30 MCQ In the long run, an increase in the money supply will cause output

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Question 1 of 30 3.3334 Points
In the long run, an increase in the money supply will cause output:

A. to decrease.
B. to remain the same.
C. to fluctuate up and down.
D. to increase.
Question 2 of 30 3.3334 Points
Sticky prices are a result of:

A. labor union influence.
B. economic coordination problems.
C. lack of coordination between auction prices and custom prices.
D. government regulation of the economy.
Question 3 of 30 3.3334 Points
A decrease in the money supply will cause output:

A. to increase in the short run; increase in the long run.
B. to decrease in the short run; not change in the long run.
C. to increase in the short run, decrease in the long run.
D. to decrease in the short run; decrease in the long run.
Question 4 of 30 3.3334 Points
An example of a good/service that has custom prices is:

A. oil.
B. gasoline.
C. steel rods.
D. labor.
Question 5 of 30 3.3334 Points
In the long run, the aggregate supply curve is:

A. upward sloping.
B. horizontal at the full employment level of GDP.
C. vertical at the full employment level of GDP.
D. downward sloping.
Question 6 of 30 3.3334 Points
The aggregate demand curve:

A. slopes upward.
B. is horizontal.
C. may slope upward or downward.
D. slopes downward.
Question 7 of 30 3.3334 Points
________ is a curve that shows the relationship between the price level and the quantity of real GDP demanded.

A. The aggregate demand curve
B. The product demand curve
C. The market demand curve
D. The aggregate supply curve
Question 8 of 30 3.3334 Points
Sticky prices cause an economic coordination problem for the economy because:

A. they confuse the signal system that brings together consumers and producers.
B. they increase the transaction costs in open market auctions.
C. they confuse the system of custom prices.
D. they are likely to cause the CPI to understate the actual increase in the cost of living.
Question 9 of 30 3.3334 Points
The aggregate supply curve depicts the relationship between:

A. the unemployment rate and the total quantity of goods and services that firms supply.
B. the cost of inputs and the total quantity of goods and services that firms supply.
C. the level of prices and the total quantity of goods and services that firms supply.
D. the cost of labor and the total quantity of goods and services that firms supply.
Question 10 of 30 3.3334 Points
If prices are slow to adjust, then it is possible that:

A. some markets will not be in equilibrium.
B. there will be a demand surplus.
C. there will be a supply shortage.
D. all of the above are true.
Question 11 of 30 3.3334 Points
When the general price level rises:

A. investment falls as a result of the consumption link effect.
B. consumption increases as a result of the multiplier effect.
C. consumption falls as a result of the wealth effect.
D. investment rises as a result of the wealth effect.
Question 12 of 30 3.3334 Points
Prices that do not always adjust rapidly to maintain equality between quantity supplied and quantity demanded are known as:

A. sticky prices.
B. regulatory prices.
C. market prices.
D. fixed prices.
Question 13 of 30 3.3334 Points
The aggregate supply curve in the short run is different from the aggregate supply curve in the long run because of:

A. the existence of sticky prices in the short run.
B. the recurring nature of supply shocks.
C. the crowding out effect.
D. the wealth effect.
Question 14 of 30 3.3334 Points
An increase in the price level results in a decline in aggregate demand because people’s “net worth” decreases and will spend less. This effect is called the:

A. trade effect.
B. interest rate effect.
C. income effect.
D. wealth effect.
Question 15 of 30 3.3334 Points
In the short run, an increase in the money supply will cause output:

A. to increase.
B. to decrease.
C. to become zero.
D. to remain the same.
Question 16 of 30 3.3334 Points
If Say’s Law holds true, then if the economy produced $10 trillion this year:

A. production next year has to be larger than $10 trillion.
B. the demand for goods and services also equals $10 trillion.
C. production next year has to be smaller than $10 trillion.
D. the demand for goods and services must be less than $10 trillion.
Question 17 of 30 3.3334 Points
Which of the following curves is drawn as a vertical line?

A. the short-run aggregate supply curve
B. the short-run aggregate demand curve
C. the long-run aggregate demand curve
D. the long-run aggregate supply curve
Question 18 of 30 3.3334 Points
If Say’s Law holds true, then if households save more of their incomes:

A. the economy will experience a recession.
B. the government will increase taxes on savings to discourage it.
C. government spending will increase.
D. firms will increase spending by the same amount.
Question 19 of 30 3.3334 Points
In the short run, which of the following determines the level of real GDP?

A. stock prices
B. prices
C. wages
D. aggregate demand
Question 20 of 30 3.3334 Points
In macroeconomics, the “short run” denotes the time period:

A. less than one year.
B. within the same fiscal year.
C. when some prices are sticky.
D. when all prices fully adjust.
Question 21 of 30 3.3334 Points
Say’s Law states that:

A. supply creates its own demand.
B. economic markets are unstable.
C. demand always creates its own supply.
D. people are motivated by self-interest.
Question 22 of 30 3.3334 Points
Monetary neutrality implies that a decrease in the money supply will:

A. increase real GDP.
B. not affect unemployment.
C. decrease real interest rates.
D. not affect the price level.
Question 23 of 30 3.3334 Points
The view that the labor market quickly adjusts to reach equilibrium is consistent with the assumption of ________ aggregate supply curve.

A. a vertical
B. a downward-sloping
C. an upward-sloping
D. a horizontal
Question 24 of 30 3.3334 Points
Which of the following will cause investments to decrease?

A. a decrease in the price level
B. a decrease in both income and the price level
C. a decrease in the level of income
D. an increase in the price level
Question 25 of 30 3.3334 Points
Classical economists believed that:

A. the government could lift the economy out of recession.
B. recessions were not self-correcting.
C. unemployment could not persist for extended periods of time.
D. government could intervene in the economy and increase the level of output and employment.
Question 26 of 30 3.3334 Points
Suppose the economy is at full employment. An increase in the money supply will ________ in the short run and ________ in the long run.

A. increase investment, leave investment unchanged
B. leave investment unchanged, leave investment unchanged
C. increase investment, increase investment
D. decrease investment, decrease investment
Question 27 of 30 3.3334 Points
If the equilibrium output is below potential output:

A. unemployment is constant.
B. the price level decreases.
C. aggregate demand increases.
D. inflation usually rises.
Question 28 of 30 3.3334 Points
One implication of Say’s Law is that:

A. there will always be a recession, as not all goods in the economy will be purchased.
B. there is no recession, as all goods produced in the economy will be purchased.
C. inflation will always exist, as all goods in the economy will be purchased.
D. unemployment will always persist.
Question 29 of 30 3.3334 Points
Assuming that the economy is in the long run equilibrium at full employment, an increase in the money supply will cause a:

A. proportional increase in the price level and no change in real GDP.
B. proportional increase in the price level and a reduction in real GDP.
C. proportional increase in the price level and an increase in real GDP.
D. proportional reduction in the price level and an increase in real GDP.
Question 30 of 30 3.3334 Points
Monetary neutrality implies that an increase in the money supply will:

A. increase the price level.
B. increase real interest rates.
C. lower real GDP.
D. lower the unemployment rate.

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