Econ 202

57 Questions | Total Attempts: 14

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Economics Quizzes & Trivia

Questions and Answers
  • 1. 
    In the basic AD-AS model, an increase in income taxes will in the SHORT RUN lead to _________ in real GDP and    ________ in the price level.
    • A. 

      An increase; an increase

    • B. 

      An increase; a decrease

    • C. 

      A decrease; a decrease

    • D. 

      A decrease; an increase

  • 2. 
    Which of the following would decrease the money supply?
    • A. 

      An increase in excess reserves held by banks

    • B. 

      A decrease in the discount rate

    • C. 

      A decrease in the required reserve ratio

    • D. 

      A decrease in currency relative to deposits held by households and firms

  • 3. 
    Increase in Aggregate Demand in the SHORT RUN.
    • A. 

      Increase in Real GDP

    • B. 

      Decrease in Real GDP

    • C. 

      No Change in Real GDP

    • D. 

      Increase in Unemployment Rate

    • E. 

      Decrease in Unemployment Rate

    • F. 

      No Change in Unemployment Rate

    • G. 

      Increase Price Level

    • H. 

      Decrease Price Level

    • I. 

      Causes a Recession

    • J. 

      Does NOT cause a Recession

    • K. 

      Causes Inflation

    • L. 

      Causes Deflation

    • M. 

      Does NOT cause inflation

  • 4. 
    Graphical causes of inflation are a(n)  ___________ in AD or a(n) _________ in AS.
    • A. 

      Decrease; decrease

    • B. 

      Decrease; increase

    • C. 

      Increase; increase

    • D. 

      Increase; decrease

  • 5. 
    In the basic AD-AS model, a decrease in interest rates will in the short run lead to ______ in real GDP and______ in the price level.
    • A. 

      An increase; a decrease

    • B. 

      An increase; an increase

    • C. 

      A decrease; a decrease

    • D. 

      A decrease; an increase

  • 6. 
    In the AD-AS model, the long run automatic adjustment mechanism to potential GDP in the long run from a level of real GDP above potential GDP occurs as nominal wages _________, shifting the short-run aggregate supply curve to the __________.
    • A. 

      Fall; right

    • B. 

      Rise; right

    • C. 

      Fall; left

    • D. 

      Rise; left

  • 7. 
    Increase in Short-Run Aggregate Supply in the SHORT RUN.
    • A. 

      Increase in Real GDP

    • B. 

      Decrease in Real GDP

    • C. 

      No Change in Real GDP

    • D. 

      Increase in Unemployment Rate

    • E. 

      Decrease in Unemployment Rate

    • F. 

      No Change in Unemployment Rate

    • G. 

      Increase Price Level

    • H. 

      Decrease Price Level

    • I. 

      Causes a Recession

    • J. 

      Does NOT cause a Recession

    • K. 

      Causes Inflation

    • L. 

      Causes Deflation

    • M. 

      Does NOT cause inflation

  • 8. 
    In the basic AD-AS model, an increase in the expected future price level (an increase in inflationary expectations) will in the short run lead to ________ in real GDP, _________ in the unemployment rate, and _________ in the price level.
    • A. 

      An increase; a decrease; an increase

    • B. 

      A decrease; an increase; an increase

    • C. 

      An increase; an increase; an increase

    • D. 

      A decrease; an increase; a decrease

  • 9. 
    In the basic AD-AS model, which of the following would cause a recession?
    • A. 

      An increase in foreign real GDP

    • B. 

      A decrease in the expected future price level

    • C. 

      A decrease in expected future profits by businesses

    • D. 

      An increase in household wealth

  • 10. 
    In the basic AD-AS model, which of the following would cause inflation
    • A. 

      A decrease in oil prices

    • B. 

      An increase in government purchases

    • C. 

      An increase in interest rates

    • D. 

      An increase in income taxes

  • 11. 
    Which of the following would cause the aggregate demand curve to shift to the left?
    • A. 

      A decrease in the interest rate

    • B. 

      An increase in the price level

    • C. 

      A decrease in foreign real GDP

    • D. 

      An increase in government spending

  • 12. 
    As an economy moves out and up along a given short-run aggregate supply curve...
    • A. 

      The natural rate of unemployment decreases

    • B. 

      The natural rate of unemployment increases

    • C. 

      Cyclical unemployment decreases

    • D. 

      Cyclical unemployment increases

  • 13. 
    An increase in the expected future price level would shift...
    • A. 

      Both the short-run aggregate supply curve and the long-run aggregate supply curve to the left

    • B. 

      Both the short-run aggregate supply curve and the long-run aggregate supply curve to the right

    • C. 

      Only the short-run aggregate supply curve to the right

    • D. 

      Only the short-run aggregate supply curve to the left

  • 14. 
    In the static AD-AS model, a decrease in the aggregate demand will in the long run lead to _______ in real GDP and ______ in the price level.
    • A. 

      Decrease; decrease

    • B. 

      Decrease; no change

    • C. 

      No change; decrease

    • D. 

      No change; no change

  • 15. 
    Which variables cause the aggregate demand curve to shift up?
    • A. 

      Federal Reserve increases interest rates

    • B. 

      Federal Reserve decreases interest rates

    • C. 

      Increase in government spending

    • D. 

      Decrease in government spending

    • E. 

      Government raises taxes

    • F. 

      Government lowers taxes

    • G. 

      Household Wealth increases

    • H. 

      Household Wealth decreases

    • I. 

      Expected future income increases

    • J. 

      Expected future income decreases

    • K. 

      Foreign real GDP increases

    • L. 

      Foreign real GDP decreases

    • M. 

      Expected future profitability increases

    • N. 

      Expected future profitability decreases

  • 16. 
    Graphical causes of a recession and cyclical unemployment are a ________ in AD or a _________ in AS.
    • A. 

      Decrease; decrease

    • B. 

      Decrease; increase

    • C. 

      Increase; increase

    • D. 

      Increase; decrease

  • 17. 
    The Quantity Theory of Money is the __________ of inflation?
    • A. 

      Short-Run

    • B. 

      Long-Run

    • C. 

      Both Short-Run and Long-Run

    • D. 

      Neither Short-Run nor Long-Run

  • 18. 
    Which is the correct Quantity Equation?
    • A. 

      M+V+P+Y=Money Supply

    • B. 

      M + V = P + Y

    • C. 

      M x V=P x Y

    • D. 

      M=[(V+P)/Y]

  • 19. 
    Decrease in Aggregate Demand in the LONG RUN.
    • A. 

      Increase in Real GDP

    • B. 

      Decrease in Real GDP

    • C. 

      No Change in Real GDP

    • D. 

      Increase in Unemployment Rate

    • E. 

      Decrease in Unemployment Rate

    • F. 

      No Change in Unemployment Rate

    • G. 

      Increase Price Level

    • H. 

      Decrease Price Level

    • I. 

      Causes a Recession

    • J. 

      Does NOT cause a Recession

    • K. 

      Causes Inflation

    • L. 

      Causes Deflation

    • M. 

      Does NOT cause inflation

  • 20. 
    The Velocity of Money is...
    • A. 

      Nominal GDP/Money Supply

    • B. 

      Real GDP/Money Supply

    • C. 

      Nominal GDP/Real GDP

    • D. 

      Real GDP/Nominal GDP

  • 21. 
    If the money supply increases and the velocity of money is constant, nominal GDP must increase.
    • A. 

      True

    • B. 

      False

  • 22. 
    What is the Growth Rates version of the Quantity Equation?
    • A. 

      % /\ V + % /\ P = % /\ M + % /\ Y

    • B. 

      % /\ M + % /\ V = % /\ P + % /\ Y

    • C. 

      % /\ V + % /\ Y = % /\ M + % /\ P

    • D. 

      % /\ P + % /\ M = % /\ Y + % /\ V

  • 23. 
    Inflation rate is equal to % /\ M + % /\ V + % /\ Y
    • A. 

      True

    • B. 

      False

  • 24. 
    If the money supply is growing at a rate of 6% per year, real GDP is growing at a rate of 3% per year, & velocity is constant, what will the inflation rate be?
    • A. 

      9%

    • B. 

      6%

    • C. 

      3%

    • D. 

      0%

  • 25. 
    The aggregate demand-aggregate supply model seeks to explain...
    • A. 

      The business cycle, but no the inflation rate

    • B. 

      The inflation rate, but not the business cycle.

    • C. 

      The business cycle and the inflation rate.

    • D. 

      Neither the business cycle nor the inflation rate.

  • 26. 
    In the static AD-AS model, an increase in the expected future price level will in the short run lead to ______ inreal GDP and ________ in the price level. 
    • A. 

      Increase; increase

    • B. 

      Increase; decrease

    • C. 

      Decrease; decrease

    • D. 

      Decrease; increase

  • 27. 
    When would there be deflation?
    • A. 

      % /\ M is greater than % /\ Y

    • B. 

      % /\ M is less than % /\ Y

    • C. 

      % /\ M is equal to % /\ Y

    • D. 

      Quantity Theory of Money has no effect on inflation

  • 28. 
    The aggregate demand-aggregate supply model considers ___________ of the economy.
    • A. 

      Only the producer (supply) side.

    • B. 

      Only the spending (demand) side.

    • C. 

      Both the producer (supply) side and the spending (demand) side.

    • D. 

      Neither the producer (supply) nor the spending (demand) side.

  • 29. 
    When would there be inflation?
    • A. 

      % /\ M is greater than % /\ Y

    • B. 

      % /\ M is less than % /\ Y

    • C. 

      % /\ M is equal to % /\ Y

    • D. 

      Quantity Theory of Money has no effect on inflation

  • 30. 
    When would there be zero inflation?
    • A. 

      % /\ M is greater than % /\ Y

    • B. 

      % /\ M is less than % /\ Y

    • C. 

      % /\ M is equal to % /\ Y

    • D. 

      Quantity Theory of Money has no effect on inflation

  • 31. 
    Hyperinflation occurs when there is an unusually large increase in the money supply.
    • A. 

      True

    • B. 

      False

  • 32. 
    The level of aggregate supply in the long run is not affected by...
    • A. 

      Changes in price level

    • B. 

      Changes in technology

    • C. 

      Changes in the capital stock

    • D. 

      Changes in the number of workers

  • 33. 
    Decrease in Aggregate Demand in the SHORT RUN.
    • A. 

      Increase in Real GDP

    • B. 

      Decrease in Real GDP

    • C. 

      No Change in Real GDP

    • D. 

      Increase in Unemployment Rate

    • E. 

      Decrease in Unemployment Rate

    • F. 

      No Change in Unemployment Rate

    • G. 

      Increase Price Level

    • H. 

      Decrease Price Level

    • I. 

      Causes a Recession

    • J. 

      Does NOT cause a Recession

    • K. 

      Causes Inflation

    • L. 

      Causes Deflation

    • M. 

      Does NOT cause inflation

  • 34. 
    In the basic AD-AS model, a decrease in the aggregate demand curve will in the LONG RUN lead to ________ in real GDP and ________ in the price level.
    • A. 

      A decrease; a decrease

    • B. 

      A decrease; no change

    • C. 

      No change; a decrease

    • D. 

      No change; no change

  • 35. 
    The short-run aggregate supply curve has a _________ slope because as prices of __________ rise, price of________ rise more slowly.
    • A. 

      Infinite; final goods and services; inputs

    • B. 

      Positive; final goods and services; inputs

    • C. 

      Infinite; inputs; final goods and services

    • D. 

      Positive; inputs; final goods and services

  • 36. 
    In the static AD-AS model, a decrease in households expectations for their future incomes will in the short run lead to_______ in real GDP rate and __________ in the price level.
    • A. 

      Decrease; decrease

    • B. 

      Decrease; increase

    • C. 

      Increase; increase

    • D. 

      Increase; decrease

  • 37. 
    Suppose a developing country receives more machinery and capital equipment as foreign entrepreneurs increase the amount of investment in the economy. As a result, 
    • A. 

      The economy will move up along the long-run aggregate supply curve

    • B. 

      The long-run aggregate supply curve will shift to the right

    • C. 

      The economy will move down along the long-run aggregate supply curve

    • D. 

      The long-run aggregate supply curve will shift to the left

  • 38. 
    Suppose that you deposit $2,000 in your bank and the required reserve ration is 10%. The maximum loan that your bank can make as a direct result of your deposit is...
    • A. 

      $200

    • B. 

      $1800

    • C. 

      $2000

    • D. 

      $180

  • 39. 
    As an economy moves out an up along a given short-run aggregate supply curve...
    • A. 

      The natural rate of unemployment increases

    • B. 

      The natural rate of unemployment decreases

    • C. 

      Cyclical unemployment increases

    • D. 

      Cyclical unemployment decreases

  • 40. 
    In the static AD-AS model, which of the following would cause inflation?
    • A. 

      A decrease in government purchases

    • B. 

      A decrease in income taxes

    • C. 

      A decrease in foreign real GDP

    • D. 

      A decrease in household wealth

  • 41. 
    The invention of the cotton gin ushered in the Industrial Revolution and began a long period of technological innovation. What did this technological change do to the short-run supply curve?
    • A. 

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

    • B. 

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

    • C. 

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

    • D. 

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

  • 42. 
    Decrease in Short-Run Aggregate Supply in the SHORT RUN.
    • A. 

      Increase in Real GDP

    • B. 

      Decrease in Real GDP

    • C. 

      No Change in Real GDP

    • D. 

      Increase in Unemployment Rate

    • E. 

      Decrease in Unemployment Rate

    • F. 

      No Change in Unemployment Rate

    • G. 

      Increase Price Level

    • H. 

      Decrease Price Level

    • I. 

      Causes a Recession

    • J. 

      Does NOT cause a Recession

    • K. 

      Causes Inflation

    • L. 

      Causes Deflation

    • M. 

      Does NOT cause inflation

  • 43. 
    Workers and firms both expect that prices will be 2.5% higher next year than they are this year. As a result,
    • A. 

      Workers will be willing to take lower wages next year, but no lower than a 2.5% decrease

    • B. 

      The short-run aggregate supply curve will shift to the left as wages increase

    • C. 

      The purchasing power of wages will rise if wages increase by 2.5%

    • D. 

      Aggregate demand will increase by 2.5%

  • 44. 
    In the static AD-AS model, an increase in oil prices will in the short run lead to _______ in real GDPand _________ in the price level. 
    • A. 

      Decrease; decrease

    • B. 

      Increase; decrease

    • C. 

      Increase; increase

    • D. 

      Decrease; increase

  • 45. 
    Which of the following is one explanation as to why the aggregate demand curve slopes downward?
    • A. 

      Decreases in the price level raise the interest rate and increase consumption spending

    • B. 

      Decreases in the price level raise the interest rate and increase investment spending

    • C. 

      Decreases in the price level raise real wealth and increase consumption spending

    • D. 

      Decreases in the U.S. price level relative to the price level in other countries lower net exports

  • 46. 
    Spending on the war in Afghanistan is essentially categorized as government purchases. How do increases in spending on the war in Afghanistan affect the aggregate demand curve?
    • A. 

      They will move the economy up along a stationary aggregate demand curve

    • B. 

      They will shift the aggregate demand curve to the right

    • C. 

      They will shift the aggregate demand curve to the left

    • D. 

      They will move the economy down along a stationary aggregate demand curve

  • 47. 
    Suppose the economy is at a short-run equilibrium GDP that lies above potential GDP. Which of the following will occur because of the automatic mechanism adjusting the economy back to potential GDP?
    • A. 

      Output will increase

    • B. 

      Unemployment will decline

    • C. 

      Prices will decline

    • D. 

      Short-Run aggregate supply will shift to the left

  • 48. 
    Using the AD-AS model, which of the following would cause inflation?
    • A. 

      A shift to the right of the aggregate supply curve

    • B. 

      A shift to the left of the aggregate demand curve

    • C. 

      A movement down along the aggregate demand curve

    • D. 

      A shift to the left of the aggregate supply curve

  • 49. 
    In the basic AD-AS model, which of the following would cause inflation? A decrease in ________.
    • A. 

      Firms expectations of future profitability of investment spending

    • B. 

      Interest rates

    • C. 

      Household wealth

    • D. 

      Government purchases

  • 50. 
    Increase in Aggregate Demand in the LONG RUN.
    • A. 

      Increase in Real GDP

    • B. 

      Decrease in Real GDP

    • C. 

      No Change in Real GDP

    • D. 

      Increase in Unemployment Rate

    • E. 

      Decrease in Unemployment Rate

    • F. 

      No Change in Unemployment Rate

    • G. 

      Increase Price Level

    • H. 

      Decrease Price Level

    • I. 

      Causes a Recession

    • J. 

      Does NOT cause a Recession

    • K. 

      Causes Inflation

    • L. 

      Causes Deflation

    • M. 

      Does NOT cause inflation

  • 51. 
    In the basic AD-AS model, which of the following would cause a recession? A decrease in _________.
    • A. 

      Firms expectations of future profitability of investment spending

    • B. 

      Oil prices

    • C. 

      Income taxes

    • D. 

      Interest rates

  • 52. 
    If the money supply is growing at a rate of 10% per year, real GDP is growing at a rate of 2% per year, and velocity is constant, what will the inflation rate be?
  • 53. 
    If the money supply is growing at a rate of 10% per year, real GDP is growing at a rate of 2% per year, and velocity is growing at a rate of 1%, what will the inflation rate be?
  • 54. 
    If Irving Fischer was correct in his prediction about the value of velocity, then the quantity equation can be written to solve for the inflation rate as follows: 
    • A. 

      Inflation rate= Growth rate of money supply - Growth rate of velocity

    • B. 

      Inflation rate= Growth rate of money supply - Growth rate of real output

    • C. 

      Inflation rate= Growth rate of money supply + Growth rate of velocity

    • D. 

      Inflation rate= Growth rate of money supply + Growth rate of real output

  • 55. 
    Luxury car exports were hurt in 2009 as a result of the recession. How would this decrease in exports have affected Germany's aggregate demand curve?
    • A. 

      The AD curve would have shifted to the left

    • B. 

      The AD curve would have shifted to the right

    • C. 

      There would have been a movement down the AD curve

    • D. 

      There would have been a movement up the AD curve

  • 56. 
    A bank holds its reserves as _______ and ________.
    • A. 

      Vault cash; loans

    • B. 

      Securities; deposits at the Fed

    • C. 

      Vault cash; deposits at the Fed

    • D. 

      Securities; loans

  • 57. 
    There is a strong link between changes in the money supply and inflation
    • A. 

      In neither the short run nor the long run

    • B. 

      In the short run but not the long run

    • C. 

      In both the short run and the long run

    • D. 

      In the long run but not the short run