Question 1

A combination of recession and inflation is called

Accepted Answer

A) stagflation. 
B) an expansion. 
C) depression. 
D) a business cycle. 
E) a recession. 
A) stagflation. 
B) an expansion. 
C) depression. 
D) a business cycle. 
E) a recession.

Question 2

If the aggregate demand curve and the aggregate supply curve intersect at a level of real GDP less than potential GDP, there is

Accepted Answer

A) an inflationary gap. 
B) an above full-employment equilibrium. 
C) a rising price level. 
D) a recessionary gap. 
E) a falling real GDP. 
A) an inflationary gap. 
B) an above full-employment equilibrium. 
C) a rising price level. 
D) a recessionary gap. 
E) a falling real GDP.

Question 3

In the short-run, an increase in the price of raw materials will --------------------the price level and --------------------Real GDP.

Accepted Answer

A) raise; not change 
B) raise; decrease 
C) lower; increase 
D) raise; increase 
E) lower; decrease 
A) raise; not change 
B) raise; decrease 
C) lower; increase 
D) raise; increase 
E) lower; decrease

Question 4

Changes in which of the following do NOT shift the AS curve?
I. the price level
Ii. potential GDP
Iii. the money wage rate

Accepted Answer

A) i and ii 
B) ii only 
C) iii only 
D) i, ii, and iii 
E) i only 
A) i and ii 
B) ii only 
C) iii only 
D) i, ii, and iii 
E) i only

Question 5

Moving along the aggregate supply curve,

Accepted Answer

A) only the price level changes. 
B) the quantity of capital used increases. 
C) the real wage rate is constant. 
D) the stock of human capital increases. 
E) technology advances. 
A) only the price level changes. 
B) the quantity of capital used increases. 
C) the real wage rate is constant. 
D) the stock of human capital increases. 
E) technology advances.

Question 6

Moving along the potential GDP line, when the price level changes, the
I. real wage rate stays at the full-employment equilibrium level.
Ii. money wage rate changes by the same percentage.
Iii. money prices of non-labor resources change by the same percentage.

Accepted Answer

A) iii only 
B) i and ii 
C) i only 
D) i, ii, and iii 
E) ii only 
A) iii only 
B) i and ii 
C) i only 
D) i, ii, and iii 
E) ii only

Question 7

-
Based on the figure above, the aggregate demand curve will shift from AD0 to AD1 when

Accepted Answer

A) the Federal Reserve lowers the interest rate. 
B) government expenditure decreases. 
C) the price level rises. 
D) potential GDP increases. 
E) the price level falls. 
A) the Federal Reserve lowers the interest rate. 
B) government expenditure decreases. 
C) the price level rises. 
D) potential GDP increases. 
E) the price level falls.

Question 8

When the macroeconomic equilibrium is such that real GDP exceeds potential real GDP, the economy is suffering from --------------------, and the government policy to eliminate this gap will real GDP and to --------------------the price level.

Accepted Answer

A) an inflationary gap; increase; decrease 
B) a recessionary gap; decrease; decrease 
C) an inflationary gap; decrease; decrease 
D) a recessionary gap; increase; decrease 
E) an inflationary gap; increase; increase 
A) an inflationary gap; increase; decrease 
B) a recessionary gap; decrease; decrease 
C) an inflationary gap; decrease; decrease 
D) a recessionary gap; increase; decrease 
E) an inflationary gap; increase; increase

Question 9

If real GDP is less than potential GDP, then the money wage rate------------------ , aggregate supply-------------------- so that the price level --------------------.

Accepted Answer

A) rises; decreases; rises 
B) falls; decreases; rises 
C) rises; increases; falls 
D) falls; increases; falls 
E) does not change; increases; falls 
A) rises; decreases; rises 
B) falls; decreases; rises 
C) rises; increases; falls 
D) falls; increases; falls 
E) does not change; increases; falls

Question 10

Aggregate demand--------------------and shifts the AD curve--------------------  	when --------------------.

Accepted Answer

A) decreases; rightward; government expenditure increases 
B) decreases; leftward; government expenditure increases 
C) increases; rightward; taxes increase 
D) increases; leftward; taxes decrease 
E) decreases; leftward; foreign incomes decrease 
A) decreases; rightward; government expenditure increases 
B) decreases; leftward; government expenditure increases 
C) increases; rightward; taxes increase 
D) increases; leftward; taxes decrease 
E) decreases; leftward; foreign incomes decrease

Question 11

The aggregate supply curve shifts rightward when

Accepted Answer

A) the money wage rate falls. 
B) the money wage rate rises. 
C) potential GDP decreases. 
D) government purchases increase. 
E) income taxes increase. 
A) the money wage rate falls. 
B) the money wage rate rises. 
C) potential GDP decreases. 
D) government purchases increase. 
E) income taxes increase.

Question 12

-
Based on the figure above, the aggregate demand curve will shift from AD0 to AD2 when

Accepted Answer

A) the price level rises. 
B) the price level falls. 
C) government expenditure decreases. 
D) potential GDP increases. 
E) the Federal Reserve lowers the interest rate. 
A) the price level rises. 
B) the price level falls. 
C) government expenditure decreases. 
D) potential GDP increases. 
E) the Federal Reserve lowers the interest rate.

Question 13

--------------------increases the quantity of real GDP supplied and is shown as a movement along the AS
Curve.

Accepted Answer

A) A decrease in the quantity of money 
B) A rise in the price level 
C) A decrease in consumption expenditure 
D) A fall in the expected rate of profit 
E) An increase in potential GDP 
A) A decrease in the quantity of money 
B) A rise in the price level 
C) A decrease in consumption expenditure 
D) A fall in the expected rate of profit 
E) An increase in potential GDP

Question 14

When the price level increases there is-------------------- movement along the aggregate demand curve because the buying power of money --------------------.

Accepted Answer

A) no; does not change 
B) an upward; increases 
C) an upward; decreases 
D) a downward; increases 
E) a downward; decreases 
A) no; does not change 
B) an upward; increases 
C) an upward; decreases 
D) a downward; increases 
E) a downward; decreases

Question 15

During a demand-pull inflation, if the Fed tries to maintain a level of real GDP above potential GDP, the AD curve will -------------------- and the AS curve will --------------------.

Accepted Answer

A) shift rightward continuously; shift rightward continuously 
B) not shift; shift rightward continuously 
C) shift rightward continuously; not shift 
D) shift rightward continuously; shift leftward continuously 
E) shift rightward once; shift rightward continuously 
A) shift rightward continuously; shift rightward continuously 
B) not shift; shift rightward continuously 
C) shift rightward continuously; not shift 
D) shift rightward continuously; shift leftward continuously 
E) shift rightward once; shift rightward continuously

Question 16

-

Based on the figure above, the aggregate demand curve will shift from AD0 to AD2 when

Accepted Answer

A) potential GDP increases. 
B) the price level falls. 
C) taxes are lowered. 
D) government expenditure decreases. 
E) the price level rises. 
A) potential GDP increases. 
B) the price level falls. 
C) taxes are lowered. 
D) government expenditure decreases. 
E) the price level rises.

Question 17

At the start of a cost-push inflation,

Accepted Answer

A) the price level rises and real GDP decreases. 
B) the price level rises and real GDP does not change. 
C) the price level remains constant and real GDP increases. 
D) the price level and real GDP both increase. 
E) the price level remains constant and real GDP decreases. 
A) the price level rises and real GDP decreases. 
B) the price level rises and real GDP does not change. 
C) the price level remains constant and real GDP increases. 
D) the price level and real GDP both increase. 
E) the price level remains constant and real GDP decreases.

Question 18

A rise in the price level--------------------the buying power of money and--------------------the quantity of real 	 GDP demanded.

Accepted Answer

A) lowers; increases 
B) does not affect; increases 
C) does not affect; does not change 
D) lowers; decreases 
E) raises; decreases 
A) lowers; increases 
B) does not affect; increases 
C) does not affect; does not change 
D) lowers; decreases 
E) raises; decreases

Question 19

A technological advance -------------------- aggregate qsupply, shifting the aggregate supply curve -------------------- and potentially bringing the
-------------------- phase of the business cycle.

Accepted Answer

A) increases; leftward; expansion 
B) decreases; rightward; expansion 
C) decreases; leftward recession 
D) increases; rightward; expansion 
E) increases; rightward; recession 
A) increases; leftward; expansion 
B) decreases; rightward; expansion 
C) decreases; leftward recession 
D) increases; rightward; expansion 
E) increases; rightward; recession

Question 20

If the money wage rate does not change, a decrease in the price level will-------------------- the real wage rate and-------------------- firms' profit.

Accepted Answer

A) raise; increase 
B) lower; decrease 
C) lower; increase 
D) lower; not change 
E) raise; decrease 
A) raise; increase 
B) lower; decrease 
C) lower; increase 
D) lower; not change 
E) raise; decrease

A combination of recession and inflation is called

If the aggregate demand curve and the aggregate supply curve intersect at a level of real GDP less than potential GDP, there is

In the short-run, an increase in the price of raw materials will _{--------------------}the price level and _{--------------------}Real GDP.

Changes in which of the following do NOT shift the AS curve? I. the price level Ii. potential GDP Iii. the money wage rate

Moving along the aggregate supply curve,

Moving along the potential GDP line, when the price level changes, the I. real wage rate stays at the full-employment equilibrium level. Ii. money wage rate changes by the same percentage. Iii. money prices of non-labor resources change by the same percentage.

- Based on the figure above, the aggregate demand curve will shift from AD0 to AD1 when

When the macroeconomic equilibrium is such that real GDP exceeds potential real GDP, the economy is suffering from _{--------------------}, and the government policy to eliminate this gap will real GDP and to _{--------------------}the price level.

If real GDP is less than potential GDP, then the money wage rate_{------------------} , aggregate supply_{--------------------} so that the price level _{--------------------}.

Aggregate demand_{--------------------}and shifts the AD curve_{--------------------} when _{--------------------}.

The aggregate supply curve shifts rightward when

- Based on the figure above, the aggregate demand curve will shift from AD0 to AD2 when

_{--------------------}increases the quantity of real GDP supplied and is shown as a movement along the AS Curve.

When the price level increases there is_{--------------------} movement along the aggregate demand curve because the buying power of money _{--------------------}.

During a demand-pull inflation, if the Fed tries to maintain a level of real GDP above potential GDP, the AD curve will _{--------------------} and the AS curve will _{--------------------}.

- Based on the figure above, the aggregate demand curve will shift from AD0 to AD2 when

At the start of a cost-push inflation,

A rise in the price level_{--------------------}the buying power of money and_{--------------------}the quantity of real GDP demanded.

A technological advance _{--------------------} aggregate qsupply, shifting the aggregate supply curve _{--------------------} and potentially bringing the _{--------------------} phase of the business cycle.

If the money wage rate does not change, a decrease in the price level will_{--------------------} the real wage rate and_{--------------------} firms' profit.

Getting Started

The Us and Global Economies

The Economic Problem

Demand and Supply

GDP: a Measure of Total Production and Income

Jobs and Unemployment

The Cpi and the Cost of Living

Potential Gdp and the Natural Unemployment Rate

Economic Growth

Finance, Saving, and Investment

The Monetary System

Money, Interest, and Inflation

Aggregate Expenditure Multiplier

The Short-Run Policy Tradeoff

Fiscal Policy

Monetary Policy

International Trade Policy

International Finance

Filters

Exam 13: Aggregate Supply Ad Aggregate Demand

A combination of recession and inflation is called

If the aggregate demand curve and the aggregate supply curve intersect at a level of real GDP less than potential GDP, there is

In the short-run, an increase in the price of raw materials will --------------------the price level and --------------------Real GDP.

Changes in which of the following do NOT shift the AS curve? I. the price level Ii. potential GDP Iii. the money wage rate

Moving along the aggregate supply curve,

Moving along the potential GDP line, when the price level changes, the I. real wage rate stays at the full-employment equilibrium level. Ii. money wage rate changes by the same percentage. Iii. money prices of non-labor resources change by the same percentage.

- Based on the figure above, the aggregate demand curve will shift from AD0 to AD1 when

When the macroeconomic equilibrium is such that real GDP exceeds potential real GDP, the economy is suffering from --------------------, and the government policy to eliminate this gap will real GDP and to --------------------the price level.

If real GDP is less than potential GDP, then the money wage rate------------------ , aggregate supply-------------------- so that the price level --------------------.

Aggregate demand--------------------and shifts the AD curve-------------------- when --------------------.

The aggregate supply curve shifts rightward when

- Based on the figure above, the aggregate demand curve will shift from AD0 to AD2 when

--------------------increases the quantity of real GDP supplied and is shown as a movement along the AS Curve.

When the price level increases there is-------------------- movement along the aggregate demand curve because the buying power of money --------------------.

During a demand-pull inflation, if the Fed tries to maintain a level of real GDP above potential GDP, the AD curve will -------------------- and the AS curve will --------------------.

- Based on the figure above, the aggregate demand curve will shift from AD0 to AD2 when

At the start of a cost-push inflation,

A rise in the price level--------------------the buying power of money and--------------------the quantity of real GDP demanded.

A technological advance -------------------- aggregate qsupply, shifting the aggregate supply curve -------------------- and potentially bringing the -------------------- phase of the business cycle.

If the money wage rate does not change, a decrease in the price level will-------------------- the real wage rate and-------------------- firms' profit.

Getting Started

The Us and Global Economies

The Economic Problem

Demand and Supply

GDP: a Measure of Total Production and Income

Jobs and Unemployment

The Cpi and the Cost of Living

Potential Gdp and the Natural Unemployment Rate

Economic Growth

Finance, Saving, and Investment

The Monetary System

Money, Interest, and Inflation

Aggregate Expenditure Multiplier

The Short-Run Policy Tradeoff

Fiscal Policy

Monetary Policy

International Trade Policy

International Finance

Filters

In the short-run, an increase in the price of raw materials will _{--------------------}the price level and _{--------------------}Real GDP.

When the macroeconomic equilibrium is such that real GDP exceeds potential real GDP, the economy is suffering from _{--------------------}, and the government policy to eliminate this gap will real GDP and to _{--------------------}the price level.

If real GDP is less than potential GDP, then the money wage rate_{------------------} , aggregate supply_{--------------------} so that the price level _{--------------------}.

Aggregate demand_{--------------------}and shifts the AD curve_{--------------------} when _{--------------------}.

_{--------------------}increases the quantity of real GDP supplied and is shown as a movement along the AS Curve.

When the price level increases there is_{--------------------} movement along the aggregate demand curve because the buying power of money _{--------------------}.

During a demand-pull inflation, if the Fed tries to maintain a level of real GDP above potential GDP, the AD curve will _{--------------------} and the AS curve will _{--------------------}.

A rise in the price level_{--------------------}the buying power of money and_{--------------------}the quantity of real GDP demanded.

A technological advance _{--------------------} aggregate qsupply, shifting the aggregate supply curve _{--------------------} and potentially bringing the _{--------------------} phase of the business cycle.

If the money wage rate does not change, a decrease in the price level will_{--------------------} the real wage rate and_{--------------------} firms' profit.