1

The 2002 Economic Report of the President states: After expanding at an annual rate of 5.7 percent in the second quarter of 2
product (GDP) began to falter later that year. And after several quarters of increasingly weak growth the terrorist attacks of Se
the economy into recession.
Based on this information regarding gross domestic product, you may conclude that after the attacks

I do not want to answer this Question

gross domestic product increased by an annual rate of less than 5.7 percent.

gross domestic product, at an annual rate, did not increase.

gross domestic product increased by an annual rate of more than 5.7 percent.

gross domestic product was negative.

none of the above

Correct Answer: 2 Your Answer: 1 Points Awarded: -0.1

The 2002 Economic Report of the President states: After several quarters of increasingly weak growth the terrorist attacks of
tipped the economy into recession.

I do not want to answer this Question

shifting the aggregate demand curve to the right.

shifting the aggregate supply curve to the right.

shifting the aggregate demand curve to the left.

it had no effect

none of the above

Correct Answer: 3 Your Answer: 3 Points Awarded: 1

Suppose the model of aggregate demand and aggregate supply depicted in the figure is in equilibrium at point A. Assume th
consumer confidence led to a decrease in consumer purchases, which caused the aggregate demand to shift to the left to AD1
happened to the unemployment rate in the short run?

I do not want to answer this Question

it has increased

it has decreased

it has stayed the same

not enough information to answer the question

none of the above

Correct Answer: 1 Your Answer: 1 Points Awarded: 1

Suppose the model of aggregate demand and aggregate supply depicted in the figure is in equilibrium at point C. Now suppo
increase in the expected price level. What happens to the unemployment rate?

I do not want to answer this Question

it increases

it decreases

it stays the same

there is not enough information to answer the question

none of the above

Correct Answer: 1 Your Answer: 3 Points Awarded: -0.1

Suppose the stock market declines sharply. What is the long-run effect on output and the price level, assuming policy makers

I do not want to answer this Question

output declines, the price level declines

output declines, the price level increases

output is unchanged, the price level declines

output is unchanged, the price level increases

none of the above

Correct Answer: 3 Your Answer: 3 Points Awarded: 1

Suppose the U.S. President and Congress impose an investment tax credit (a tax rebate tied to a firms investment spending).
would this have on a firms willingness to invest at every price level.

I do not want to answer this Question

it increases a firms willingness to invest

it decreases a firms willingness to invest

it has no effect

not enough information to answer the question

none of the above

Correct Answer: 1 Your Answer: 1 Points Awarded: 1

Ethel maintains that she can predict when the economy is going to move up or down a business cycle. In fact

I do not want to answer this Question

most economists can predict the business cycle.

the business cycle is quite regular, with a new phase beginning every 24 months.

business cycles are irregular and unpredictable in the short run.

only the Federal Reserve can predict moves in the business cycle.

none of the above

Correct Answer: 3 Your Answer: 3 Points Awarded: 1

In the long run, the aggregate demand curve is

I do not want to answer this Question

horizontal.

upward sloping.

downward sloping.

vertical.

none of the above

Correct Answer: 4 Your Answer: 4 Points Awarded: 1

Anyone seeking to understand the causes of recessions must examine

I do not want to answer this Question

the saving behaviors of different age groups.

investment patterns in the housing market.

disequilibrium in the manufacturing sector.

changes in the level of spending.

none of the above

Correct Answer: 4 Your Answer: 4 Points Awarded: 1

10

Due to expectations of a future recession, companies do not think that they can sell all of their output and therefore purchase
machinery. As an immediate result, the aggregate

I do not want to answer this Question

supply curve becomes vertical.

supply curve shifts right.

demand curve shifts right.

demand curve shifts left.

none of the above

Correct Answer: 4 Your Answer: 2 Points Awarded: -0.1

11

Movements along the aggregate supply curve are caused by changes in

I do not want to answer this Question

technology.

government regulations.

wages and salaries.

the price level.

none of the above

Correct Answer: 4 Your Answer: 4 Points Awarded: 1

12

To say that nominal prices are sticky means

I do not want to answer this Question

the average price level seldom changes.

relative prices seldom change.

it takes at least one year for prices to change to a new equilibrium level.

it takes time for prices to adjust to equilibrium.

none of the above

Correct Answer: 4 Your Answer: 4 Points Awarded: 1

13

Which of the following is not a determinant of long-run aggregate supply?

I do not want to answer this Question

the level of skills in the workforce

the price level

technology

the quantity of capital

none of the above

Correct Answer: 2 Your Answer: 2 Points Awarded: 1

14

Many economists believe that the severity of the Great Depression was due to

I do not want to answer this Question

a flood of imported goods brought about by tariff reductions.

the failure of the Federal Reserve to prevent a large drop in the money supply.

the huge budget deficits of the federal government.

hyperinflation that occurred following World War I.

none of the above

Correct Answer: 2 Your Answer: 2 Points Awarded: 1

15

If there is speculation that a recession is around the corner, which means that our future incomes will most likely fall, then the
the economy now will be that the

I do not want to answer this Question

AS curve will shift to the left.

AD curve will shift to the right.

price level will rise and real output will rise.

price level will fall and real output will fall.

none of the above

Correct Answer: 4 Your Answer: 4 Points Awarded: 1

16

Because of the slope the aggregate demand curve we can say that

I do not want to answer this Question

a decrease in the price level leads to a lower level of real GDP demanded.

an increase in the price level leads to a shift in the aggregate demand curve.

a decrease in the price level leads to a higher level of real GDP demanded.

an increase in the price level leads to a higher level of real GDP demanded.

none of the above

Correct Answer: 3 Your Answer: 3 Points Awarded: 1

17

Increases in personal income taxes

I do not want to answer this Question

increase aggregate demand.

increase disposable income.

decrease aggregate demand.

both B and C

none of the above

Correct Answer: 3 Your Answer: 3 Points Awarded: 1

18

Workers expect inflation to rise from 3% to 5% next year. As a result this should

I do not want to answer this Question

shift the short-run aggregate supply curve to the left.

shift the short-run aggregate supply curve to the right.

move the economy up along a stationary short-run aggregate supply curve.

move the economy down along a stationary short-run aggregate supply curve.

none of the above

Correct Answer: 1 Your Answer: 1 Points Awarded: 1

19

The invention of the cotton gin ushered in the Industrial Revolution and began a long period of technological innovation. Wha
technological change do the short-run supply curve?

I do not want to answer this Question

It shifted the short-run aggregate supply curve to the left.

It shifted the short-run aggregate supply curve to the right.

It moved the economy up along a stationary short-run aggregate supply curve.

It moved the economy down along a stationary short-run aggregate supply curve.

none of the above

Correct Answer: 2 Your Answer: 1 Points Awarded: -0.1

20

A decrease in aggregate demand results in a(n) in the .

I do not want to answer this Question

recession; long run

expansion; long run

expansion; short run

recession; short run

none of the above

Correct Answer: 4 Your Answer: 4 Points Awarded: 1