Individual Quiz 3 Corrected

Topics: Macroeconomics, Inflation, Recession Pages: 4 (882 words) Published: December 1, 2014
Please highlight the best response (answer) in each of the following questions. There is only one correct answer per question.

1. An inflationary gap exists when:
A. aggregate demand exceeds output.
B. actual output exceeds potential output.
C. output exceeds aggregate demand.
D. potential output exceeds actual output.

2. A recessionary gap exists when:
A. aggregate demand exceeds output.
B. actual output exceeds potential output.
C. output exceeds aggregate demand.
D. potential output exceeds actual output.

3. The paradox of thrift will not arise if:
A. increases in saving are translated into identical increases in investment. B. increases in saving are translated into identical decreases in consumption. C. decreases in saving are translated into identical increases in investment. D. decreases in saving are translated into identical decreases in consumption.

4. A decrease in the expected future income of the U.S. would likely: A. shift its AD curve to the left.
B. shift its AD curve to the right.
C. make its AD curve flatter.
D. make its AD curve steeper.

5. In 2009 Iran was experiencing inflation of about 20% per year. Other things equal, the expectations by the people of Iran of worsening inflation in the future would probably: A. shift the AD curve to the left.

B. shift the AD curve to the right.
C. make the AD curve flatter.
D. make the AD curve steeper.

6. Which of the following would shift the aggregate demand curve to the right? A. an increase in foreign income.
B. an appreciation of the value of a country's currency.
C. a lower future expected price level.
D. an increase in imports.

7. In the late 1990s, the Brazilian currency, the real, depreciated by 40%. The AS-AD model predicts that this would cause a trade: A. deficit for Brazil and shifted its AD curve left.
B. surplus for Brazil and shifted its AD curve left.
C. deficit for Brazil and shifted its AD curve right.
D. surplus for Brazil and...
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