Question 1

For movements along the long-run aggregate supply curve,

Accepted Answer

A)  the prices of goods and services change while the prices of productive resources hold steady. 
B)  the price level and the money wage rate change by the same percentage. 
C)  potential GDP is dependent on the price level. 
D)  All of the above are correct. 
A)  the prices of goods and services change while the prices of productive resources hold steady. 
B)  the price level and the money wage rate change by the same percentage. 
C)  potential GDP is dependent on the price level. 
D)  All of the above are correct.

Question 2

For movements along the short-run aggregate supply curve,

Accepted Answer

A)  potential GDP remains constant. 
B)  the money wage rate is constant. 
C)  the real wage rate changes. 
D)  All of the above are correct. 
A)  potential GDP remains constant. 
B)  the money wage rate is constant. 
C)  the real wage rate changes. 
D)  All of the above are correct.

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 120,

Accepted Answer

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

Question 4

We distinguish between the long-run aggregate supply curve and the short-run aggregate supply curve. In the long run

Accepted Answer

A)  the aggregate supply curve is horizontal while in the short run it is upward sloping. 
B)  real GDP equals potential GDP. 
C)  the price level is constant but in the short run it fluctuates. 
D)  technology is fixed but not in the short run. 
A)  the aggregate supply curve is horizontal while in the short run it is upward sloping. 
B)  real GDP equals potential GDP. 
C)  the price level is constant but in the short run it fluctuates. 
D)  technology is fixed but not in the short run.

Question 5

The short-run aggregate supply curve___________

Accepted Answer

A)  illustrates the level of potential real GDP. 
B)  shows the impact changes in the price level have on the quantity of real GDP when resource prices are constant. 
C)  is vertical. 
D)  shifts whenever the price level changes. 
A)  illustrates the level of potential real GDP. 
B)  shows the impact changes in the price level have on the quantity of real GDP when resource prices are constant. 
C)  is vertical. 
D)  shifts whenever the price level changes.

Question 6

What are fiscal and monetary policies? Do they have an immediate effect on the AD curve or the SAS curve?

Accepted Answer

Fiscal policy is defined as changes in g

Question 7

If the aggregate demand curve shifts____________faster than the long -run aggregate supply curve, then ____________occurs.

Accepted Answer

A)  rightward; economic growth 
B)  leftward; economic growth 
C)  rightward; inflation 
D)  leftward; inflation 
A)  rightward; economic growth 
B)  leftward; economic growth 
C)  rightward; inflation 
D)  leftward; inflation

Question 8

$$\begin{array}{l}
\text { Real GDP supplied }\
\begin{array} { | l | l | l | l | } 
\hline \text { Price level } & \begin{array} { l } 
\text { Real GDP } \
\text { demanded } \
\text { (dollars) }
\end{array} & \begin{array} { l } 
\text { Short run } \
\text { (dollars) }
\end{array} & \begin{array} { l } 
\text { Long run } \
\text { (dollars) }
\end{array} \
\hline 90 & 700 & 300 & 600 \
\hline 100 & 600 & 400 & 600 \
\hline 110 & 500 & 500 & 600 \
\hline 120 & 400 & 600 & 600 \
\hline
\end{array}
\end{array}$$
-The table above gives the aggregate demand and aggregate supply schedules in Lotus Land. Lotus Land is in short-run macroeconomic equilibrium. In the long run, if aggregate demand does not change then Lotus Land will return to full-employment as____________ .

Accepted Answer

A)  businesses cut their imports 
B)  the money wage rate falls 
C)  the government cuts taxes 
D)  the money wage rate rises 
A)  businesses cut their imports 
B)  the money wage rate falls 
C)  the government cuts taxes 
D)  the money wage rate rises

Question 9

In 2008 the money wage rate in Ireland increased by 4 percent while the price level increased by 8 percent. As a result, Irelandʹs

Accepted Answer

A)  short-run and long-run aggregate supply curves shifted rightward. 
B)  long-run aggregate supply curve shifted rightward. 
C)  short-run aggregate supply curve shifted rightward. 
D)  short-run aggregate supply curve shifted leftward. 
A)  short-run and long-run aggregate supply curves shifted rightward. 
B)  long-run aggregate supply curve shifted rightward. 
C)  short-run aggregate supply curve shifted rightward. 
D)  short-run aggregate supply curve shifted leftward.

Question 10

$$\begin{array} { | l | l | l | l | } 
\hline \begin{array} { l } 
\text { Price } \
\text { level }
\end{array} & \begin{array} { l } 
\text { A ggregate } \
\text { demand } \
\text { (trillions of } \
\text { 2005 dollars) }
\end{array} & \begin{array} { l } 
\text { Short-run } \
\text { aggregate } \
\text { supply } \
\text { (trillions of } \
\text { 2005 dollars) }
\end{array} & \begin{array} { l } 
\text { Long-run } \
\text { aggregate } \
\text { supply } \
\text { (trillions of } \
\text { 2005 dollars) }
\end{array} \
\hline 140 & 4 & 8 & 7 \
\hline 130 & 5 & 7 & 7 \
\hline 120 & 6 & 6 & 7 \
\hline 110 & 7 & 5 & 7 \
\hline 100 & 8 & 4 & 7 \
\hline
\end{array}$$
-The data in the above table show that when the price level is 120, the economy

Accepted Answer

A)  has a recessionary gap. 
B)  is in a long-run macroeconomic equilibrium. 
C)  will have falling money wage rates sometime in the future. 
D)  has an inflationary gap. 
A)  has a recessionary gap. 
B)  is in a long-run macroeconomic equilibrium. 
C)  will have falling money wage rates sometime in the future. 
D)  has an inflationary gap.

Question 11

The level of output at which the short-run aggregate supply curve and the aggregate demand curve intersect is the full employment level of GDP.

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

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

Question 13

What is the effect on the aggregate demand curve from an increase in the price level? In particular, does the aggregate demand curve shift leftward or rightward?

Accepted Answer

When the price level increases, there is

Question 14

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 Britainʹs aggregate demand curve.

Accepted Answer

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

Question 15

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

Accepted Answer

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

Question 16

Moving along which curve does the money wage rate and the price level change in the same proportions?

Accepted Answer

A)  the AD curve 
B)  the LAS curve 
C)  the SAS curve 
D)  None of the above because there is no curve along which both the money wage rate and the price level change in the same proportions. 
A)  the AD curve 
B)  the LAS curve 
C)  the SAS curve 
D)  None of the above because there is no curve along which both the money wage rate and the price level change in the same proportions.

Question 17

One reason that the aggregate demand curve has a negative slope is that when the domestic price level rises,

Accepted Answer

A)  firms produce more goods and services. 
B)  peoplesʹ wealth increases. 
C)  firms produce fewer goods and services. 
D)  people substitute toward more imported goods and services. 
A)  firms produce more goods and services. 
B)  peoplesʹ wealth increases. 
C)  firms produce fewer goods and services. 
D)  people substitute toward more imported goods and services.

Question 18

Which of the following shifts the aggregate demand curve rightward?

Accepted Answer

A)  an increase in the quantity of money 
B)  an increase in the tax rate 
C)  a decrease in the price level 
D)  an increase in the exchange rate 
A)  an increase in the quantity of money 
B)  an increase in the tax rate 
C)  a decrease in the price level 
D)  an increase in the exchange rate

Question 19

A decrease in the money wage rate increases _________and an increase in the full employment quantity of labor increases _________.

Accepted Answer

A)  only the LAS; the SAS and the LAS 
B)  only the SAS; the SAS and the LAS 
C)  the SAS and the LAS; only the LAS 
D)  the SAS and the LAS; only the SAS 
A)  only the LAS; the SAS and the LAS 
B)  only the SAS; the SAS and the LAS 
C)  the SAS and the LAS; only the LAS 
D)  the SAS and the LAS; only the SAS

Question 20

$$\begin{array} { | l | l | l | l | } 
\hline \begin{array} { l } 
\text { Price } \
\text { level }
\end{array} & \begin{array} { l } 
\text { A ggregate } \
\text { demand } \
\text { (trillions of } \
\text { 2005 dollars) }
\end{array} & \begin{array} { l } 
\text { Short-run } \
\text { aggregate } \
\text { supply } \
\text { (trillions of } \
\text { 2005 dollars) }
\end{array} & \begin{array} { l } 
\text { Long-run } \
\text { aggregate } \
\text { supply } \
\text { (trillions of } \
\text { 2005 dollars) }
\end{array} \
\hline 100 & 13 & 9 & 10 \
\hline 105 & 12 & 10 & 10 \
\hline 110 & 11 & 11 & 10 \
\hline 115 & 10 & 13 & 10 \
\hline
\end{array}$$
-Using the data in the above table, in the short-run macroeconomic equilibrium, there is

Accepted Answer

A)  a recessionary gap of $2 trillion. 
B)  an inflationary gap of $1 trillion. 
C)  a recessionary gap of $1 trillion. 
D)  an inflationary gap of $2 trillion. 
A)  a recessionary gap of $2 trillion. 
B)  an inflationary gap of $1 trillion. 
C)  a recessionary gap of $1 trillion. 
D)  an inflationary gap of $2 trillion.

For movements along the long-run aggregate supply curve,

For movements along the short-run aggregate supply curve,

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 120,

We distinguish between the long-run aggregate supply curve and the short-run aggregate supply curve. In the long run

The short-run aggregate supply curve___________

What are fiscal and monetary policies? Do they have an immediate effect on the AD curve or the SAS curve?

If the aggregate demand curve shiftsfaster than the long -run aggregate supply curve, then occurs.

In 2008 the money wage rate in Ireland increased by 4 percent while the price level increased by 8 percent. As a result, Irelandʹs

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) 140 4 8 7 130 5 7 7 120 6 6 7 110 7 5 7 100 8 4 7 -The data in the above table show that when the price level is 120, the economy

The level of output at which the short-run aggregate supply curve and the aggregate demand curve intersect is the full employment level of GDP.

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 120,

What is the effect on the aggregate demand curve from an increase in the price level? In particular, does the aggregate demand curve shift leftward or rightward?

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 Britainʹs aggregate demand curve.

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

Moving along which curve does the money wage rate and the price level change in the same proportions?

One reason that the aggregate demand curve has a negative slope is that when the domestic price level rises,

Which of the following shifts the aggregate demand curve rightward?

A decrease in the money wage rate increases _and an increase in the full employment quantity of labor increases _.

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

For movements along the long-run aggregate supply curve,

For movements along the short-run aggregate supply curve,

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 120,

We distinguish between the long-run aggregate supply curve and the short-run aggregate supply curve. In the long run

The short-run aggregate supply curve___________

What are fiscal and monetary policies? Do they have an immediate effect on the AD curve or the SAS curve?

If the aggregate demand curve shifts____________faster than the long -run aggregate supply curve, then ____________occurs.

In 2008 the money wage rate in Ireland increased by 4 percent while the price level increased by 8 percent. As a result, Irelandʹs

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) 140 4 8 7 130 5 7 7 120 6 6 7 110 7 5 7 100 8 4 7 -The data in the above table show that when the price level is 120, the economy

The level of output at which the short-run aggregate supply curve and the aggregate demand curve intersect is the full employment level of GDP.

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 120,

What is the effect on the aggregate demand curve from an increase in the price level? In particular, does the aggregate demand curve shift leftward or rightward?

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 Britainʹs aggregate demand curve.

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

Moving along which curve does the money wage rate and the price level change in the same proportions?

One reason that the aggregate demand curve has a negative slope is that when the domestic price level rises,

Which of the following shifts the aggregate demand curve rightward?

A decrease in the money wage rate increases _________and an increase in the full employment quantity of labor increases _________.

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

If the aggregate demand curve shiftsfaster than the long -run aggregate supply curve, then occurs.

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 Britainʹs aggregate demand curve.

A decrease in the money wage rate increases _and an increase in the full employment quantity of labor increases _.