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Which of the following is a TRUE statement
Unanticipated inflation is a change in the general level of prices that catches most decision makers by surprise
If the unexpected inflation rate is 7 percent and banks are charging a 12 percent money rate of interest, the real rate of interest is
An appreciation in the US dollar would
discourage foreign consumers from buying US goods
The long run equilibrium price level is the price level the economy is expected to reach when the
economy produces its potential output
The actions of borrowers and lenders are coordinated by
the interest rate in the loanable funds market
The three reasons why the aggregate demand curve slopes downward are
the real balance effect, the international substitution effect, and the interest rate effect
Suppose we observe an economy experiencing an economic expansion and high inflation. This means the expansion is attributed to
an anticipated increase in aggregate demand
As the real interest rate in the domestic loanable funds market increases,
the net inflow of capital from abroad will increase
Potential output is the
maximum sustainable output level consistent with the economy's resource base and current institutions
The natural rate of unemployment
is associated with the economy's maximum sustainable output rate
If there is a shortage of loanable funds, then
the quantity of loanable funds demanded is greater than the quantity of loanable funds supplied and the interest rate is below equilibrium
Suppose you received a 3 percent in your nominal wage. Over the year, inflation ran about 6%. Which of the following is true?
your real wage fell
The population of Lebos is 400 million; 20 million unemployed, 230 million hold jobs. What are the rates of the unemployment and labor force?
Unemployment is 8.7%; labor is 92%
The circular flow of income is coordinated by the
goods and services market, resources market, foreign exchange market, and loanable funds market
Which of the following increase aggregate demand in the goods and services market?
increased optimism on the part of consumers and businesses
If a lender expects inflation to be 5%, and after a loan is made, actual inflation is 10%, which of the following is true?
The lender will receive a lower real interest rate than he expected
When workers are unemployed due to a mismatch between their skills and the jobs available, economists call this
Suppose people anticipate inflation will be 4% during the next several years. If the real rate of interest is 5%, the money rate of interest must be
If reduction in stock prices reduces the real wealth of Americans, the
aggregate demand curve will shift to the left
Which of the following would be most likely to cause an increase in current aggregate demand in US?
sharp increase in the value of stocks owned by Americans
Cyclical unemployment is primarily caused by
a general downturn in the economy
How will increased usage of the Internet by employers and employees influence the job search process?
It will make job-related info less costly and, therefore, reduce the rate of unemployment
As prices fall, the wealth of people holding the fixed quantity of money increases, causing them to expand their purchases of goods and services
Which of the following helps explain why the aggregate quantity demanded of goods and services is inversely related to prices within the framework of the AD/AS model
Within the AD/AS framework, the quantity produced and purchased in the goods and services market represents,
real output or real GDP
Older Americans living on a pension and therefore on a fixed income, tend to be made
worse off when prices rises
An anticipated change is an economic occurrence that
is foreseen by most economic participates
Which of the following will most likely occur during the expansionary phase of a business cycle?
Real GDP rises, and unemployment falls
A currency appreciation will be most likely to
reduce net exports and therefore decrease AD
Full employment means which of the following is zero?
Jamal lost his job. He has very specialized skills that are no longer in demand. Jamal's unemployment is BEST classified as,
If the $ price of the English pound goes from $1.50 to $2.00, the $ has
depreciated, and the English will find US goods cheaper
Louise is unemployed dues to a decrease in the demand for workers with a knowledge of a certain word processing language. Ex of
Which of the following accurately indicates the relationship between the short-run and long-run aggregate supply curves?
Short-run: AS sloped upward to the right, long-run: vertical
Which of the following is most indicative of a recession?
A decline in real GDP
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