The table gives the aggregate demand and aggregate supply schedules for a nation.   21) Based on the table above, equilibrium real GDP is A) $10 trillion. B) $9 trillion. C) $8 trillion. D) $7 trillion. E) $6 trillion. 22) Based on the table above, the equilibrium price level is A) 130. B) 120. C) 110. D) 100. E) 90. 23) Refer to […]

  15.2   Short-Run and Long-Run Phillips Curves   1) The curve that shows the relationship between inflation and unemployment when the economy is at full employment is the A) short-run Phillips curve. B) long-run Phillips curve. C) long-run Okun’s curve. D) aggregate demand curve. E) aggregate supply curve. 2) In the long run, the unemployment rate A) is zero. B) is equal to the natural […]

  61) The shifts of the short-run and long-run Phillips curves in the figure above are the result of A) an increase in the natural unemployment rate. B) a decrease in the natural unemployment rate. C) an increase in the expected inflation rate. D) a decrease in the expected inflation rate. E) an increase in the actual inflation rate. 62) When inflation expectations changed during […]

  49) During financial crisis of 2008-09, the government rescued financial firms and the auto industry. As a result, A) the government’s budget deficit increased, the government’s demand for loanable funds increased and private investment was crowded out. B) real interest rates decreased. C) the supply of loanable funds decreased in response to the government’s budget deficit. D) the private demand for loanable funds increased. […]

  11) If the market in the figure above changes from perfectly competitive to a profit-maximizing single-price monopoly, the amount of the gain in producer surplus is the area ________. A) ABH B) BFGH C) ACG D) BDEH E) ACE The figure above shows a natural monopoly regulated using a marginal cost pricing rule.   12) In the figure above, an A) efficient output results, […]

  11) Which of the following statements is true? A) A decrease in the crime rate increases GDP as people will spend more on security. B) Household production is counted in GDP as it amounts to real production. C) GDP accounting rules do not adjust for production that pollutes the economy. D) GDP growth distributes income equally to people in the economy. 12) Which of […]

  14.3   Expenditure Multipliers   1) The expenditure multiplier explains how a change in A) real GDP leads to a change in autonomous expenditure. B) induced expenditure leads to a change in real GDP. C) autonomous expenditure leads to a change in real GDP. D) real GDP leads to a change in induced expenditure. E) induced expenditure leads to a change in autonomous expenditure.   […]

  Two colleagues—Mathew and Peter—have successfully completed a project and their employer has decided to reward them but in a unique way. Each of them is taken to a separate room and asked to choose if the other colleague is a good teammate or a bad teammate. They are told that if both of them choose bad, they will not get any reward. If both […]

  101) During the 1970s, Canada experienced an unusual pattern of interest rates. During this period A) the nominal interest rate was less than the real interest rate. B) the inflation rate was negative, implying a real interest rate that was higher than the nominal interest rate. C) the inflation rate exceeded the nominal interest rate, implying a negative real interest rate. D) the inflation […]

  41) If perfectly competitive firms are making an economic profit, the economic profit A) attracts entry by more firms, which lowers the price. B) can be earned both in the short run and the long run. C) is less than the normal profit. D) leads to a decrease in market demand. E) generally leads to firms exiting as they seek higher profit in other […]