Question 1

Starting from short-run equilibrium,wage rates rise.What is the effect on the price level and Real GDP in the short run?

Accepted Answer

A)  The price level rises and Real GDP falls. 
B)  The price level falls and Real GDP rises. 
C)  The price level rises and Real GDP rises. 
D)  The price level falls Real GDP falls. 
A)  The price level rises and Real GDP falls. 
B)  The price level falls and Real GDP rises. 
C)  The price level rises and Real GDP rises. 
D)  The price level falls Real GDP falls. A

Question 2

Exhibit 8-1
  
-Refer to Exhibit 8-1. Assume that the economy is originally in equilibrium at point A. If foreign real national income rises,at which point is the economy most likely to end up in the short run?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
E)  A change in foreign real national income would have no impact on the domestic economy. 
A)  A 
B)  B 
C)  C 
D)  D 
E)  A change in foreign real national income would have no impact on the domestic economy. B

Question 3

An increase in the money supply may __________ total expenditures,leading to a __________ shift of the AD curve.

Accepted Answer

A)  increase; rightward 
B)  increase; leftward 
C)  decrease; rightward 
D)  decrease; leftward 
A)  increase; rightward 
B)  increase; leftward 
C)  decrease; rightward 
D)  decrease; leftward A

Question 4

A decrease in consumption at a given price level

Accepted Answer

A)  shifts the AD curve to the right. 
B)  shifts the AD curve to the left. 
C)  causes an upward movement along the existing AD curve. 
D)  causes a downward movement along the existing AD curve. 
E)  none of the above. 
A)  shifts the AD curve to the right. 
B)  shifts the AD curve to the left. 
C)  causes an upward movement along the existing AD curve. 
D)  causes a downward movement along the existing AD curve. 
E)  none of the above.

Question 5

Exhibit 8-1
  
-Refer to Exhibit 8-1. Assume that the economy is originally in equilibrium at point A. If businesses become more optimistic about future sales,at which point is the economy most likely to end up in the short run?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
A)  A 
B)  B 
C)  C 
D)  D

Question 6

If foreign real national income rises,the U.S.____________ curve shifts _____________.When labor productivity increases the _____________ curve shifts _______________. If both of these situations occur simultaneously,the combined result would be a(n)______________ the price level and a(n)__________________ Real GDP in the United States.

Accepted Answer

A)  AD; leftward; SRAS; rightward; decrease in; indeterminant impact on 
B)  AD; rightward; SRAS; leftward; increase in; indeterminant impact on 
C)  SRAS; leftward; SRAS rightward; indeterminant impact on; indeterminat impact on 
D)  AD; rightward; SRAS; rightward; indeterminant impact on; increase in 
A)  AD; leftward; SRAS; rightward; decrease in; indeterminant impact on 
B)  AD; rightward; SRAS; leftward; increase in; indeterminant impact on 
C)  SRAS; leftward; SRAS rightward; indeterminant impact on; indeterminat impact on 
D)  AD; rightward; SRAS; rightward; indeterminant impact on; increase in

Question 7

Exhibit 8-3
  
-Refer to Exhibit 8-3. A shift in aggregate demand from AD? to AD? would have been the result of

Accepted Answer

A)  a decrease in the price level. 
B)  an increase in the price level. 
C)  businesses become more optimistic about future sales. 
D)  businesses become more pessimistic about future sales. 
A)  a decrease in the price level. 
B)  an increase in the price level. 
C)  businesses become more optimistic about future sales. 
D)  businesses become more pessimistic about future sales.

Question 8

The expectation of higher future income is a

Accepted Answer

A)  rightward shifter of the AD curve. 
B)  leftward shifter of the AD curve. 
C)  reason for moving up along a given AD curve. 
D)  reason for moving down along a given AD curve. 
A)  rightward shifter of the AD curve. 
B)  leftward shifter of the AD curve. 
C)  reason for moving up along a given AD curve. 
D)  reason for moving down along a given AD curve.

Question 9

A rise in the price level prompts an increase in the demand for credit.This is relevant to the __________ effect.

Accepted Answer

A)  international trade 
B)  real balance 
C)  aggregate demand 
D)  interest rate 
E)  b and c 
A)  international trade 
B)  real balance 
C)  aggregate demand 
D)  interest rate 
E)  b and c

Question 10

The wage rate rises.As a result,in the short run Real GDP will __________ and the price level will __________.

Accepted Answer

A)  rise; rise 
B)  fall; fall 
C)  remain constant; fall 
D)  fall; rise 
E)  rise; fall 
A)  rise; rise 
B)  fall; fall 
C)  remain constant; fall 
D)  fall; rise 
E)  rise; fall

Question 11

Exhibit 8-4
  
-Refer to Exhibit 8-4. Which of the following could not have caused a shift in aggregate supply from SRAS? to SRAS??

Accepted Answer

A)  an increase in productivity 
B)  a beneficial supply shock 
C)  a decrease in the price of a nonlabor input 
D)  a change in the price level 
E)  a decrease in wage rates 
A)  an increase in productivity 
B)  a beneficial supply shock 
C)  a decrease in the price of a nonlabor input 
D)  a change in the price level 
E)  a decrease in wage rates

Question 12

The interest rate effect occurs because a change in interest rates causes a change in the price level.

Accepted Answer

A) True 
 B)False

Question 13

If businesses buy fewer capital goods,and nothing else changes,then total expenditures on U.S.goods and services will decrease.And if total expenditures decrease,then __________ will decrease; consequently,the __________ curve will shift __________.

Accepted Answer

A)  aggregate demand (A
D) ; AD; rightward 
B)  short-run aggregate supply (SRAS); SRAS; leftward 
C)  aggregate demand (A
D) ; AD; leftward 
D)  interest rates; AD; leftward 
E)  prices; AD; rightward 
A)  aggregate demand (A
D) ; AD; rightward 
B)  short-run aggregate supply (SRAS); SRAS; leftward 
C)  aggregate demand (A
D) ; AD; leftward 
D)  interest rates; AD; leftward 
E)  prices; AD; rightward

Question 14

The level of Real GDP that the economy produces in long-run equilibrium is Natural Real GDP.

Accepted Answer

A) True 
 B)False

Question 15

The interest rate effect is one of the

Accepted Answer

A)  reasons why an AD curve is downward-sloping. 
B)  shifters of an AD curve. 
C)  reasons why a short-run aggregate supply curve can be derived. 
D)  shifters of a short-run aggregate supply curve. 
A)  reasons why an AD curve is downward-sloping. 
B)  shifters of an AD curve. 
C)  reasons why a short-run aggregate supply curve can be derived. 
D)  shifters of a short-run aggregate supply curve.

Question 16

One of the problems facing the Greek economy in 2012 was the Greek government's inability to unilaterally devalue the euro.

Accepted Answer

A) True 
 B)False

Question 17

Generally,an increase in aggregate supply is

Accepted Answer

A)  the result of an increase in the price level. 
B)  represented by a movement up along the SRAS curve. 
C)  represented by a rightward shift in the SRAS curve. 
D)  both a and b 
E)  both a and C 
A)  the result of an increase in the price level. 
B)  represented by a movement up along the SRAS curve. 
C)  represented by a rightward shift in the SRAS curve. 
D)  both a and b 
E)  both a and C

Question 18

A decrease in the money supply may __________ total expenditures and thus __________ aggregate demand.

Accepted Answer

A)  raise; raise 
B)  raise; lower 
C)  lower; raise 
D)  lower; lower 
A)  raise; raise 
B)  raise; lower 
C)  lower; raise 
D)  lower; lower

Question 19

When the dollar appreciates,U.S.net exports fall and aggregate demand decreases.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following statements represents a correct and sequentially accurate economic explanation?

Accepted Answer

A)  Wage rates rise, SRAS rises, and the SRAS curve shifts to the left. 
B)  The prices of nonlabor inputs rise, SRAS decreases, and the SRAS curve shifts to the right. 
C)  Labor productivity rises, SRAS increases, and the SRAS curve shifts to the right. 
D)  An adverse supply shock hits, SRAS decreases, and the SRAS curve shifts to the right. 
E)  a and c 
A)  Wage rates rise, SRAS rises, and the SRAS curve shifts to the left. 
B)  The prices of nonlabor inputs rise, SRAS decreases, and the SRAS curve shifts to the right. 
C)  Labor productivity rises, SRAS increases, and the SRAS curve shifts to the right. 
D)  An adverse supply shock hits, SRAS decreases, and the SRAS curve shifts to the right. 
E)  a and c

Exam 8: Aggregate Demand and Aggregate Supply

Starting from short-run equilibrium,wage rates rise.What is the effect on the price level and Real GDP in the short run?

Exhibit 8-1 -Refer to Exhibit 8-1. Assume that the economy is originally in equilibrium at point A. If foreign real national income rises,at which point is the economy most likely to end up in the short run?

An increase in the money supply may __________ total expenditures,leading to a __________ shift of the AD curve.

A decrease in consumption at a given price level

Exhibit 8-1 -Refer to Exhibit 8-1. Assume that the economy is originally in equilibrium at point A. If businesses become more optimistic about future sales,at which point is the economy most likely to end up in the short run?

Exhibit 8-3 -Refer to Exhibit 8-3. A shift in aggregate demand from AD? to AD? would have been the result of

The expectation of higher future income is a

A rise in the price level prompts an increase in the demand for credit.This is relevant to the __________ effect.

The wage rate rises.As a result,in the short run Real GDP will __________ and the price level will __________.

Exhibit 8-4 -Refer to Exhibit 8-4. Which of the following could not have caused a shift in aggregate supply from SRAS? to SRAS??

The interest rate effect occurs because a change in interest rates causes a change in the price level.

If businesses buy fewer capital goods,and nothing else changes,then total expenditures on U.S.goods and services will decrease.And if total expenditures decrease,then __________ will decrease; consequently,the __________ curve will shift __________.

The level of Real GDP that the economy produces in long-run equilibrium is Natural Real GDP.

The interest rate effect is one of the

One of the problems facing the Greek economy in 2012 was the Greek government's inability to unilaterally devalue the euro.

Generally,an increase in aggregate supply is

A decrease in the money supply may __________ total expenditures and thus __________ aggregate demand.

When the dollar appreciates,U.S.net exports fall and aggregate demand decreases.

Which of the following statements represents a correct and sequentially accurate economic explanation?

What Economics Is About

Production Possibilities Frontier Framework

Supply and Demand: Theory

Prices: Free, Controlled, and Relative

Supply, Demand, and Price: Applications

Macroeconomic Measurements: Prices and Unemployment

Macroeconomic Measurements: GDP and Real GDP

Classical Macroeconomics and the Self Regulating Economy

Keynesian Macroeconomics and Economic Instability: A Critique of the Self-Regulating Economy

Fiscal Policy and the Federal Budget

Money, Banking,and the Financial System

The Federal Reserve System

Money and the Economy

Monetary Policy

Expectations Theory and the Economy

Economic Growth: Resources, Technology, Ideas, and Institutions

The Financial Crisis of 2007-2009

Debates in Macroeconomics Over the Role and Effects of Government

Elasticity

Consumer Choice: Maximizing Utility and Behavioral Economics

Production and Costs

Perfect Competition

Monopoly

Monopolistic Competition, Oligopoly, and Game Theory

Government and Product Markets: Antitrust and Regulation

Factor Markets: With Emphasis on the Labor Market

Wages,Unions,and Labor

The Distribution of Income and Poverty

Interest, Rent, and Profit

Market Failure: Externalities, Public Goods, and Asymmetric Information

Public Choice and Special-Interest-Group Politics

Building Theories to Explain Everyday Life: From Observations to Questions to Theories to Predictions

International Trade

International Finance

Globalization and International Impacts on the Economy

The Economic Case For and Against Government: Five Topics Considered

Stocks, Bonds, Futures, and Options

Agriculture: Problems, Policies, and Unintended Effects

Filters

An increase in the money supply may total expenditures,leading to a shift of the AD curve.

The wage rate rises.As a result,in the short run Real GDP will and the price level will .

If businesses buy fewer capital goods,and nothing else changes,then total expenditures on U.S.goods and services will decrease.And if total expenditures decrease,then will decrease; consequently,the curve will shift __.

A decrease in the money supply may total expenditures and thus aggregate demand.