ECO 202:– Questions With Complete Solutions (A+)
The AD-AS supply model considers _____ of the economy. Right Ans - both
the producer (supply) side and the spending (demand) of the economy
The AD-AS model seek to explain: Right Ans - the business cycle and the
inflation rate
The level of AS in the long run is NOT affected by Right Ans - changes in the
price level
The level of AS in the long run is affected by Right Ans - changes in
technology
changes in the number of workers
changes in the capitol stock
Suppose a developing country receives more machinery and capital
equipment as foreign entrepreneurs increase the amount of investment in the
economy. As a result, Right Ans - The LRAS curve will shift to the right
As an economy moves out and up along a given SRAS curve, Right Ans -
cyclical unemployment decreases
The invention of a cotton gin ushered in the industrial revolution and began a
long period of technological innovation. What did this technological change do
to the SRAS curve? Right Ans - It shifted the SRAS curve to the right
Workers and firms both expect that prices will be 2.5% higher next year than
they are this year. As a result, Right Ans - The SRAS will shift left as wages
increase
Which of the following is one explanation as to why the AD curve slopes
downward Right Ans - Decreases in the price level raise real wealth and
increase consumption spending
The SRAS curve has a _______ slope because as prices of ______ rise, prices of
______ rise more slowly. Right Ans - Positive
, Final Goods and Services
Inputs
Spending on the war in Afghanistan is essentially categorized as government
purchases. How do increases in spending on the war in Afghanistan affect the
AD curve? Right Ans - The AD curve would have shifted to the right
German luxury car exports were hurt in 2009 as a result of the recession. How
would this decrease in exports have affected Germany's AD curve? Right
Ans - The AD curve would have shifted left
Dollar bills in the modern economy serve as money because Right Ans -
people have confidence that others will accept them as money
A bank holds its reserves as ______ and ______. Right Ans - vault cash
deposits at the federal reseve
Which of the following are the two new monetary policy tools for the federal
reserve? Right Ans - Interest rate on the bank reserve deposits at the Fed
and the interest on funds deposited at the Fed for more than one day (Term
Deposit Facility)
A central bank can help stop a bank panic by: Right Ans - acting as a lender
of last resort
By increasing the interest rate on bank reserve deposits, the fed can ______ the
level of reserves are willing to hold, thereby ______ bank lending Right Ans -
Increasing
Decreasing
During bank panics, banks have liquidity problems because of Right Ans -
the maturity mismatch between their deposits and loans
If households in the economy decide to take money out of checking account
deposits and put money into savings accounts, this will intially Right Ans -
Decrease M1 and not change M2
During the 2007-2009 financial crisis, the 'bank panic' occurred in the _____
which ______ federal deposit insurance Right Ans - Shadow banking system
The AD-AS supply model considers _____ of the economy. Right Ans - both
the producer (supply) side and the spending (demand) of the economy
The AD-AS model seek to explain: Right Ans - the business cycle and the
inflation rate
The level of AS in the long run is NOT affected by Right Ans - changes in the
price level
The level of AS in the long run is affected by Right Ans - changes in
technology
changes in the number of workers
changes in the capitol stock
Suppose a developing country receives more machinery and capital
equipment as foreign entrepreneurs increase the amount of investment in the
economy. As a result, Right Ans - The LRAS curve will shift to the right
As an economy moves out and up along a given SRAS curve, Right Ans -
cyclical unemployment decreases
The invention of a cotton gin ushered in the industrial revolution and began a
long period of technological innovation. What did this technological change do
to the SRAS curve? Right Ans - It shifted the SRAS curve to the right
Workers and firms both expect that prices will be 2.5% higher next year than
they are this year. As a result, Right Ans - The SRAS will shift left as wages
increase
Which of the following is one explanation as to why the AD curve slopes
downward Right Ans - Decreases in the price level raise real wealth and
increase consumption spending
The SRAS curve has a _______ slope because as prices of ______ rise, prices of
______ rise more slowly. Right Ans - Positive
, Final Goods and Services
Inputs
Spending on the war in Afghanistan is essentially categorized as government
purchases. How do increases in spending on the war in Afghanistan affect the
AD curve? Right Ans - The AD curve would have shifted to the right
German luxury car exports were hurt in 2009 as a result of the recession. How
would this decrease in exports have affected Germany's AD curve? Right
Ans - The AD curve would have shifted left
Dollar bills in the modern economy serve as money because Right Ans -
people have confidence that others will accept them as money
A bank holds its reserves as ______ and ______. Right Ans - vault cash
deposits at the federal reseve
Which of the following are the two new monetary policy tools for the federal
reserve? Right Ans - Interest rate on the bank reserve deposits at the Fed
and the interest on funds deposited at the Fed for more than one day (Term
Deposit Facility)
A central bank can help stop a bank panic by: Right Ans - acting as a lender
of last resort
By increasing the interest rate on bank reserve deposits, the fed can ______ the
level of reserves are willing to hold, thereby ______ bank lending Right Ans -
Increasing
Decreasing
During bank panics, banks have liquidity problems because of Right Ans -
the maturity mismatch between their deposits and loans
If households in the economy decide to take money out of checking account
deposits and put money into savings accounts, this will intially Right Ans -
Decrease M1 and not change M2
During the 2007-2009 financial crisis, the 'bank panic' occurred in the _____
which ______ federal deposit insurance Right Ans - Shadow banking system
