Question 1

Which school of thought believes that real GDP always equals potential GDP?

Accepted Answer

A)  only Keynesian 
B)  Monetarist 
C)  both Keynesian and classical 
D)  only classical 
A)  only Keynesian 
B)  Monetarist 
C)  both Keynesian and classical 
D)  only classical

Question 2

-The data in the above table indicate that when the price level is 120,

Accepted Answer

A)  firms have unexpectedly low inventories, so prices will rise. 
B)  firms will plan to increase the level of output. 
C)  firms have unexpectedly high inventories, so prices fall. 
D)  inventories are at levels planned by firms. 
A)  firms have unexpectedly low inventories, so prices will rise. 
B)  firms will plan to increase the level of output. 
C)  firms have unexpectedly high inventories, so prices fall. 
D)  inventories are at levels planned by firms.

Question 3

The long- run aggregate supply curve

Accepted Answer

A)  is positively sloped. 
B)  is horizontal at the level of potential GDP. 
C)  is negatively sloped. 
D)  is vertical at the level of potential GDP. 
A)  is positively sloped. 
B)  is horizontal at the level of potential GDP. 
C)  is negatively sloped. 
D)  is vertical at the level of potential GDP.

Question 4

The AD curve shows the sum of

Accepted Answer

A)  consumption expenditure, investment, the price level, and real GDP. 
B)  the price level, employment, and real GDP. 
C)  consumption expenditure, investment, and real GDP. 
D)  consumption expenditure, investment, government expenditures on goods and services, and net exports. 
A)  consumption expenditure, investment, the price level, and real GDP. 
B)  the price level, employment, and real GDP. 
C)  consumption expenditure, investment, and real GDP. 
D)  consumption expenditure, investment, government expenditures on goods and services, and net exports.

Question 5

The SAS curve shifts if there is a change in

Accepted Answer

A)  nominal GDP. 
B)  the price level. 
C)  real GDP. 
D)  potential GDP. 
A)  nominal GDP. 
B)  the price level. 
C)  real GDP. 
D)  potential GDP.

Question 6

A change in the full- employment quantity of labor the short- run aggregate supply curve and _ the long- run aggregate supply curve.

Accepted Answer

A)  does not shift; shifts 
B)  shifts; shifts 
C)  shifts; does not shift 
D)  does not shift; does not shift 
A)  does not shift; shifts 
B)  shifts; shifts 
C)  shifts; does not shift 
D)  does not shift; does not shift

Question 7

-The data in the above table show that the economy will be in a short- run macroeconomic equilibrium at a price level of

Accepted Answer

A)  100. 
B)  120. 
C)  90. 
D)  110. 
A)  100. 
B)  120. 
C)  90. 
D)  110.

Question 8

A rise in the expected future inflation rate

Accepted Answer

A)  increases the aggregate quantity demanded. 
B)  decreases aggregate demand. 
C)  decreases the aggregate quantity demanded. 
D)  increases aggregate demand. 
A)  increases the aggregate quantity demanded. 
B)  decreases aggregate demand. 
C)  decreases the aggregate quantity demanded. 
D)  increases aggregate demand.

Question 9

In 2008, Japan's economy suffered as world economies slowed. If authorities in Japan followed the monetarist viewpoint, _ to bring the economy back to full employment.

Accepted Answer

A)  nothing should be done 
B)  aggregate supply would shift leftward 
C)  the money supply would be kept growing at a steady pace 
D)  taxes would be decreased and the money supply should be increased 
A)  nothing should be done 
B)  aggregate supply would shift leftward 
C)  the money supply would be kept growing at a steady pace 
D)  taxes would be decreased and the money supply should be increased

Question 10

-In the above figure, point A represents

Accepted Answer

A)  a full- employment equilibrium. 
B)  an increase in aggregate demand. 
C)  a recessionary gap. 
D)  an inflationary gap. 
A)  a full- employment equilibrium. 
B)  an increase in aggregate demand. 
C)  a recessionary gap. 
D)  an inflationary gap.

Question 11

Explain the relationship of the long- run aggregate supply curve, the short- run aggregate supply curve and the aggregate demand curve in determining a long- run and short- run macroeconomic equilibrium.

Accepted Answer

Short- run macroeconomic equilibrium occ

Question 12

Aggregate supply is

Accepted Answer

A)  the relationship between the unemployment rate and real GDP. 
B)  the relationship between labor employment and the real (inflation adjusted) wage rate. 
C)  desired spending on output at different price levels. 
D)  the relationship between the quantity of real GDP and the price level. 
A)  the relationship between the unemployment rate and real GDP. 
B)  the relationship between labor employment and the real (inflation adjusted) wage rate. 
C)  desired spending on output at different price levels. 
D)  the relationship between the quantity of real GDP and the price level.

Question 13

Substitution effects help explain the slope of the aggregate demand curve. One substitution effect refers to the

Accepted Answer

A)  effect on investment expenditures that result from a change in interest rates produced by a change in the price level. 
B)  direct relationship between the interest rate and the real value of wealth. 
C)  change in wealth that results from a change in the interest rate. 
D)  inverse relationship between the interest rate and the price level. 
A)  effect on investment expenditures that result from a change in interest rates produced by a change in the price level. 
B)  direct relationship between the interest rate and the real value of wealth. 
C)  change in wealth that results from a change in the interest rate. 
D)  inverse relationship between the interest rate and the price level.

Question 14

If you are have $1,000 of money in the bank and the price level rises 5 percent, your

Accepted Answer

A)  money is worth less in terms of what it can purchase. 
B)  purchasing power has risen. 
C)  money is worth more in terms of what it can purchase. 
D)  money is worth the same in terms of what it can purchase. 
A)  money is worth less in terms of what it can purchase. 
B)  purchasing power has risen. 
C)  money is worth more in terms of what it can purchase. 
D)  money is worth the same in terms of what it can purchase.

Question 15

-Suppose the economy is at point B. If firms expect profits will be higher in the future, to what point might the economy's move in the short run?

Accepted Answer

A)  It shifts to a point such as C. 
B)  It shifts to a point such as A. 
C)  It stays at point B. 
D)  None of the above answers are correct because it is the SAS curve that shifts, not the AD curve. 
A)  It shifts to a point such as C. 
B)  It shifts to a point such as A. 
C)  It stays at point B. 
D)  None of the above answers are correct because it is the SAS curve that shifts, not the AD curve.

Question 16

A decrease in government expenditure on goods and services

Accepted Answer

A)  increases aggregate demand. 
B)  decreases aggregate demand. 
C)  increases the aggregate quantity demanded. 
D)  decreases the aggregate quantity demanded. 
A)  increases aggregate demand. 
B)  decreases aggregate demand. 
C)  increases the aggregate quantity demanded. 
D)  decreases the aggregate quantity demanded.

Question 17

The long- run aggregate supply curve is vertical because

Accepted Answer

A)  at full employment prices are stable. 
B)  potential GDP is independent of the price level. 
C)  there is no cyclical inflation. 
D)  the money wage rate increases faster than the price level. 
A)  at full employment prices are stable. 
B)  potential GDP is independent of the price level. 
C)  there is no cyclical inflation. 
D)  the money wage rate increases faster than the price level.

Question 18

The quantity of real GDP supplied depends on the

Accepted Answer

A)  level of aggregate demand. 
B)  quantity of labor, the quantity of capital, and the state of technology. 
C)  quantity of capital, bonds, and stocks. 
D)  price level, the unemployment rate, and the quantity of government expenditures on goods and services. 
A)  level of aggregate demand. 
B)  quantity of labor, the quantity of capital, and the state of technology. 
C)  quantity of capital, bonds, and stocks. 
D)  price level, the unemployment rate, and the quantity of government expenditures on goods and services.

Question 19

If the full- employment quantity of labor increases, then the

Accepted Answer

A)  LAS curve shifts rightward and the SAS curve does not shift. 
B)  SAS curve shifts rightward and the LAS curve does not shift. 
C)  SAS curve shifts rightward and the LAS curve does shifts leftward. 
D)  SAS curve shifts rightward and the LAS curve shifts rightward. 
A)  LAS curve shifts rightward and the SAS curve does not shift. 
B)  SAS curve shifts rightward and the LAS curve does not shift. 
C)  SAS curve shifts rightward and the LAS curve does shifts leftward. 
D)  SAS curve shifts rightward and the LAS curve shifts rightward.

Question 20

If the expected future inflation rate decreases, then

Accepted Answer

A)  aggregate demand increases. 
B)  aggregate demand decreases. 
C)  short- run aggregate supply increases. 
D)  short- run aggregate supply decreases. 
A)  aggregate demand increases. 
B)  aggregate demand decreases. 
C)  short- run aggregate supply increases. 
D)  short- run aggregate supply decreases.

Which school of thought believes that real GDP always equals potential GDP?

-The data in the above table indicate that when the price level is 120,

The long- run aggregate supply curve

The AD curve shows the sum of

The SAS curve shifts if there is a change in

A change in the full- employment quantity of labor the short- run aggregate supply curve and _ the long- run aggregate supply curve.

-The data in the above table show that the economy will be in a short- run macroeconomic equilibrium at a price level of

A rise in the expected future inflation rate

In 2008, Japan's economy suffered as world economies slowed. If authorities in Japan followed the monetarist viewpoint, _ to bring the economy back to full employment.

-In the above figure, point A represents

Explain the relationship of the long- run aggregate supply curve, the short- run aggregate supply curve and the aggregate demand curve in determining a long- run and short- run macroeconomic equilibrium.

Aggregate supply is

Substitution effects help explain the slope of the aggregate demand curve. One substitution effect refers to the

If you are have $1,000 of money in the bank and the price level rises 5 percent, your

-Suppose the economy is at point B. If firms expect profits will be higher in the future, to what point might the economy's move in the short run?

A decrease in government expenditure on goods and services

The long- run aggregate supply curve is vertical because

The quantity of real GDP supplied depends on the

If the full- employment quantity of labor increases, then the

If the expected future inflation rate decreases, then

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

Which school of thought believes that real GDP always equals potential GDP?

-The data in the above table indicate that when the price level is 120,

The long- run aggregate supply curve

The AD curve shows the sum of

The SAS curve shifts if there is a change in

A change in the full- employment quantity of labor the short- run aggregate supply curve and _ the long- run aggregate supply curve.

-The data in the above table show that the economy will be in a short- run macroeconomic equilibrium at a price level of

A rise in the expected future inflation rate

In 2008, Japan's economy suffered as world economies slowed. If authorities in Japan followed the monetarist viewpoint, _ to bring the economy back to full employment.

-In the above figure, point A represents

Explain the relationship of the long- run aggregate supply curve, the short- run aggregate supply curve and the aggregate demand curve in determining a long- run and short- run macroeconomic equilibrium.

Aggregate supply is

Substitution effects help explain the slope of the aggregate demand curve. One substitution effect refers to the

If you are have $1,000 of money in the bank and the price level rises 5 percent, your

-Suppose the economy is at point B. If firms expect profits will be higher in the future, to what point might the economy's move in the short run?

A decrease in government expenditure on goods and services

The long- run aggregate supply curve is vertical because

The quantity of real GDP supplied depends on the

If the full- employment quantity of labor increases, then the

If the expected future inflation rate decreases, then

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