Question 1

Which of the following was a contributing factor to the instability of 2002 to 2008?

Accepted Answer

A) ideal weather from 2002 to 2006, followed by a severe drought in 2007 and 2008 
B) falling housing prices leading to an expansion, followed by rising housing prices leading to a sharp economic downturn 
C) an increase in housing prices leading to an expansion, followed by a collapse in housing prices and a sharp economic downturn 
D) falling stock prices leading to an expansion, followed by rising stock prices leading to a sharp economic downturn 
A) ideal weather from 2002 to 2006, followed by a severe drought in 2007 and 2008 
B) falling housing prices leading to an expansion, followed by rising housing prices leading to a sharp economic downturn 
C) an increase in housing prices leading to an expansion, followed by a collapse in housing prices and a sharp economic downturn 
D) falling stock prices leading to an expansion, followed by rising stock prices leading to a sharp economic downturn

Question 2

When the U.S. dollar appreciates,

Accepted Answer

A) U.S.exports rise. 
B) U.S.imports decline. 
C) aggregate demand shifts leftward. 
D) aggregate demand shifts rightward. 
A) U.S.exports rise. 
B) U.S.imports decline. 
C) aggregate demand shifts leftward. 
D) aggregate demand shifts rightward.

Question 3

Which of the following will lead to an increase in aggregate demand in the United States?

Accepted Answer

A) a higher price level 
B) an increase in the real interest rate 
C) an increase in wealth due to a substantial appreciation in the value of stocks 
D) a decrease in real income in Japan and Western Europe 
A) a higher price level 
B) an increase in the real interest rate 
C) an increase in wealth due to a substantial appreciation in the value of stocks 
D) a decrease in real income in Japan and Western Europe

Question 4

Figure 10-18  
-Given the shift of the aggregate demand curve from AD1 to AD2 in Figure 10-18, the real GDP and price level (CPI) in long-run equilibrium will be

Accepted Answer

A) $10 billion and 200. 
B) $4 billion and 150. 
C) $10 billion and 150. 
D) $10 billion and 100. 
A) $10 billion and 200. 
B) $4 billion and 150. 
C) $10 billion and 150. 
D) $10 billion and 100.

Question 5

Which of the following will most likely increase aggregate supply in the long run?

Accepted Answer

A) unfavorable weather conditions in agricultural areas 
B) an increase in the expected inflation rate 
C) higher real interest rates 
D) an increase in the rate of capital formation 
A) unfavorable weather conditions in agricultural areas 
B) an increase in the expected inflation rate 
C) higher real interest rates 
D) an increase in the rate of capital formation

Question 6

Other things constant, an increase in the real interest rate will

Accepted Answer

A) cause consumers to reduce their purchases of durable items like appliances and automobiles. 
B) induce businesses to increase their level of investment. 
C) make borrowing money more attractive. 
D) increase the natural rate of unemployment. 
A) cause consumers to reduce their purchases of durable items like appliances and automobiles. 
B) induce businesses to increase their level of investment. 
C) make borrowing money more attractive. 
D) increase the natural rate of unemployment.

Question 7

Figure 10-13  
-In Figure 10-13, which of the following would most likely cause the movement from point e2 to point E2?

Accepted Answer

A) higher wages and resource prices 
B) lower interest rates 
C) an increase in aggregate demand 
D) a technological advance 
A) higher wages and resource prices 
B) lower interest rates 
C) an increase in aggregate demand 
D) a technological advance

Question 8

Use the figure below to answer the following question(s).
Figure 10-4  
-Starting from long-run equilibrium at point F in Figure 10-4, at which of the following points would short-run equilibrium occur following a decrease in resource prices?

Accepted Answer

A) I 
B) F 
C) G 
D) H 
A) I 
B) F 
C) G 
D) H

Question 9

Use the figure below to answer the following question(s).
Figure 10-16  
-With the passage of time, which of the following will help direct this economy in Figure 10-16 toward its potential long-run rate of output?

Accepted Answer

A) lower interest rates that will stimulate AD and lower resource prices that will increase SRAS 
B) higher interest rates that will reduce aggregate demand and higher resource prices that will reduce SRAS 
C) lower interest rates and higher resource prices, both of which will stimulate aggregate demand 
D) higher interest rates that will reduce SRAS and lower resource prices that will stimulate aggregate demand 
A) lower interest rates that will stimulate AD and lower resource prices that will increase SRAS 
B) higher interest rates that will reduce aggregate demand and higher resource prices that will reduce SRAS 
C) lower interest rates and higher resource prices, both of which will stimulate aggregate demand 
D) higher interest rates that will reduce SRAS and lower resource prices that will stimulate aggregate demand

Question 10

When an economy is experiencing an economic boom and operating beyond its long-run capacity,

Accepted Answer

A) strong demand for investment funds will push interest rates upward. 
B) weak demand for resources will push the prices of resources downward. 
C) weak demand for investment funds will cause the real interest rate to decline. 
D) the unemployment rate will be greater than its natural rate. 
A) strong demand for investment funds will push interest rates upward. 
B) weak demand for resources will push the prices of resources downward. 
C) weak demand for investment funds will cause the real interest rate to decline. 
D) the unemployment rate will be greater than its natural rate.

Question 11

Which of the following will most likely occur in the short run if long-run equilibrium is disturbed by an unanticipated decrease in aggregate demand?

Accepted Answer

A) a decrease in output and a higher price level 
B) an increase in output and a higher price level 
C) a decrease in output and a lower price level 
D) an increase in output, while prices remain unchanged 
A) a decrease in output and a higher price level 
B) an increase in output and a higher price level 
C) a decrease in output and a lower price level 
D) an increase in output, while prices remain unchanged

Question 12

An improvement in technology would shift which of the following curve(s)?

Accepted Answer

A) aggregate demand and short-run aggregate supply 
B) only the short-run aggregate supply 
C) only the aggregate demand 
D) short-run and long-run aggregate supply 
A) aggregate demand and short-run aggregate supply 
B) only the short-run aggregate supply 
C) only the aggregate demand 
D) short-run and long-run aggregate supply

Question 13

If a market economy was in a recession, which of the following would help direct it back toward the full employment rate of output?

Accepted Answer

A) an increase in the rate of inflation 
B) lower resource prices and lower real interest rates 
C) higher resource prices and higher real interest rates 
D) a decrease in the natural rate of unemployment 
A) an increase in the rate of inflation 
B) lower resource prices and lower real interest rates 
C) higher resource prices and higher real interest rates 
D) a decrease in the natural rate of unemployment

Question 14

If there is an unanticipated decrease in aggregate demand, which of the following is most likely to occur?

Accepted Answer

A) an increase in the price level 
B) a reduction in employment 
C) an increase in the growth rate of real GDP 
D) an increase in consumption 
A) an increase in the price level 
B) a reduction in employment 
C) an increase in the growth rate of real GDP 
D) an increase in consumption

Question 15

Suppose the economy is in long-run equilibrium. In a short span of time, there is a large influx of skilled immigrants, a major new discovery of oil, and a major new technological advance in electricity production. In the short run, we would expect

Accepted Answer

A) the price level to rise and real GDP to fall. 
B) the price level to fall and real GDP to rise. 
C) the price level and real GDP both to stay the same. 
D) All of the above are possible. 
A) the price level to rise and real GDP to fall. 
B) the price level to fall and real GDP to rise. 
C) the price level and real GDP both to stay the same. 
D) All of the above are possible.

Question 16

Use the figure below to answer the following question(s).
Figure 10-7  
-Given the aggregate demand and aggregate supply curves for the economy depicted in Figure 10-7, the economy's output and price level are

Accepted Answer

A) output y1 and price level P1. 
B) output y2 and price level P2 
C) output y1 and price level P3. 
D) output y2 and price level P1. 
A) output y1 and price level P1. 
B) output y2 and price level P2 
C) output y1 and price level P3. 
D) output y2 and price level P1.

Question 17

Within the AD/AS model, how does an economy adjust to an output beyond its long-run capacity as a result of an unanticipated increase in aggregate demand?

Accepted Answer

A) Wage rates and resource prices will fall, causing a decrease in aggregate demand and the restoration of equilibrium at a higher price level. 
B) Long-run aggregate supply will increase, leading to a new equilibrium at a lower price level. 
C) Resource prices and real interest rates will rise causing output to fall back to its long-run sustainable rate. 
D) Lower real interest rates will stimulate demand and restore equilibrium at the initial price level. 
A) Wage rates and resource prices will fall, causing a decrease in aggregate demand and the restoration of equilibrium at a higher price level. 
B) Long-run aggregate supply will increase, leading to a new equilibrium at a lower price level. 
C) Resource prices and real interest rates will rise causing output to fall back to its long-run sustainable rate. 
D) Lower real interest rates will stimulate demand and restore equilibrium at the initial price level.

Question 18

If business decision makers expect that the inflation rate will increase in the near future,

Accepted Answer

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

Question 19

Which of the following is most likely to throw an economy into a recession?

Accepted Answer

A) a reduction in the real interest rate 
B) an unanticipated increase in short-run aggregate supply 
C) an unanticipated increase in aggregate demand 
D) an unanticipated reduction in aggregate demand 
A) a reduction in the real interest rate 
B) an unanticipated increase in short-run aggregate supply 
C) an unanticipated increase in aggregate demand 
D) an unanticipated reduction in aggregate demand

Question 20

Which of the following would be most likely to cause an increase in current aggregate demand in the United States?

Accepted Answer

A) increased fear that the U.S.economy was going into a recession 
B) an increase in the real interest rate 
C) sharp increase in the value of stocks owned by Americans 
D) a recession in Canada, Mexico, and Western Europe 
A) increased fear that the U.S.economy was going into a recession 
B) an increase in the real interest rate 
C) sharp increase in the value of stocks owned by Americans 
D) a recession in Canada, Mexico, and Western Europe

Which of the following was a contributing factor to the instability of 2002 to 2008?

When the U.S. dollar appreciates,

Which of the following will lead to an increase in aggregate demand in the United States?

Figure 10-18 -Given the shift of the aggregate demand curve from AD₁ to AD₂in Figure 10-18, the real GDP and price level (CPI) in long-run equilibrium will be

Which of the following will most likely increase aggregate supply in the long run?

Other things constant, an increase in the real interest rate will

Figure 10-13 -In Figure 10-13, which of the following would most likely cause the movement from point e₂ to point E₂?

Use the figure below to answer the following question(s). Figure 10-4 -Starting from long-run equilibrium at point F in Figure 10-4, at which of the following points would short-run equilibrium occur following a decrease in resource prices?

Use the figure below to answer the following question(s). Figure 10-16 -With the passage of time, which of the following will help direct this economy in Figure 10-16 toward its potential long-run rate of output?

When an economy is experiencing an economic boom and operating beyond its long-run capacity,

Which of the following will most likely occur in the short run if long-run equilibrium is disturbed by an unanticipated decrease in aggregate demand?

An improvement in technology would shift which of the following curve(s)?

If a market economy was in a recession, which of the following would help direct it back toward the full employment rate of output?

If there is an unanticipated decrease in aggregate demand, which of the following is most likely to occur?

Suppose the economy is in long-run equilibrium. In a short span of time, there is a large influx of skilled immigrants, a major new discovery of oil, and a major new technological advance in electricity production. In the short run, we would expect

Use the figure below to answer the following question(s). Figure 10-7 -Given the aggregate demand and aggregate supply curves for the economy depicted in Figure 10-7, the economy's output and price level are

Within the AD/AS model, how does an economy adjust to an output beyond its long-run capacity as a result of an unanticipated increase in aggregate demand?

If business decision makers expect that the inflation rate will increase in the near future,

Which of the following is most likely to throw an economy into a recession?

Which of the following would be most likely to cause an increase in current aggregate demand in the United States?

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Taking the Nations Economic Pulse

Economic Fluctuations, Unemployment, and Inflation

An Introduction to Basic Macroeconomic Markets

Fiscal Policy: the Keynesian View and the Historical Development of Macroeconomics

Fiscal Policy, Incentives, and Secondary Effects

Money and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, Output, and Employment

Creating an Environment for Growth and Prosperity

Institutions, Policies, and Cross-Country Differences in Income and Growth

Gaining From International Trade

International Finance and the Foreign Exchange Market

Filters

Exam 10: Dynamic Change, Economic Fluctuations, and the Ad-As Model

Which of the following was a contributing factor to the instability of 2002 to 2008?

When the U.S. dollar appreciates,

Which of the following will lead to an increase in aggregate demand in the United States?

Figure 10-18 -Given the shift of the aggregate demand curve from AD1 to AD2 in Figure 10-18, the real GDP and price level (CPI) in long-run equilibrium will be

Which of the following will most likely increase aggregate supply in the long run?

Other things constant, an increase in the real interest rate will

Figure 10-13 -In Figure 10-13, which of the following would most likely cause the movement from point e2 to point E2?

Use the figure below to answer the following question(s). Figure 10-4 -Starting from long-run equilibrium at point F in Figure 10-4, at which of the following points would short-run equilibrium occur following a decrease in resource prices?

Use the figure below to answer the following question(s). Figure 10-16 -With the passage of time, which of the following will help direct this economy in Figure 10-16 toward its potential long-run rate of output?

When an economy is experiencing an economic boom and operating beyond its long-run capacity,

Which of the following will most likely occur in the short run if long-run equilibrium is disturbed by an unanticipated decrease in aggregate demand?

An improvement in technology would shift which of the following curve(s)?

If a market economy was in a recession, which of the following would help direct it back toward the full employment rate of output?

If there is an unanticipated decrease in aggregate demand, which of the following is most likely to occur?

Suppose the economy is in long-run equilibrium. In a short span of time, there is a large influx of skilled immigrants, a major new discovery of oil, and a major new technological advance in electricity production. In the short run, we would expect

Use the figure below to answer the following question(s). Figure 10-7 -Given the aggregate demand and aggregate supply curves for the economy depicted in Figure 10-7, the economy's output and price level are

Within the AD/AS model, how does an economy adjust to an output beyond its long-run capacity as a result of an unanticipated increase in aggregate demand?

If business decision makers expect that the inflation rate will increase in the near future,

Which of the following is most likely to throw an economy into a recession?

Which of the following would be most likely to cause an increase in current aggregate demand in the United States?

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Taking the Nations Economic Pulse

Economic Fluctuations, Unemployment, and Inflation

An Introduction to Basic Macroeconomic Markets

Fiscal Policy: the Keynesian View and the Historical Development of Macroeconomics

Fiscal Policy, Incentives, and Secondary Effects

Money and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, Output, and Employment

Creating an Environment for Growth and Prosperity

Institutions, Policies, and Cross-Country Differences in Income and Growth

Gaining From International Trade

International Finance and the Foreign Exchange Market

Filters

Figure 10-18 -Given the shift of the aggregate demand curve from AD₁ to AD₂in Figure 10-18, the real GDP and price level (CPI) in long-run equilibrium will be

Figure 10-13 -In Figure 10-13, which of the following would most likely cause the movement from point e₂ to point E₂?