B b a page 6 30 long run growth in real gdp is

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30. Long-run growth in real GDP is determined primarily by ______, while short-run movements in real GDP are associated with ______. B) technological progress; variations in labor-market utilization 31. The aggregate demand curve tells us possible: C) combinations of P and Y for a given value of M . 32. For a fixed money supply, the aggregate demand curve slopes downward because at a lower price level real money balances are ______ generating a ______ quantity of output demanded. A) higher; greater 33. The version of Okun”s law studied in Chapter 9 assumes that with no change in unemployment, real GDP normally grows by 3 percent over a year. If the unemployment rate fell by 1 percentage point over a year, Okun”s law predicts that real GDP would: D) increase by 5 percent. 34. In the short run an adverse supply shock causes: B) prices to rise and output to fall. 35. Making use of Okun”s law, it may be computed that if the Fed reduces the money supply 5 percent and the quantity theory of money is true, then the unemployment rate will rise about: D) 2.5 percent in the short run but will return to its natural rate in the long run. 36. Starting from long-run equilibrium, if a drought pushes up food prices throughout the economy, the Fed could move the economy more rapidly back to full employment output by: A) increasing the money supply, but at the cost of permanently higher prices. 37. The short run refers to a period: B) during which prices are sticky and unemployment may occur. Page 7
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38. If the short-run aggregate supply curve is horizontal, then the: B) money supply cannot affect prices in the short run. 39. The index of leading indicators compiled by the Conference Board includes 10 data series that are used to forecast economic activity about ______ in advance. B) six to nine months 40. The version of Okun”s law studied in Chapter 9 assumes that with no change in unemployment, real GDP normally grows by 3 percent over a year. If the unemployment rate rose by 2 percentage points over a year, Okun”s law predicts that real GDP would: A) decrease by 1 percent. 41. If Fed A cares only about keeping the price level stable and Fed B cares only about keeping output at its natural level, then in response to an exogenous decrease in the velocity of money: A) both Fed A and Fed B should increase the quantity of money. 42. Looking at the aggregate demand curve alone, one can tell ______ that will prevail in the economy. D) neither the quantity of output nor the price level 43. A decline in the Index of Supplier Deliveries is typically an indicator of a future _____ in economic production and a narrowing of the interest rate spread between the 10-year Treasury note and 3-month Treasury Bill is typically an indicator of a future _____ in economic production. D) slowdown; slowdown 44. When GDP growth declines, investment spending typically ______ and consumption spending typically ______.
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