Question 1

(Figure: Understanding Aggregate Graphs)   This economy is currently at point a. This figure depicts an economy:

Accepted Answer

A)  in neither short-run nor long-run equilibrium. 
B)  in short-run equilibrium only. 
C)  in both short-run and long-run equilibrium 
D)  in long-run equilibrium only. 
A)  in neither short-run nor long-run equilibrium. 
B)  in short-run equilibrium only. 
C)  in both short-run and long-run equilibrium 
D)  in long-run equilibrium only.

Question 2

The long-run aggregate supply curve is horizontal.

Accepted Answer

A) True 
 B)False

Question 3

A shift of the aggregate _____ curve to the _____ would cause inflation to rise and employment to increase.

Accepted Answer

A)  supply; left 
B)  demand; left 
C)  supply; right 
D)  demand; right 
A)  supply; left 
B)  demand; left 
C)  supply; right 
D)  demand; right

Question 4

At high domestic price levels compared to other countries, Americans:

Accepted Answer

A)  sell more exported goods. 
B)  buy more imported goods. 
C)  buy the same amount of foreign goods. 
D)  try to buy American-made goods. 
A)  sell more exported goods. 
B)  buy more imported goods. 
C)  buy the same amount of foreign goods. 
D)  try to buy American-made goods.

Question 5

The long-run aggregate supply curve is vertical because:

Accepted Answer

A)  many inputs are fixed. 
B)  it incorporates the assumptions of Keynesian theory. 
C)  the economy will gravitate to the position of full employment when all variables are flexible. 
D)  wages, prices, and interest rates are not flexible in the long run. 
A)  many inputs are fixed. 
B)  it incorporates the assumptions of Keynesian theory. 
C)  the economy will gravitate to the position of full employment when all variables are flexible. 
D)  wages, prices, and interest rates are not flexible in the long run.

Question 6

Increased productivity causes the aggregate supply curve to shift to the left.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following provides an accurate description regarding the slope of the short-run aggregate supply curve?

Accepted Answer

A)  The negative slope of the short-run aggregate supply curve is flatter the more flexible prices are or steeper the more rigid prices are. 
B)  The negative slope of the short-run aggregate supply curve is steeper the more flexible prices are or flatter the more rigid prices are. 
C)  The positive slope of the short-run aggregate supply curve is flatter the more flexible prices are or steeper the more rigid prices are. 
D)  The positive slope of the short-run aggregate supply curve is steeper the more flexible prices are or flatter the more rigid prices are. 
A)  The negative slope of the short-run aggregate supply curve is flatter the more flexible prices are or steeper the more rigid prices are. 
B)  The negative slope of the short-run aggregate supply curve is steeper the more flexible prices are or flatter the more rigid prices are. 
C)  The positive slope of the short-run aggregate supply curve is flatter the more flexible prices are or steeper the more rigid prices are. 
D)  The positive slope of the short-run aggregate supply curve is steeper the more flexible prices are or flatter the more rigid prices are.

Question 8

The aggregate demand curve has the price level on the vertical axis and output on the horizontal axis.

Accepted Answer

A) True 
 B)False

Question 9

The aggregate demand curve displays:

Accepted Answer

A)  real GDP demanded at various price levels. 
B)  nominal GDP versus real GDP. 
C)  GDP demanded at various investment levels. 
D)  the business cycle. 
A)  real GDP demanded at various price levels. 
B)  nominal GDP versus real GDP. 
C)  GDP demanded at various investment levels. 
D)  the business cycle.

Question 10

(Figure: Determining Aggregate Equilibrium Levels)   Equilibrium output is _____ units and the equilibrium price level is _____.

Accepted Answer

A)  2,000; $130 
B)  5,000; $160 
C)  3,000; $100 
D)  100; $3,000 
A)  2,000; $130 
B)  5,000; $160 
C)  3,000; $100 
D)  100; $3,000

Question 11

A(n) _____ in government spending, a _____ domestic currency, and _____ interest rates will shift a country's aggregate demand to the left.

Accepted Answer

A)  decrease; stronger; higher 
B)  increase; weaker; higher 
C)  increase; stronger; lower 
D)  decrease; weaker; lower 
A)  decrease; stronger; higher 
B)  increase; weaker; higher 
C)  increase; stronger; lower 
D)  decrease; weaker; lower

Question 12

(Figure: Determining SRAS Shifts 3)   Which of the following might cause a change in short-run aggregate supply?

Accepted Answer

A)  Unions successfully negotiate higher wages. 
B)  Subsidies to firms increase. 
C)  Consumer incomes decrease. 
D)  Workers and firms believe that inflation is going to fall. 
A)  Unions successfully negotiate higher wages. 
B)  Subsidies to firms increase. 
C)  Consumer incomes decrease. 
D)  Workers and firms believe that inflation is going to fall.

Question 13

Which of the following sets of events clearly would lead to a decrease in aggregate demand if the events occurred simultaneously?

Accepted Answer

A)  Taxes are cut, giving the government less revenue while household debt levels rise. 
B)  Interest rates fall, giving savers less interest income while government spending on research is cut. 
C)  There is a strong expansion in the economy of the country's main trading partner at the same time that the country's currency appreciates. 
D)  Debt levels in the country rise at the same time that the country's currency appreciates. 
A)  Taxes are cut, giving the government less revenue while household debt levels rise. 
B)  Interest rates fall, giving savers less interest income while government spending on research is cut. 
C)  There is a strong expansion in the economy of the country's main trading partner at the same time that the country's currency appreciates. 
D)  Debt levels in the country rise at the same time that the country's currency appreciates.

Question 14

Increased taxes will shift the aggregate demand curve to the _____ and _____ output demanded.

Accepted Answer

A)  left; decrease 
B)  left; increase 
C)  right; increase 
D)  right; decrease 
A)  left; decrease 
B)  left; increase 
C)  right; increase 
D)  right; decrease

Question 15

The U.S. price level rose more than expected after the 2008-2009 stimulus.

Accepted Answer

A) True 
 B)False

Question 16

Assume that Macroland starts in a long-run equilibrium and then faces a reduction in government spending. What chain of events will lead to a new long-run equilibrium?

Accepted Answer

A)  SRAS falls; then AD falls leading to a new long-run equilibrium with lower prices and lower output. 
B)  AD falls causing unemployment. Unemployed workers eventually accept lower wages, increasing SRAS and leading to a new long-run equilibrium with lower prices and the original output. 
C)  AD falls causing prices to fall. At lower prices, AD then rises back to the original level, leading to a return to the original price and output levels. 
D)  SRAS falls causing unemployment. With less output, investments fall leading to a reduction in LRAS and a new long-run equilibrium with lower output and higher prices. 
A)  SRAS falls; then AD falls leading to a new long-run equilibrium with lower prices and lower output. 
B)  AD falls causing unemployment. Unemployed workers eventually accept lower wages, increasing SRAS and leading to a new long-run equilibrium with lower prices and the original output. 
C)  AD falls causing prices to fall. At lower prices, AD then rises back to the original level, leading to a return to the original price and output levels. 
D)  SRAS falls causing unemployment. With less output, investments fall leading to a reduction in LRAS and a new long-run equilibrium with lower output and higher prices.

Question 17

Which of the following will NOT cause a shift in the short-run aggregate supply curve?

Accepted Answer

A)  changes in the aggregate price level 
B)  changes in input prices 
C)  changes in productivity 
D)  changes in inflationary expectations 
A)  changes in the aggregate price level 
B)  changes in input prices 
C)  changes in productivity 
D)  changes in inflationary expectations

Question 18

Ceteris paribus, a decrease in imports will increase aggregate demand.

Accepted Answer

A) True 
 B)False

Question 19

What would cause the price level to decrease and employment to increase?

Accepted Answer

A)  a shift to the left of the AD curve 
B)  a shift to the right of the AD curve 
C)  a shift to the left of the SRAS curve 
D)  a shift to the right of the SRAS curve 
A)  a shift to the left of the AD curve 
B)  a shift to the right of the AD curve 
C)  a shift to the left of the SRAS curve 
D)  a shift to the right of the SRAS curve

Question 20

If an economy is on the vertical portion of the aggregate supply curve, then it:

Accepted Answer

A)  is overheating. 
B)  is at full employment. 
C)  has high unemployment. 
D)  is in a severe recession. 
A)  is overheating. 
B)  is at full employment. 
C)  has high unemployment. 
D)  is in a severe recession.

(Figure: Understanding Aggregate Graphs) This economy is currently at point a. This figure depicts an economy:

The long-run aggregate supply curve is horizontal.

A shift of the aggregate _ curve to the _ would cause inflation to rise and employment to increase.

At high domestic price levels compared to other countries, Americans:

The long-run aggregate supply curve is vertical because:

Increased productivity causes the aggregate supply curve to shift to the left.

Which of the following provides an accurate description regarding the slope of the short-run aggregate supply curve?

The aggregate demand curve has the price level on the vertical axis and output on the horizontal axis.

The aggregate demand curve displays:

(Figure: Determining Aggregate Equilibrium Levels) Equilibrium output is _ units and the equilibrium price level is _.

A(n) ___ in government spending, a _ domestic currency, and ___ interest rates will shift a country's aggregate demand to the left.

(Figure: Determining SRAS Shifts 3) Which of the following might cause a change in short-run aggregate supply?

Which of the following sets of events clearly would lead to a decrease in aggregate demand if the events occurred simultaneously?

Increased taxes will shift the aggregate demand curve to the _ and _ output demanded.

The U.S. price level rose more than expected after the 2008-2009 stimulus.

Assume that Macroland starts in a long-run equilibrium and then faces a reduction in government spending. What chain of events will lead to a new long-run equilibrium?

Which of the following will NOT cause a shift in the short-run aggregate supply curve?

Ceteris paribus, a decrease in imports will increase aggregate demand.

What would cause the price level to decrease and employment to increase?

If an economy is on the vertical portion of the aggregate supply curve, then it:

Exploring Economics

Production, Economic Growth, and Trade

Supply and Demand

Markets and Government

Introduction to Macroeconomics

Measuring Inflation and Unemployment

Economic Growth

Aggregate Expenditures

Fiscal Policy and Debt

Saving, Investment, and the Financial System

Money Creation and the Federal Reserve

Monetary Policy

Macroeconomic Policy: Challenges in a Global Economy

International Trade

Open Economy Macroeconomics

Filters

Exam 9: Aggregate Demand and Supply

(Figure: Understanding Aggregate Graphs) This economy is currently at point a. This figure depicts an economy:

The long-run aggregate supply curve is horizontal.

A shift of the aggregate _____ curve to the _____ would cause inflation to rise and employment to increase.

At high domestic price levels compared to other countries, Americans:

The long-run aggregate supply curve is vertical because:

Increased productivity causes the aggregate supply curve to shift to the left.

Which of the following provides an accurate description regarding the slope of the short-run aggregate supply curve?

The aggregate demand curve has the price level on the vertical axis and output on the horizontal axis.

The aggregate demand curve displays:

(Figure: Determining Aggregate Equilibrium Levels) Equilibrium output is _____ units and the equilibrium price level is _____.

A(n) _____ in government spending, a _____ domestic currency, and _____ interest rates will shift a country's aggregate demand to the left.

(Figure: Determining SRAS Shifts 3) Which of the following might cause a change in short-run aggregate supply?

Which of the following sets of events clearly would lead to a decrease in aggregate demand if the events occurred simultaneously?

Increased taxes will shift the aggregate demand curve to the _____ and _____ output demanded.

The U.S. price level rose more than expected after the 2008-2009 stimulus.

Assume that Macroland starts in a long-run equilibrium and then faces a reduction in government spending. What chain of events will lead to a new long-run equilibrium?

Which of the following will NOT cause a shift in the short-run aggregate supply curve?

Ceteris paribus, a decrease in imports will increase aggregate demand.

What would cause the price level to decrease and employment to increase?

If an economy is on the vertical portion of the aggregate supply curve, then it:

Exploring Economics

Production, Economic Growth, and Trade

Supply and Demand

Markets and Government

Introduction to Macroeconomics

Measuring Inflation and Unemployment

Economic Growth

Aggregate Expenditures

Fiscal Policy and Debt

Saving, Investment, and the Financial System

Money Creation and the Federal Reserve

Monetary Policy

Macroeconomic Policy: Challenges in a Global Economy

International Trade

Open Economy Macroeconomics

Filters

A shift of the aggregate _ curve to the _ would cause inflation to rise and employment to increase.

(Figure: Determining Aggregate Equilibrium Levels) Equilibrium output is _ units and the equilibrium price level is _.

A(n) ___ in government spending, a _ domestic currency, and ___ interest rates will shift a country's aggregate demand to the left.

Increased taxes will shift the aggregate demand curve to the _ and _ output demanded.