Macroeconomics 8th Canadian Edition Andrew Abel – Test Bank

Chapter 11 Classical Business Cycle Analysis: Market-Clearing Macroeconomics

11.1 Multiple-Choice Questions

1) Which of the following is NOT a primary cause of business cycle fluctuations, according to real business cycle theory?
A) a change in the production function
B) a change in the size of the labour force
C) a change in the money supply
D) a change in the real quantity of government purchases
Answer: C
Diff: 1 Type: MC Page Ref: 353

2) The distinction between real and nominal shocks is that
A) real shocks directly affect only the IS curve, but not the FE line or LM curve.
B) real shocks directly affect only the FE line, but not the LM curve.
C) real shocks directly affect only the IS curve or the FE line, but not the LM curve.
D) real shocks have a large direct effect on the IS curve and the FE line, but only a small direct effect on the LM curve.
Answer: C
Diff: 2 Type: MC Page Ref: 354

3) Real business cycle theorists think that most business cycle fluctuations are caused by shocks to
A) the production function.
B) the size of the labour force.
C) the real quantity of government purchases.
D) the spending and saving decisions of consumers.
Answer: A
Diff: 1 Type: MC Page Ref: 354

4) Which of the following is an example of a real shock?
A) an increase in the money supply
B) a stock market crash
C) a rise in oil prices
D) a decrease in the money supply
Answer: C
Diff: 1 Type: MC Page Ref: 354

5) Which one of the following is an example of a real shock?
A) a shock to the money supply
B) a shock to the money demand
C) a shock to the production function
D) a shock to the price level
Answer: C
Diff: 1 Type: MC Page Ref: 354

6) By real shock, economists mean
A) shocks to the money supply.
B) shocks to the money demand.
C) a shock to the real side of the economy.
D) shocks that shift the LM curve.
Answer: C
Diff: 1 Type: MC Page Ref: 354

7) A real shock to an economy will shift
A) the IS curve.
B) the LM curve.
C) both the IS and LM curves.
D) neither the IS nor LM curve.
Answer: A
Diff: 1 Type: MC Page Ref: 354

8) Which of the following would NOT be an example of a productivity shock?
A) the introduction of new management techniques
B) a change in government regulations affecting production
C) a change in the level of government transfer programs
D) a spell of unusually good or unusually bad weather
Answer: C
Diff: 1 Type: MC Page Ref: 354

9) Which of the following is NOT an example of the productivity shock?
A) an increase in oil price because of oil supply disruption that came after a political turmoil in a major oil-exporting country
B) severe weather that caused an adverse effect on farming
C) development of new software that allows firms to keep track of their services
D) a 2 percent rise in nominal wages
Answer: B
Diff: 1 Type: MC Page Ref: 354

10) Which of the following is an example of a nominal shock?
A) an increase in money supply
B) an increase in population growth
C) a rise in oil price
D) a decline in demand for labour
Answer: A
Diff: 1 Type: MC Page Ref: 354