Question 1

All else being equal, as the population ages and many people leave the labor force,

Accepted Answer

A)  the unemployment rate will rise. 
B)  the price level will fall. 
C)  long-run aggregate supply will fall. 
D)  long-run aggregate supply will be unaffected. 
E)  aggregate demand must rise. 
A)  the unemployment rate will rise. 
B)  the price level will fall. 
C)  long-run aggregate supply will fall. 
D)  long-run aggregate supply will be unaffected. 
E)  aggregate demand must rise.

Question 2

Refer to the following figure to answer the next  questions.
  
-Based on the figure, which of the following would cause the aggregate demand curve to shift from AD2 to AD1?

Accepted Answer

A)  The economy has been producing more than its full-employment output level and wages and input prices begin to rise. 
B)  There is an increase in the price of oil. 
C)  There is an increase in the general price level that reduces real wealth. 
D)  There is a reduction in consumer confidence about future growth in the economy. 
E)  There is a reduction in income tax rates. 
A)  The economy has been producing more than its full-employment output level and wages and input prices begin to rise. 
B)  There is an increase in the price of oil. 
C)  There is an increase in the general price level that reduces real wealth. 
D)  There is a reduction in consumer confidence about future growth in the economy. 
E)  There is a reduction in income tax rates.

Question 3

An increase in aggregate demand is beneficial in the short run because ________ but not in the long run because ________.

Accepted Answer

A)  output decreases; the unemployment rate falls 
B)  the unemployment rate falls; the price level rises 
C)  wages decrease; wages increase 
D)  real wealth decreases; real wealth increases 
E)  wages increase; the unemployment rate rises 
A)  output decreases; the unemployment rate falls 
B)  the unemployment rate falls; the price level rises 
C)  wages decrease; wages increase 
D)  real wealth decreases; real wealth increases 
E)  wages increase; the unemployment rate rises

Question 4

Which of the following would cause an upward movement along the aggregate demand curve?

Accepted Answer

A)  There is an increase in expected income. 
B)  An increase in the price level increases the value of real wealth. 
C)  An increase in housing prices increases the value of real wealth. 
D)  The value of the dollar increases. 
E)  There is an increase in the expected price level. 
A)  There is an increase in expected income. 
B)  An increase in the price level increases the value of real wealth. 
C)  An increase in housing prices increases the value of real wealth. 
D)  The value of the dollar increases. 
E)  There is an increase in the expected price level.

Question 5

Adjustments in ________ naturally move the economy toward long-run equilibrium.

Accepted Answer

A)  aggregate demand 
B)  the price level 
C)  government spending 
D)  the productive capacity of firms 
E)  full-employment output 
A)  aggregate demand 
B)  the price level 
C)  government spending 
D)  the productive capacity of firms 
E)  full-employment output

Question 6

What happens to net export spending when the price level rises? Explain.

Accepted Answer

When the price level rises, domestically

Question 7

In the long run, the output of an economy

Accepted Answer

A)  does not grow. 
B)  grows at a positive rate. 
C)  depends on aggregate demand. 
D)  is equal to full-employment output. 
E)  depends on the price level. 
A)  does not grow. 
B)  grows at a positive rate. 
C)  depends on aggregate demand. 
D)  is equal to full-employment output. 
E)  depends on the price level.

Question 8

If the current short-run equilibrium level of output is less than full-employment output, we can then expect that in the long run

Accepted Answer

A)  the price level will fall. 
B)  the price level will rise. 
C)  aggregate demand will decrease. 
D)  aggregate demand will increase. 
E)  long-run aggregate supply will decrease. 
A)  the price level will fall. 
B)  the price level will rise. 
C)  aggregate demand will decrease. 
D)  aggregate demand will increase. 
E)  long-run aggregate supply will decrease.

Question 9

An increase in investment spending can be expected to ________ interest rates and cause ________ the aggregate demand curve.

Accepted Answer

A)  increase; a rightward shift of 
B)  increase; an upward movement along 
C)  decrease; a downward movement along 
D)  decrease; a leftward shift of 
E)  have no effect on; no change in 
A)  increase; a rightward shift of 
B)  increase; an upward movement along 
C)  decrease; a downward movement along 
D)  decrease; a leftward shift of 
E)  have no effect on; no change in

Question 10

An increasing number of firms decide to install tablets and computers so that customers are able to order and pay on their own. This can be expected to ________ investment spending by the firms. At the same time we can expect the unemployment rate to ________ and consumption spending to ________. Overall the effect on gross domestic product (GDP) is ________.

Accepted Answer

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

Question 11

If people expect higher incomes in the future, then spending today ________ and aggregate demand________.

Accepted Answer

A)  increases; is unaffected 
B)  increases; increases 
C)  increases; decreases 
D)  decreases; decreases 
E)  is unaffected; is unaffected 
A)  increases; is unaffected 
B)  increases; increases 
C)  increases; decreases 
D)  decreases; decreases 
E)  is unaffected; is unaffected

Question 12

Suppose a hurricane destroys 20 percent of the capital stock in a country. In the long run, output will
________ and the price level will ________.

Accepted Answer

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

Question 13

Unemployment rises and real gross domestic product (GDP) growth slows during the ________business cycle.

Accepted Answer

A)  expansion phase of a 
B)  recession phase of a 
C)  entire 
D)  recovery phase of a 
E)  short-run phase of a 
A)  expansion phase of a 
B)  recession phase of a 
C)  entire 
D)  recovery phase of a 
E)  short-run phase of a

Question 14

In 2013, the price of gas was $3.60 per gallon, and in 2016, the price of gas was $2.05 per gallon. Since one would be spending less on gas in 2016 than in 2013, one would have more to spend on other goods and services. All else the same, this is an example of the  ________ effect.

Accepted Answer

A)  wealth 
B)  net export 
C)  consumption 
D)  interest rate 
E)  oil price 
A)  wealth 
B)  net export 
C)  consumption 
D)  interest rate 
E)  oil price

Question 15

The relationship between sticky input prices and flexible output prices explains the

Accepted Answer

A)  positive slope of the short-run aggregate supply curve. 
B)  vertical slope of the long-run aggregate supply curve. 
C)  negative slope of the short-run aggregate supply curve. 
D)  negative slope of the aggregate demand curve. 
E)  positive slope of both the short-run and long-run aggregate supply curves. 
A)  positive slope of the short-run aggregate supply curve. 
B)  vertical slope of the long-run aggregate supply curve. 
C)  negative slope of the short-run aggregate supply curve. 
D)  negative slope of the aggregate demand curve. 
E)  positive slope of both the short-run and long-run aggregate supply curves.

Question 16

Refer to the following figure to answer the next  questions.
  
-Based on the figure, if the economy is initially at point B and new technology leads to an increase in labor productivity, then in the long run we will end up at point

Accepted Answer

A)  A. 
B)  B. 
C)  C. 
D)  D. 
E)  E. 
A)  A. 
B)  B. 
C)  C. 
D)  D. 
E)  E.

Question 17

Perfect summer weather increases farm output by 30 percent. In the short run, this can be expected to ________ the price level and ________ real wealth.

Accepted Answer

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

Question 18

How many recessions have there been in the United States since 1982?

Accepted Answer

A)  none 
B)  one 
C)  two 
D)  three 
E)  four 
A)  none 
B)  one 
C)  two 
D)  three 
E)  four

Question 19

Suppose the majority of students who are graduating in May from a large university have found jobs and signed employment contracts by February. Starting in February, these students are likely to ________ spending, and aggregate demand will ________.

Accepted Answer

A)  increase; increase 
B)  decrease; decrease 
C)  decrease; increase 
D)  increase; decrease 
E)  not change their rate of; not change 
A)  increase; increase 
B)  decrease; decrease 
C)  decrease; increase 
D)  increase; decrease 
E)  not change their rate of; not change

Question 20

The aggregate demand curve is best represented by which of the following equations?

Accepted Answer

A)  AD = C + I + G - NX 
B)  AD = C + I+ G - NX 
C)  AD = C + I + G 
D)  AD =C + I 
E)  AD= C + I - G - NX 
A)  AD = C + I + G - NX 
B)  AD = C + I+ G - NX 
C)  AD = C + I + G 
D)  AD =C + I 
E)  AD= C + I - G - NX

All else being equal, as the population ages and many people leave the labor force,

Refer to the following figure to answer the next questions. -Based on the figure, which of the following would cause the aggregate demand curve to shift from AD₂ to AD₁?

An increase in aggregate demand is beneficial in the short run because but not in the long run because .

Which of the following would cause an upward movement along the aggregate demand curve?

Adjustments in ________ naturally move the economy toward long-run equilibrium.

What happens to net export spending when the price level rises? Explain.

In the long run, the output of an economy

If the current short-run equilibrium level of output is less than full-employment output, we can then expect that in the long run

An increase in investment spending can be expected to interest rates and cause the aggregate demand curve.

If people expect higher incomes in the future, then spending today and aggregate demand.

Suppose a hurricane destroys 20 percent of the capital stock in a country. In the long run, output will and the price level will .

Unemployment rises and real gross domestic product (GDP) growth slows during the ________business cycle.

In 2013, the price of gas was $3.60 per gallon, and in 2016, the price of gas was $2.05 per gallon. Since one would be spending less on gas in 2016 than in 2013, one would have more to spend on other goods and services. All else the same, this is an example of the ________ effect.

The relationship between sticky input prices and flexible output prices explains the

Refer to the following figure to answer the next questions. -Based on the figure, if the economy is initially at point B and new technology leads to an increase in labor productivity, then in the long run we will end up at point

Perfect summer weather increases farm output by 30 percent. In the short run, this can be expected to the price level and real wealth.

How many recessions have there been in the United States since 1982?

Suppose the majority of students who are graduating in May from a large university have found jobs and signed employment contracts by February. Starting in February, these students are likely to spending, and aggregate demand will .

The aggregate demand curve is best represented by which of the following equations?

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

All else being equal, as the population ages and many people leave the labor force,

Refer to the following figure to answer the next questions. -Based on the figure, which of the following would cause the aggregate demand curve to shift from AD2 to AD1?

An increase in aggregate demand is beneficial in the short run because ________ but not in the long run because ________.

Which of the following would cause an upward movement along the aggregate demand curve?

Adjustments in ________ naturally move the economy toward long-run equilibrium.

What happens to net export spending when the price level rises? Explain.

In the long run, the output of an economy

If the current short-run equilibrium level of output is less than full-employment output, we can then expect that in the long run

An increase in investment spending can be expected to ________ interest rates and cause ________ the aggregate demand curve.

If people expect higher incomes in the future, then spending today ________ and aggregate demand________.

Suppose a hurricane destroys 20 percent of the capital stock in a country. In the long run, output will ________ and the price level will ________.

Unemployment rises and real gross domestic product (GDP) growth slows during the ________business cycle.

In 2013, the price of gas was $3.60 per gallon, and in 2016, the price of gas was $2.05 per gallon. Since one would be spending less on gas in 2016 than in 2013, one would have more to spend on other goods and services. All else the same, this is an example of the ________ effect.

The relationship between sticky input prices and flexible output prices explains the

Refer to the following figure to answer the next questions. -Based on the figure, if the economy is initially at point B and new technology leads to an increase in labor productivity, then in the long run we will end up at point

Perfect summer weather increases farm output by 30 percent. In the short run, this can be expected to ________ the price level and ________ real wealth.

How many recessions have there been in the United States since 1982?

Suppose the majority of students who are graduating in May from a large university have found jobs and signed employment contracts by February. Starting in February, these students are likely to ________ spending, and aggregate demand will ________.

The aggregate demand curve is best represented by which of the following equations?

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

Refer to the following figure to answer the next questions. -Based on the figure, which of the following would cause the aggregate demand curve to shift from AD₂ to AD₁?

An increase in aggregate demand is beneficial in the short run because but not in the long run because .

An increase in investment spending can be expected to interest rates and cause the aggregate demand curve.

If people expect higher incomes in the future, then spending today and aggregate demand.

Suppose a hurricane destroys 20 percent of the capital stock in a country. In the long run, output will and the price level will .

Perfect summer weather increases farm output by 30 percent. In the short run, this can be expected to the price level and real wealth.

Suppose the majority of students who are graduating in May from a large university have found jobs and signed employment contracts by February. Starting in February, these students are likely to spending, and aggregate demand will .