Question 1

In the aggregate demand- aggregate supply framework, how does an increase in the price level affect potential GDP?

Accepted Answer

An increase in the price level

Question 2

An above full- employment equilibrium is

Accepted Answer

A)  a theoretical possibility but cannot happen in reality. 
B)  the period of time when prices are falling. 
C)  the equilibrium in which the economy is in most of the time. 
D)  when real GDP exceeds potential GDP. 
A)  a theoretical possibility but cannot happen in reality. 
B)  the period of time when prices are falling. 
C)  the equilibrium in which the economy is in most of the time. 
D)  when real GDP exceeds potential GDP.

Question 3

-In the figure above, the economy is at point A when the price level falls to 100. Money wage rates and all other resource prices remain constant. Firms are willing to supply output equal to

Accepted Answer

A)  $11.5 trillion. 
B)  $12.5 trillion. 
C)  $12.0 trillion. 
D)  None of the above answers is correct. 
A)  $11.5 trillion. 
B)  $12.5 trillion. 
C)  $12.0 trillion. 
D)  None of the above answers is correct.

Question 4

An increase in the quantity of money shifts the aggregate demand curve rightward.

Accepted Answer

A) True 
 B)False

Question 5

-In the above figure, at the point where AD equals SAS,

Accepted Answer

A)  the unemployment rate is zero. 
B)  real GDP exceeds potential GDP. 
C)  the economy is in a recession. 
D)  potential GDP exceeds real GDP. 
A)  the unemployment rate is zero. 
B)  real GDP exceeds potential GDP. 
C)  the economy is in a recession. 
D)  potential GDP exceeds real GDP.

Question 6

The Great Depression, in which real GDP fell and unemployment rose, can be characterized as a
)

Accepted Answer

A)  long- run equilibrium 
B)  recessionary gap 
C)  full- employment equilibrium 
D)  inflationary gap 
A)  long- run equilibrium 
B)  recessionary gap 
C)  full- employment equilibrium 
D)  inflationary gap

Question 7

If the price level in Great Britain increases from 102 to 105 (holding all else constant), real wealth
And there is a movement along Great Britain's aggregate demand curve.

Accepted Answer

A)  increases; downward 
B)  increases; upward 
C)  decreases; downward 
D)  decreases; upward 
A)  increases; downward 
B)  increases; upward 
C)  decreases; downward 
D)  decreases; upward

Question 8

The long- run aggregate supply curve is because along it, as prices rise, the money wage rate .

Accepted Answer

A)  vertical; rises 
B)  upward sloping; stays constant 
C)  vertical; falls 
D)  upward sloping; falls 
A)  vertical; rises 
B)  upward sloping; stays constant 
C)  vertical; falls 
D)  upward sloping; falls

Question 9

Which of the following is NOT part of the short- run macroeconomic adjustment to equilibrium when the price level is greater than the equilibrium price level?

Accepted Answer

A)  There is a decrease in the money wage rate. 
B)  There are decreases in production and prices. 
C)  The quantity of real GDP demanded is less than the quantity of real GDP supplied. 
D)  There are unexpected increases in business inventories. 
A)  There is a decrease in the money wage rate. 
B)  There are decreases in production and prices. 
C)  The quantity of real GDP demanded is less than the quantity of real GDP supplied. 
D)  There are unexpected increases in business inventories.

Question 10

In the short run, a supply shock that shifts the short- run aggregate supply curve leftward real GDP and _ the price level.

Accepted Answer

A)  decreases; lowers 
B)  decreases; raises 
C)  increases; raises 
D)  increases; lowers 
A)  decreases; lowers 
B)  decreases; raises 
C)  increases; raises 
D)  increases; lowers

Question 11

The Keynesian theory of business cycle views volatile expectations of future sales and profits as the main source of economic fluctuations.

Accepted Answer

A) True 
 B)False

Question 12

A movement along the aggregate demand curve but not a shift in the aggregate demand curve is created by a

Accepted Answer

A)  change in the price level. 
B)  change in fiscal policy. 
C)  change in tax rates. 
D)  None of the above because they all shift the aggregate demand curve. 
A)  change in the price level. 
B)  change in fiscal policy. 
C)  change in tax rates. 
D)  None of the above because they all shift the aggregate demand curve.

Question 13

If the economy is in short run equilibrium then

Accepted Answer

A)  nominal GDP equals potential GDP. 
B)  real GDP equals potential GDP. 
C)  real GDP can be greater than, less than, or equal to potential GDP. 
D)  real GDP cannot be equal to potential GDP. 
A)  nominal GDP equals potential GDP. 
B)  real GDP equals potential GDP. 
C)  real GDP can be greater than, less than, or equal to potential GDP. 
D)  real GDP cannot be equal to potential GDP.

Question 14

If real GDP is less than potential GDP, then the economy is _ equilibrium.

Accepted Answer

A)  in long- run macroeconomic 
B)  at an above full- employment 
C)  at a below full- employment 
D)  not in short- run macroeconomic 
A)  in long- run macroeconomic 
B)  at an above full- employment 
C)  at a below full- employment 
D)  not in short- run macroeconomic

Question 15

If aggregate demand decreases and neither short- run nor long- run aggregate supply changes, then

Accepted Answer

A)  there will be an inflationary gap. 
B)  there will be a recessionary gap. 
C)  in the long run, the long- run aggregate supply will decrease. 
D)  the price level will increase in the short- run and decrease in the long- run. 
A)  there will be an inflationary gap. 
B)  there will be a recessionary gap. 
C)  in the long run, the long- run aggregate supply will decrease. 
D)  the price level will increase in the short- run and decrease in the long- run.

Question 16

An economy currently has a inflationary gap. An increase in the money wage rate will the inflationary gap and the price level.

Accepted Answer

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

Question 17

Aggregate demand increases when

Accepted Answer

A)  the exchange rate rises. 
B)  interest rates rise. 
C)  foreign incomes fall. 
D)  None of the above answers is correct. 
A)  the exchange rate rises. 
B)  interest rates rise. 
C)  foreign incomes fall. 
D)  None of the above answers is correct.

Question 18

-In the above figure, if the economy is at point a, an increase in will move the economy to
)

Accepted Answer

A)  expected future income; point d 
B)  expected future income; point c 
C)  real wealth from the fall in the price level; point c 
D)  real wealth from the fall in the price level; point b 
A)  expected future income; point d 
B)  expected future income; point c 
C)  real wealth from the fall in the price level; point c 
D)  real wealth from the fall in the price level; point b

Question 19

Economic growth will occur and the price level will be constant when the increase in aggregate demand

Accepted Answer

A)  exactly equals the increase in long- run aggregate supply. 
B)  is accompanied by a decrease in short- run aggregate supply. 
C)  is more than the increase in long- run aggregate supply. 
D)  is less than the increase in long- run aggregate supply. 
A)  exactly equals the increase in long- run aggregate supply. 
B)  is accompanied by a decrease in short- run aggregate supply. 
C)  is more than the increase in long- run aggregate supply. 
D)  is less than the increase in long- run aggregate supply.

Question 20

The long- run aggregate supply curve shows the

Accepted Answer

A)  maximum GDP the nation will ever produce. 
B)  level of output for which real GDP equals nominal GDP. 
C)  level of real GDP associated with a constant price level. 
D)  full- employment level of real GDP. 
A)  maximum GDP the nation will ever produce. 
B)  level of output for which real GDP equals nominal GDP. 
C)  level of real GDP associated with a constant price level. 
D)  full- employment level of real GDP.

In the aggregate demand- aggregate supply framework, how does an increase in the price level affect potential GDP?

An above full- employment equilibrium is

-In the figure above, the economy is at point A when the price level falls to 100. Money wage rates and all other resource prices remain constant. Firms are willing to supply output equal to

An increase in the quantity of money shifts the aggregate demand curve rightward.

-In the above figure, at the point where AD equals SAS,

The Great Depression, in which real GDP fell and unemployment rose, can be characterized as a )

If the price level in Great Britain increases from 102 to 105 (holding all else constant), real wealth And there is a movement along Great Britain's aggregate demand curve.

The long- run aggregate supply curve is because along it, as prices rise, the money wage rate .

Which of the following is NOT part of the short- run macroeconomic adjustment to equilibrium when the price level is greater than the equilibrium price level?

In the short run, a supply shock that shifts the short- run aggregate supply curve leftward real GDP and _ the price level.

The Keynesian theory of business cycle views volatile expectations of future sales and profits as the main source of economic fluctuations.

A movement along the aggregate demand curve but not a shift in the aggregate demand curve is created by a

If the economy is in short run equilibrium then

If real GDP is less than potential GDP, then the economy is _ equilibrium.

If aggregate demand decreases and neither short- run nor long- run aggregate supply changes, then

An economy currently has a inflationary gap. An increase in the money wage rate will the inflationary gap and the price level.

Aggregate demand increases when

-In the above figure, if the economy is at point a, an increase in will move the economy to )

Economic growth will occur and the price level will be constant when the increase in aggregate demand

The long- run aggregate supply curve shows the

What Is Economics

The Economic Problem

Demand and Supply

Measuring Gdp and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Expenditure Multipliers: They Keynesian Model

U.S. Inflation, Unemployment, and Business Cycle

Fiscal Policy

Monetary Policy

International Trade Policy

Filters

Exam 10: Aggregate Supply and Aggregate Demand

In the aggregate demand- aggregate supply framework, how does an increase in the price level affect potential GDP?

An above full- employment equilibrium is

-In the figure above, the economy is at point A when the price level falls to 100. Money wage rates and all other resource prices remain constant. Firms are willing to supply output equal to

An increase in the quantity of money shifts the aggregate demand curve rightward.

-In the above figure, at the point where AD equals SAS,

The Great Depression, in which real GDP fell and unemployment rose, can be characterized as a )

If the price level in Great Britain increases from 102 to 105 (holding all else constant), real wealth And there is a movement along Great Britain's aggregate demand curve.

The long- run aggregate supply curve is because along it, as prices rise, the money wage rate .

Which of the following is NOT part of the short- run macroeconomic adjustment to equilibrium when the price level is greater than the equilibrium price level?

In the short run, a supply shock that shifts the short- run aggregate supply curve leftward real GDP and _ the price level.

The Keynesian theory of business cycle views volatile expectations of future sales and profits as the main source of economic fluctuations.

A movement along the aggregate demand curve but not a shift in the aggregate demand curve is created by a

If the economy is in short run equilibrium then

If real GDP is less than potential GDP, then the economy is _ equilibrium.

If aggregate demand decreases and neither short- run nor long- run aggregate supply changes, then

An economy currently has a inflationary gap. An increase in the money wage rate will the inflationary gap and the price level.

Aggregate demand increases when

-In the above figure, if the economy is at point a, an increase in will move the economy to )

Economic growth will occur and the price level will be constant when the increase in aggregate demand

The long- run aggregate supply curve shows the

What Is Economics

The Economic Problem

Demand and Supply

Measuring Gdp and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Expenditure Multipliers: They Keynesian Model

U.S. Inflation, Unemployment, and Business Cycle

Fiscal Policy

Monetary Policy

International Trade Policy

Filters