If business cycles are caused by changes in aggregate demand, you would expect to see
a. prices and unemployment moving in the same direction.
b. price and unemployment moving in opposite directions.
c. prices not moving with unemployment.
d. unemployment is not included in the Keynesian model.
B
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Which of the following would cause the money supply in the United States to expand?
a. a decrease in reserve requirements b. an increase in the discount rate c. the sale of bonds by a Federal Reserve bank d. an increase in the world supply of gold
Suppose the government never borrows, so that it always finances its expenditures with taxes. Suppose further that government spending does not depend on income. In this case:
A. neither government spending nor taxes are automatic stabilizers. B. taxes are an automatic stabilizer but government spending is not. C. government spending is an automatic stabilizer, but taxes are not. D. both government spending and taxes are automatic stabilizers.
For the recessions in the United States since the 1950s
A) cyclical unemployment has been nonexistent. B) unemployment rises on average by about 1.2 percentage points during the 12 months after a recession begins. C) unemployment falls on average by 2 percentage points during the 12 months after a recession begins. D) unemployment rises on average about 5 percentage points during the 12 months after a recession begins.
If the Fed decides to tighten monetary policy because the inflation rate has risen to a level inconsistent with economic efficiency and long-term growth:
A. in the long run the AD curve will shift to the left and the long-run equilibrium is restored. B. in the short run the AD curve shifts to the left and a recessionary gap is created. C. in the short run the AD curve shifts to the right and a recessionary gap is created. D. in the short run the SRAS curve will shift downward and a recessionary gap is created.