Question 1

The SAS curve shifts if there is a change in the price level.

Accepted Answer

A) True 
 B)False

Question 2

The short-run aggregate supply curve is upward sloping because

Accepted Answer

A)  money wage rates do not immediately change when the price level changes. 
B)  most business firms operate with long-term contracts for output but not labor. 
C)  a lower price level creates a wealth effect. 
D)  lower taxes motivate people to work more. 
A)  money wage rates do not immediately change when the price level changes. 
B)  most business firms operate with long-term contracts for output but not labor. 
C)  a lower price level creates a wealth effect. 
D)  lower taxes motivate people to work more.

Question 3

$$\begin{array} { | l | l | l | l | } 
\hline \begin{array} { l } 
\text { Price } \
\text { level }
\end{array} & \begin{array} { l } 
\text { A ggregate } \
\text { demand } \
\text { (trillions of } \
\text { 2005 dollars) }
\end{array} & \begin{array} { l } 
\text { Short-run } \
\text { aggregate } \
\text { supply } \
\text { (trillions of } \
\text { 2005 dollars) }
\end{array} & \begin{array} { l } 
\text { Long-run } \
\text { aggregate } \
\text { supply } \
\text { (trillions of } \
\text { 2005 dollars) }
\end{array} \
\hline 130 & 8 & 12 & 10 \
\hline 120 & 9 & 11 & 10 \
\hline 110 & 10 & 10 & 10 \
\hline 100 & 11 & 9 & 10 \
\hline 90 & 12 & 8 & 10 \
\hline
\end{array}$$
-The data in the above table indicate that when the price level is 100,

Accepted Answer

A)  inventories fall and the price level rises. 
B)  inventories rise and the price level falls. 
C)  the economy is in a long-run macroeconomic equilibrium. 
D)  the unemployment rate is at its equilibrium level. 
A)  inventories fall and the price level rises. 
B)  inventories rise and the price level falls. 
C)  the economy is in a long-run macroeconomic equilibrium. 
D)  the unemployment rate is at its equilibrium level.

Question 4

The government increases taxes. As a result, in the short run, real GDP_____________ and the price level_____________ .

Accepted Answer

A)  decreases; falls 
B)  decreases; rises 
C)  increases; rises 
D)  increases; falls 
A)  decreases; falls 
B)  decreases; rises 
C)  increases; rises 
D)  increases; falls

Question 5

-In the above figure, the aggregate demand curve is AD2, so the long-run equilibrium level of real GDP is

Accepted Answer

A)  $13.5 trillion. 
B)  more than $13 and less than $13.5 trillion. 
C)  $13 trillion. 
D)  None of the above answers is correct. 
A)  $13.5 trillion. 
B)  more than $13 and less than $13.5 trillion. 
C)  $13 trillion. 
D)  None of the above answers is correct.

Question 6

In the United States, during the past 5 decades inflation was highest during the .____________,

Accepted Answer

A)  1960s 
B)  2000s 
C)  1990s 
D)  1970s 
A)  1960s 
B)  2000s 
C)  1990s 
D)  1970s

Question 7

Suppose the price level rises and the money wage remains constant. This set of changes leads to

Accepted Answer

A)  an upward movement along the LAS curve. 
B)  a leftward shift of the SAS curve. 
C)  an upward movement along the SAS curve. 
D)  a leftward shift of the SAS curve and the LAS curve. 
A)  an upward movement along the LAS curve. 
B)  a leftward shift of the SAS curve. 
C)  an upward movement along the SAS curve. 
D)  a leftward shift of the SAS curve and the LAS curve.

Question 8

-The curve labeled A in the above figure will shift rightward when

Accepted Answer

A)  technology increases. 
B)  the price level rises. 
C)  the price level falls. 
D)  population falls. 
A)  technology increases. 
B)  the price level rises. 
C)  the price level falls. 
D)  population falls.

Question 9

When the economy is at an above full-employment equilibrium, ____________.

Accepted Answer

A)  a recessionary gap exists 
B)  nominal GDP exceeds real GDP 
C)  real GDP is less than potential GDP 
D)  an inflationary gap exists 
A)  a recessionary gap exists 
B)  nominal GDP exceeds real GDP 
C)  real GDP is less than potential GDP 
D)  an inflationary gap exists

Question 10

The U.S. aggregate demand curve shifts leftward if

Accepted Answer

A)  the exchange rate falls. 
B)  there is a tax cut. 
C)  the economic conditions in Europe improve so that European incomes increase. 
D)  the Federal Reserve hikes the interest rate. 
A)  the exchange rate falls. 
B)  there is a tax cut. 
C)  the economic conditions in Europe improve so that European incomes increase. 
D)  the Federal Reserve hikes the interest rate.

Question 11

-In the above figure, the short-run aggregate supply curve is SAS1. Suppose that the price level in the economy increases. As a result there is

Accepted Answer

A)  an upward movement along SAS1. 
B)  a shift to SAS2. 
C)  a downward movement along SAS1. 
D)  a shift to SAS0. 
A)  an upward movement along SAS1. 
B)  a shift to SAS2. 
C)  a downward movement along SAS1. 
D)  a shift to SAS0.

Question 12

-In the above figure, the economy initially is at point C. Then the domestic price level rises by 10. A

Accepted Answer

A)  wealth effect would help move the economy to point B. 
B)  substitution effect would help move the economy to point D. 
C)  substitution effect would keep the economy at point C. 
D)  substitution effect would help move the economy to point B. 
A)  wealth effect would help move the economy to point B. 
B)  substitution effect would help move the economy to point D. 
C)  substitution effect would keep the economy at point C. 
D)  substitution effect would help move the economy to point B.

Question 13

In the short run, an increase in government expenditure on goods and services real GDP_____________ and the price level_____________.

Accepted Answer

A)  increases; falls 
B)  decreases; falls 
C)  decreases; rises 
D)  increases; rises 
A)  increases; falls 
B)  decreases; falls 
C)  decreases; rises 
D)  increases; rises

Question 14

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

Accepted Answer

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

Question 15

Long-run macroeconomic equilibrium is achieved when the money wage rate has adjusted so that employment is such that real GDP equals potential GDP.

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

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

Question 17

Long-run aggregate supply will decrease for all of the following reasons EXCEPT

Accepted Answer

A)  decreased capital. 
B)  reduced money wages. 
C)  decreased human capital. 
D)  decrease in the level of full employment. 
A)  decreased capital. 
B)  reduced money wages. 
C)  decreased human capital. 
D)  decrease in the level of full employment.

Question 18

Which of the following changes does NOT   shift the long-run aggregate supply curve?

Accepted Answer

A)  a tax hike that reduces the capital stock 
B)  a fall in the price level 
C)  a rise in number of college graduates in the labor force 
D)  a decrease in the labor force 
A)  a tax hike that reduces the capital stock 
B)  a fall in the price level 
C)  a rise in number of college graduates in the labor force 
D)  a decrease in the labor force

Question 19

-In the above figure, the economy is initially at point B. Then the price level falls by 10. The wealth effect will help

Accepted Answer

A)  move the economy to point A. 
B)  move the economy to point C. 
C)  keep the economy to point B. 
D)  move the economy to point D. 
A)  move the economy to point A. 
B)  move the economy to point C. 
C)  keep the economy to point B. 
D)  move the economy to point D.

Question 20

The long-run aggregate supply curve shows the

Accepted Answer

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

The SAS curve shifts if there is a change in the price level.

The short-run aggregate supply curve is upward sloping because

Price level A ggregate demand (trillions of 2005 dollars) Short-run aggregate supply (trillions of 2005 dollars) Long-run aggregate supply (trillions of 2005 dollars) 130 8 12 10 120 9 11 10 110 10 10 10 100 11 9 10 90 12 8 10 -The data in the above table indicate that when the price level is 100,

The government increases taxes. As a result, in the short run, real GDP_ and the price level_ .

-In the above figure, the aggregate demand curve is AD₂, so the long-run equilibrium level of real GDP is

In the United States, during the past 5 decades inflation was highest during the .____________,

Suppose the price level rises and the money wage remains constant. This set of changes leads to

-The curve labeled A in the above figure will shift rightward when

When the economy is at an above full-employment equilibrium, ____________.

The U.S. aggregate demand curve shifts leftward if

-In the above figure, the short-run aggregate supply curve is SAS₁. Suppose that the price level in the economy increases. As a result there is

-In the above figure, the economy initially is at point C. Then the domestic price level rises by 10. A

In the short run, an increase in government expenditure on goods and services real GDP_ and the price level_.

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

Long-run macroeconomic equilibrium is achieved when the money wage rate has adjusted so that employment is such that real GDP equals potential GDP.

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

Long-run aggregate supply will decrease for all of the following reasons EXCEPT

Which of the following changes does NOT shift the long-run aggregate supply curve?

-In the above figure, the economy is initially at point B. Then the price level falls by 10. The wealth effect will help

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: the Keynesian Model

U.S Inflation, Unemployment, and Business Cycle

Fiscal Policy

Monetary Policy

International Trade Policy

Review

Filters

Exam 10: Aggregate Supply and Aggregate Demand

The SAS curve shifts if there is a change in the price level.

The short-run aggregate supply curve is upward sloping because

Price level A ggregate demand (trillions of 2005 dollars) Short-run aggregate supply (trillions of 2005 dollars) Long-run aggregate supply (trillions of 2005 dollars) 130 8 12 10 120 9 11 10 110 10 10 10 100 11 9 10 90 12 8 10 -The data in the above table indicate that when the price level is 100,

The government increases taxes. As a result, in the short run, real GDP_____________ and the price level_____________ .

-In the above figure, the aggregate demand curve is AD2, so the long-run equilibrium level of real GDP is

In the United States, during the past 5 decades inflation was highest during the .____________,

Suppose the price level rises and the money wage remains constant. This set of changes leads to

-The curve labeled A in the above figure will shift rightward when

When the economy is at an above full-employment equilibrium, ____________.

The U.S. aggregate demand curve shifts leftward if

-In the above figure, the short-run aggregate supply curve is SAS1. Suppose that the price level in the economy increases. As a result there is

-In the above figure, the economy initially is at point C. Then the domestic price level rises by 10. A

In the short run, an increase in government expenditure on goods and services real GDP_____________ and the price level_____________.

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

Long-run macroeconomic equilibrium is achieved when the money wage rate has adjusted so that employment is such that real GDP equals potential GDP.

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

Long-run aggregate supply will decrease for all of the following reasons EXCEPT

Which of the following changes does NOT shift the long-run aggregate supply curve?

-In the above figure, the economy is initially at point B. Then the price level falls by 10. The wealth effect will help

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: the Keynesian Model

U.S Inflation, Unemployment, and Business Cycle

Fiscal Policy

Monetary Policy

International Trade Policy

Review

Filters

The government increases taxes. As a result, in the short run, real GDP_ and the price level_ .

-In the above figure, the aggregate demand curve is AD₂, so the long-run equilibrium level of real GDP is

-In the above figure, the short-run aggregate supply curve is SAS₁. Suppose that the price level in the economy increases. As a result there is

In the short run, an increase in government expenditure on goods and services real GDP_ and the price level_.

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