ECN 211 Ballinger - ASU West Exam Questions With Correct Answers.

ECN 211 Ballinger - ASU West Exam Questions
With Correct Answers

If |there |is |crowding |out... |Fiscal |expansion |(Lowers/Raises) |interest |rates, |which
|(Increases/Reduces) |the |net |increase |in |aggregate |demand |- |CORRECT |ANSWER✔✔-Raises |& |


Reduces



According |to |the |theory |of |rational |expectations, |if |households |and |firms |believe |the |Federal |
Reserve's |contractionary |policy |to |be |credible |and |revise |expectations |to |expect |a |lower |
inflation |rate |- |CORRECT |ANSWER✔✔-Inflation |will |fall |and |there |would |be |less |
unemployment |than |the |traditional |sacrifice |ratio |predicts



Which |of |the |following |would |cause |a |shift |in |the |short-run |aggregate-supply |curve, |but |no |
change |in |the |long-run |aggregate-supply |curve? |- |CORRECT |ANSWER✔✔-A |change |in |price |
expectation



Question |6. |According |to |the |theory |of |rational |expectations, |if |households |and |firms |believe |
the |Federal |Reserve's |contractionary |policy |to |be |credible |and |revise |expectations |to |expect |a |
lower |inflation |rate, |then |- |CORRECT |ANSWER✔✔-Inflation |will |fall |and |there |would |be |less |
unemployment |than |the |traditional |sacrifice |ratio |predicts



8. |Would |the |federal |government |cutting |taxes |to |stimulate |the |economy |be |classified |as |fiscal
|policy? |- |CORRECT |ANSWER✔✔-Yes




9. |What |would |a |decrease |in |the |price |level |do |to |the |short-run |aggregate |supply |curve? |- |
CORRECT |ANSWER✔✔-Shift |the |short-run |supply |curve |to |the |right

, 11. |Under |the |assumptions |of |the |fisher |effect |and |monetary |neutrality, |if |the |money |supply |
growth |rate |falls |then |- |CORRECT |ANSWER✔✔-The |nominal |interest |rate |falls, |but |the |real |
interest |rate |does |not.



12. |The |costs |of |inflation |include: |- |CORRECT |ANSWER✔✔-Shoeleather |costs, |Menu |costs, |
Misallocation |of |resources |from |relative |price |variability



13. |What |is |the |signal |to |allocate |resources |in |a |market |economy? |- |CORRECT |ANSWER✔✔-
Prices



14. |Inflation |tax |refers |to |- |CORRECT |ANSWER✔✔-The |revenue |the |government |raises |by |
printing |money



15. |If |the |economy |experiences |technological |advancement, |- |CORRECT |ANSWER✔✔-The |
long-run |aggregate |supply |curve |will |shift |to |the |right



16. |The |long-run |aggregate |supply |curve |is |vertical, |because |- |CORRECT |ANSWER✔✔-The |price
|level |does |not |affect |the |long-run |determinants |of |real |GDP




18. |Which |of |the |following |are |reasons |for |the |downward |slope |of |the |aggregate |demand |
curve? |The |wealth |effect, |the |interest |rate |effect, |the |exchange |rate |effect, |or |all |of |the |
above? |- |CORRECT |ANSWER✔✔-All |of |the |above



19. |According |to |the |interest |rate |effect, |as |the |price |level |(increases/decreases), |Interest |rates
|(increase/decrease), |and |investment |(Increases/decreases) |- |CORRECT |ANSWER✔✔-Increases,


|interest |rates |increase, |and |investment |decreases




21. |Policymakers |face |a |trade-off |between |unemployment |and |inflation |(in |the |long |run/In |the
|short |run/In |both/In |neither) |- |CORRECT |ANSWER✔✔-In |the |short |run