AP Econ
CH 35 Review/Warm up
1. Comparing the short-run and long-run Phillips curve suggests that:
A. There is both a short-run and long-run tradeoff between inflation and unemployment
B. There is neither a short-run nor a long-run tradeoff between inflation and unemployment
C. There is a short-run but not a long-run tradeoff between inflation and unemployment
D. There is a long-run but not a short-run tradeoff between inflation and unemployment
2. In the short run, demand-pull inflation causes _________
A. Price level rises and real output drops
B. Price level drops and real output drops
C. Price level remains constant and real output rises
D. Price level rises and real output rises
3. Cost-Push inflation ______ the price level and ______ the real output.
A. Raises, lowers
B. Raises
C. Lowers, raises
D. Raises, doesn’t change
4. Which of the following could cause simultaneous increase in inflation and unemployment?
A.
B.
C.
D.
E.
A decrease in government spending
A decrease in the money supply
A decrease in the velocity of money
An increase in inflationary expectations
An increase in the overall level of productivity
5. In the extended aggregate demand-aggregate supply model:
A. Long-run equilibrium occurs wherever the aggregate demand curve intersects the short-run
aggregate supply curve
B. The long-run aggregate supply curve is horizontal
C. The price level is the same regardless of the location of the aggregate demand curve
D. Long-run equilibrium occurs at the intersection of the aggregate demand curve, the short-run
aggregate supply curve, and the long run aggregate supply
6. The long-run aggregate supply curve is vertical:
A. Because the rate of inflation is steady in the long run
B. Because resource prices eventually rise and fall with product prices
C. Because product prices always increase at a faster rate than resource prices
D. Only when the money supply increases at the same rate as real GDP
7. The short-run aggregate supply curve is upsloping because:
A. Of the interest rate effect
B. Higher price levels create incentives to expand output when resource prices are unresponsive to
price level changes
C. Of the net export effect
D. Higher price levels create an expectation among producers of still higher price levels
8. Which of the following is associated with cost-push inflation?
A. Shift right of aggregate demand
B. Shift left of aggregate supply
C. Decrease of equilibrium price level
D. Shift in long run AS
9. In order to temporarily reduce the unemployment rate below its natural rate, the government could:
A. Decrease the rate of inflation below peoples' expectations
B. Reduce both the trade deficit and the budget deficit
C. Raise marginal tax rates and cut wasteful government spending
D. Increase the rate of inflation above peoples' expectations
10. If aggregate demand increases at a faster rate than long-run aggregate supply:
A.
The economy will enter a recession
B.
The production possibilities curve will shift to the left
C.
There will be upward pressure on the price level
D.
The Fed will be tempted to lower interest rates