Macroeconomics Quiz

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Question 1 of 40

2.5 Points

The marginal __________ is the fraction of a change in real GDP that is paid in income tax.

A. tax rate

B. income

C. GDP

D. tax revenue

Question 2 of 40

2.5 Points

When the Federal Reserve changes the quantity of money and the interest rate, it influences aggregate demand by using __________.

A. the world economy
B. consumer expectations
C. monetary policy
D. fiscal policy

Question 3 of 40

2.5 Points

The __________ is the amount by which a change in autonomous expenditures is multiplied in order to determine the change in equilibrium expenditure that it generates.

A. marginal tax rate
B. marginal multiplier
C. expenditure reducer
D. expenditure multiplier

Question 4 of 40

2.5 Points

What is the total amount of final goods and service that firms in a country plan to produce, depending on the labor, capital, technology, natural resources, and entrepreneurial talent in the market?

A. the supply-demand model
B. the quantity of real gross domestic product (GDP. supplied
C. the quantity of potential GDP
D. the quantity of real GDP demanded

Question 5 of 40

2.5 Points

When the price level increases, the real interest rate __________.

A. is not affected
B. falls
C. rises
D. will rise or fall depending on demand

Question 6 of 40

2.5 Points

If home prices are falling, consumers purchasing a home will find their purchasing power of money has increased. This benefit to consumers is called the __________.

A. inflation effect

B. wealth effect

C. home equity effect

D. multiplier effect

Question 7 of 40

2.5 Points

When the real GDP increases, disposable income and consumption expenditure __________.

A. do not change
B. become inverted
C. decrease
D. increase

Question 8 of 40

2.5 Points

The __________ curve summarizes the relationship between aggregate planned expenditure and the real GDP.

A. AES
B. AE
C. AD
D. APE

Question 9 of 40

2.5 Points

When governments change taxes, their transfer payments, and expenditure on goods and service, they influence aggregate demand through __________.

A. the world economy
B. consumer expectations
C. monetary policy
D. fiscal policy
Question 10 of 40	2.5 Points

Which of the following would cause an increase in aggregate demand in the short run?

A. an increase in the supply of money
B. a decrease in the price level
C. an increase in taxes
D. a crop failure

Question 11 of 40

2.5 Points

To determine the equilibrium price level and equilibrium level of real GDP, the aggregate demand and aggregate supply must __________.

A. be considered separately
B. intersect
C. be disregarded
D. be considered as a multiplier

Question 12 of 40

2.5 Points

Aggregate __________ is the sum of planned consumption expenditure, investment, government expenditure on goods and services, and exports minus imports.

A. planned expenditure
B. supply
C. demand
D. expenditure schedule
Question 13 of 40	2.5 Points

Adjustments in __________ take the economy from the short-run equilibrium to the long-run equilibrium.

A. imports and exports
B. interest rates
C. wages and prices
D. the multiplier

Question 14 of 40

2.5 Points

All other things remaining the same, the lower the price level, the __________ the quantity of real GDP demanded.

A. smaller
B. greater
C. more constant
D. less constant

Question 15 of 40

2.5 Points

What is the total amount of final goods and service produced in a country that people, businesses, governments, and foreigners plan to buy?

A. the supply-demand model
B. the quantity of real GDP supplied
C. the quantity of potential GDP
D. the quantity of real GDP demanded
Question 16 of 40	2.5 Points

What represents the relationship between the quantity of real GDP supplied and the price level when all other influences on production plans remain the same?

A. aggregate demand
B. aggregate supply
C. the money wage rate
D. the money price index

Question 17 of 40

2.5 Points

A rise in the price level __________ the buying power of money.

A. does not affect
B. increases
C. decreases
D. inverts

Question 18 of 40

2.5 Points

When the U.S. price level rises and other things remain the same, the prices in other countries __________.

A. rise
B. fall
C. do not change
D. will rise or fall depending on demand

Question 19 of 40

2.5 Points

__________ occurs when aggregate planned expenditure equals real GDP.

A. Price-fixing
B. Stable economic leveling
C. Unplanned inventory change
D. Equilibrium expenditure

Question 20 of 40

2.5 Points

Why does the quantity of real GDP supplied change when the price level changes?

A. movement along the AS curve brings a change in the price of resources
B. movement along the AS curve brings a change in the potential GDP
C. movement along the AS curve brings a change in the GDP price index
D. movement along the AS curve brings a change in the real wage rate

Question 21 of 40

2.5 Points

What policy action by the Fed describes an unexpected rise in interest rates and deceleration in money growth in order to slow inflation at the cost of recession?

A. rational reduction
B. surprise inflation reduction
C. credible announced inflation reduction
D. statistical model of reduction

Question 22 of 40

2.5 Points

Say’s law from a classical economic perspective __________.

A. states that supply creates its own demand
B. explains the classical idea that the value of GDP will equal the demand for goods and services
C. supports economists belief that neither surplus nor shortage would ever exist when production and demand are equal for goods and services
D. all of the above

Question 23 of 40

2.5 Points

Classical economics refers to a body of work initially developed by __________.

A. Keynes
B. Malthus
C. Say
D. Smith

Question 24 of 40

2.5 Points

The short-run Phillips curve is another way at looking at the __________.

A. equilibrium expenditure
B. AD curve
C. aggregate supply (AS. curve
D. potential GDP
Question 25 of 40	2.5 Points

The Federal Reserve can use monetary policy to __________.

A. change output in the long run, but not the short run
B. change output in the short run, but not the long run
C. change output in both the short run and the long run
D. Monetary policy has no effect on output

Question 26 of 40

2.5 Points

To lower the expected inflation rate, the Fed must take actions that will __________ the actual inflation rate.

A. decelerate
B. accelerate
C. increase
D. decrease

Question 27 of 40

2.5 Points

A necessary condition for the classical model to work is that __________.

A. wages and prices are fully flexible
B. prices, but not wages, are fully flexible
C. wages and prices are not fully flexible
D. wages, but not prices, are fully flexible

Question 28 of 40

2.5 Points

Suppose GDP __________ the level of potential output. We would expect to see __________ unemployment, rising wages, and rising prices.

A. exceeds; high
B. exceeds; low
C. is below; high
D. is below; low

Question 29 of 40

2.5 Points

What is the proposition that when the inflation rate changes, the unemployment rate changes temporarily and then turns to the natural unemployment rate?

A. the trade-off theory
B. the natural rate hypothesis
C. Okun’s law
D. Phillip’s monetary policy

Question 30 of 40

2.5 Points

The __________ shows the relationship between inflation and unemployment when the economy is at full employment.

A. AS curve
B. short-run Phillips curve
C. long-run Phillips curve
D. AE curve
Question 31 of 40	2.5 Points

In the short run, increases in the money supply increase the level of output because __________.

A. prices and wages are sticky
B. prices and wages are flexible
C. interest rates are sticky
D. demand is fixed

Question 32 of 40

2.5 Points

What is the name for the inflation rate that people forecast and use to set the money wage rate and other money prices?

A. the equilibrium inflation rate
B. the fixed-money inflation rate
C. the potential inflation rate
D. the expected inflation rate

Question 33 of 40

2.5 Points

What is the forecast for inflation that results from the analysis of all the relevant data and economic science?

A. rational expectation
B. surprise inflation expectation
C. credible announced inflation expectation
D. statistical model of expectation

Question 34 of 40

2.5 Points

The __________ is a curve that shows the relationship between the inflation rate and the unemployment rate when the natural unemployment rate and the expected inflation rate remain constant.

A. aggregate demand (AD. curve
B. short-run Phillips curve
C. long-run Phillips curve
D. aggregate expenditure (AE. curve

Question 35 of 40

2.5 Points

The trade-off between inflation and unemployment occurs when a lower unemployment rate brings a __________.

A. lower inflation rate
B. higher inflation rate
C. lower aggregate supply
D. higher aggregate supply

Question 36 of 40

2.5 Points

The Keynesian view that demand could fall short of production is more likely to hold true if __________.

A. wages and prices are fully flexible
B. prices, but not wages, are fully flexible
C. wages and prices are not fully flexible
D. wages, but not prices, are fully flexible
Question 37 of 40	2.5 Points

What policy action by the Fed describes when people believe that the Fed will lower the inflation rate, and the expected inflation rate falls in order to slow the inflation rate without any accompanying loss of output or increase in unemployment?

A. rational reduction
B. surprise inflation reduction
C. credible announced inflation reduction
D. statistical model of reduction

Question 38 of 40

2.5 Points

At full employment, the unemployment rate equals the __________.

A. equilibrium expenditure
B. consumer price level
C. natural unemployment rate
D. inflation rate

Question 39 of 40

2.5 Points

How does change in the expected inflation rate affect the short-run tradeoff between inflation and unemployment?

A. Immediately, because the money wage rate is sensitive to change in the expected inflation rate.
B. Immediately, because unemployment and job production respond quickly to change in the expected inflation rate.
C. Gradually, because the money wage rate responds only gradually to change in the expected inflation rate.
D. Gradually, because the natural unemployment rate rarely changes.

Question 40 of 40

2.5 Points

Since the long-run Phillips curve is vertical at the natural unemployment rate, what type of trade-off is there between employment and inflation?

A. There is no trade-off between employment and inflation.
B. There is a constant trade-off between employment and inflation.
C. There is a linear trade-off between employment and inflation.
D. Employment and inflation are indirectly proportional (the one goes up, the other goes down.