Economics Test 11/2 – Flashcards
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Under which of the following conditions would consumer spending increase?
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consumers wealth is increased by changes in the stock market
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An increase in which of the following will increase AD?
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Government spending
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A change in which of the following will cause the short-run AS curve to shift?
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III only
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In an economy with a horizontal AS curve, an increase in government spending will cause output and PL to change in which ways?
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Increase...No change
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The AD curve is downward sloping because as the PL increases the
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purchasing power of wealth decreases
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Which of the following events will most likely cause an increase in both the price level and real gross domestic product?
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Exports increase
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If an economy's AS curve is upward sloping an increase in government spending will most likely result in a decrease in the
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unemployment rate
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An increase in which of the following will lead to lower inflation and lower unemployment
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Labor productivity (would lead to an increase in AS, lowering PL & unemployment)
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An unanticipated decrease in AD when the economy is in equilibrium will result in
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an increase in unplanned inventories
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Which of the following would be true if the actual rate of inflation were less than the expected rate of inflation
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People would borrow funds at the nominal interest rate during this time period would lose
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A contractionary supply shock would most likely result in
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a decrease in employment
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If the economy is operating in the intermediate range of the AS curve and if AD increases due to an increase in net exports, then the price level, output, & the unemployment rate are most likely to change in which of the following ways?
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Increase...increase....decrease
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The short-run AS curve is likely to shift to the left when there is an increase in
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the cost of productive resources
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Which of the following best explains how an economy could simultaneously experience high inflation and high unemployment?
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Negative supply shocks cause factor prices to increase
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The intersection of the AS & the AD curve occurs at the economy's equilibrium level of
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real domestic output (GDP) and the price level
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Which of the following would cause a rightward shift of the AS curve?
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an across-the-board reduction of wages in the manufacturing sector
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Which changes in the AD & AS curves is likely to result in stag inflation?
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The AS curve shifts to the left
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Which argument is typically associated with classical economists?
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A market economy is self correcting and thus will not remain in a recession indefinitely
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An important assumption in Kaynesian theory is that
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prices are inflexible [rigid] downward & decreases in AD will lead to an increase in unemployment
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What would be the effect of a large increase in labor productivity on the real GDP and the price level?
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Increase.. Decrease
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Which of the following is true about supply shocks?
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It could lead to a lower price level
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Suppose that from 2003 to 2004, unemployment fell from 7.2 to 7.0% and inflation fell from 3.8 to 1.1%. An explanation of these changes might be that the
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Macroeconomic equilibrium can occur at less than full employment
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According to Keynesian theory, the most important determinant of saving and consumption is the
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level of income
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An inflationary gap could be reduced by
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an increase in the income tax rate
