Question 1

A movement along the short-run aggregate supply curve in response to a change in the price level is called a

Accepted Answer

A)  determinant of aggregate supply. 
B)  revealed cost on aggregate supply. 
C)  change in aggregate supply. 
D)  change in the aggregate quantity of goods and services supplied. 
A)  determinant of aggregate supply. 
B)  revealed cost on aggregate supply. 
C)  change in aggregate supply. 
D)  change in the aggregate quantity of goods and services supplied.

Question 2

Use the following to answer questions .
Exhibit: Long-run Equilibrium  
-(Exhibit: Long-run Equilibrium) If the real GDP is $7,000 billion and the implicit price deflator is 1.08, what is the value of nominal GDP?

Accepted Answer

A)  $6,481 billion 
B)  $7,000 billion 
C)  $7,560 billion 
D)  cannot be determined from the information given 
A)  $6,481 billion 
B)  $7,000 billion 
C)  $7,560 billion 
D)  cannot be determined from the information given

Question 3

All other things unchanged, a lower exchange rate

Accepted Answer

A)  increases exports, imports, and aggregate demand. 
B)  decreases exports, imports, and aggregate demand. 
C)  increases exports, decreases imports, increases net exports and aggregate demand. 
D)  decreases exports, increases imports, decreases net exports and aggregate demand. 
A)  increases exports, imports, and aggregate demand. 
B)  decreases exports, imports, and aggregate demand. 
C)  increases exports, decreases imports, increases net exports and aggregate demand. 
D)  decreases exports, increases imports, decreases net exports and aggregate demand.

Question 4

Use the following to answer questions.
Exhibit: The Aggregate Demand/Aggregate Supply Model 1  
-(Exhibit: The Aggregate Demand/Aggregate Supply Model 1) For the economy represented in the figure,

Accepted Answer

A)  the real wage rate is higher than full-employment real wage. 
B)  the real wage rate is lower than full-employment real wage. 
C)  the nominal wage rate is higher than full-employment nominal wage. 
D)  the nominal wage rate is lower than full-employment nominal wage. 
A)  the real wage rate is higher than full-employment real wage. 
B)  the real wage rate is lower than full-employment real wage. 
C)  the nominal wage rate is higher than full-employment nominal wage. 
D)  the nominal wage rate is lower than full-employment nominal wage.

Question 5

An economy adjusts on its own to close an inflationary gap because there is

Accepted Answer

A)  pressure on nominal wages to fall and this shifts the SRAS curve rightward. 
B)  pressure on nominal wages to rise and this shifts the SRAS curve rightward. 
C)  pressure on nominal wages to fall and this shifts the SRAS curve leftward. 
D)  pressure on nominal wages to rise and this shifts the SRAS curve leftward. 
A)  pressure on nominal wages to fall and this shifts the SRAS curve rightward. 
B)  pressure on nominal wages to rise and this shifts the SRAS curve rightward. 
C)  pressure on nominal wages to fall and this shifts the SRAS curve leftward. 
D)  pressure on nominal wages to rise and this shifts the SRAS curve leftward.

Question 6

The strong dollar in 2001

Accepted Answer

A)  made U.S. exports more attractive relative to foreign goods, thereby increasing U.S. exports. 
B)  made U.S. exports more expensive relative to foreign goods, thereby reducing U.S. exports. 
C)  made U.S. imports more expensive, thereby reducing aggregate demand. 
D)  made U.S. imports more attractive, thereby increasing aggregate demand. 
A)  made U.S. exports more attractive relative to foreign goods, thereby increasing U.S. exports. 
B)  made U.S. exports more expensive relative to foreign goods, thereby reducing U.S. exports. 
C)  made U.S. imports more expensive, thereby reducing aggregate demand. 
D)  made U.S. imports more attractive, thereby increasing aggregate demand.

Question 7

Use the following to answer questions.
Exhibit: The Aggregate Demand/Aggregate Supply Model 1  
-(Exhibit: The Aggregate Demand/Aggregate Supply Model 1) What are the prevailing price level and the output level in the economy?

Accepted Answer

A)  Price level = P1; real GDP = Yp 
B)  Price level = P1; real GDP = Y1 
C)  Price level = P2; real GDP = Y2 
D)  Price level = P3; real GDP = Yp 
A)  Price level = P1; real GDP = Yp 
B)  Price level = P1; real GDP = Y1 
C)  Price level = P2; real GDP = Y2 
D)  Price level = P3; real GDP = Yp

Question 8

When an economy fails to produce at its potential,
I. there may be actions that the government or the central bank can take to push the economy toward its potential.
II. the unemployment rate is below its natural rate.
III. the average price level is likely to rise.

Accepted Answer

A)  I, II, and III 
B)  I and II only 
C)  I and III only 
D)  I only 
A)  I, II, and III 
B)  I and II only 
C)  I and III only 
D)  I only

Question 9

Use the following to answer questions .
Exhibit: Short-run Aggregate Supply  
-(Exhibit: Short-run Aggregate Supply) Suppose that the economy is in long-run equilibrium at point A. Now suppose net exports increase. In the short run,

Accepted Answer

A)  unemployment is above its natural level. 
B)  those who were cyclically unemployed will now find jobs at the going nominal wage rate. 
C)  those who were structurally or frictionally unemployed will now find jobs at the going nominal wage rate. 
D)  the nominal wage rate rises. 
A)  unemployment is above its natural level. 
B)  those who were cyclically unemployed will now find jobs at the going nominal wage rate. 
C)  those who were structurally or frictionally unemployed will now find jobs at the going nominal wage rate. 
D)  the nominal wage rate rises.

Question 10

The aggregate demand curve shifts due to changes in consumption expenditures, investment expenditures, government purchases, or net exports.

Accepted Answer

A) True 
 B)False

Question 11

A change in the price level, all other things unchanged, causes

Accepted Answer

A)  a movement along the aggregate demand curve. 
B)  a shift of the aggregate demand curve. 
C)  both a movement along the aggregate demand curve and a shift in the curve. 
D)  no change in the value of assets held in the form of money. 
A)  a movement along the aggregate demand curve. 
B)  a shift of the aggregate demand curve. 
C)  both a movement along the aggregate demand curve and a shift in the curve. 
D)  no change in the value of assets held in the form of money.

Question 12

What do economists mean by the term "sticky wage"?

Accepted Answer

A)  It refers to the reluctance by employers to decrease nominal wages during an inflationary period. 
B)  It refers to a wage that is slow to adjust to its equilibrium level, creating sustained periods of shortage or surplus in the labor market. 
C)  It refers to a breakdown in wage negotiations between employers and employee unions. 
D)  It refers to a union negotiated wage. 
A)  It refers to the reluctance by employers to decrease nominal wages during an inflationary period. 
B)  It refers to a wage that is slow to adjust to its equilibrium level, creating sustained periods of shortage or surplus in the labor market. 
C)  It refers to a breakdown in wage negotiations between employers and employee unions. 
D)  It refers to a union negotiated wage.

Question 13

The aggregate demand curve slopes downward
I. for the same reasons that an ordinary demand curve does.
II. in part because when the price level falls, the real wealth of the public falls, and this induces people to change their consumption.
III. because as the price level falls, the net export component of aggregate demand increases.

Accepted Answer

A)  I, II, and III 
B)  II and III 
C)  II only 
D)  III only 
A)  I, II, and III 
B)  II and III 
C)  II only 
D)  III only

Question 14

Public policy to eliminate inflationary or recessionary gaps is called stabilization policy.

Accepted Answer

A) True 
 B)False

Question 15

Use the following to answer questions .
Exhibit: Long-run Equilibrium  
-(Exhibit: Long-run Equilibrium) Based on the figure, we can conclude that

Accepted Answer

A)  in the short run, the economy will always achieve full-employment equilibrium. 
B)  in the long run, given flexible wages and prices, the economy will achieve equilibrium at its potential output level. 
C)  flexible wages and prices are irrelevant since the LRAS curve is vertical. 
D)  in the long run, the aggregate demand curve determines the potential output level. 
A)  in the short run, the economy will always achieve full-employment equilibrium. 
B)  in the long run, given flexible wages and prices, the economy will achieve equilibrium at its potential output level. 
C)  flexible wages and prices are irrelevant since the LRAS curve is vertical. 
D)  in the long run, the aggregate demand curve determines the potential output level.

Question 16

The intersection of the economy's aggregate demand and long-run aggregate supply curves
I. determines its equilibrium real GDP in both the long run and the short run.
II. determines its equilibrium price level in both the long run and the short run.
III. occurs at the economy's potential output.

Accepted Answer

A)  I, II, and III 
B)  I and III only 
C)  II and III only 
D)  III only 
A)  I, II, and III 
B)  I and III only 
C)  II and III only 
D)  III only

Question 17

Which of the following will decrease the short-run aggregate supply?

Accepted Answer

A)  An increase in wages 
B)  An increase in the labor force 
C)  A decrease in net exports 
D)  A decrease in the personal income tax rates 
A)  An increase in wages 
B)  An increase in the labor force 
C)  A decrease in net exports 
D)  A decrease in the personal income tax rates

Question 18

A change in the aggregate quantity of goods and services supplied at every price level is called a

Accepted Answer

A)  change in short-run aggregate supply. 
B)  change in long-run aggregate supply. 
C)  change in short-run aggregate quantity of output supplied. 
D)  determinant of short-run aggregate supply. 
A)  change in short-run aggregate supply. 
B)  change in long-run aggregate supply. 
C)  change in short-run aggregate quantity of output supplied. 
D)  determinant of short-run aggregate supply.

Question 19

The rise and fall of real GDP over the course of the business cycle suggests that

Accepted Answer

A)  the economy is always at full employment. 
B)  the economy may not always be in long-run equilibrium. 
C)  the economy is always at its potential output level. 
D)  wage and price stickiness ensures that the economy moves from a peak to a trough. 
A)  the economy is always at full employment. 
B)  the economy may not always be in long-run equilibrium. 
C)  the economy is always at its potential output level. 
D)  wage and price stickiness ensures that the economy moves from a peak to a trough.

Question 20

Suppose the U.S. experiences a recession while foreign countries that trade with the U.S. prosper. How will this affect the U.S.?

Accepted Answer

A)  U.S. imports and its aggregate demand will decrease. 
B)  U.S. net exports and its aggregate demand will decrease. 
C)  U.S. exports and its aggregate demand will decrease. 
D)  U.S. exports and its aggregate demand will increase. 
A)  U.S. imports and its aggregate demand will decrease. 
B)  U.S. net exports and its aggregate demand will decrease. 
C)  U.S. exports and its aggregate demand will decrease. 
D)  U.S. exports and its aggregate demand will increase.

A movement along the short-run aggregate supply curve in response to a change in the price level is called a

Use the following to answer questions . Exhibit: Long-run Equilibrium -(Exhibit: Long-run Equilibrium) If the real GDP is $7,000 billion and the implicit price deflator is 1.08, what is the value of nominal GDP?

All other things unchanged, a lower exchange rate

Use the following to answer questions. Exhibit: The Aggregate Demand/Aggregate Supply Model 1 -(Exhibit: The Aggregate Demand/Aggregate Supply Model 1) For the economy represented in the figure,

An economy adjusts on its own to close an inflationary gap because there is

The strong dollar in 2001

Use the following to answer questions. Exhibit: The Aggregate Demand/Aggregate Supply Model 1 -(Exhibit: The Aggregate Demand/Aggregate Supply Model 1) What are the prevailing price level and the output level in the economy?

When an economy fails to produce at its potential, I. there may be actions that the government or the central bank can take to push the economy toward its potential. II. the unemployment rate is below its natural rate. III. the average price level is likely to rise.

Use the following to answer questions . Exhibit: Short-run Aggregate Supply -(Exhibit: Short-run Aggregate Supply) Suppose that the economy is in long-run equilibrium at point A. Now suppose net exports increase. In the short run,

The aggregate demand curve shifts due to changes in consumption expenditures, investment expenditures, government purchases, or net exports.

A change in the price level, all other things unchanged, causes

What do economists mean by the term "sticky wage"?

Public policy to eliminate inflationary or recessionary gaps is called stabilization policy.

Use the following to answer questions . Exhibit: Long-run Equilibrium -(Exhibit: Long-run Equilibrium) Based on the figure, we can conclude that

The intersection of the economy's aggregate demand and long-run aggregate supply curves I. determines its equilibrium real GDP in both the long run and the short run. II. determines its equilibrium price level in both the long run and the short run. III. occurs at the economy's potential output.

Which of the following will decrease the short-run aggregate supply?

A change in the aggregate quantity of goods and services supplied at every price level is called a

The rise and fall of real GDP over the course of the business cycle suggests that

Suppose the U.S. experiences a recession while foreign countries that trade with the U.S. prosper. How will this affect the U.S.?

Economics: the Study of Choice

Demand and Supply

Applications of Supply and Demand

Macroeconomics: the Big Picture

Measuring Total Output and Income

Economic Growth

The Nature and Creation of Money

Financial Markets and the Economy

Monetary Policy and the Fed

Government and Fiscal Policy

Consumption and the Aggregate Expenditures Model

Investment and Economic Activity

Net Exports and International Finance

Inflation and Unemployment

A Brief History of Macroeconomic Thought and Policy

Inequality, Poverty, and Discrimination

Filters

Exam 7: Aggregate Demand and Aggregate Supply

A movement along the short-run aggregate supply curve in response to a change in the price level is called a

Use the following to answer questions . Exhibit: Long-run Equilibrium -(Exhibit: Long-run Equilibrium) If the real GDP is $7,000 billion and the implicit price deflator is 1.08, what is the value of nominal GDP?

All other things unchanged, a lower exchange rate

Use the following to answer questions. Exhibit: The Aggregate Demand/Aggregate Supply Model 1 -(Exhibit: The Aggregate Demand/Aggregate Supply Model 1) For the economy represented in the figure,

An economy adjusts on its own to close an inflationary gap because there is

The strong dollar in 2001

Use the following to answer questions. Exhibit: The Aggregate Demand/Aggregate Supply Model 1 -(Exhibit: The Aggregate Demand/Aggregate Supply Model 1) What are the prevailing price level and the output level in the economy?

When an economy fails to produce at its potential, I. there may be actions that the government or the central bank can take to push the economy toward its potential. II. the unemployment rate is below its natural rate. III. the average price level is likely to rise.

Use the following to answer questions . Exhibit: Short-run Aggregate Supply -(Exhibit: Short-run Aggregate Supply) Suppose that the economy is in long-run equilibrium at point A. Now suppose net exports increase. In the short run,

The aggregate demand curve shifts due to changes in consumption expenditures, investment expenditures, government purchases, or net exports.

A change in the price level, all other things unchanged, causes

What do economists mean by the term "sticky wage"?

Public policy to eliminate inflationary or recessionary gaps is called stabilization policy.

Use the following to answer questions . Exhibit: Long-run Equilibrium -(Exhibit: Long-run Equilibrium) Based on the figure, we can conclude that

The intersection of the economy's aggregate demand and long-run aggregate supply curves I. determines its equilibrium real GDP in both the long run and the short run. II. determines its equilibrium price level in both the long run and the short run. III. occurs at the economy's potential output.

Which of the following will decrease the short-run aggregate supply?

A change in the aggregate quantity of goods and services supplied at every price level is called a

The rise and fall of real GDP over the course of the business cycle suggests that

Suppose the U.S. experiences a recession while foreign countries that trade with the U.S. prosper. How will this affect the U.S.?

Economics: the Study of Choice

Demand and Supply

Applications of Supply and Demand

Macroeconomics: the Big Picture

Measuring Total Output and Income

Economic Growth

The Nature and Creation of Money

Financial Markets and the Economy

Monetary Policy and the Fed

Government and Fiscal Policy

Consumption and the Aggregate Expenditures Model

Investment and Economic Activity

Net Exports and International Finance

Inflation and Unemployment

A Brief History of Macroeconomic Thought and Policy

Inequality, Poverty, and Discrimination

Filters