Question 1

A classical economist believes that

Accepted Answer

A)  if the economy was left alone, it would rarely operate at full employment. 
B)  the economy is self-regulating and will normally, though not always, operate at full employment if fiscal policy is not erratic. 
C)  the economy is self-regulating and always at full employment. 
D)  the economy is self-regulating and will normally, though not always, operate at full employment if monetary policy is not erratic. 
A)  if the economy was left alone, it would rarely operate at full employment. 
B)  the economy is self-regulating and will normally, though not always, operate at full employment if fiscal policy is not erratic. 
C)  the economy is self-regulating and always at full employment. 
D)  the economy is self-regulating and will normally, though not always, operate at full employment if monetary policy is not erratic.

Question 2

$$\begin{array} { | l | l | l | l | } 
\hline \text { Price level } & \begin{array} { l } 
\text { A ggregate demand } \
\text { (trillions of 2005 } \
\text { dollars) }
\end{array} & \begin{array} { l } 
\text { Short-run aggregate } \
\text { supply (trillions of } \
\text { 2005 dollars) }
\end{array} & \begin{array} { l } 
\text { Long-run aggregate } \
\text { supply (trilli ons of } \
2005 \text { dollars) }
\end{array} \
\hline 100 & 11 & 7 & 10 \
\hline 110 & 10 & 8 & 10 \
\hline 120 & 9 & 9 & 10 \
\hline 130 & 8 & 10 & 10 \
\hline 140 & 7 & 11 & 10 \
\hline
\end{array}$$
-Based on the data in the table above, the economy will be in short -run equilibrium at a price level of

Accepted Answer

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

Question 3

In the macroeconomic short run,

Accepted Answer

A)  actual real GDP always equals potential GDP. 
B)  the unemployment rate is zero. 
C)  by definition, the economy is always moving away from full employment. 
D)  actual real GDP may be less than or more than potential GDP. 
A)  actual real GDP always equals potential GDP. 
B)  the unemployment rate is zero. 
C)  by definition, the economy is always moving away from full employment. 
D)  actual real GDP may be less than or more than potential GDP.

Question 4

In the short-run, a rise in the money wage rate leads to

Accepted Answer

A)  an increase in the price level, but no change in real GDP. 
B)  an increase in the price level and an increase in real GDP. 
C)  no change in the price level, but an increase in real GDP. 
D)  an increase in the price level and a decrease in real GDP. 
A)  an increase in the price level, but no change in real GDP. 
B)  an increase in the price level and an increase in real GDP. 
C)  no change in the price level, but an increase in real GDP. 
D)  an increase in the price level and a decrease in real GDP.

Question 5

A decrease in short-run aggregate supply____________ the equilibrium price level and ____________the equilibrium quantity of real GDP.

Accepted Answer

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

Question 6

When real GDP exceeds potential GDP, then the economy has

Accepted Answer

A)  a recessionary gap. 
B)  an inflationary gap. 
C)  a below full-employment equilibrium. 
D)  None of the above answers are correct. 
A)  a recessionary gap. 
B)  an inflationary gap. 
C)  a below full-employment equilibrium. 
D)  None of the above answers are correct.

Question 7

Aggregate demand increases when

Accepted Answer

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

Question 8

All of the following shift the LAS curve EXCEPT

Accepted Answer

A)  technological progress. 
B)  a change in the capital stock. 
C)  an increase in the money wage rate. 
D)  an increase in the stock of human capital. 
A)  technological progress. 
B)  a change in the capital stock. 
C)  an increase in the money wage rate. 
D)  an increase in the stock of human capital.

Question 9

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

Question 10

Stagflation is the combination of

Accepted Answer

A)  deflation and recession. 
B)  inflation and increasing real GDP. 
C)  deflation with increasing real GDP. 
D)  inflation and recession. 
A)  deflation and recession. 
B)  inflation and increasing real GDP. 
C)  deflation with increasing real GDP. 
D)  inflation and recession.

Question 11

An increase in government expenditure on goods and services

Accepted Answer

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

Question 12

-In the above figure, what is the short-run equilibrium real GDP and the short-run equilibrium price level?

Accepted Answer

The short-run equilibrium occu

Question 13

Assume the equilibrium price level is 140 and the equilibrium real GDP is $15 trillion. What happens if the current price level equals 125?

Accepted Answer

The quantity of real GDP demanded is gre

Question 14

-In the above figure, the economy is initially at point B. If taxes increase, there is

Accepted Answer

A)  a shift to AD2. 
B)  a movement to point C. 
C)  a shift to AD1. 
D)  a movement to point A. 
A)  a shift to AD2. 
B)  a movement to point C. 
C)  a shift to AD1. 
D)  a movement to point A.

Question 15

Which of the following shifts the short-run aggregate supply curve?
I. changes in the size of the labor force
II. changes in the money wage rate

Accepted Answer

A)  II only 
B)  both I and II 
C)  neither I nor II 
D)  I only 
A)  II only 
B)  both I and II 
C)  neither I nor II 
D)  I only

Question 16

In the long-run equilibrium, an increase in the quantity of capital leads to

Accepted Answer

A)  a decrease in the equilibrium price level, but no change in equilibrium real GDP. 
B)  a decrease in the equilibrium price level and an increase in equilibrium real GDP. 
C)  no change in the equilibrium price level, but an increase in equilibrium real GDP. 
D)  an increase in the equilibrium price level and an increase in equilibrium real GDP. 
A)  a decrease in the equilibrium price level, but no change in equilibrium real GDP. 
B)  a decrease in the equilibrium price level and an increase in equilibrium real GDP. 
C)  no change in the equilibrium price level, but an increase in equilibrium real GDP. 
D)  an increase in the equilibrium price level and an increase in equilibrium real GDP.

Question 17

-In the figure above, potential GDP equals

Accepted Answer

A)  $13.5 trillion. 
B)  $13.0 trillion. 
C)  $12.5 trillion. 
D)  None of the above answers is correct. 
A)  $13.5 trillion. 
B)  $13.0 trillion. 
C)  $12.5 trillion. 
D)  None of the above answers is correct.

Question 18

If you have $1,000 in wealth and the price level increases 20 percent, then

Accepted Answer

A)  the $1,000 dollars will buy 20 percent more goods and services. 
B)  the real value of the $1,000 increases. 
C)  the $1,000 will buy fewer goods and services. 
D)  you will be able to buy fewer goods, but the real value of those goods will increase. 
A)  the $1,000 dollars will buy 20 percent more goods and services. 
B)  the real value of the $1,000 increases. 
C)  the $1,000 will buy fewer goods and services. 
D)  you will be able to buy fewer goods, but the real value of those goods will increase.

Question 19

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

Accepted Answer

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

Question 20

-The curve labeled A in the above figure is

Accepted Answer

A)  an aggregate demand curve. 
B)  a short-run aggregate supply curve. 
C)  a production possibilities curve. 
D)  a long-run aggregate supply curve. 
A)  an aggregate demand curve. 
B)  a short-run aggregate supply curve. 
C)  a production possibilities curve. 
D)  a long-run aggregate supply curve.

A classical economist believes that

In the macroeconomic short run,

In the short-run, a rise in the money wage rate leads to

A decrease in short-run aggregate supply the equilibrium price level and the equilibrium quantity of real GDP.

When real GDP exceeds potential GDP, then the economy has

Aggregate demand increases when

All of the following shift the LAS curve EXCEPT

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

Stagflation is the combination of

An increase in government expenditure on goods and services

-In the above figure, what is the short-run equilibrium real GDP and the short-run equilibrium price level?

Assume the equilibrium price level is 140 and the equilibrium real GDP is $15 trillion. What happens if the current price level equals 125?

-In the above figure, the economy is initially at point B. If taxes increase, there is

Which of the following shifts the short-run aggregate supply curve? I. changes in the size of the labor force II. changes in the money wage rate

In the long-run equilibrium, an increase in the quantity of capital leads to

-In the figure above, potential GDP equals

If you have $1,000 in wealth and the price level increases 20 percent, then

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

-The curve labeled A in the above figure is

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

A classical economist believes that

In the macroeconomic short run,

In the short-run, a rise in the money wage rate leads to

A decrease in short-run aggregate supply____________ the equilibrium price level and ____________the equilibrium quantity of real GDP.

When real GDP exceeds potential GDP, then the economy has

Aggregate demand increases when

All of the following shift the LAS curve EXCEPT

In the short run, a supply shock that shifts the short-run aggregate supply curve leftward____________ Real GDP and ____________ the price level.

Stagflation is the combination of

An increase in government expenditure on goods and services

-In the above figure, what is the short-run equilibrium real GDP and the short-run equilibrium price level?

Assume the equilibrium price level is 140 and the equilibrium real GDP is $15 trillion. What happens if the current price level equals 125?

-In the above figure, the economy is initially at point B. If taxes increase, there is

Which of the following shifts the short-run aggregate supply curve? I. changes in the size of the labor force II. changes in the money wage rate

In the long-run equilibrium, an increase in the quantity of capital leads to

-In the figure above, potential GDP equals

If you have $1,000 in wealth and the price level increases 20 percent, then

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

-The curve labeled A in the above figure is

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

A decrease in short-run aggregate supply the equilibrium price level and the equilibrium quantity of real GDP.

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