Quiz 4

(1)The business cycles occur in the time horizon of:

  1. Three to five years
  2. Five to ten years
  3. Ten to fifteen years
  4. Fifteen to twenty years

(2)The main reason of output fluctuation in the short run is:

  1. Money supply does not change in the face of changes in demand and supply
  2. Nominal wages are rigid in the face of changes in demand and supply
  3. Prices are rigid in the face of changes in demand and supply
  4. Both (b) and (c)

(3)A 5-percent reduction in the money supply will, according to most economists, reduce prices 5-percent:

  1. In both the short and long run
  2. In neither the short nor long run
  3. In the short run but lead to unemployment in the long run
  4. In the long run but lead to unemployment in the short run

(4)Along an aggregate demand curve, which of the following are held constant :

  1. Real output and prices
  2. Nominal output and velocity
  3. The money supply and real output
  4. The money supply and velocity

(5)According to the quantity equation, if the velocity of money and the supply of money are fixed, and the price level increases, then the quantity of goods and services purchased:

  1. Increases
  2. Decreases
  3. Does not change
  4. May either increase or decrease

(6)If the long-run aggregate supply curve is vertical, then changes in aggregate demand affect:

  1. Neither prices nor level output
  2. Both prices and level of output
  3. Level of output but not prices
  4. Prices but not level of output

(7)If the short-run aggregate supply curve is horizontal, then changes in aggregate demand affect:

  1. Level of prices but not output
  2. Level of output but not prices
  3. Both prices and level of output
  4. Neither prices nor level of output

(8)In the face of an adverse supply shock, an accommodating monetary policy would result in:

  1. Permanently higher output level
  2. Permanently lower price level
  3. Permanently lower output level
  4. Permanently higher price level

(9)Which of the following is an example of a demand shock:

  1. A large oil price increase
  2. The introduction and greater availability of credit cards
  3. A drought that destroys agricultural crops
  4. Union obtain a substantial wage increase

(10)Stabilization policy:

  1. Is generally ineffective
  2. Always succeeds in keeping output and employment at their natural rates
  3. Aims at keeping output and employment at their natural rates
  4. Does more harm than good