Quiz #7
Department of Economics
Professor Siegler
UC Davis
Spring 2011
1.
Suppose that an economy is currently not in shortrun equilibrium (spending balance)
and Y<PAE.
In this case, there would be an unexpected _________ in inventories,
which would provide a signal to firms to _________ production.
A)
decrease; decrease
B)
increase; increase
C)
increase; decrease
D)
decrease; increase
2.
In order for the aggregate demand (AD) curve to be downwardsloping,
A)
there has to be an inverse relationship between the real interest rate and
real GDP and a positive relationship between inflation and the real interest
rate.
B)
there has to be a positive relationship between the real interest rate and real GDP
and a negative relationship between inflation and the real interest rate.
C)
there has to be an inverse relationship between the real interest rate and real
GDP and an inverse relationship between inflation and the real interest rate.
D)
there has to be a positive relationship between the real interest rate and real GDP
and a positive relationship between inflation and the real interest rate.
E)
there has to be an inverse relationship between the real interest rate and real
GDP but there cannot be a relationship between inflation and the real interest
rate.
3.
The positive correlation between real interest rates and inflation is best explained by
examining
A)
the behavior of the government.
B)
forces of supply and demand.
C)
the behavior of the market.
D)
the behavior of central banks.
E)
equilibrium in the economic fluctuations model.
4.
When the Fed wants to raise nominal interest rates, it
A)
increases bank reserves.
B)
orders all banks to increase interest rates.
C)
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 Spring '07
 Sheffrin
 Economics, Inflation, aggregate demand curve, inflation adjustment line

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