1) On an aggregate demand and aggregate supply graph, the stagflation of the 1970s can be represented as a
a. leftward shift of the aggregate supply curve
b. rightward shift of the aggregate supply curve
c. rise in the price level that caused an excess demand for output
d. rightward shift of the aggregate demand curve
e. decrease in the price level that caused an excess supply of output
2) Economic fluctuations (or business cycles)
a. Are changes in the number of business started
b. are fluctuations in the Dow Jones industrial average relative to a long-term growth trend
c. look at the role of business in the hiring resources
d. are fluctuations in the level of economic activity, relative to a long-term growth trend
e. are changes in govt spending that occur over a period of years
3) According to Keynes, “animal spirits”
a. make investment spending unstable
b. make consumption spending unstable
c. make government spending inherently stable
d. guide the economy back to equilibrium after a disruption
e. create the federal government budget deficits that have become so common today
4) The Reagan administration’s 1981 investment tax changes were designed to
a. stimulate aggregate demand and thereby reduce unemployment
b. stimulate aggregate demand and thereby increase economic growth
c. stimulate aggregate supply and thereby increase economic growth
d. decrease aggregate demand in order to reduce inflation
e. increase tax revenues to reduce the federal budget deficit
5) A recession is a period during which
a. employment, production, and income decrease
b. the price level is increasing
c. inventories are falling dramatically
d. the unemployment rate is falling while the price level is rising
e. the government attempts to reduce a budget deficit by reducing taxes and increasing government spending
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