ECON 211 Unit 4 study guide FA16.docx

ECON 211 Unit 4 study guide FA16.docx

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ECON 211 Unit 4 Study Guide FA/16 - Chapters 27-29 Name___________________________________ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Price level Aggregate demand (trillions of 2009 dollars) Short-run aggregate supply (trillions of 2009 dollars) Long-run aggregate supply (trillions of 2009 dollars) 100 13 9 10 105 12 10 10 110 11 11 10 115 10 13 10 1) Using the data in the above table, in the long-run macroeconomic equilibrium, the price level is ________ and the level of real GDP is ________. A) 105; $11 trillion B) 115; $11 trillion C) 110; $10 trillion D) 115; $10 trillion 2) Using the data in the above table, in the short-run macroeconomic equilibrium, there is A) an inflationary gap of $2 trillion. B) a recessionary gap of $1 trillion. C) a recessionary gap of $2 trillion. D) an inflationary gap of $1 trillion. 3) Which business cycle theory emphasizes that, because of long-term wage agreements, both expected and unexpected fluctuations in aggregate demand can change real GDP? A) the new Keynesian cycle theory B) Keynesian cycle theory C) monetarist cycle theory D) the new classical cycle theory 4) Economic growth in India has averaged about 8.5 percent in recent years and while inflation averaged almost 9 percent. The AS -AD model shows this process as A) movements upward along the aggregate demand curve. B) rightward shifts in the short-run aggregate supply curve. C) rightward shifts in the aggregate demand curve and leftward shifts in the short-run aggregate supply curve. D) rightward shifts in the both the aggregate demand and long-run aggregate supply curves. Price level Aggregate demand (trillions of 2009 dollars) Short-run aggregate supply (trillions of 2009 dollars) Long-run aggregate supply (trillions of 2009 dollars) 100 11 7 10 110 10 8 10 120 9 9 10 130 8 10 10 140 7 11 10 5) Based on the data in the table above, at the short-run equilibrium A) the unemployment rate is less than the natural unemployment rate. B) the money wage rate will rise in the long run. C) the unemployment rate is greater than the natural unemployment rate. D) the economy is at full employment.
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6) Phillips curves show the relationship between the A) expected rate of inflation and the nominal interest rate. B) nominal interest rate and the real interest rate. C) real interest rate and the unemployment rate. D) unemployment rate and the inflation rate. 7) A change in the natural unemployment rate ________. A) shifts only the long-run Phillips curve B) shifts both the short-run and long-run Phillips curves C) causes a movement along the short-run Phillips curve D) shifts only the short-run Phillips curve 8) Which school of thought believes that recessions are the result of inappropriate monetary policy? A) only classical B) Monetarist C) only Keynesian D) both Keynesian and classical 9) In the above figure, at a disposable income level of $2 trillion, saving equals A) zero.
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