Question

1) When discussing wages, incomes and interest rates you always want to focus on the ........ when making comparisons.

a. Nominal Value

b. Real value

c. both are needed

d. none of the above

2) When there is a decrease in the interest rate you can expect to see

a. increase in investment

b. decrease in spending

c. increase in savings

d. both increase in investment and increase in savings

3. A decrease in the supply of oil ( an input in every good in an economy because the good had to be transported to the market) will cause which of the following.

a. Increase in aggregate supply

b. decrease in aggregate supply

c. increase in aggregate demand

d. decrease in aggregate demand

4. If an economy develops a technology to produce all goods and services more efficiently (i.e the internet)

a. we would move up the short run aggregate supply curve

b. we would move down the short run aggregate supply curve

c. the long run aggregate supply curve would shift left

d. the long run aggregate supply curve would shift right

5. All of the following would cause a decrease in the aggregate demand except

a. increase in interest rates

b. household wealth falls

c. dollar depreciation relation to foreign currencies

d. increase in tax rates

6. Which of the following would most likely cause stagflation; an outcome with increasing unemployment and inflation

a. decrease in oil prices

b. increase in oil prices

c. decrease in wages

d. decrease in non labor inputs

7. The government decides to increase government spending in an attempt to help move the economy into its long run equilibrium, which of the following should be a concern?

a. crowding out

b. liquidity trap

c. deflation, leading to recession

d. stagflation

8. The rate at which the federal reserve bank loans to banks who cannot meet their reserve is known as

a. discount rate

b. feds fund rate

c. inflation rate

d. nominal interest rate

9. In micro short run equilibrium

a. economy is in a recessionary period

b. economy is in inflationary period

c. either recessionary or inflationary period

d. not enough information

Answer 1

(1) (a)

In general nominal values of these variables are compared.

(2) (a)

Lower interest rate makes borrowing cheaper, thus increasing investment.

(3) (b)

Lower supply of oil will increase price of oil, which will increase input cost for firms, so firms will lower output. Aggregate supply will decrease.

(4) (d)

Improvement in technology will increase potential GDP of the economy, shifting LRAS curve rightward.

NOTE: As per Answering Policy, 1st 4 questions are answered.