NAIMMCQ: Microeconomics

An increase in the price level may be caused

a. only by an increase in aggregate demand.
b. by either an increase in aggregate demand or an increase in aggregate supply.
c. only by an increase in aggregate supply.
d. by either an increase or a decrease in aggregate demand.
e. by either an increase in aggregate demand or a decrease in aggregate supply.

Answer: E

Which of the following events can cause short-term interest rates to increase?

A. An increase in the federal government budget surplus
B. Federal Reserve open market purchases of government securities
C. Federal Reserve open market sales of government securities
D. A decrease in demand for loanable funds

Answer: C

Suppose that wages increase sharply this year. Other things being equal a wide-spread increase in wages will have which of the following consequences for the U.S. economy?

A. An increase in the equilibrium price level and a decrease in equilibrium real GDP
B. An increase in both equilibrium price level and equilibrium real GDP
C. A decrease in both the equilibrium price level and equilibrium real GDP
D. A decrease in the equilibrium price level and an increase in equilibrium real GDP

Answer: A

An unanticipated increase in inflation this year will

A. Make debtors worse off
B.Make creditors worse off
C. Make both creditors and debtors worse off
D. Make workers whose wages were set at the beginning of the year better off

Answer: B

If the US economy falls into a recession, then which of the following is likely to happen?

A. Potential real GDP will fall
B. The rate of growth of real GDP will be 5%
C. The rate of growth of real GDP will be negative
D. Unemployment rates will decline
E. The natural rate of unemployment will increase

Answer: E

In 1998, the U.S. economy was at full employment which means that

A. the unemployment rate was zero
B. The natural rate of unemployment was zero
C. equilibrium real GDP was equal to potential real GDP
D. Cyclical unemployment was zero
E. Both C and D

Answer: E

Last year, real GDP grew by 5% in the U.S. which implies that

A. nominal GDP also grew by 5%
B. aggregate real income also grew by 5%
C. Aggregate real income grew by less than 5%
D. Production grew by less than 5%

Answer: B

The current wage paid for carpenters in Raleigh is $15 per hour. At that wage there are 10,000 labor hours supplied per week while the number of labor hours demanded is 12,000. It follows that

A. There is a surplus of carpenter labor on the market
B. The market equilibrium wage for carpenters is $15 per hour
C. The market equilibrium wage for carpenters is less than $15 per hour
D. The market equilibrium wage for carpenters is more than $15 per hour

Answer: D

The home building industry in Raleigh is perfectly competitive and currently in long-run competitive equilibrium. Which of the following statements is true?

A. The price of homes is equal to the minimum possible average variable cost of production
B. The price of homes is equal to the minimum possible average cost of production
C. The price of homes is equal to the marginal cost of production
D. Both B and C

Answer: D

The price elasticity of demand for flights between RDU and Washington DC is equal to -3. A 20 percent decrease in air fare between RDU and D.C. will therefore result in

A. A 20 percent increase in the quantity of tickets demanded on this route
B. A 30 percent increase in the quantity of tickets demanded on this route
C. A 60 percent increase in the quantity of tickets demanded on this route
D. A 60 percent decrease in the quantity of tickets demanded on this route

Answer: C

Which of the following changes in the market for loanable funds can cause interest rates to go up?

A. an increase in the business demand for credit
B. A decrease in the consumer demand for credit
C. An increase in the supply of credit
D. A decrease in government demand for credit resulting from a budget surplus

Answer: A

Which of the following is an example of a contractionary fiscal policy that can be used to decrease aggregate demand and prevent inflation?

A. An increase in income taxes
B. A decrease in government purchases
C. A decrease in income tax rates
D. An increase in the size of the federal government's budget deficit
E. Either a or b

Answer: E

Which of the following statements about the federal budget deficit is true?

A. Other things being equal, the deficit can contribute to lower economic growth a decrease in future living standards by increasing interest rates ad "crowding out" private investment
B. A deficit is financed by borrowing from the public decreases interest rates ad encourages private investment
C. The deficit decreases current aggregate demand
D. Both B and C

Answer: A

As the economy expands the demand for money typically increases. Other things being equal, which of the following is a likely consequence of the increase in the money demand?

A. An increase in short-term interest rates
B. A decrease in short term interest rates
C. A decrease in the equilibrium amount of M1
D. both b and c

Answer: A

Suppose the equilibrium GDP is greater than potential real GDP. Which of the following is likely?

A. Wages will decline and aggregate supply will increase
B. Wages will increase causing aggregate supply to decrease
C. Wages will decline causing aggregate demand to decrease
D. Inflation is not going to be a problem for the economy

Answer: B

Current equilibrium GDP is less than potential real GDP. According to the classical model of macroeconomic equilibrium, which of the following is true?

A. the economy will remain locked below full employment unless government increases aggregate demand
B. Wages and other input prices will increase thereby increasing aggregate demand until full employment is achieved
C. Aggregate supply will decrease causing the price level to increase
D. Wages and other input prices will decline thereby increasing aggregate supply until equilibrium GDP increases to equal potential real GDP

Answer: D

Suppose the price of a key productive resource such as fuel increases. Other things being equal, which of the following will be a consequence of the increase in fuel price?

A. An increase in aggregate supply
B. An increase in aggregate demand
C. An increase in the equilibrium price level and a decrease in the equilibrium real GDP
D. A decrease in the equilibrium price level and an increase in equilibrium real GDP
E. An increase in the equilibrium price level but no effect on the equilibrium real GDP

Answer: C

Other things being equal, which of the following can cause a recession?

A. An increase in aggregate demand
B. An increase in aggregate supply
C. A decrease in aggregate demand
D. An increase in potential real GDP

Answer: C

An unanticipated increase in the inflation rate during this year will

A. Increase the real interest rate earned by lenders
B. Decrease the real interest rate earned by lenders
C. Make workers whose wages were set at the beginning of the year better off
D. Make everybody in the economy worse off

Answer: B

Which of the following statements is true?

A. When monopoly is in equilibrium the price of its product will always equal the minimum possible Average cost of production
B. When a perfectly competitive industry is in the long-run equilibrium new firms will have incentive to enter the industry
C. When a perfectly competitive industry is in long run equilibrium firms in the industry will earn zero economic profit
D. When a perfectly competitive industry is in long-run equilibrium firms in the industry will earn positive economic profit

Answer: C