Question 1

What portion of GDP does agriculture in the United States currently generate?

Accepted Answer

A)  around 1% 
B)  10% 
C)  20% 
D)  over 40% 
A)  around 1% 
B)  10% 
C)  20% 
D)  over 40%

Question 2

A negative shock to the long-run aggregate supply curve will cause:

Accepted Answer

A)  both real growth and inflation to fall. 
B)  both real growth and inflation to rise. 
C)  real growth to fall, but the inflation rate will rise. 
D)  real growth to rise, but the inflation rate will fall. 
A)  both real growth and inflation to fall. 
B)  both real growth and inflation to rise. 
C)  real growth to fall, but the inflation rate will rise. 
D)  real growth to rise, but the inflation rate will fall.

Question 3

Use the following to answer questions: Figure: Long-Run Aggregate Supply Curves  
-(Figure: Long-Run Aggregate Supply Curves) Which of the following can explain the shift of the long-run aggregate supply curve from A to B in the figure?

Accepted Answer

A)  development of new technology 
B)  war 
C)  negative supply shock 
D)  oil crisis 
A)  development of new technology 
B)  war 
C)  negative supply shock 
D)  oil crisis

Question 4

Money is always neutral in the long run in the AD-AS model.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following causes a shift of the AD curve to the right?

Accepted Answer

A)  an increase in income taxes 
B)  an increase in consumer confidence 
C)  an increase in import growth 
D)  an increase in interest rates 
A)  an increase in income taxes 
B)  an increase in consumer confidence 
C)  an increase in import growth 
D)  an increase in interest rates

Question 6

What happened to the price level between 1929 and 1932?

Accepted Answer

A)  It did not change. 
B)  Inflation reached 20%. 
C)  Inflation hovered around 5%. 
D)  Deflation reached 10%. 
A)  It did not change. 
B)  Inflation reached 20%. 
C)  Inflation hovered around 5%. 
D)  Deflation reached 10%.

Question 7

Sustained inflation:

Accepted Answer

A)  can occur as a result of changes in $\vec { C }$
. 
B)  can occur as a result of changes in $\vec { I }$
. 
C)  requires ongoing increases in the money supply. 
D)  can never occur. 
A)  can occur as a result of changes in $\vec { C }$
. 
B)  can occur as a result of changes in $\vec { I }$
. 
C)  requires ongoing increases in the money supply. 
D)  can never occur.

Question 8

In the AD-AS model, an unexpected decrease in the growth rate of the money supply causes:

Accepted Answer

A)  a rightward shift of the AD curve and then an upward shift of the SRAS curve. 
B)  a rightward shift of the AD curve and then a downward shift of the SRAS curve. 
C)  a leftward shift of the AD curve and then an upward shift of the SRAS curve. 
D)  a leftward shift of the AD curve and then a downward shift of the SRAS curve. 
A)  a rightward shift of the AD curve and then an upward shift of the SRAS curve. 
B)  a rightward shift of the AD curve and then a downward shift of the SRAS curve. 
C)  a leftward shift of the AD curve and then an upward shift of the SRAS curve. 
D)  a leftward shift of the AD curve and then a downward shift of the SRAS curve.

Question 9

The aggregate demand curve shows all the combinations of _____ and _____ that are consistent with a specified rate of _____.

Accepted Answer

A)  prices; real GDP; spending 
B)  prices; GNP; money supply 
C)  inflation; nominal growth; money supply 
D)  inflation; real GDP growth; spending growth 
A)  prices; real GDP; spending 
B)  prices; GNP; money supply 
C)  inflation; nominal growth; money supply 
D)  inflation; real GDP growth; spending growth

Question 10

An increase in spending growth causes:

Accepted Answer

A)  an upward movement along the AD curve. 
B)  a downward movement along the AD curve. 
C)  a rightward shift of the AD curve. 
D)  a leftward shift of the AD curve. 
A)  an upward movement along the AD curve. 
B)  a downward movement along the AD curve. 
C)  a rightward shift of the AD curve. 
D)  a leftward shift of the AD curve.

Question 11

Explain why sticky wages tend to amplify negative productivity shocks.

Accepted Answer

A negative productivity shock means that

Question 12

The short-run aggregate supply curve shows that higher-than-expected-inflation will increase output and lower-than-expected-inflation will decrease output.

Accepted Answer

A) True 
 B)False

Question 13

Why is the long-run aggregate supply curve vertical in the AD-AS model?

Accepted Answer

The vertical nature of the LRAS curve sh

Question 14

Which of the following is NOT consistent with points along the long-run aggregate supply curve?

Accepted Answer

A)  Real GDP is growing at its long-run potential growth rate. 
B)  All prices are fully flexible. 
C)  All real factors of production are being fully utilized. 
D)  Real output growth is negatively related to inflation. 
A)  Real GDP is growing at its long-run potential growth rate. 
B)  All prices are fully flexible. 
C)  All real factors of production are being fully utilized. 
D)  Real output growth is negatively related to inflation.

Question 15

An increase in the rate of spending growth must flow into either higher inflation or:

Accepted Answer

A)  higher deflation. 
B)  lower inflation. 
C)  higher growth. 
D)  lower growth. 
A)  higher deflation. 
B)  lower inflation. 
C)  higher growth. 
D)  lower growth.

Question 16

In 2011, the major earthquake and tsunami in Japan destroyed much of the capital infrastructure in Japan. Those natural disasters were examples of a:

Accepted Answer

A)  negative shock to the long-run aggregate supply curve. 
B)  positive shock to the long-run aggregate supply curve. 
C)  negative shock to the AD curve. 
D)  positive shock to the AD curve. 
A)  negative shock to the long-run aggregate supply curve. 
B)  positive shock to the long-run aggregate supply curve. 
C)  negative shock to the AD curve. 
D)  positive shock to the AD curve.

Question 17

If $\bar { M }$ = 5%, $\vec { v }$
= -3%, and $\bar { P }$
= 2%, then $\bar { Y } _ { R }$
Must equal:

Accepted Answer

A)  -3% 
B)  -2% 
C)  0% 
D)  2% 
A)  -3% 
B)  -2% 
C)  0% 
D)  2%

Question 18

The aggregate demand curve is a straight line with a slope of _____.

Accepted Answer

A)  0 
B)  1 
C)  -1 
D)  -10 
A)  0 
B)  1 
C)  -1 
D)  -10

Question 19

The slope of the aggregate demand curve is equal to 1.

Accepted Answer

A) True 
 B)False

Question 20

The primary purpose of the AD-AS model is to explain:

Accepted Answer

A)  the steady-state output. 
B)  trends in output. 
C)  business fluctuations. 
D)  long-term economic growth. 
A)  the steady-state output. 
B)  trends in output. 
C)  business fluctuations. 
D)  long-term economic growth.

Exam 13: Business Fluctuations: Aggregate Demand and Supply

What portion of GDP does agriculture in the United States currently generate?

A negative shock to the long-run aggregate supply curve will cause:

Use the following to answer questions: Figure: Long-Run Aggregate Supply Curves -(Figure: Long-Run Aggregate Supply Curves) Which of the following can explain the shift of the long-run aggregate supply curve from A to B in the figure?

Money is always neutral in the long run in the AD-AS model.

Which of the following causes a shift of the AD curve to the right?

What happened to the price level between 1929 and 1932?

Sustained inflation:

In the AD-AS model, an unexpected decrease in the growth rate of the money supply causes:

The aggregate demand curve shows all the combinations of _____ and _____ that are consistent with a specified rate of _____.

An increase in spending growth causes:

Explain why sticky wages tend to amplify negative productivity shocks.

The short-run aggregate supply curve shows that higher-than-expected-inflation will increase output and lower-than-expected-inflation will decrease output.

Why is the long-run aggregate supply curve vertical in the AD-AS model?

Which of the following is NOT consistent with points along the long-run aggregate supply curve?

An increase in the rate of spending growth must flow into either higher inflation or:

In 2011, the major earthquake and tsunami in Japan destroyed much of the capital infrastructure in Japan. Those natural disasters were examples of a:

If Mˉ\bar { M }Mˉ = 5%, v⃗\vec { v }v = -3%, and Pˉ\bar { P }Pˉ = 2%, then YˉR\bar { Y } _ { R }YˉR​ Must equal:

The aggregate demand curve is a straight line with a slope of _____.

The slope of the aggregate demand curve is equal to 1.

The primary purpose of the AD-AS model is to explain:

The Big Ideas

The Power of Trade and Comparative Advantage

Supply and Demand

Equilibrium: How Supply and Demand Determine Prices

Price Ceilings and Floors

GDP and the Measurement of Progress

The Wealth of Nations and Economic Growth

Growth, Capital Accumulation and the Economics of Ideas: Catching up Vs the Cutting Edge

Saving, Investment, and the Financial System

Stock Markets and Personal Finance

Unemployment and Labor Force Participation

Inflation and the Quantity Theory of Money

Transmission and Amplification Mechanisms

The Federal Reserve System and Open Market Operations

Monetary Policy

The Federal Budget: Taxes and Spending

Fiscal Policy

International Trade

International Finance

Political Economy and Public Choice

Filters

The aggregate demand curve shows all the combinations of ___ and _ that are consistent with a specified rate of ___.

If $\bar { M }$ = 5%, $\vec { v }$ = -3%, and $\bar { P }$ = 2%, then $\bar { Y } _ { R }$ Must equal: