Question 1

The aggregate demand curve would NOT shift to the left as a result of:

Accepted Answer

A)  a fall in consumers' wealth. 
B)  a decrease in the amount of money in circulation. 
C)  more pessimistic consumer expectations. 
D)  lower labor productivity. 
A)  a fall in consumers' wealth. 
B)  a decrease in the amount of money in circulation. 
C)  more pessimistic consumer expectations. 
D)  lower labor productivity.

Question 2

As an inflationary gap self-corrects, the equilibrium price level _____ and the equilibrium real output _____.

Accepted Answer

A)  rises; decreases 
B)  rises; increases 
C)  falls; decreases 
D)  falls; increases 
A)  rises; decreases 
B)  rises; increases 
C)  falls; decreases 
D)  falls; increases

Question 3

The aggregate supply curve shows the relationship between the aggregate price level and the aggregate:

Accepted Answer

A)  output supplied. 
B)  money supply. 
C)  unemployment rate. 
D)  employment. 
A)  output supplied. 
B)  money supply. 
C)  unemployment rate. 
D)  employment.

Question 4

When short-run aggregate supply decreases, it means that the short-run aggregate supply curve shifts to the _____ and the quantity of aggregate output that producers are willing to supply _____.

Accepted Answer

A)  right; decreases 
B)  right; increases 
C)  left; decreases 
D)  left; increases 
A)  right; decreases 
B)  right; increases 
C)  left; decreases 
D)  left; increases

Question 5

The economy is self-correcting in the long run.

Accepted Answer

A) True 
 B)False

Question 6

The short-run aggregate supply curve will shift to the left if:

Accepted Answer

A)  the aggregate price level falls. 
B)  commodity prices rise. 
C)  tax revenues fall. 
D)  productivity increases. 
A)  the aggregate price level falls. 
B)  commodity prices rise. 
C)  tax revenues fall. 
D)  productivity increases.

Question 7

An increase in the aggregate price level will increase:

Accepted Answer

A)  short-run aggregate supply. 
B)  the quantity of aggregate output supplied in the short run. 
C)  aggregate demand. 
D)  the quantity of aggregate output demanded. 
A)  short-run aggregate supply. 
B)  the quantity of aggregate output supplied in the short run. 
C)  aggregate demand. 
D)  the quantity of aggregate output demanded.

Question 8

Assuming that prices remain constant, suppose that consumer assets and wealth lose value. The aggregate demand curve will undergo a:

Accepted Answer

A)  shift to the left. 
B)  movement upward. 
C)  shift to the right. 
D)  movement downward. 
A)  shift to the left. 
B)  movement upward. 
C)  shift to the right. 
D)  movement downward.

Question 9

According to the aggregate demand curve, when the aggregate price level _____, the quantity of aggregate output _____.

Accepted Answer

A)  rises; supplied falls 
B)  falls; demanded falls 
C)  rises; demanded falls 
D)  rises; demanded does not change 
A)  rises; supplied falls 
B)  falls; demanded falls 
C)  rises; demanded falls 
D)  rises; demanded does not change

Question 10

If Nike sells basketball shoes for $150 per pair and the cost of producing and selling a pair of basketball shoes is $15, Nike's profit per unit on a pair of basketball shoes is:

Accepted Answer

A)  $135. 
B)  $160 
C)  $165. 
D)  $10. 
A)  $135. 
B)  $160 
C)  $165. 
D)  $10.

Question 11

The aggregate demand curve slopes:

Accepted Answer

A)  downward for the same reasons that an ordinary demand curve does. 
B)  downward in part because when the price level falls, the real wealth of the public falls, and this induces people to change their consumption. 
C)  downward in part because as the price level falls, the ability of households and firms to borrow cheaply increases. 
D)  upward, unlike an ordinary demand curve. 
A)  downward for the same reasons that an ordinary demand curve does. 
B)  downward in part because when the price level falls, the real wealth of the public falls, and this induces people to change their consumption. 
C)  downward in part because as the price level falls, the ability of households and firms to borrow cheaply increases. 
D)  upward, unlike an ordinary demand curve.

Question 12

Use the following to answer questions:
Figure: Policy Alternatives  
-(Figure: Policy Alternatives) Refer to Figure: Policy Alternatives. If the economy is in equilibrium at Y1 in panel (a) and government spending increases, the result will likely be:

Accepted Answer

A)  an increase in unemployment. 
B)  a decrease in interest rates. 
C)  inflation. 
D)  deflation. 
A)  an increase in unemployment. 
B)  a decrease in interest rates. 
C)  inflation. 
D)  deflation.

Question 13

Nominal wages are sticky because:

Accepted Answer

A)  wages are slow to rise when there are labor shortages and slow to fall even when the level of unemployment is significant. 
B)  wages remain fixed in the long run, increasing the profitability of the firms. 
C)  wages are slow to fall when there are labor shortages and slow to rise even when the level of unemployment is significant. 
D)  in the long run all wages are adjusted for inflation. 
A)  wages are slow to rise when there are labor shortages and slow to fall even when the level of unemployment is significant. 
B)  wages remain fixed in the long run, increasing the profitability of the firms. 
C)  wages are slow to fall when there are labor shortages and slow to rise even when the level of unemployment is significant. 
D)  in the long run all wages are adjusted for inflation.

Question 14

If prices are constant, but the value of financial assets increases, aggregate _____ shifts to the _____.

Accepted Answer

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

Question 15

When aggregate demand decreased between 1929 and 1933, the GDP deflator decreased.

Accepted Answer

A) True 
 B)False

Question 16

Use the following to answer questions:
Figure: Aggregate Supply  
-(Figure: Aggregate Supply) Refer to Figure: Aggregate Supply. If the economy is at point E:

Accepted Answer

A)  actual output is less than potential output. 
B)  actual output is more than potential output. 
C)  actual output is equal to potential output. 
D)  potential output will decrease. 
A)  actual output is less than potential output. 
B)  actual output is more than potential output. 
C)  actual output is equal to potential output. 
D)  potential output will decrease.

Question 17

Aggregate demand will shift to the RIGHT if:

Accepted Answer

A)  the aggregate price level increases. 
B)  government purchases increase. 
C)  taxes go up. 
D)  the money supply shrinks. 
A)  the aggregate price level increases. 
B)  government purchases increase. 
C)  taxes go up. 
D)  the money supply shrinks.

Question 18

The short run in macroeconomic analysis is a period:

Accepted Answer

A)  in which many production costs can be taken as fixed. 
B)  in which wages become fully flexible. 
C)  of two months, and the long run is more than 12 months. 
D)  in which interest rates are fixed. 
A)  in which many production costs can be taken as fixed. 
B)  in which wages become fully flexible. 
C)  of two months, and the long run is more than 12 months. 
D)  in which interest rates are fixed.

Question 19

Use the following to answer question 108:
Figure: Aggregate Supply Movements  
-(Figure: Aggregate Supply Movements) Refer to Figure: Aggregate Supply Movements. Which statement is correct?

Accepted Answer

A)  An increase in the price level is responsible for pushing the curve to the right. 
B)  A decrease in the price level is responsible for pushing the short-run aggregate supply curve to the right. 
C)  Short-run aggregate supply has increased. 
D)  Short-run aggregate supply has decreased. 
A)  An increase in the price level is responsible for pushing the curve to the right. 
B)  A decrease in the price level is responsible for pushing the short-run aggregate supply curve to the right. 
C)  Short-run aggregate supply has increased. 
D)  Short-run aggregate supply has decreased.

Question 20

According to the long-run aggregate supply curve, when _____, the quantity of aggregate output supplied _____.

Accepted Answer

A)  nominal wages rise; falls 
B)  the aggregate price level rises; does not change 
C)  the aggregate price level rises; falls 
D)  the price of commodities falls; rises 
A)  nominal wages rise; falls 
B)  the aggregate price level rises; does not change 
C)  the aggregate price level rises; falls 
D)  the price of commodities falls; rises

The aggregate demand curve would NOT shift to the left as a result of:

As an inflationary gap self-corrects, the equilibrium price level _ and the equilibrium real output _.

The aggregate supply curve shows the relationship between the aggregate price level and the aggregate:

When short-run aggregate supply decreases, it means that the short-run aggregate supply curve shifts to the _ and the quantity of aggregate output that producers are willing to supply _.

The economy is self-correcting in the long run.

The short-run aggregate supply curve will shift to the left if:

An increase in the aggregate price level will increase:

Assuming that prices remain constant, suppose that consumer assets and wealth lose value. The aggregate demand curve will undergo a:

According to the aggregate demand curve, when the aggregate price level _, the quantity of aggregate output _.

If Nike sells basketball shoes for $150 per pair and the cost of producing and selling a pair of basketball shoes is $15, Nike's profit per unit on a pair of basketball shoes is:

The aggregate demand curve slopes:

Use the following to answer questions: Figure: Policy Alternatives -(Figure: Policy Alternatives) Refer to Figure: Policy Alternatives. If the economy is in equilibrium at Y₁ in panel (a) and government spending increases, the result will likely be:

Nominal wages are sticky because:

If prices are constant, but the value of financial assets increases, aggregate _ shifts to the _.

When aggregate demand decreased between 1929 and 1933, the GDP deflator decreased.

Use the following to answer questions: Figure: Aggregate Supply -(Figure: Aggregate Supply) Refer to Figure: Aggregate Supply. If the economy is at point E:

Aggregate demand will shift to the RIGHT if:

The short run in macroeconomic analysis is a period:

Use the following to answer question 108: Figure: Aggregate Supply Movements -(Figure: Aggregate Supply Movements) Refer to Figure: Aggregate Supply Movements. Which statement is correct?

According to the long-run aggregate supply curve, when _, the quantity of aggregate output supplied _.

First Principles

Economic Models: Trade-Offs and Trade

Supply and Demand

Price Controls and Quotas: Meddling With Markets

International Trade

Macroeconomics: the Big Picture

GDP and the CPI: Tracking the Macroeconomy

Unemployment and Inflation

Long-Run Economic Growth

Savings, Investment Spending, and the Financial Syst

Income and Expenditure

Fiscal Policy

Money, Banking, and the Federal Reserve System

Monetary Policy

Inflation, Disinflation, and Deflation

Macroeconomics: Events and Ideas

International Macroeconomics

Filters

Exam 12: Aggregate Demand and Aggregate Supply

The aggregate demand curve would NOT shift to the left as a result of:

As an inflationary gap self-corrects, the equilibrium price level _____ and the equilibrium real output _____.

The aggregate supply curve shows the relationship between the aggregate price level and the aggregate:

When short-run aggregate supply decreases, it means that the short-run aggregate supply curve shifts to the _____ and the quantity of aggregate output that producers are willing to supply _____.

The economy is self-correcting in the long run.

The short-run aggregate supply curve will shift to the left if:

An increase in the aggregate price level will increase:

Assuming that prices remain constant, suppose that consumer assets and wealth lose value. The aggregate demand curve will undergo a:

According to the aggregate demand curve, when the aggregate price level _____, the quantity of aggregate output _____.

If Nike sells basketball shoes for $150 per pair and the cost of producing and selling a pair of basketball shoes is $15, Nike's profit per unit on a pair of basketball shoes is:

The aggregate demand curve slopes:

Use the following to answer questions: Figure: Policy Alternatives -(Figure: Policy Alternatives) Refer to Figure: Policy Alternatives. If the economy is in equilibrium at Y1 in panel (a) and government spending increases, the result will likely be:

Nominal wages are sticky because:

If prices are constant, but the value of financial assets increases, aggregate _____ shifts to the _____.

When aggregate demand decreased between 1929 and 1933, the GDP deflator decreased.

Use the following to answer questions: Figure: Aggregate Supply -(Figure: Aggregate Supply) Refer to Figure: Aggregate Supply. If the economy is at point E:

Aggregate demand will shift to the RIGHT if:

The short run in macroeconomic analysis is a period:

Use the following to answer question 108: Figure: Aggregate Supply Movements -(Figure: Aggregate Supply Movements) Refer to Figure: Aggregate Supply Movements. Which statement is correct?

According to the long-run aggregate supply curve, when _____, the quantity of aggregate output supplied _____.

First Principles

Economic Models: Trade-Offs and Trade

Supply and Demand

Price Controls and Quotas: Meddling With Markets

International Trade

Macroeconomics: the Big Picture

GDP and the CPI: Tracking the Macroeconomy

Unemployment and Inflation

Long-Run Economic Growth

Savings, Investment Spending, and the Financial Syst

Income and Expenditure

Fiscal Policy

Money, Banking, and the Federal Reserve System

Monetary Policy

Inflation, Disinflation, and Deflation

Macroeconomics: Events and Ideas

International Macroeconomics

Filters

As an inflationary gap self-corrects, the equilibrium price level _ and the equilibrium real output _.

When short-run aggregate supply decreases, it means that the short-run aggregate supply curve shifts to the _ and the quantity of aggregate output that producers are willing to supply _.

According to the aggregate demand curve, when the aggregate price level _, the quantity of aggregate output _.

Use the following to answer questions: Figure: Policy Alternatives -(Figure: Policy Alternatives) Refer to Figure: Policy Alternatives. If the economy is in equilibrium at Y₁ in panel (a) and government spending increases, the result will likely be:

If prices are constant, but the value of financial assets increases, aggregate _ shifts to the _.

According to the long-run aggregate supply curve, when _, the quantity of aggregate output supplied _.