An expansionary gap is equal to:
a. real GDP minus nominal GDP.
b. nominal GDP minus real GDP.
c. the actual short-run output minus potential output.
d. the actual price level minus expected price level.
e. the actual long-run real GDP minus actual short-run disposable income.
QUESTION 2The demand curve for investment depicts:
a. an inverse relationship between interest rate and aggregate demand.
b. an inverse relationship between interest rate and investment.
c. an inverse relationship between price level and real GDP.
d. a direct relationship between interest rate and quantity of money.
e. a direct relationship between aggregate demand and real GDP.
QUESTION 3When actual output increases the potential output, _____.
a. more resources become unemployed.
b. prices remain constant.
c. prices tend to increase.
d. nominal GDP decreases.
e. resource prices decrease.
QUESTION 4When the Fed purchases U.S. government securities through the open market, the money supply:
a. increases, the interest rate falls, and the quantity of money demanded increases.
b. falls, the interest rate falls, and the quantity of money demanded increases.
c. increases, the interest rate increases, and the quantity of money demanded increases.
d. falls, the interest rate increases, and the quantity of money demanded falls.
e. falls, the interest rate falls, and the quantity of money demanded falls.
QUESTION 5Suppose the actual and expected price levels in an economy are initially equal. However, the actual price level falls eventually due to a change in economic conditions. Which of the following will occur over the long run?
a. The economy will move rightward along the short-run aggregate supply curve.
b. The economy will move leftward along the short-run aggregate supply curve.
c. The short-run aggregate supply curve will shift to the right.
d. The short-run aggregate supply curve will shift to the left.
e. The short-run aggregate supply curve will become flatter.
QUESTION 6If the Fed increases the money supply, then:
a. the interest rate declines and the quantity of money demanded increases.
b. the interest rate declines and the quantity of money demanded declines.
c. the interest rate increases and the quantity of money demanded increases.
d. the interest rate increases and the quantity of money demanded declines.
e. the interest rate increases but the quantity of money demanded remains unaffected.
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