ECON 102
Spring 2006
Dr. Ebru Guven Solakoglu
Fatih University
Name:
Student No:
Honor Pledge: I have neither given nor received an unauthorized aid on this assignment.
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QUIZ 2
Part 1: Circle one answer for each question (8 pts each)
1.
Which of the following will cause a decrease in aggregate quantity supplied?
a. An increase in worker productivity
b. A decrease in the prices of inputs
c. A lower price level
d. Technological changes that lower production costs
e. A decrease in the prices of inputs
2.
The nation is in a recession. As a result, the current macroeconomic equilibrium occurs along the flat
portion of the aggregate supply curve. A moderate increase in aggregate demand is likely to:
a. cause the price level to fall.
b. increase equilibrium real GDP with little effect on the price level.
c. decrease employment.
d. increase the equilibrium price level with little effect on equilibrium real GDP.
3.
Consumers decide to increase their level of saving to repay a larger portion of household debt. What
happens?
a. Aggregate supply decreases, causing equilibrium GDP to decline
b. Aggregate demand increases, causing the recessionary GDP gap to diminish
c. Aggregate supply and aggregate demand both decrease, causing equilibrium GDP to decline
d. Aggregate demand declines, resulting in lower levels of real output and employment
e. Aggregate demand shifts to the right, causing a higher equilibrium real GDP
4.
In segment 1 of the aggregate supply curve, the economy is:
a. overheated.
b. close to full employment.
c. operating well below potential with considerable cyclical unemployment.
d. operating above full employment.
5.
If both aggregate supply and aggregate demand simultaneously increase
a. equilibrium real GDP will increase but we cannot predict what will happen to the price level.
b. the price level and equilibrium real GDP will both decline.
c. the price level and equilibrium real GDP will both remain unchanged.
d. the price level will increase but we cannot predict what will happen to equilibrium real GDP.
e. the price level will increase but equilibrium real GDP will decline.
6.
A recessionary GDP gap occurs when:
a. equilibrium real GDP exceeds full-employment real GDP.
b. potential real GDP exceeds full-employment real GDP.
c. the price level has not caught up to the equilibrium level.
d. nominal GDP exceeds real GDP.
e. full-employment real GDP exceeds equilibrium real GDP.
7.
During the late 1960s when the United States was engaged in the Vietnam war, the economy operated
with:
a. an inflationary GDP gap.
b. a foreign exchange deficit.
c. a recessionary GDP gap.
d. a trade deficit.
8.
Suppose the U. S. economy is in macroeconomic equilibrium at a level of real GDP that is below
potential real GDP. According to the classical model of macroeconomic equilibrium which of the
following is true?
a. Nominal wages will rise thereby decreasing aggregate supply to move the economy to full
employment.
b. Nominal wages will decline thereby increasing aggregate supply to move the economy to full
employment.
c. Nominal wages will rise thereby decreasing aggregate supply and causing both unemployment
and the price level to increase.
d. The only way to restore full employment is to increase aggregate demand.
9.
Suppose the graph above shows the current aggregate demand and aggregate supply curves for the economy of
Lithuania. Given the current equilibrium level of real GDP you can conclude that
a. there is cyclical unemployment in the economy.
b. real GDP will decline and the price level will rise as a result of increases in nominal wages that are
likely to occur during the year.
c. real GDP will increase and the price level will fall as a result of declines in nominal wages that are
likely to occur during the year.
d. the economy is likely to remain in equilibrium at the current level of real GDP and current price
level during the year.
Part2:
10. "Government efforts to increase productivity and improve technology can offset inflationary pressures."
Analyze. (8)
11. "The quality and education of younger workers has declined." Discuss the macroeconomic
implications. (10)
12. In the middle of the 80s oil prices decreased and unions lost some of their power. Analyze. (10)