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Macroeconomics Principles Applications and Tools

Business

Quiz 15 :

Modern Macroeconomics: From the Short Run to the Long Run

Quiz 15 :

Modern Macroeconomics: From the Short Run to the Long Run

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When the economy is producing above full employment, the unemployment rate is below the natural rate. This makes it more difficult for:
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A

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According to Say's law:
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D

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The classical aggregate supply curve is:
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A

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The aggregate demand curve shows the relationship between prices and the
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Patinkin and Modigliani argue that Keynes' argument that demand could fall below production would hold only if:
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Recall Application 1, "Avoiding a Liquidity Trap," to answer the following questions: -What was the policy adopted by the Fed in response to the looming liquidity trap?
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Rising wages and input prices:
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AN UNFORTUNATE GAMBLE What explained the decision by the Japanese government to increase taxes in the 1990s when the economy was still suffering from a recession? The Japanese government sharply increased taxes on consumption in 1997—just as Japan was in the midst of its prolonged recession. Why did the government do this? The reasons were clear. As the economy slumped, fiscal deficits were increasing, as taxes fell and government spending rose. Policy makers understood that their society was aging rapidly and that this would mean even more demands on the public sector in the near future. They became convinced that the current fiscal deficits plus the inevitable future demands on the government would lead to long-run increases in government spending. To avoid crowding out of investment in the future, they decided to tax consumption in order to reduce it. Their goal was to match the increases in government spending with decreases in consumption spending and therefore not experience crowding out of investment. Although policy makers were right to consider the long-run consequences of increases in government spending, they made the unfortunate gamble that the short-run effects of the tax increase would not hinder the economy’s recovery. They were wrong, because the tax increase prolonged the recession. Although it is important to consider the long-run consequences of policy, it is important to understand the short-run consequences as well. -According to the application, what was the reason why the Japanese government increased consumption taxes in the 1990s?
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Say's Law states that:
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The process by which changes in wages and prices causing further changes in wages and prices is called:
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Which of the following curves is drawn as a vertical line?
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The reduction in investment spending in the long run results from an increase in government expenditures because:
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Classical economists believed that:
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The view that the labor market quickly adjusts to reach equilibrium is consistent with the assumption of _______ aggregate supply curve.
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Assuming that the economy is in the long run equilibrium at full employment, an expansionary monetary policy _______ the price level and _______ output.
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Those who believe that wages adjust quickly to clear the labor market also believe that:
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img Figure 15.2 -Refer to Figure 15.2. For this economy to produce Y1 and sustain that level of output without inflation:
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Which of the following sequence of events occurs in response to an expansionary fiscal policy?
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If left alone, the boom experienced by an economy will cause the short- run
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Monetary neutrality:
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