Question

46. In the AD-AS model, an unexpected decrease in the growth rate of the money supply causes: A) a rightward shift of the AD curve and then a leftward shift of the SRAS curve. B) a rightward shift of the AD curve and then a rightward shift of the SRAS curve. C) a leftward shift of the AD curve and then a leftward shift of the SRAS curve. D) a leftward shift of the AD curve and then a rightward shift of the SRAS curve. 47. Sustained inflation: A) can occur as a result of changes in C. B) can occur as a result of changes in l. C) requires ongoing increases in the money supply. D) can never occur. 48. In 1970, 1.3 barrels of oil were used to produce $1,000 of GDP. In 2004, it took only 0.64 barrels of oil. What implications does this have for economic fluctuations in the United States today? A) American producers are now producing the same goods and services today by using half the amount of oil that they did in 1970. B) Oil consumption has stayed steady, but GDP has more than doubled since 1970. C) Spikes in oil prices will not have as severe an impact on the U.S. economy today as they did in the 1970s. D) America is still purchasing 1.3 barrels of oil per $1,000 of GDP and saving the remainder for the future. 49. If a lender expects an inflation rate of 5% but the inflation rate unexpectedly increases to 7%, and if the nominal interest rate was 10%, what is the real rate of interest earned? A) 2% B) 3% C) 4% D) 5% 50. One reason for an increased female labor force participation rate is that the birth control pill has: A) raised the cost of living. B) reduced the adult population. C) reduced women's opportunity cost of working. D) reduced the number of male workers relative to female workers. Page 10

Answer 1

46.

C

Decrease in money supply, will discourage demand and supply. It will cause leftward shift in AD as well as AS.

47.

A

48.

B

The oil consumption is increasing at the steady rate, but GDP has gone doubled.

49.

B

Real interest rate earned = 10% - 7% = 3%

50.

C

It is the reason for the increased labor force participation rate of women.