1
Select a graph. Assume that the economy starts below the full employment level of output. Then, the government increases spending on infrastructure such as roads, bridges, and dams by enough to close the output gap.
2
Select a graph. Assume that the economy starts at the full employment level of output. Then, the interest rate increases.
3
Select a graph. Assume that the economy starts above the full employment level of output. Then, the price of oil, a key input, increases.
4
Select a graph. Assume that the economy is experiencing a recessionary gap. Then, workers expect a lower rate of inflation.
5
Select a graph. Assume that current output equals potential output. Then, the government increases transfer payments.
6
Select a graph. Assume that the economy is experiencing an inflationary gap. Then, the government increases personal income taxes.
7
Select a graph. Assume that the actual rate of unemployment is 10 percent and the natural rate of unemployment is 6 percent. Then, productivity decreases as a result of new regulations.
8
Select a graph. Assume that the actual rate of unemployment is 4 percent and the natural rate of unemployment is 4 percent. Then, the price of microchips, a key input, decreases.
9
Select a graph. Assume that the actual rate of unemployment is 2 percent and the natural rate of unemployment is 5 percent. Then, the government decreases personal income taxes.
10
Assume that the stock of existing capital falls. How will this affect the price level and real GDP?
11
Assume that households become more pessimistic about their future income. How will this affect the price level and real GDP?
12
Assume that nominal wages decrease. How will this affect the price level and real GDP?
13
Assume that the expected rate of inflation increases. How will this affect the price level and real GDP?
14
Assume that the government increases spending on roads, bridges, and dams. How will this affect the price level and unemployment?
15
Assume that the government increases personal income taxes. How will this affect the price level and unemployment?
16
Assume that a new technology with widespead business applications is introduced. How will this affect the price level and unemployment?
17
What term best describes a simultaneous increase in the price level and unemployment?
18
Which event will lead to an increase in real GDP and an increase in the price level?
19
Which event will lead to an increase in the price level and a decrease in real GDP?
20
Which event will lead to a decrease in the price level and an increase in real GDP?
21
Which event will lead to a decrease in the price level and a decrease in real GDP?
22
Select a graph. Assume that the economy is experiencing a recessionary gap. Then, the government increases spending by an insufficient amount to close the output gap.