Question

1. In a typical boom, consumption _____. Investment moves in the same direction but proportionately _____.

Question 1 options:

rise, more

rises, less

falls, more

falls, less

Question 2 (1 point)

2. Which of the following changed would contribute to a rise in the index of leading indicators, suggesting that a boom is more likely?

Question 2 options:

a decline in stock prices

a decline in building permits

a decline in the initial claims for unemployment insurance

a decline in the slope of the yield curve

Question 3 (1 point)

3. If a technological advance at credit card companies makes stores start accepting more credit payments, the demand for money will _____. If the money supply is held constant, the aggregate demand curve will shift to the _____.

Question 3 options:

increase, right

increase, left

decrease, right

decrease, left

Question 4 (1 point)

4. An expansion in aggregate demand increases _____ in the short run. In the long run, however, it increases only the ____.

Question 4 options:

real GDP, price level

real GDP, velocity of money

unemployment rate, price level

unemployment rate, velocity of money

Question 5 (1 point)

6. If the Fed responds to a positive supply shock by reducing the money supply, it will

Question 5 options:

stabilize aggregate demand at its previous level

make the resulting recession deeper than it otherwise would have been

keep the economy closer to its natural levels of output and employment

allow the price level to return to the level that prevailed before the shock

Answer 1

1. In a typical boom, consumption rises, Investment moves in the same direction but proportionately less

2. a decline in the initial claims for unemployment insurance

Because

Initial claims typically rise before the economy enters a recession and decline before the economy starts to recover.

3. If a technological advance at credit card companies makes stores start accepting more credit payments, the demand for money will increase. If the money supply is held constant, the aggregate demand curve will shift to the right

4. An expansion in aggregate demand increases real GDP in the short run. In the long run, however, it increases only the price level

Because , In the long run ,shifts in aggregate demand affect the overall price level but do not affect the output.

6. If the Fed responds to a positive supply shock by reducing the money supply, it will allow the price level to return to the level that prevailed before the shock

Because

If the shock is positive, shifting AS to the right, this is very, very good since both inflation and unemployment fall.