Question 1

Which of the following will most likely accompany an unanticipated reduction in aggregate demand?

Accepted Answer

A) an increase in the general price level 
B) an increase in unemployment 
C) an increase in real GDP 
D) an increase in resource prices 
A) an increase in the general price level 
B) an increase in unemployment 
C) an increase in real GDP 
D) an increase in resource prices

Question 2

Use the figure below to answer the following question(s).
Figure 10-17  
-With the passage of time, which of the following will tend to direct this economy in Figure 10-17 toward its long-run sustainable 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 3

The situation in which actual output exceeds potential output

Accepted Answer

A) is impossible because all resources are employed to produce potential output 
B) is possible only in times of high unemployment 
C) is possible only if the unemployment rate is negative 
D) is possible only in the long run 
E) creates pressure for inflation 
A) is impossible because all resources are employed to produce potential output 
B) is possible only in times of high unemployment 
C) is possible only if the unemployment rate is negative 
D) is possible only in the long run 
E) creates pressure for inflation

Question 4

Which of the following will most likely occur in the short run when the long-run equilibrium of an economy 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 5

If a reduction in stock prices reduces the real wealth of Americans, the

Accepted Answer

A) aggregate demand curve will shift to the left. 
B) long-run aggregate supply will shift to the left. 
C) general price level will increase. 
D) aggregate demand curve will shift to the right. 
A) aggregate demand curve will shift to the left. 
B) long-run aggregate supply will shift to the left. 
C) general price level will increase. 
D) aggregate demand curve will shift to the right.

Question 6

Use the figure below to answer the following question(s).
Figure 10-15  
-The economy's short-run (SRAS ) and long-run (LRAS) aggregate supply curves are shown in Figure 10-15, along with three alternative aggregate demand curves and the accompanying equilibrium points. At which point will resource prices naturally tend to decrease?

Accepted Answer

A) A 
B) B 
C) C 
D) D 
A) A 
B) B 
C) C 
D) D

Question 7

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) a reduction in the expected rate of inflation 
D) rapid growth of real income in Canada 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) a reduction in the expected rate of inflation 
D) rapid growth of real income in Canada and Western Europe

Question 8

Which of the following will most likely accompany an unanticipated increase in aggregate demand?

Accepted Answer

A) a decrease in prices 
B) a decrease in resource prices 
C) a decrease in real GDP 
D) an increase in real GDP 
A) a decrease in prices 
B) a decrease in resource prices 
C) a decrease in real GDP 
D) an increase in real GDP

Question 9

A rise in the price of oil would be most likely to cause which of the following in the United States?

Accepted Answer

A) an economic boom 
B) an economic slowdown or recession 
C) a decrease in the general level of prices 
D) an increase in aggregate demand 
A) an economic boom 
B) an economic slowdown or recession 
C) a decrease in the general level of prices 
D) an increase in aggregate demand

Question 10

Which of the following would cause prices to rise and real GDP to fall in the short run?

Accepted Answer

A) an increase in the expected price level 
B) an increase in the capital stock 
C) an increase in the quantity of labor available 
D) All of the above are correct. 
A) an increase in the expected price level 
B) an increase in the capital stock 
C) an increase in the quantity of labor available 
D) All of the above are correct.

Question 11

Which will cause a larger short-run increase in prices: an anticipated or unanticipated increase in aggregate demand? Will they cause the same increase in prices in the long run?

Accepted Answer

An anticipated increase in aggregate dem

Question 12

Other things constant, an increase in resource prices will

Accepted Answer

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

Question 13

Within the AD/AS model, an increase in capital formation that permits the economy to achieve a larger output will

Accepted Answer

A) increase long-run aggregate supply. 
B) increase short-run aggregate supply, but long-run aggregate supply will be unaffected. 
C) increase aggregate demand. 
D) decrease aggregate demand. 
A) increase long-run aggregate supply. 
B) increase short-run aggregate supply, but long-run aggregate supply will be unaffected. 
C) increase aggregate demand. 
D) decrease aggregate demand.

Question 14

The long-run equilibrium price level is the price level the economy is expected to reach when the

Accepted Answer

A) economy produces its potential output 
B) Fed has stabilized interest rates 
C) federal budget is balanced 
D) discount rate equals the prime rate 
E) inflation rate is zero 
A) economy produces its potential output 
B) Fed has stabilized interest rates 
C) federal budget is balanced 
D) discount rate equals the prime rate 
E) inflation rate is zero

Question 15

Figure 10-3  
-Starting from long-run equilibrium at point A in Figure 10-3, at which of the following points would short-run equilibrium occur immediately following an unanticipated increase in stock prices?

Accepted Answer

A) A 
B) B 
C) C 
D) D 
A) A 
B) B 
C) C 
D) D

Question 16

During an economic contraction, housing and stock prices generally

Accepted Answer

A) fall, leading to a reduction in aggregate demand. 
B) fall, leading to an increase in aggregate demand. 
C) rise, leading to a reduction in aggregate demand. 
D) rise, leading to an increase in aggregate demand. 
A) fall, leading to a reduction in aggregate demand. 
B) fall, leading to an increase in aggregate demand. 
C) rise, leading to a reduction in aggregate demand. 
D) rise, leading to an increase in aggregate demand.

Question 17

If an unanticipated increase in aggregate demand results in an output beyond the economy's long-run capacity, long-run equilibrium will eventually be restored by

Accepted Answer

A) an increase in the economy's productive capacity (LRAS shifts to the right). 
B) higher resource prices, an increase in SRAS, and a decrease in the general level of prices. 
C) higher resource prices, a decrease in SRAS, and an increase in the general level of prices. 
D) a decrease in the natural rate of unemployment. 
A) an increase in the economy's productive capacity (LRAS shifts to the right). 
B) higher resource prices, an increase in SRAS, and a decrease in the general level of prices. 
C) higher resource prices, a decrease in SRAS, and an increase in the general level of prices. 
D) a decrease in the natural rate of unemployment.

Question 18

Which of the following will most likely cause an increase (shift to the right) in both the long-run and short-run aggregate supply curves?

Accepted Answer

A) an increase in the national debt 
B) an increase in income tax rates 
C) a decrease in the economy's rate of investment and capital formation 
D) a technological improvement in robotics that substantially increases labor productivity 
A) an increase in the national debt 
B) an increase in income tax rates 
C) a decrease in the economy's rate of investment and capital formation 
D) a technological improvement in robotics that substantially increases labor productivity

Question 19

Which of the following factors would increase aggregate demand in the goods and services market?

Accepted Answer

A) an decrease in stock prices 
B) an increase in the real interest rate 
C) a decrease in real incomes abroad 
D) increased optimism on the part of consumers and businesses 
A) an decrease in stock prices 
B) an increase in the real interest rate 
C) a decrease in real incomes abroad 
D) increased optimism on the part of consumers and businesses

Question 20

A supply shock is a surprise occurrence that

Accepted Answer

A) shifts the long-run aggregate supply curve to the right. 
B) either increases or decreases short-run aggregate supply and output. 
C) temporarily increases aggregate demand. 
D) temporarily reduces aggregate demand. 
A) shifts the long-run aggregate supply curve to the right. 
B) either increases or decreases short-run aggregate supply and output. 
C) temporarily increases aggregate demand. 
D) temporarily reduces aggregate demand.

Which of the following will most likely accompany an unanticipated reduction in aggregate demand?

Use the figure below to answer the following question(s). Figure 10-17 -With the passage of time, which of the following will tend to direct this economy in Figure 10-17 toward its long-run sustainable rate of output?

The situation in which actual output exceeds potential output

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

If a reduction in stock prices reduces the real wealth of Americans, the

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

Which of the following will most likely accompany an unanticipated increase in aggregate demand?

A rise in the price of oil would be most likely to cause which of the following in the United States?

Which of the following would cause prices to rise and real GDP to fall in the short run?

Which will cause a larger short-run increase in prices: an anticipated or unanticipated increase in aggregate demand? Will they cause the same increase in prices in the long run?

Other things constant, an increase in resource prices will

Within the AD/AS model, an increase in capital formation that permits the economy to achieve a larger output will

The long-run equilibrium price level is the price level the economy is expected to reach when the

Figure 10-3 -Starting from long-run equilibrium at point A in Figure 10-3, at which of the following points would short-run equilibrium occur immediately following an unanticipated increase in stock prices?

During an economic contraction, housing and stock prices generally

If an unanticipated increase in aggregate demand results in an output beyond the economy's long-run capacity, long-run equilibrium will eventually be restored by

Which of the following will most likely cause an increase (shift to the right) in both the long-run and short-run aggregate supply curves?

Which of the following factors would increase aggregate demand in the goods and services market?

A supply shock is a surprise occurrence that

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 will most likely accompany an unanticipated reduction in aggregate demand?

Use the figure below to answer the following question(s). Figure 10-17 -With the passage of time, which of the following will tend to direct this economy in Figure 10-17 toward its long-run sustainable rate of output?

The situation in which actual output exceeds potential output

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

If a reduction in stock prices reduces the real wealth of Americans, the

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

Which of the following will most likely accompany an unanticipated increase in aggregate demand?

A rise in the price of oil would be most likely to cause which of the following in the United States?

Which of the following would cause prices to rise and real GDP to fall in the short run?

Which will cause a larger short-run increase in prices: an anticipated or unanticipated increase in aggregate demand? Will they cause the same increase in prices in the long run?

Other things constant, an increase in resource prices will

Within the AD/AS model, an increase in capital formation that permits the economy to achieve a larger output will

The long-run equilibrium price level is the price level the economy is expected to reach when the

Figure 10-3 -Starting from long-run equilibrium at point A in Figure 10-3, at which of the following points would short-run equilibrium occur immediately following an unanticipated increase in stock prices?

During an economic contraction, housing and stock prices generally

If an unanticipated increase in aggregate demand results in an output beyond the economy's long-run capacity, long-run equilibrium will eventually be restored by

Which of the following will most likely cause an increase (shift to the right) in both the long-run and short-run aggregate supply curves?

Which of the following factors would increase aggregate demand in the goods and services market?

A supply shock is a surprise occurrence that

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