Question 1

An increase in the minimum wage would likely cause an increase in short-run aggregate supply.

Accepted Answer

A) True 
 B)False

Question 2

An increase in aggregate demand is seen as a(n) _____ the aggregate demand curve.

Accepted Answer

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

Question 3

Use the following to answer questions:
Figure: Policy Alternatives  
-(Figure: Policy Alternatives) Refer to Figure: Policy Alternatives. Suppose that the initial equilibrium is at real GDP level Y1 and price level P2 in panel (a). At real GDP level Y1 there is:

Accepted Answer

A)  an inflationary gap. 
B)  a recessionary gap. 
C)  no gap. 
D)  long-run equilibrium. 
A)  an inflationary gap. 
B)  a recessionary gap. 
C)  no gap. 
D)  long-run equilibrium.

Question 4

Changes in aggregate demand can be caused by changes in:

Accepted Answer

A)  wages. 
B)  business costs. 
C)  raw materials costs. 
D)  government spending. 
A)  wages. 
B)  business costs. 
C)  raw materials costs. 
D)  government spending.

Question 5

Producing a short-run level of aggregate output that exceeds the economy's potential output results in a(n) _____ adjustment in _____.

Accepted Answer

A)  downward; nominal wages 
B)  downward; profits per unit of output 
C)  downward; production costs 
D)  upward; nominal wages 
A)  downward; nominal wages 
B)  downward; profits per unit of output 
C)  downward; production costs 
D)  upward; nominal wages

Question 6

In the short run, a positive demand shock _____ aggregate output and _____ the aggregate price level.

Accepted Answer

A)  reduces; increases 
B)  increases; reduces 
C)  reduces; reduces 
D)  increases; increases 
A)  reduces; increases 
B)  increases; reduces 
C)  reduces; reduces 
D)  increases; increases

Question 7

In 2011, the Federal Reserve was facing:

Accepted Answer

A)  hyperinflation, which can be reversed only with disinflationary policies. 
B)  stagflation, a combination of high inflation and high unemployment, which cannot be reversed easily. 
C)  the deepest recession since the Great Depression combined with rapidly falling prices. 
D)  a very severe deflation, rare in history, which was experienced only by Japan. 
A)  hyperinflation, which can be reversed only with disinflationary policies. 
B)  stagflation, a combination of high inflation and high unemployment, which cannot be reversed easily. 
C)  the deepest recession since the Great Depression combined with rapidly falling prices. 
D)  a very severe deflation, rare in history, which was experienced only by Japan.

Question 8

When demand declined in the Great Depression of 1929-1933, the GDP deflator:

Accepted Answer

A)  increased by 15%. 
B)  increased by 26%. 
C)  decreased by 15%. 
D)  decreased by 26%. 
A)  increased by 15%. 
B)  increased by 26%. 
C)  decreased by 15%. 
D)  decreased by 26%.

Question 9

Policy CANNOT offset the effects of a:

Accepted Answer

A)  positive demand shock by decreasing government spending. 
B)  negative demand shock by cutting taxes. 
C)  negative supply shock by increasing money supply. 
D)  positive demand shock by increasing taxes. 
A)  positive demand shock by decreasing government spending. 
B)  negative demand shock by cutting taxes. 
C)  negative supply shock by increasing money supply. 
D)  positive demand shock by increasing taxes.

Question 10

Use the following to answer question 7:
Figure: Aggregate Demand  
-(Figure: Aggregate Demand) Refer to Figure: Aggregate Demand. The quantity of output demanded if the price level is 120 is:

Accepted Answer

A)  $9 trillion. 
B)  $10 trillion. 
C)  $11 trillion. 
D)  $12 trillion. 
A)  $9 trillion. 
B)  $10 trillion. 
C)  $11 trillion. 
D)  $12 trillion.

Question 11

The end of the Great Depression was due largely to increased government spending for World War II.

Accepted Answer

A) True 
 B)False

Question 12

Deflation was a problem in both the Great Depression and the recession of 1979-1982.

Accepted Answer

A) True 
 B)False

Question 13

An inflationary gap gradually:

Accepted Answer

A)  increases short-run aggregate supply. 
B)  decreases short-run aggregate supply. 
C)  increases aggregate demand. 
D)  decreases aggregate demand. 
A)  increases short-run aggregate supply. 
B)  decreases short-run aggregate supply. 
C)  increases aggregate demand. 
D)  decreases aggregate demand.

Question 14

In 1979 and 1980, because of the interest rate and wealth effects, the economy was moving upward along the aggregate demand curve from right to left.

Accepted Answer

A) True 
 B)False

Question 15

The aggregate supply curve shows the relationship of prices to:

Accepted Answer

A)  sales. 
B)  the quantity of output people want to buy. 
C)  the quantity of output producers are willing to provide. 
D)  both the amount of output people want to buy and the amount of output producers want to provide. 
A)  sales. 
B)  the quantity of output people want to buy. 
C)  the quantity of output producers are willing to provide. 
D)  both the amount of output people want to buy and the amount of output producers want to provide.

Question 16

A major reason for the end of the Great Depression was an increase in government spending:

Accepted Answer

A)  for social security. 
B)  for space exploration 
C)  for environmental protection. 
D)  during World War II. 
A)  for social security. 
B)  for space exploration 
C)  for environmental protection. 
D)  during World War II.

Question 17

Use the following to answer questions:
Figure: AD-AS Model II  
-(Figure: AD-AS Model II) Refer to Figure: AD-AS Model II. As the size of the labor force increases over time, the _____ curve will shift to the _____.

Accepted Answer

A)  LRAS; right 
B)  LRAS; left 
C)  AD; left 
D)  AD; right 
A)  LRAS; right 
B)  LRAS; left 
C)  AD; left 
D)  AD; right

Question 18

Which statement is TRUE with respect to short-run and long-run aggregate supply?

Accepted Answer

A)  The economy can be on both curves simultaneously. 
B)  If the economy is on the short-run aggregate supply curve, it cannot also be on the long-run aggregate supply curve. 
C)  If the economy is on the long-run aggregate supply curve, it cannot also be on the short-run aggregate supply curve. 
D)  The economy can never rest on both curves simultaneously. 
A)  The economy can be on both curves simultaneously. 
B)  If the economy is on the short-run aggregate supply curve, it cannot also be on the long-run aggregate supply curve. 
C)  If the economy is on the long-run aggregate supply curve, it cannot also be on the short-run aggregate supply curve. 
D)  The economy can never rest on both curves simultaneously.

Question 19

The long-run aggregate supply curve is:

Accepted Answer

A)  upward sloping. 
B)  downward sloping. 
C)  horizontal. 
D)  vertical. 
A)  upward sloping. 
B)  downward sloping. 
C)  horizontal. 
D)  vertical.

Question 20

An inflationary gap is automatically closed by _____ wages that shift the SRAS curve _____.

Accepted Answer

A)  falling; rightward 
B)  falling; leftward 
C)  rising; rightward 
D)  rising; leftward 
A)  falling; rightward 
B)  falling; leftward 
C)  rising; rightward 
D)  rising; leftward

An increase in the minimum wage would likely cause an increase in short-run aggregate supply.

An increase in aggregate demand is seen as a(n) _____ the aggregate demand curve.

Use the following to answer questions: Figure: Policy Alternatives -(Figure: Policy Alternatives) Refer to Figure: Policy Alternatives. Suppose that the initial equilibrium is at real GDP level Y₁ and price level P₂ in panel (a). At real GDP level Y₁ there is:

Changes in aggregate demand can be caused by changes in:

Producing a short-run level of aggregate output that exceeds the economy's potential output results in a(n) _ adjustment in _.

In the short run, a positive demand shock _ aggregate output and _ the aggregate price level.

In 2011, the Federal Reserve was facing:

When demand declined in the Great Depression of 1929-1933, the GDP deflator:

Policy CANNOT offset the effects of a:

Use the following to answer question 7: Figure: Aggregate Demand -(Figure: Aggregate Demand) Refer to Figure: Aggregate Demand. The quantity of output demanded if the price level is 120 is:

The end of the Great Depression was due largely to increased government spending for World War II.

Deflation was a problem in both the Great Depression and the recession of 1979-1982.

An inflationary gap gradually:

In 1979 and 1980, because of the interest rate and wealth effects, the economy was moving upward along the aggregate demand curve from right to left.

The aggregate supply curve shows the relationship of prices to:

A major reason for the end of the Great Depression was an increase in government spending:

Use the following to answer questions: Figure: AD-AS Model II -(Figure: AD-AS Model II) Refer to Figure: AD-AS Model II. As the size of the labor force increases over time, the _ curve will shift to the _.

Which statement is TRUE with respect to short-run and long-run aggregate supply?

The long-run aggregate supply curve is:

An inflationary gap is automatically closed by _ wages that shift the SRAS curve _.

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

An increase in the minimum wage would likely cause an increase in short-run aggregate supply.

An increase in aggregate demand is seen as a(n) _____ the aggregate demand curve.

Use the following to answer questions: Figure: Policy Alternatives -(Figure: Policy Alternatives) Refer to Figure: Policy Alternatives. Suppose that the initial equilibrium is at real GDP level Y1 and price level P2 in panel (a). At real GDP level Y1 there is:

Changes in aggregate demand can be caused by changes in:

Producing a short-run level of aggregate output that exceeds the economy's potential output results in a(n) _____ adjustment in _____.

In the short run, a positive demand shock _____ aggregate output and _____ the aggregate price level.

In 2011, the Federal Reserve was facing:

When demand declined in the Great Depression of 1929-1933, the GDP deflator:

Policy CANNOT offset the effects of a:

Use the following to answer question 7: Figure: Aggregate Demand -(Figure: Aggregate Demand) Refer to Figure: Aggregate Demand. The quantity of output demanded if the price level is 120 is:

The end of the Great Depression was due largely to increased government spending for World War II.

Deflation was a problem in both the Great Depression and the recession of 1979-1982.

An inflationary gap gradually:

In 1979 and 1980, because of the interest rate and wealth effects, the economy was moving upward along the aggregate demand curve from right to left.

The aggregate supply curve shows the relationship of prices to:

A major reason for the end of the Great Depression was an increase in government spending:

Use the following to answer questions: Figure: AD-AS Model II -(Figure: AD-AS Model II) Refer to Figure: AD-AS Model II. As the size of the labor force increases over time, the _____ curve will shift to the _____.

Which statement is TRUE with respect to short-run and long-run aggregate supply?

The long-run aggregate supply curve is:

An inflationary gap is automatically closed by _____ wages that shift the SRAS curve _____.

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

Use the following to answer questions: Figure: Policy Alternatives -(Figure: Policy Alternatives) Refer to Figure: Policy Alternatives. Suppose that the initial equilibrium is at real GDP level Y₁ and price level P₂ in panel (a). At real GDP level Y₁ there is:

Producing a short-run level of aggregate output that exceeds the economy's potential output results in a(n) _ adjustment in _.

In the short run, a positive demand shock _ aggregate output and _ the aggregate price level.

Use the following to answer questions: Figure: AD-AS Model II -(Figure: AD-AS Model II) Refer to Figure: AD-AS Model II. As the size of the labor force increases over time, the _ curve will shift to the _.

An inflationary gap is automatically closed by _ wages that shift the SRAS curve _.