ECO 3203 MACROECONOMICS EXAM 2 CHAPTER 9 SH-R TO MED-R

92) The Phillips curve shows that when the unemployment rate is lower than the natural rate,

A) inflation is higher than expected.

B) inflation is lower than expected.

C) policy rate is higher than expected.

D) policy rate is lower than expected

A) inflation is higher than expected.

93) Okun's law shows that when the unemployment rate is above the natural rate,

A) inflation is higher than expected.

B) inflation is lower than expected.

C) output is below potential.

D) output is above potential

C) output is below potential.

94) Okun's law shows that when the unemployment rate is below the natural rate,

A) inflation is higher than expected.

B) inflation is lower than expected.

C) output is below potential.

D) output is above potential

D) output is above potential

95) Disposable income equals

A) income minus saving.

B) income minus both saving and taxes.

C) consumption minus taxes.

D) the sum of consumption and saving.

E) none of these

D) the sum of consumption and saving.

96) In the IS-LM-PC model, which of the following is assumed to be exogenous?

A) G

B) C

C) I

D) Y

A) G

97) In the IS-LM-PC model, LM curve is

A) flat.

B) upward sloping.

C) downward sloping.

D) vertical

A) flat.

98) The change in the unemployment rate is approximately equal to

A) the negative of the growth rate of output.

B) the negative policy rate.

C) the negative inflation rate.

D) the negative of the growth rate of money supply

A) the negative of the growth rate of output.

99) Empirically output growth 1% above normal for one year leads to a ________ increase in the employment rate.

A) 0.6%

B) 0.7%

C) 0.8%

D) 0.5%

A) 0.6%

100) The natural rate of interest is not

A) zero.

B) the neutral rate of interest.

C) Wicksellian rate of interest.

D) associated with the natural rate of unemployment.

A) zero.

101) If the output is too high, to achieve the medium run equilibrium, the central bank will

A) increases policy rate.

B) reduces policy rate.

C) increase money supply.

D) increases inflation rate.

A) increases policy rate.

102) If the output is too low, to achieve the medium run equilibrium, the central bank will

A) increases policy rate.

B) reduces policy rate.

C) increase money supply.

D) increases inflation rate.

B) reduces policy rate.

103) The zero lower bound refers to the situation that

A) the lowest the central bank can decrease the nominal policy rate is 0%.

B) real interest rate is 0%.

C) inflation rate is 0%.

D) risk premium is 0%

A) the lowest the central bank can decrease the nominal policy rate is 0%.

104) When the policy rate increases,

A) IS curve does not change.

B) IS curve shifts to the right.

C) IS curve shifts to the left.

D) LM curve shifts upward.

E) LM curve shifts downward

A) IS curve does not change.

105) What is the major reason for oil price to go up in the 1970s?

A) formation of the OPEC

B) fast of growth of emerging economies

C) new energy

D) higher demand from the US

A) formation of the OPEC

106) From 1970 to the mid-1990s, the relative price of crude petroleum

A) steadily increased.

B) steadily decreased.

C) increased dramatically, then decreased dramatically.

D) decreased dramatically, then increased dramatically.

E) remained more or less the same.

C) increased dramatically, then decreased dramatically.

107) What is the major reason for oil price to go up in the 2000s?

A) formation of the OPEC

B) fast of growth of emerging economies

C) new energy

D) higher demand from the US

B) fast of growth of emerging economies

108) An increase in the price of oil will cause which of the following in the medium run?

A) no change in the level of output

B) no change in the price level

C) an increase in the unemployment rate

D) a reduction in the interest rate

E) none of these

C) an increase in the unemployment rate

109) For this question, assume that the economy is initially operating at the natural level of output. An increase in the price of oil will

cause which of the following in the medium run?

A) a reduction in the interest rate

B) a reduction in output and an increase in the aggregate price level

C) a reduction in output and a reduction in the interest rate

D) a reduction in unemployment, an increase in the nominal wage and an increase in the aggregate price level

E) a reduction in the aggregate price level and no change in output

B) a reduction in output and an increase in the aggregate price level

110) For this question, assume that the economy is initially operating at the natural level of output. A reduction in consumer confidence

will cause

A) an increase in the real wage in the medium run.

B) a reduction in the real wage in the medium run.

C) no change in the real wage in the medium run.

D) ambiguous effects on the real wage in the medium run

C) no change in the real wage in the medium run.

111) For this question, assume that the economy is initially operating at the natural level of output. A reduction in taxes will cause

A) an increase in the real wage in the medium run.

B) a reduction in the real wage in the medium run.

C) no change in the nominal wage in the medium run.

D) ambiguous effects on the real wage in the medium run.

E) none of these

E) none of these

112) For this question, assume that the economy is initially operating at the natural level of output. An increase in unemployment

benefits will cause

A) an increase in the real wage in the medium run.

B) a reduction in the real wage in the medium run.

C) no change in the real wage in the medium run.

D) ambiguous effects on the real wage in the medium run.

C) no change in the real wage in the medium run.

113) For this question, assume that the economy is initially operating at the natural level of output. A monetary expansion will cause

A) no change in the real wage in the medium run.

B) an increase in investment in the medium run.

C) a reduction in the interest rate in the medium run.

D) no change in the nominal wage in the medium run

A) no change in the real wage in the medium run.

114) For this question, assume that the economy is initially operating at the natural level of output. An increase in consumer confidence

will cause

A) a reduction in the real wage in the medium run.

B) an increase in the real wage in the medium run.

C) no change in the real wage in the medium run.

D) ambiguous effects on the real wage in the medium run

C) no change in the real wage in the medium run.

115) which of the following is not an example of a shock to the economy?

A) A firm shuts down.

B) increase in oil price

C) sudden decline in consumer confidence

D) sharp drop in investment spending

A) A firm shuts down.