Chapter 33 Study Guide

Multiple Choice
1. The following are groupings of GDP growth rates, unemployment rates, and inflation rates. Economists would be shocked to see most of these groupings in the U. S. Which grouping of GDP growth rates, unemployment rates, and inflation rates is realistic? 2. Which part of real GDP fluctuates most over the course of the business cycle? 3. Recessions come at 4. If the dollar appreciates because of speculation or government policy
 * a. 5 percent, 1 percent, 5 percent
 * b. 3 percent, 5 percent, 3 percent
 * c. 5 percent, 5 percent, 5 percent
 * d. 2 percent, 7 percent, 2 percent
 * e. 8 percent, 3 percent, 7 percent.
 * a. consumption expenditures
 * b. government expenditures
 * c. investment expenditures
 * d. net exports
 * e. net imports
 * a. regular intervals. During recessions, consumption spending falls relatively more than investment spending.
 * b. regular intervals. During recessions, investment spending falls relatively more than consumption spending.
 * c. irregular intervals. During recessions, consumption spending falls relatively more than investment spending.
 * d. irregular intervals. During recessions, investment spending falls relatively more than consumption spending.
 * e. irregular intervals. During recessions, investment spending falls by approximately the same amount as consumption spending and government spending.
 * a. aggregate demand shifts left. If other countries experience recessions, aggregate demand in the United States also shifts left.
 * b. aggregate demand shifts left. If other countries experience recessions, aggregate demand in the United States shifts right.
 * c. aggregate demand shifts right. If other countries experience recessions, aggregate demand in the United States shifts left.
 * d. aggregate demand shifts right. If other countries experience recessions, aggregate demand in the United States also shifts right.
 * e. aggregate demand shifts right. If other countries experience inflation, aggregate demand in the United States also shifts right.

5. Refer to Figure 33-1. The appearance of the long-run aggregate-supply (LRAS) curve 6. Refer to Figure 33-1. The shift of the short-run aggregate-supply curve from AS1 to AS2
 * a. is inconsistent with the concept of counter-cyclical monetary policy.
 * b. is consistent with the idea that point A represents a long-run equilibrium but not short-run equilibrium when the relevant short-run aggregate-supply curve is AS1.
 * c. indicates that Y1 is the natural rate of output.
 * d. indicates that Y2 is the natural rate of output.
 * e. is inconsistent with the concept of counter-fiscal policy.
 * a. could be caused by a decrease in the availability of oil.
 * b. could be caused by a decrease in the expected price level.
 * c. causes the economy to experience an increase in the unemployment rate.
 * d. causes the economy to experience stagflation.
 * e. causes the economy to experience increase in the inflation rate.

7. Refer to Figure 33-2. An increase in the money supply would move the economy from C to 8. Refer to Figure 33-2. If the economy is at A and there is a fall in aggregate demand then A 9. Refer to Figure 33-2. The economy would be moving to long-run equilibrium if it started at 10. Refer to Figure 33-2. In the short run, a favorable shift in aggregate supply would move the economy from 11. Refer to Figure 33-2. If the economy is in long-run equilibrium, then an adverse shift in aggregate supply would move the economy from 12. Refer to Figure 33-2. If the economy starts at A and moves to D in the short run, the economy
 * a. B in the short run and the long run.
 * b. D in the short run and the long run.
 * c. B in the short run and A in the long run.
 * d. D in the short run and C in the long run.
 * e. A in the short run and D in the long run.
 * a. in the short run stays at A.
 * b. in the short run moves to B.
 * c. in the short run moves to C.
 * d. in the short run moves to D.
 * e. in the long run moves to B.
 * a. A and moved to B.
 * b. C and moved to B.
 * c. D and moved to C.
 * d. C and moved to D.
 * e. A and moved to D.
 * a. A to B.
 * b. B to C.
 * c. C to D.
 * d. D to A.
 * e. B to D.
 * a. A to B.
 * b. C to D.
 * c. B to A.
 * d. D to C.
 * e. C to B.
 * a. moves to A in the long run.
 * b. moves to B in the long run.
 * c. moves to C in the long run.
 * d. stays at D in the long run.
 * e. moves to either B or D in the long run.

Free Response
1. Make a list of things that would shift the aggregate-demand curve to the right. Make another list of things that would shift the long-run aggregate-supply curve to the right.

2. Suppose that a decrease in the demand for goods and services pushes the economy into recession. What happens to the price level? If the government does nothing, what ensures that the economy will eventually get back to the natural rate of out