregate demand curve

c. a leftward shift in the aggregate supply curve

d. a leftward shift in the aggregate demand curve

2.Suppose a small economy has had an inflation rate of 25% for many years. Suppose that the country's central bank undertakes a public relations campaign to convince people that a new monetary policy will reduce inflation to 12.5%. If citizens of the country believe their central bank and adjust their inflation expectations downwards, then which of the following happens?

a. The short-run Phillips curve shifts down

b. The short-run Phillips curve shifts up

c. The economy moves to the right along the short-run Phillips curve

d. The short-run Phillips curve gets steeper

3. If both the quantity of aggregate output and the aggregate price level increase:

a. Nominal GDP will increase more than real GDP

b. Real GDP and nominal GDP will both increase more than the price level

c. Real GDP will increase more than nominal GDP

d. It makes no difference to real or nominal GDP

4. When an economy goes into recession, firms decrease output before they start laying off workers. When the economy starts to recover, firms increase output before they start rehiring workers.This behavior makes labor productivity

a. remain constant when recession starts and then rise when recovery starts.

b. rise when recession starts and fall when recovery starts.

c. fall when recession starts and rise when recovery starts.

d. rise when recession starts and rise faster when recovery starts.

5. Investment in automation and software has doubled the output per U.S. manufacturing worker over the past two decades.This increase in productivity will cause:

a. an increase in the aggregate supply, that leads to an increase in the aggregate price level and an increase in GDP

b. an increase in the aggregate demand, that leads to an increase in the aggregate price level and an increase in real GDP

c. an increase in the aggregate supply, that leads to a decrease in the aggregate price level and an increase in real GDP

d. a decrease in the aggregate demand, that leads to an increase in the aggregate price level and an increase in GDP

6. In March 2016 American employers added 215,000 positions to their payrolls, bringing the average job increase for the year to more than 200,000 per month. At the same time, though, the official U-3 unemployment rate actually went up, from 4.9% to 5.0%.What is a likely explanation?

a. The labor force has decreased

b. "Discouraged workers" re-entered the labor force

c. The number of people working part-time has increased

d. The number of volunteering positions in the U.S. economy has decreased

7. On June 29, 2020, a Seattle Times article entitled "New data shows how Seattle residents spent their stimulus checks" reported the following about the $1200 CARES Act checks:

"There is, unsurprisingly, a very large discrepancy between the way lower-income individuals in Seattle have spent their stimulus money compared with those with higher incomes. For folks who live in a household with an income of less than $50,000, nearly all (91%) have put the money directly toward their expenses. But for those with a six-figure income, only 54% used the money for expenses. These more affluent recipients were much more likely to put the money into savings..."

These observations suggest that

a. The MPC for high income households is lower than the MPC for low income households.

b. The consumption function for high income households has a lower intercept than the consumption function for low income households.

c. The MPC for high income households is higher than the MPC for low income households.

d. Low income households have more precautionary savings than high income households.

8. "Gross domestic product of Romeria fell 0.3% in the fourth quarter of 2011... with the latest survey data suggesting the economy will contract again in the first quarter of 2012... The new downturn followed seven quarters of weak growth after the country's 2008-09 recession."Based on the popular definition of recession, at the moment of writing, the economy of Romeria

a. had been in recession continuously since 2008

b. was most likely in recession already, but we can't tell for sure until data on GDP growth for the 1st quarter of 2012 is reported

c. was in recession during the second half of 2011

d. would have been in recession only if GDP continued to contract through all of 2012

9.The Great Recession has officially ended in June 2009, according to the NBER Business Cycle Dating Committee. However, the unemployment rate peaked only in October 2009.This could be interpreted as follows:

a. The NBER committee likely announced the end of the recession too early

b. There was something unusual about this recent business cycle if unemployment rose after the recession ended

c. This rise in the unemployment rate was most likely a result of workers becoming discouraged and dropping out of the labor force

d. It is normal for unemployment to continue rising even after the recession is "officially" over

10.In term structure theory, the liquidity premium

a. reflects the risk of default

b. assumes that bonds of different maturities are perfect substitutes in terms of risk

c. indicates that today's long-term interest rate equals the average of short-term interest rates that people expect to occur over the life of the long-term bond

d. suggests that risk-averse investors prefer short-term over long-term assets, which is why the yield curve is typically upward-sloping

11.In the long-run, a country's government debt is considered sustainable if

a. the rate of GDP growth is lower than the interest rate on the debt

b. the debt/GDP ratio is constant or falling

c. the debt/GDP ratio is rising

d. the balanced budget multiplier equals 1