Ag Econ 1042
Quiz 7, 30 points
April 14, 2010
Name ____________KEY____________________
8 a.m. Section
True/False – one point each
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F 1. The unemployment rate is typically understated at the end of a recession because of
fewer discouraged workers.
F 2. Inflation is higher in China than the U.S.
F 3. Inflation tends to worsen during recessions.
F 4. We measure inflation using the CPI.
F 5. The catastrophe in Japan is reducing the costs of some inputs in producing a wide
array of products that have electronic components.
F 6. In the U.S. today, full employment corresponds roughly with an unemployment rate
of approximately 5%.
F 7. Structural unemployment is necessary to allow firms, industries or entire economies
to become more efficient.
F 8. Higher commodity and energy prices are rapidly increasing aggregate supply.
F 9. If both AD and AS increase we will certainly have an inflation problem.
F 10. If increased government spending during and immediately following the recession
was effective, private spending and hiring should increase now due to the multiplier
effect.
Multiple choice – two points each
__D___ 11. Expansionary fiscal policy
a) Consists of decreasing government spending
b) Consists of increasing taxes
c) Corrects problems associated with business cycle expansion
d) Should increase aggregate demand
e) None of the above
__E___ 12. Money paid out of Social Security goes to
a) Retired workers
b) Retired workers and their spouses
c) Disabled workers
d) Those who have paid into Social Security or their dependents
e) All of the above
__D___ 13. Which of the following is not a Social Security solution
a) Reduce benefits
b) Raise the retirement age
c) Create private accounts
d) Increase payments to the rich
e) Increase Social Security tax receipts
TURN THE QUIZ OVER
__B___ 14. Stabilization policy consisting of reduced government spending and/or increased
taxes is
a) Expansionary fiscal policy
b) Contractionary fiscal policy
c) Monetary policy
d) Government debt policy
e) None of the above
__A___ 15. Madeline graduates and starts looking for a job. She is
a) Frictionally unemployed
b) Structurally unemployed
c) Cyclically unemployed
d) Seasonally unemployed
e) All of the above
Short answers are valued at five points each
16. Diagram a situation where deflation results.
PL
AS
PL0
PL1
AD1
0
Q
Q0
AD
rGDP
17. Show with a diagram how bad weather in many countries is affecting agricultural
commodity prices in the U.S.
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S
P1
P0
D
0
Q1 Q0
Q