Question 1

If consumers decide to save a larger percentage of their incomes, it will be

Accepted Answer

A)  harmful in the long run because the price level will rise. 
B)  beneficial in the short run because saving will rise. 
C)  beneficial in the long run because interest rates will fall. 
D)  harmful in the long run because aggregate supply will fall. 
E)  harmful in the long run because unemployment will increase. 
A)  harmful in the long run because the price level will rise. 
B)  beneficial in the short run because saving will rise. 
C)  beneficial in the long run because interest rates will fall. 
D)  harmful in the long run because aggregate supply will fall. 
E)  harmful in the long run because unemployment will increase.

Question 2

Shifts in the aggregate demand curve are caused by

Accepted Answer

A)  the wealth effect. 
B)  the interest rate effect. 
C)  money illusion. 
D)  changes in labor productivity. 
E)  changes in spending. 
A)  the wealth effect. 
B)  the interest rate effect. 
C)  money illusion. 
D)  changes in labor productivity. 
E)  changes in spending.

Question 3

Suppose firms increase investment spending to replace worn-out equipment. In the short run,aggregate demand will ________ and output will ________.

Accepted Answer

A)  increase; increase 
B)  increase; decrease 
C)  decrease; decrease 
D)  remain unchanged; remain unchanged 
E)  decrease; increase 
A)  increase; increase 
B)  increase; decrease 
C)  decrease; decrease 
D)  remain unchanged; remain unchanged 
E)  decrease; increase

Question 4

Refer to the following figure to answer the next  questions.
  
- Based on the figure, a decrease in ________ could cause the economy to move from point A to point B.

Accepted Answer

A)  investment 
B)  consumer confidence 
C)  labor productivity 
D)  the price of oil 
E)  taxes 
A)  investment 
B)  consumer confidence 
C)  labor productivity 
D)  the price of oil 
E)  taxes

Question 5

Which of the following would shift aggregate demand to the left?

Accepted Answer

A)  A study predicts that the recent drought will increase food prices this winter. 
B)  There is a rise in the median price of houses. 
C)  A rise in the price level reduces saving and increases interest rates. 
D)  The value of the dollar increases. 
E)  The European Union emerges from recession. 
A)  A study predicts that the recent drought will increase food prices this winter. 
B)  There is a rise in the median price of houses. 
C)  A rise in the price level reduces saving and increases interest rates. 
D)  The value of the dollar increases. 
E)  The European Union emerges from recession.

Question 6

Business-cycle theory focuses on time horizons of less than

Accepted Answer

A)  five years. 
B)  ten years. 
C)  two years. 
D)  one year. 
E)  one month. 
A)  five years. 
B)  ten years. 
C)  two years. 
D)  one year. 
E)  one month.

Question 7

Aggregate supply describes a relationship between

Accepted Answer

A)  spending and income. 
B)  output and prices. 
C)  costs and revenue. 
D)  spending and output. 
E)  spending and prices. 
A)  spending and income. 
B)  output and prices. 
C)  costs and revenue. 
D)  spending and output. 
E)  spending and prices.

Question 8

The economy is in long-run equilibrium when

Accepted Answer

A)  aggregate demand intersects short-run aggregate supply. 
B)  short-run aggregate supply intersects long-run aggregate supply. 
C)  aggregate demand intersects long-run aggregate supply. 
D)  aggregate demand intersects both long-run and short-run aggregate supply. 
E)  the inflation rate is equal to zero. 
A)  aggregate demand intersects short-run aggregate supply. 
B)  short-run aggregate supply intersects long-run aggregate supply. 
C)  aggregate demand intersects long-run aggregate supply. 
D)  aggregate demand intersects both long-run and short-run aggregate supply. 
E)  the inflation rate is equal to zero.

Question 9

An increase in the price level that reduces the real value of wealth is likely to ________ consumption and ________ saving.

Accepted Answer

A)  increase; increase 
B)  decrease; decrease 
C)  decrease; increase 
D)  increase; decrease 
E)  have no effect on; have no effect on 
A)  increase; increase 
B)  decrease; decrease 
C)  decrease; increase 
D)  increase; decrease 
E)  have no effect on; have no effect on

Question 10

China's working-age population is expected to decline in the next 20 years. In the long run, we can expect this to

Accepted Answer

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

Question 11

When decision makers have time to fully adjust to changes in the overall price level, we refer to this as

Accepted Answer

A)  the short run. 
B)  the long run. 
C)  short-run equilibrium. 
D)  a period of time longer than one year. 
E)  equilibrium. 
A)  the short run. 
B)  the long run. 
C)  short-run equilibrium. 
D)  a period of time longer than one year. 
E)  equilibrium.

Question 12

The term “________ cycle” is a popular way to describe the recession-expansion pattern followed by
the economy.

Accepted Answer

A)  business 
B)  output 
C)  inflation 
D)  unemployment 
E)  long-run 
A)  business 
B)  output 
C)  inflation 
D)  unemployment 
E)  long-run

Question 13

Explain and illustrate how the short-run and long-run equilibrium levels of output and the price level are affected by successful efforts by the government to reduce the budget deficit.

Accepted Answer

To reduce the budget deficit, the govern

Question 14

Suppose a country’s population is growing due to immigration. In the long run, output will ________due to ________.

Accepted Answer

A)  increase; an increase in both long-run and short-run aggregate supply 
B)  increase; an increase in long-run aggregate supply 
C)  increase; an increase in aggregate demand 
D)  increase; an increase in short-run aggregate supply 
E)  remain unaffected; price adjustment 
A)  increase; an increase in both long-run and short-run aggregate supply 
B)  increase; an increase in long-run aggregate supply 
C)  increase; an increase in aggregate demand 
D)  increase; an increase in short-run aggregate supply 
E)  remain unaffected; price adjustment

Question 15

The long-run aggregate supply curve is

Accepted Answer

A)  vertical at the level of full-employment output. 
B)  horizontal at the going-price level. 
C)  illustrating a positive relationship between price and output. 
D)  illustrating a negative relationship between price and output. 
E)  the same as the short-run aggregate supply curve. 
A)  vertical at the level of full-employment output. 
B)  horizontal at the going-price level. 
C)  illustrating a positive relationship between price and output. 
D)  illustrating a negative relationship between price and output. 
E)  the same as the short-run aggregate supply curve.

Question 16

A severe drought hits a country and reduces farm output by 50 percent. In the short run, this will________ output and ________ employment.

Accepted Answer

A)  decrease; decrease 
B)  decrease; increase 
C)  decrease; have no effect on 
D)  have no effect on; have no effect on 
E)  increase; increase 
A)  decrease; decrease 
B)  decrease; increase 
C)  decrease; have no effect on 
D)  have no effect on; have no effect on 
E)  increase; increase

Question 17

When an economy has a more stable and well-developed financial system, it is reasonable to expect

Accepted Answer

A)  an upward movement along the long-run aggregate supply curve. 
B)  a downward movement along the long-run aggregate supply curve. 
C)  a leftward shift of the long-run aggregate supply curve. 
D)  a rightward shift of the long-run aggregate supply curve. 
E)  no change in the long-run aggregate supply curve. 
A)  an upward movement along the long-run aggregate supply curve. 
B)  a downward movement along the long-run aggregate supply curve. 
C)  a leftward shift of the long-run aggregate supply curve. 
D)  a rightward shift of the long-run aggregate supply curve. 
E)  no change in the long-run aggregate supply curve.

Question 18

Refer to the following figure to answer the next  questions.
  
-Based on the figure, which of the following would cause the short-run aggregate supply curve to shift from SRAS1 to SRAS2?

Accepted Answer

A)  Congress votes to increase the minimum wage. 
B)  There is an increase in spending and firms respond by producing more output. 
C)  Wages and input prices fall as the economy recovers from a recession. 
D)  A severe drought reduces farm production. 
E)  A temporary rise in the price of oil results in higher gasoline prices. 
A)  Congress votes to increase the minimum wage. 
B)  There is an increase in spending and firms respond by producing more output. 
C)  Wages and input prices fall as the economy recovers from a recession. 
D)  A severe drought reduces farm production. 
E)  A temporary rise in the price of oil results in higher gasoline prices.

Question 19

Starting from long-run equilibrium, draw an aggregate demand-aggregate supply graph to illustrate the difference between a long-run and a short-run equilibrium due to an increase in aggregate demand. Once the economy is in the short-run equilibrium, explain-but it's not necessary to illustrate-how long-run equilibrium will be restored.

Accepted Answer

In long-run equilibrium, the economy is

Question 20

The long-run output of an economy depends on

Accepted Answer

A)  the level of spending. 
B)  the level of unemployment. 
C)  the level of inflation. 
D)  the level of aggregate demand. 
E)  resources, technology, and institutions. 
A)  the level of spending. 
B)  the level of unemployment. 
C)  the level of inflation. 
D)  the level of aggregate demand. 
E)  resources, technology, and institutions.

If consumers decide to save a larger percentage of their incomes, it will be

Shifts in the aggregate demand curve are caused by

Suppose firms increase investment spending to replace worn-out equipment. In the short run,aggregate demand will and output will .

Refer to the following figure to answer the next questions. - Based on the figure, a decrease in ________ could cause the economy to move from point A to point B.

Which of the following would shift aggregate demand to the left?

Business-cycle theory focuses on time horizons of less than

Aggregate supply describes a relationship between

The economy is in long-run equilibrium when

An increase in the price level that reduces the real value of wealth is likely to consumption and saving.

China's working-age population is expected to decline in the next 20 years. In the long run, we can expect this to

When decision makers have time to fully adjust to changes in the overall price level, we refer to this as

The term “________ cycle” is a popular way to describe the recession-expansion pattern followed by the economy.

Explain and illustrate how the short-run and long-run equilibrium levels of output and the price level are affected by successful efforts by the government to reduce the budget deficit.

Suppose a country’s population is growing due to immigration. In the long run, output will due to .

The long-run aggregate supply curve is

A severe drought hits a country and reduces farm output by 50 percent. In the short run, this will output and employment.

When an economy has a more stable and well-developed financial system, it is reasonable to expect

Refer to the following figure to answer the next questions. -Based on the figure, which of the following would cause the short-run aggregate supply curve to shift from SRAS₁ to SRAS₂?

The long-run output of an economy depends on

Five Foundations of Economics

Model Building and Gains From Trade

The Market at Work: Supply and Demand

Market Outcomes and Tax Incidence

Price Controls

Introduction to Macroeconomics and Gross Domestic Product

Unemployment

The Price Level and Inflation

Savings, Interest Rates, and the Market for Loanable Funds

Financial Markets and Securities

Economic Growth and the Wealth of Nations

Growth Theory

The Great Recession, the Great Depression, and Great Macroeconomic Debates

Federal Budgets: the Tools of Fiscal Policy

Fiscal Policy

Money and the Federal Reserve

Monetary Policy Learning Objectives

International Trade

International Finance

Filters

Exam 13: The Aggregate Demandaggregate Supply Model

If consumers decide to save a larger percentage of their incomes, it will be

Shifts in the aggregate demand curve are caused by

Suppose firms increase investment spending to replace worn-out equipment. In the short run,aggregate demand will ________ and output will ________.

Refer to the following figure to answer the next questions. - Based on the figure, a decrease in ________ could cause the economy to move from point A to point B.

Which of the following would shift aggregate demand to the left?

Business-cycle theory focuses on time horizons of less than

Aggregate supply describes a relationship between

The economy is in long-run equilibrium when

An increase in the price level that reduces the real value of wealth is likely to ________ consumption and ________ saving.

China's working-age population is expected to decline in the next 20 years. In the long run, we can expect this to

When decision makers have time to fully adjust to changes in the overall price level, we refer to this as

The term “________ cycle” is a popular way to describe the recession-expansion pattern followed by the economy.

Explain and illustrate how the short-run and long-run equilibrium levels of output and the price level are affected by successful efforts by the government to reduce the budget deficit.

Suppose a country’s population is growing due to immigration. In the long run, output will ________due to ________.

The long-run aggregate supply curve is

A severe drought hits a country and reduces farm output by 50 percent. In the short run, this will________ output and ________ employment.

When an economy has a more stable and well-developed financial system, it is reasonable to expect

Refer to the following figure to answer the next questions. -Based on the figure, which of the following would cause the short-run aggregate supply curve to shift from SRAS1 to SRAS2?

The long-run output of an economy depends on

Five Foundations of Economics

Model Building and Gains From Trade

The Market at Work: Supply and Demand

Market Outcomes and Tax Incidence

Price Controls

Introduction to Macroeconomics and Gross Domestic Product

Unemployment

The Price Level and Inflation

Savings, Interest Rates, and the Market for Loanable Funds

Financial Markets and Securities

Economic Growth and the Wealth of Nations

Growth Theory

The Great Recession, the Great Depression, and Great Macroeconomic Debates

Federal Budgets: the Tools of Fiscal Policy

Fiscal Policy

Money and the Federal Reserve

Monetary Policy Learning Objectives

International Trade

International Finance

Filters

Suppose firms increase investment spending to replace worn-out equipment. In the short run,aggregate demand will and output will .

An increase in the price level that reduces the real value of wealth is likely to consumption and saving.

Suppose a country’s population is growing due to immigration. In the long run, output will due to .

A severe drought hits a country and reduces farm output by 50 percent. In the short run, this will output and employment.

Refer to the following figure to answer the next questions. -Based on the figure, which of the following would cause the short-run aggregate supply curve to shift from SRAS₁ to SRAS₂?