A..

The short-run aggregate supply curve may shift to the left if:

a inflationary expectations increase. b productivity increases. c government spending increases. d personal income taxes decrease. e commodity prices fall. Question

11 (1 point) Which of the following would cause the aggregate demand in Pinkertonville to decrease?

a Firms in Pinkertonville are more optimistic about future profits. b Interest rates in Pinkertonville are falling. c Government spending in Pinkertonville is rising. d Net exports to Fieldsville are decreasing. e Personal income tax rates are falling in Pinkertonville.

Question 12 (1 point) According to classical economic theory, a recessionary gap will automatically adjust when the:

a aggregate demand gradually increases due to higher taxation. b aggregate demand gradually decreases due to higher taxation. c short-run aggregate supply gradually increases due to increasing wages and resources prices. d long-run aggregate supply gradually increases due to declining productivity. e short-run aggregate supply gradually increases due to falling wages and resource prices.

Question 13 (1 point) The economy is currently in long-run equilibrium. Covid-19 causes consumer expectations to decline. In the long-run, we will expect:

a a short-run decrease in the unemployment rate and an increase in the price level. b a rightward shift in the long-run aggregate supply curve. c a return to full employment at a lower price level. d a decrease in nominal wages and an increase in potential GDP. e a short-run increase in both the unemployment rate and the price level.

Question 14 (1 point) Assume that current real GDP is above potential GDP. How would the self-correcting mechanism move the economy to its potential long-run equilibrium?

a The short-run aggregate supply curve shifts to the right as nominal wages remain unchanged. b The short-run aggregate supply curve shifts to the left as a result of increasing nominal wages. c The short-run aggregate supply curve shifts left as a result of decreasing nominal wages. d The short-run aggregate supply curve shifts right as a result of decreasing nominal wages. e The short-run aggregate supply curve shifts to the right as a result of increasing nominal wages.

Question 15 (1 point) If the cost of a market basket is $200 in Year 1 and $250 in Year 2, the price index for Year 2 with a Year 1 base is: a 125 b 200 c 115 d 130 e 100

Question 16 (1 point) Suppose you have a population of 170. You have 95 people that are employed, 5 are unemployed and looking for work, 3 are discouraged workers, and 30 people are retired. Based on this information, what is the unemployment rate?

a 5.0% b 10% c 5.3% d 4.8% e 2.9%

Question 17 (1 point) Pinkertonville has a population of 20,000 people. Of this population, 2,000 people are full-time students and not looking for work, 4,000 people are discouraged workers. There are currently 1,400 people that are unemployed, but actively looking for a job, and 5,000 people work part-time. The remaining people are considered fully employed. Based on this scenario, what is the unemployment rate in Pinkertonville? a 10% b 2% c 7.14% d 4.25% e 11.11%

Question 18 (1 point) An upward sloping, short-run aggregate supply is best described as a the level of real GDP that will be purchased at each possible price level. b the relationship between outputs and inputs. c the level of real GDP that will be produced at each possible price level. d the amount consumers plan to spend on output. e the trade-off between inflation and unemployment.

Question 19 (1 point) An economy can experience both high inflation and high unemployment, simultaneously, when a government spending increases while taxes remain unchanged. b negative supply shocks lead to an increase in commodity prices. c taxes increase while spending remains unchanged. d expectations of inflation decrease. e teenagers stay out of the labor force.

Question 20 (1 point) Suppose investment spending increases by $50 billion, and as a result real GDP increases by $300 billion. The multiplier is: a 6. b 4. c 10. d 3. e 1/4.

Question 21 (1 point) Suppose that the economy of Greenland is in equilibrium price of P1 and equilibrium output is Y1. If Congress uses fiscal policy which action would be most appropriate: a increase interest rates. b increase personal income taxes. c increase government spending on national defense. d increase transfer payments to retired persons. e increase subsidies for research and investment.

Question 22 (1 point) Apple Computers increases their capital business inventories. In the long-run, this increase in business inventories will cause the a long-run aggregate supply curve to shift rightward. b aggregate demand curve to shift leftward. c consumption function to shift down. d Phillips curve to shift out. e production possibilities curve to shift in.

Question 23 (1 point) Over the last year, Mr. Green has worked hard and his employer has taken notice, giving him a 6% raise in his salary. During this last year, overall prices in the economy have decreased by 4%. Given this information, Mr. Green's real wage has: a increased by 10% b increased by 6% c increased by 2% d stayed constant e decreased by 4%

Question 24 (1 point) In the United States, a $500 decrease in government spending typically causes Gross Domestic Product to fall by $5000. The spending multiplier in the United States is equal to: a 10 b 5 c .90 d .10 e 100

Question 25 (1 point) If the MPS = 0.1, then the value of the multiplier equals ___ and an increase of $500 in consumption spending will cause real gross domestic product to increase by _____. a 100; $5,000. b 1; $500. c 10; $5,000. d 1; $5,000. e 10; $500.

Question 26 (1 point) a Option A b Option B c Option C d Option D

Question 27 (1 point) If the marginal propensity to save is 0.3 and consumers receive $100, they will save ___ and spend ____: a $60; $40 b $70; $30. c $0.30; $0.70. d $50; $50 e $30; $70.

Question 28 (1 point) Congress reduces income taxes from 15% to 10% and at the same time increases government spending. What will happen to consumption and employment in the short-run? Consumption / Employment A. Decrease / Decrease B. Increase / Increase C. Decrease / Increase D. Increase / Decrease E. Increase / No Change a Option A b Option B c Option C d Option D e Option E

Question 29 (1 point) Suppose that this economy is in equilibrium at E2. If there is a decrease in disposable income, then: a AD1 will shift to the right, causing an increase in the price level and an increase in real GDP. b AD2 will shift to the left, causing an increase in the price level and a decrease in real GDP. c AD2 will shift to the left, causing a decrease in the price level and an increase in the real GDP. d AD1 will shift to the right, causing a decrease in the price level and an increase in real GDP. e AD2 will shift to the left, causing a decrease in the price level and a decrease in the real GDP.

Question 30 (1 point) Due to low interest rates, the US government begins to borrow money and spend on research and development. What is the most likely impact on the aggregate supply curve, the long-run aggregate supply curve, and the PPC? Aggregate Supply / Long-Run Aggregate Supply / PPC A. Decrease / No Change / No Change B. Decrease / Decrease / Shift Inwawrd C. Increase / Increase / Shift Outward D. Increase / No Change / Shift Inward E. Increase / Increase / No Change a Option A b Option B c Option C d Option D e Option E

Question 31 (1 point) Suppose the government increases its spending by $100 billion as a stimulus package. If the MPC is 0.5, then real GDP will: a decrease by $250 billion. b increase by $250 billion. c decrease by $200 billion. d increase by $200 billion. e increase by $600 billion.

Question 32 (1 point) Suppose Congress wants to move the United States out of a recession and towards full employment. Which of the following policies will shift the aggregate demand curve to the right? a The central bank decreases the money supply in the economy. b The government decreases its level of taxation in the economy. c The government decreases its level of transfer payments to households. d The government increases transfer payments to households. e The government increases its level of taxing on businesses.

Exercise 2.

1)

Nickel or Gold are examples of which 'Factor of Production'?

Select one:

a. Labour

b. Capital

c. Land

d. Enterprise

2)

What will cause the demand for a normal product to decrease?

Select one:

A. An increase in the price of a substitute product.

B. An increase in the price of a complementary product.

C. An increase in the size of the population.

D. The expectation by consumers that future prices will be higher.

E. An increase in income levels.

3)

How are exports and imports treated when determining GDP?

Select one:

A. Both exports and imports are added.

B. Only exports are considered.

C. Exports are subtracted, but imports are added.

D. Both exports and imports are subtracted.

E. Exports are added, but imports are subtracted.

4)

What can be concluded if depreciation is greater than gross investment?

Select one:

A. That net investment is positive.

B. That real GDP is rising but nominal GDP is remaining the same.

C. That net investment is negative.

D. That nominal GDP is rising but real GDP is remaining the same.

E. That the economy is expanding.

5)

Which of the following is false of frictional unemployment?

Select one:

A. It often involves people seeking "the right job" rather than "just a job."

B. It can be eliminated.

C. It is an inevitable part of a market economy.

D. It is a result of the time needed to match people seeking employment with job vacancies.

6)

Suppose there are 2 million unemployed workers seeking jobs. After a period of time, two hundred thousand of them become discouraged over their job prospects and stop looking for work. What will the effect of this on the unemployment rate?

Select one:

A. It will be unchanged.

B. It will increase.

C. It will fall.

D. It will increase in the short run but would eventually decline.

E. The question cannot be answered from this information.

7)

What does it mean to say that the economy is in a contractionary phase of the business cycle?

Select one:

A. That inflation is declining.

B. That the rate of growth of Real GDP is positive.

C. That the rate of growth of Real GDP is falling.

D. That Real GDP is increasing

E. That Real GDP is declining.

8)

"The aggregate quantity of goods and services produced by all sellers at various prices". Of what is this a definition?

Select one:

A. Potential GDP.

B. Aggregate expenditure.

C. Aggregate supply.

D. Aggregate demand.

9)

Which of the following will cause the aggregate demand curve to shift to the right?

Select one:

A. A decrease in the incomes of our major trading partners.

B. The discovery of new oil fields.

C. An increase in the exchange rate.

D. A decrease in the money supply.

E. A decrease in the interest rate.

10)

What economic term is described as the value of the next-best option that is given up when making a choice?

Select one:

a. Opportunity Cost

b. Scarcity

c. Law of Increasing Costs

d. Production Possibilities

e. Factors of Production

11)

Which of the following best describes a Command Economy (Communism)?

Select one:

a. Families decide to produce the goods and services that they need

b. A small group of leaders decide what the entire economy needs

c. Individuals make independent production decisions

d. A mix of different economic systems are used for production decisions

12)

Which of the following best describes a 'Competition Economy' (Capitalism)?

Select one:

a. Families decide to produce the goods and services that they need

b. A small group of leaders decide what the entire economy needs

c. Individuals make independent production decisions

d. A mix of different economic systems are used for production decisions

13)

Which of the following is NOT a normative statement?

Select one:

a. The taxes on cigarettes are way too high

b. Lowering the tax on cigarettes would decrease the price at stores

c. It is wrong for the government to tax cigarettes

d. The Ford government is trying to mislead people about the taxes on cigarettes.

C. Calculate the following.o

11.2. A monopolist faces a market demand curve given by Q = 3'0 P. The monopolist's marginal revenue function is given by MR 2 2m 2Q. a. If the monopolist can produce at constant average and marginal costs of AC = MC 2 6, what out put level will the monopolist choose in order to maxi- mize prots? What is the price at this output level? 'What are the monopolist's prots? b. Assume instead that the monopolist has a cost structure where total costs are described by TC = 0.25:? SQ + 300 and marginal cost is given by MC = 0.5Q 5. With the monopolist facing the same market demand and marginal revenue, what pricequantity combination will be chosen HOW to maximize prots? What will prots be? c. Assume now that a third cost structure explains the monopolist's position, with total costs given by 1] TC: c.0103 Q2 +45Q+1o and marginal costs given by MC = 0.03632 2Q + 45. Again, calculate the monopolist's price-quantity combination that maximizes prots. What will prots be? (Hint: set MC 2 MR as usual and use the quadratic formula or simple factoring to solve the equation for Q.) (1. Graph the market demand curve, the MR curve, and the three marginal cost curves from part a, part b, and part c. Notice that the monopolist's prot-making ability is constrained by (1} the mar- ket demand curve it faces (along 1vvith its associated MR curve), and (2} the cost structure underlying its