Question 1

How are potential GDP, full employment and the LAS curve related?

Accepted Answer

When the economy is at full em

Question 2

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

Question 3

If the money wage rate rises, then the

Accepted Answer

A)  SAS curve shifts leftward. 
B)  SAS curve shifts rightward. 
C)  LAS curve shifts rightward. 
D)  LAS curve shifts leftward. 
A)  SAS curve shifts leftward. 
B)  SAS curve shifts rightward. 
C)  LAS curve shifts rightward. 
D)  LAS curve shifts leftward.

Question 4

People expect that the El Nino effect will cause drought in Australia in coming years. If most Australian firms expect their profits will fall during the next five years, Australiaʹs __________this year.

Accepted Answer

A)  aggregate demand will decrease 
B)  aggregate demand will increase 
C)  short-run aggregate supply will increase 
D)  long-run aggregate supply will increase 
A)  aggregate demand will decrease 
B)  aggregate demand will increase 
C)  short-run aggregate supply will increase 
D)  long-run aggregate supply will increase

Question 5

-In the above figure, point B represents

Accepted Answer

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

Question 6

In the United States, during the past 5 decades economic growth was most rapid during the____________

Accepted Answer

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

Question 7

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

Accepted Answer

A)  the unemployment rate is less than the natural unemployment rate. 
B)  money wage rates will rise in long-run. 
C)  the economy is at full employment. 
D)  the unemployment rate is greater than the natural unemployment rate. 
A)  the unemployment rate is less than the natural unemployment rate. 
B)  money wage rates will rise in long-run. 
C)  the economy is at full employment. 
D)  the unemployment rate is greater than the natural unemployment rate.

Question 8

In 2008, Japanʹs 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)  taxes would be decreased and the money supply should be increased 
B)  the money supply would be kept growing at a steady pace 
C)  aggregate supply would shift leftward 
D)  nothing should be done 
A)  taxes would be decreased and the money supply should be increased 
B)  the money supply would be kept growing at a steady pace 
C)  aggregate supply would shift leftward 
D)  nothing should be done

Question 9

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

Accepted Answer

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

Question 10

Which of the following shifts both the LAS and SAS curves?

Accepted Answer

A)  a change in the money wage rate 
B)  a simultaneous change in both the price level and the money wage rate 
C)  an advance in technology 
D)  a change in the price level 
A)  a change in the money wage rate 
B)  a simultaneous change in both the price level and the money wage rate 
C)  an advance in technology 
D)  a change in the price level

Question 11

Explain the reasons why the AD curve slopes downward.

Accepted Answer

There are two reasons why the AD curve s

Question 12

Moving upward along the SAS results in a ___________ in the price level and___________  in real GDP.

Accepted Answer

A)  rise; an increase 
B)  fall; a decrease 
C)  fall; an increase 
D)  rise; a decrease 
A)  rise; an increase 
B)  fall; a decrease 
C)  fall; an increase 
D)  rise; a decrease

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

Suppose that the economy begins at a long-run equilibrium. Which of the following raises the price level and decrease real GDP in the short run?

Accepted Answer

A)  an increase in the price of oil that decreases aggregate supply 
B)  a decrease in the quantity of money 
C)  an increase in the stock of capital that increases aggregate supply 
D)  an increase in government expenditures 
A)  an increase in the price of oil that decreases aggregate supply 
B)  a decrease in the quantity of money 
C)  an increase in the stock of capital that increases aggregate supply 
D)  an increase in government expenditures

Question 15

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

Accepted Answer

A)  money wage rates will rise. 
B)  the short-run aggregate supply curve will shift rightward. 
C)  the aggregate demand curve will shift leftward. 
D)  the short-run aggregate supply curve will shift leftward. 
A)  money wage rates will rise. 
B)  the short-run aggregate supply curve will shift rightward. 
C)  the aggregate demand curve will shift leftward. 
D)  the short-run aggregate supply curve will shift leftward.

Question 16

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

Accepted Answer

A)  105; $10 trillion 
B)  115; $10 trillion 
C)  110; $10 trillion 
D)  110; $11 trillion 
A)  105; $10 trillion 
B)  115; $10 trillion 
C)  110; $10 trillion 
D)  110; $11 trillion

Question 17

In Japan in 2000 the price level fell by 5 percent and nominal wage rates did not change. As a result, there was a

Accepted Answer

A)  rightward shift in Japanʹs short-run aggregate supply curve. 
B)  movement down along Japanʹs short-run aggregate demand curve. 
C)  movement down along Japanʹs long-run aggregate supply curve. 
D)  movement down along Japanʹs short-run aggregate supply curve. 
A)  rightward shift in Japanʹs short-run aggregate supply curve. 
B)  movement down along Japanʹs short-run aggregate demand curve. 
C)  movement down along Japanʹs long-run aggregate supply curve. 
D)  movement down along Japanʹs short-run aggregate supply curve.

Question 18

-In the above figure, the curve labeled A shifts rightward if

Accepted Answer

A)  the substitution effect occurs. 
B)  taxes decrease. 
C)  expected future profits decrease. 
D)  the quantity of money decreases. 
A)  the substitution effect occurs. 
B)  taxes decrease. 
C)  expected future profits decrease. 
D)  the quantity of money decreases.

Question 19

Which of the following directly shifts the short-run aggregate supply curve?

Accepted Answer

A)  a change in resource prices 
B)  a change in aggregate demand 
C)  a change in the price level 
D)  all of the above 
A)  a change in resource prices 
B)  a change in aggregate demand 
C)  a change in the price level 
D)  all of the above

Question 20

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

Accepted Answer

A)  a change in the price level 
B)  a change in the money wage rate 
C)  a reduction in the price of a raw material 
D)  technological progress 
A)  a change in the price level 
B)  a change in the money wage rate 
C)  a reduction in the price of a raw material 
D)  technological progress

How are potential GDP, full employment and the LAS curve related?

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

If the money wage rate rises, then the

People expect that the El Nino effect will cause drought in Australia in coming years. If most Australian firms expect their profits will fall during the next five years, Australiaʹs __________this year.

-In the above figure, point B represents

In the United States, during the past 5 decades economic growth was most rapid during the____________

Price level A ggregate demand (trillions of 2005 dollars) Short-run aggregate supply (trillions of 2005 dollars) Long-run aggregate supply (trilli ons of 2005 dollars) 100 11 7 10 110 10 8 10 120 9 9 10 130 8 10 10 140 7 11 10 -Based on the data in the table above, at the short-run equilibrium

In 2008, Japanʹs 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, at the point where AD equals SAS,

Which of the following shifts both the LAS and SAS curves?

Explain the reasons why the AD curve slopes downward.

Moving upward along the SAS results in a _ in the price level and_ in real GDP.

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

Suppose that the economy begins at a long-run equilibrium. Which of the following raises the price level and decrease real GDP in the short run?

In Japan in 2000 the price level fell by 5 percent and nominal wage rates did not change. As a result, there was a

-In the above figure, the curve labeled A shifts rightward if

Which of the following directly shifts the short-run aggregate supply curve?

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

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

How are potential GDP, full employment and the LAS curve related?

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

If the money wage rate rises, then the

People expect that the El Nino effect will cause drought in Australia in coming years. If most Australian firms expect their profits will fall during the next five years, Australiaʹs __________this year.

-In the above figure, point B represents

In the United States, during the past 5 decades economic growth was most rapid during the____________

Price level A ggregate demand (trillions of 2005 dollars) Short-run aggregate supply (trillions of 2005 dollars) Long-run aggregate supply (trilli ons of 2005 dollars) 100 11 7 10 110 10 8 10 120 9 9 10 130 8 10 10 140 7 11 10 -Based on the data in the table above, at the short-run equilibrium

In 2008, Japanʹs 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, at the point where AD equals SAS,

Which of the following shifts both the LAS and SAS curves?

Explain the reasons why the AD curve slopes downward.

Moving upward along the SAS results in a ___________ in the price level and___________ in real GDP.

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

Suppose that the economy begins at a long-run equilibrium. Which of the following raises the price level and decrease real GDP in the short run?

In Japan in 2000 the price level fell by 5 percent and nominal wage rates did not change. As a result, there was a

-In the above figure, the curve labeled A shifts rightward if

Which of the following directly shifts the short-run aggregate supply curve?

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

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

Moving upward along the SAS results in a _ in the price level and_ in real GDP.