1.

For movements along the long-run aggregate supply curve:

A. The prices of goods and services change while the input prices
remain fix
B. Potential GDP is dependent on the price level
C. The inflation rate and the money wage rate (input prices) change by
the same percentage
D. All of the above
7. Prior to the Great Depression in 1929, the dominate macro-economic
theory was:
A. Keynesian
B. Classical
C. supply-side economics
D. real business cycle theory
8. Both the original classical school and the modern real business cycle
theory hold:
A. actual GDP and potential GDP can diverge creating temporary
involuntary unemployment and recession
B. actual GDP is always equal to potential GDP so all unemployment is
voluntary and
Government macroeconomic policy actions cannot influence the
economy
C. only fiscal policy can reduce the impacts of recession
D. political activism is necessary to fight recessions
9. Which will increase (shift) the short-run aggregate supply rightward?
A. an increase in the money supply
B. a favorable price shock (i.e. a fall in oil prices) or an decrease in
inflationary expectations
C. an increase in inflationary expectations and a negative price shock
(i.e. a rise in oil prices)
D. An increase in investment spending
13. The classical economists conclusion that nominal income is determined
by movements in the money supply rested on their belief that ____ could be
treated as ____ in the short run.
A. velocity; constant
B. money; variable
C. money; constant
D. velocity; variable
14. The classical economists believed that if the quantity of money doubled
A. prices would fall
B. output would double
C. prices would double
D. prices would remain constant
15. The speculative motive for holding money is closely tied to what function
of money?
A. medium of exchange

B. standard of deferred payment

C. store of wealth
D. unit of account
16. Keynes hypothesized that the transactions component of money demand
was primarily determined by the level of
A. velocity
B. stock market prices
C. income
D. interest rates
17. According to the real business cycle (RBC) theory, recessions are the
result of
A. an increase in investment
B. an increase in growth rate of the quantity of money
C. a fall in growth rate of productivity
D. a decrease in growth rate of the quantity of money
20. The U.S. exchange rate rises. As a result, there is a
A. rightward shift in the long run US aggregate supply curve
B. leftward shift in the US aggregate demand curve
C. leftward shift in the long run US aggregate supply curve
D. rightward shift in the US aggregate demand curve
21. A major technological advance shifts the
A. short run aggregate supply curve rightward but does not shift the
long run aggregate supply curve
B. long run aggregate supply curve rightward but does not shift the
short run aggregate supply curve
C. long run and short run aggregate supple curves rightward
D. long run aggregate supply curve rightward and the short run
aggregate supply curve leftward
36. According to the original Keynesian school, the primary source of the
business cycle is:
A. from unexpected fluctuations in aggregate demand and the fact that
todays money wage rates were negotiated at past datesthus past
rational expectations of the current price level influence the current
wage rate
B. supply side shocks from technological change
C. from unexpected fluctuations in aggregate demand in a rare
divergence from normal rational expectations
D. the instability of investment and consumption spending by investors
and consumers
E. FED policy with regards to monetary policy (money supply changes)
and its effect on aggregate demand