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The University of Adelaide - ECON 7200quiz 9 . Graded A and Reviewed

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The University of Adelaide - ECON 7200quiz 9
An economic contraction can cause the unemployment rate to ________ and
the inflation rate to ________.
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On the 45° line diagram, the 45° line shows points such that:
On the 45° line diagram, for points that lie above the 45° line:
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Which of the following will shift the aggregate demand curve to the
left, ceteris paribus?
Stagflation occurs when:
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Refer to Figure 14.1 for the following question(s).
Suppose the economy is at point C in Figure 14.1. If government spending
decreases in the economy, where will the eventual long-run equilibrium be?
Suppose the economy is at point A in Figure 14.1. If consumer spending increases in the
economy, where will the eventual long-run equilibrium be?
In Figure 14.1, which of the points are possible long-run equilibriums?
Which of the points in Figure 14.1 are possible short-run equilibriums but not long-run
equilibriums?
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As the economy nears the end of an expansion, interest rates usually
________ and wages rise more ________ than prices.
If aggregate planned expenditures are less than total production:
The following question(s) refer(s) to Figure 14A2.1.
How does a decrease in government spending affect the aggregate
expenditure line in Figure 14A2.1?
In Figure 14A2.1, if the economy is at point L, what will happen?
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Along a short-run aggregate supply curve, a decrease in the price level
causes:
Just as real GDP ________ potential GDP in the long run, the
unemployment rate ________ the natural rate of unemployment in the
long run.

Spending on the national defence force is categorised as government purchases.
How do increases in spending on defence affect the aggregate demand curve?
If Australia's economic growth rate is slower relative to other countries'
economic growth rates, this will:
A decrease in the price level results in a(n) ________ in the quantity of real
GDP demanded because a lower price level ________ consumption,
investment, and net exports.
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The wealth effect occurs when the price level falls causing the:
Spending on the national defence force is categorised as government
purchases. How do increases in spending on defence affect the aggregate
demand curve?
Which of the following explains why the rate of unemployment continues to
rise once a recession is over?
Policy-makers in the 1960s believed that there was a structural relationship
between unemployment and inflation. This meant that the cost of lower
unemployment was a:
After an unexpected increase in the price of oil, the long-run adjustment
________ the price level and ________ the unemployment rate as they return
to their original levels.
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Suppose that the nominal wage, the expected and actual price levels, and the
expected and actual inflation rates for a hypothetical economy in 2013 are
presented in the following table.
Given the data, the economy is at an unemployment rate:
Suppose that the nominal wage, the expected and actual price levels, and the
expected and actual inflation rates for a hypothetical economy in 2014 are
presented in the following table.
National
Wage
Expected Price Level,
Inflation
Actual Price Level, Inflation
$25
Expected P2014 = 106
Actual P2014 = 102
Expected Inflation = 6%
Actual Inflation = 2%
Given the data, we know that:
The automatic mechanism ________ the price level in the case of ________
and ________ the price level in the case of ________.
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Refer to Figure 14.2 for the following question(s).
In Figure 14.2, given the economy is at point A in year 1 and point B in year 2, what
is the rate of increase in the price level (the inflation rate) between those two years?
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If the Australian dollar increases in value relative to other currencies, how
does this affect the aggregate demand curve, ceteris paribus?
When the price level in Australia rises relative to the price level of other
countries, ceteris paribus, ________ will rise, ________ will fall, and
________ will fall.
Suppose the economy is at full employment and firms become more optimistic
about the future profitability of new investment. Which of the following will
happen in the short run?
An increase in the price level will:
If workers fail to believe that rising inflation will eventually result in
comparable increases in wages, but firms do understand this, then there is a:
Why might the short-run aggregate supply curve shift to the right in the long
run, following a decrease in aggregate demand?
If the economy is currently in equilibrium at a level of GDP that is below
potential GDP, which of the following would move the economy back to
potential GDP?
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Workers expect the rate of inflation to fall from 4% to 1% next year. As a
result, this should:
If planned aggregate expenditures are below potential GDP, and planned
aggregate expenditures equal GDP then:
The following question(s) refer(s) to Figure 14A2.2.
If the economy is currently at point K in Figure 14A2.2, which of the following could
cause it to move to point N?
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If the economy receives an influx of new workers from immigration the:
If technological change occurs in the economy the:
Because of a supply shock, in the short run:
During an expansion, how do inflation and unemployment typically change?
Milton Friedman argued that there is a ________ trade-off between
unemployment and inflation, and this trade-off comes from ________ inflation.
The experience of recessions in Australia has shown that:
In the dynamic aggregate demand and aggregate supply model, the rate of
inflation will increase if:
According to Friedman and Phelps, if actual inflation is greater than expected
inflation:
How do changes in income tax policies affect aggregate demand?
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The long-run adjustment to a supply shock results in:
Which of the following is not a reason why the wages of workers and the prices
of inputs rise more slowly than the prices of final goods and services?
Which of the following correctly describes the automatic mechanism through
which the economy adjusts to long-run equilibrium?
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A recession is often defined as:
Changes in the price level:
Refer to Figure 14A1.1 for the following question(s).
Suppose that the economy is at point A on the Phillips curve in Figure 14A1.1. If the
aggregate demand curve shifts to the right by more than the long-run aggregate
supply curve does, then the economy will:
Suppose that the economy is at point A on the Phillips curve in Figure 14A1.1. If the
aggregate demand curve shifts to the right by less than the long-run aggregate supply,
then the economy will:
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Both Milton Friedman and Edmund Phelps argued:
________ of unemployment during ________ make it easier for workers to
________ wages.
When a recession ends:
Which of the following will not shift the short-run aggregate supply curve?
Which of the following is not an assumption made by the dynamic model of
aggregate demand and aggregate supply?
When the price of oil rises unexpectedly, the price level ________ and the
unemployment rate ________ in the short run.
If aggregate planned expenditures are greater than total production:
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Suppose the economy is at a short-run equilibrium GDP that lies above
potential GDP. Which of the following will occur because of the automatic
mechanism adjusting the economy back to potential GDP?
The interest-rate effect is described as an increase in the price level which:
The recessions experienced by many countries between 2007-2009 caused a
reduction in German exports and reduction in net exports for Germany,
shifting the German aggregate demand curve. Which of the following factors
would also cause a reduction in Germany's net exports and shift Germany's
aggregate demand curve?
An increase in aggregate demand causes an increase in ________ only in the
short run, but causes an increase in ________ in both the short run and the long
run.
The impact of a natural disaster on consumers in the economy can make them
very pessimistic about their future incomes. How would an increase in
pessimism affect the aggregate demand curve?
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Total motor vehicle sales in Australia:
The consumption function describes the relationship between:
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