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Macroeconomics 4th Australian Edition by Olivier Blanchard – Test bank

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  • ISBN-10 ‏ : ‎ 0131864165
  • ISBN-13 ‏ : ‎ 978-0131864160

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Macroeconomics 4th Australian Edition by Olivier Blanchard – Test bank

Chapter 07

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1)
Suppose the central bank implements expansionary monetary policy. Which of the following will
occur in the short run? 1) A) An increase in output. B) A decrease in unemployment. C) An increase in the price level. D) A decrease in the interest rate. E) All of the above. Answer: E
Explanation: A) B) C) D) E) 2) In the aggregate supply relation, the current price level depends in the medium run upon: 2) A) fiscal policy. B) business confidence. C) consumer confidence. D) monetary policy. E) the expected price level. Answer: E
Explanation: A) B) C) D) E) 3)
Suppose the economy is operating at a point where output is less than the natural level of output.
Which of the following statements is correct given this information? 3) A) The employment rate is greater than the natural employment rate. B) The price level will be higher next period than this period. C) The price level is less than the expected price level. D) Workers will revise upwards price expectations. E) The unemployment rate is less than the natural unemployment rate. Answer: C
Explanation: A) B) C) D) E) 1
4)
At the current level of output, suppose the actual price level is greater than the price level that
individuals expect. We know that: 4) A)
any subsequent decrease in the aggregate price level will cause an increase in the real money
supply and a rightward shift in the aggregate demand curve. B) output is currently less than the natural level of output. C) the interest rate will tend to rise as the economy adjusts to this situation. D) the AS curve will tend to shift down over time. E)
the nominal wage will tend to decrease as individuals revise their expectations of the price
level. Answer: C
Explanation: A) B) C) D) E) 5) If u > un, we know with certainty that: 5) A) P = Pe. B) Y > Yn. C) Y = Yn. D) P > Pe. E) P < Pe.
Answer: E
Explanation: A) B) C) D) E) 6)
The aggregate demand curve has its particular shape because of which of the following
explanations? 6) A)
A decrease in the aggregate price level will cause an increase in the real wage, a decrease in
employment, and a decrease in output. B)
A decrease in the aggregate price level will cause a decrease in the interest rate and an
increase in output. C)
As the aggregate price level increases, goods and services become relatively more expensive
and individuals respond by decreasing the quantity demanded of goods and services. D)
An increase in the money supply will cause an increase in the interest rate, a decrease in
investment, and a decrease in output. E)
An increase in the aggregate price level prompts the government to decrease government
spending in the hope of bringing down prices. Answer: B
Explanation: A) B) C) D) E) 2
7)
Results obtained from the Taylor model suggest that the output effects of a change in the money
supply are greatest after approximately how long? 7) A) Three quarters. B) Two years. C) Five years. D) One quarter. E) One month. Answer: A
Explanation: A) B) C) D) E) 8)
Suppose the minimum wage decreases. Given this event, we would expect which of the following
to occur? 8) A) A decrease in the interest rate in the medium run. B) No change in the real wage in the medium run. C) A decrease in the aggregate price level and an increase in output in the short run. D) A decrease in the natural rate of unemployment. E) All of the above. Answer: E
Explanation: A) B) C) D) E) 9) In the aggregate supply relation, an increase in current output causes: 9) A) an increase in the expected price level and an upward shift of the AS curve. B) a shift of the aggregate supply curve. C) a change in the expected price level this year. D) an increase in the current price level. E) an increase in the markup over labour costs. Answer: D
Explanation: A) B) C) D) E) 10) If Y > Yn, we know with certainty that: 10) A) P = Pe. B) P < Pe. C) u > un. D) P > Pe. E) u = un,.
Answer: D
Explanation: A) B) C) D) E)

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