The sticky-wage theory of the short-run aggregate supply curve
The sticky-wage theory of the short-run aggregate supply curve states that when the price level rises more than expected:a. production is more profitable and employment rises.b. production is more profitable and employment falls.c. production is less profitable and employment rises.d. production is less profitable and employment falls.2.Which of the following would cause stagflation?a. Rising government expendituresb. Rising oil pricesc. A falling money supplyd. Technical progress3.Which of the following is upward sloping?a. Both the long-run Phillips curve and the long-run aggregate supply curveb. Neither the long-run Phillips curve nor the long-run aggregate supply curvec. The long-run Phillips curve, but not the long-run aggregate supply curved. The short-run Phillips curve, but not the long-run aggregate supply curve4.Depending on the size of the multiplier and crowding-out effects, the rightward shift in aggregate demand from a tax cut could be larger or smaller than the tax cut.a. Trueb. False5.A given short-run Phillips curve shows that an increase in the inflation rate will be accompanied by a lower unemployment rate in the short run.a. Trueb. False6.People will spend more if the price level:a. rises because rising prices increase the real value of a dollar.b. rises because rising prices decrease the real value of a dollar.c. falls because falling prices increase the real value of a dollar.d. falls because falling prices decreases the real value of a dollar.7.The multiplier for this economy is:a. 2.86b. 2.98c. 4.00d. 5.008.Which of the following is correct?a. An increase in the money supply causes the interest rate to decrease so that aggregate demand shifts left.b. An increase in stock prices reduces consumption spending so that aggregate demand shifts left.c. An increase in the price level causes the exchange rate to rise so that aggregate demand shifts left.d. A recession in other countries reduces U.S. net exports so that U.S. aggregate demand shifts left.9.An adverse supply shock shifts the short-run Phillips curve right and the short-run aggregate-supply curve left.a. Trueb. False10.A decrease in government spending initially and primarily shifts:a. aggregate demand to the right.b. aggregate demand to the left.c. aggregate supply to the right.d. neither aggregate demand nor aggregate supply.11.Other things remaining the same, technological progress raises the price level.a. Trueb. False12.Aggregate demand includes:a. only the quantity of goods and services households want to buy.b. only the quantity of goods and services households and firms want to buy.c. only the quantity of goods and services households, firms, and the government want to buy.d. the quantity of goods and services households, firms, the government, and customer abroad want to buy.13.Other things the same, an increase in the amount of capital firms wish to purchase would initially shift:a. aggregate demand right.b. aggregate demand left.c. aggregate supply right.d. aggregate supply left.14.During World War II, government expenditures increased almost five-fold and output almost doubled.a. Trueb. False15.If the marginal propensity to consume is 6/7, then the multiplier is 7.a. Trueb. False16.Most economists believe that classical theory describes the world in the short run but not in the long run.a. Trueb. False17.A shift of the money-demand curve from MD2 to MD1 is consistent with which of the following sets of events? a. The government reduces government spending, resulting in a decrease in people’s incomes.b. The Federal Reserve increases the supply of money, which decreases the interest rate.c. All of the choices apply.18.The theory of liquidity preference was developed by Irving Fisher.a. Trueb. False19.The wealth effect, interest-rate effect, and exchange-rate effect are all explanations for:a. the slope of short-run aggregate supply.b. the slope of long-run aggregate supply.c. the slope of the aggregate-demand curve.d. everything that makes the aggregate-demand curve shift.20.Suppose the multiplier is 5 and the government increases its purchases by $10 billion. Also, suppose the AD curve would shift from AD1 to AD2if there were no crowding out; the AD curve actually shifts from AD1 to AD3 with crowding out. Additionally, suppose the horizontal distance between the curves AD1 and AD3 is $20 billion. The extent of crowding out, for any particular level of the price level, is: a. the horizontal distance between the curves MD1 and MD2.b. $40 billion.c. $30 billion.d.$20 billion.