Question 1

Which of the following could result in a recession?

Accepted Answer

A) a tax cut 
B) an increase in government expenditures on goods and services 
C) a rise in the price of oil 
D) an increase in investment 
E) an increase in the quantity of money 
A) a tax cut 
B) an increase in government expenditures on goods and services 
C) a rise in the price of oil 
D) an increase in investment 
E) an increase in the quantity of money

Question 2

During an inflationary gap,

Accepted Answer

A) the aggregate demand curve and the aggregate supply curve intersect at a level of real GDP that exceeds potential GDP. 
B) real GDP is less than potential GDP. 
C) the aggregate demand curve and the aggregate supply curve intersect at potential GDP. 
D) the aggregate demand curve and the aggregate supply curve do not intersect. 
E) the price level will fall to restore the long-run equilibrium. 
A) the aggregate demand curve and the aggregate supply curve intersect at a level of real GDP that exceeds potential GDP. 
B) real GDP is less than potential GDP. 
C) the aggregate demand curve and the aggregate supply curve intersect at potential GDP. 
D) the aggregate demand curve and the aggregate supply curve do not intersect. 
E) the price level will fall to restore the long-run equilibrium.

Question 3

If potential GDP increases,

Accepted Answer

A) the money wage rate must have fallen. 
B) aggregate supply increases. 
C) aggregate supply does not change. 
D) the price level rises. 
E) the quantity of aggregate supply decreases. 
A) the money wage rate must have fallen. 
B) aggregate supply increases. 
C) aggregate supply does not change. 
D) the price level rises. 
E) the quantity of aggregate supply decreases.

Question 4

An increase in technology--------------------potential GDP and--------------------  	aggregate supply.

Accepted Answer

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

Question 5

The government passes a law which doubles the wages of all workers. aggregate supply will --------------------, and real GDP will --------------------, and the price level will-------------------- .

Accepted Answer

A) increase; remain the same; increase. 
B) remain the same; increase; increase. 
C) increase; increase; remain the same. 
D) decrease; decrease; increase. 
E) decrease; increase; increase. 
A) increase; remain the same; increase. 
B) remain the same; increase; increase. 
C) increase; increase; remain the same. 
D) decrease; decrease; increase. 
E) decrease; increase; increase.

Question 6

If the quantity of real GDP demanded is less than the quantity of real GDP supplied, then

Accepted Answer

A) aggregate demand changes to restore the equilibrium. 
B) the economy must be producing at potential GDP. 
C) the price level falls and firms increase production. 
D) the price level rises to restore the macroeconomic equilibrium 
E) the price level falls and firms decrease production. 
A) aggregate demand changes to restore the equilibrium. 
B) the economy must be producing at potential GDP. 
C) the price level falls and firms increase production. 
D) the price level rises to restore the macroeconomic equilibrium 
E) the price level falls and firms decrease production.

Question 7

An increase in--------------------increases potential GDP and--------------------  	aggregate supply

Accepted Answer

A) technology; increases 
B) the money wage rate; decreases 
C) the money wage rate; increases 
D) the money price of oil; decreases 
E) technology; decreases 
A) technology; increases 
B) the money wage rate; decreases 
C) the money wage rate; increases 
D) the money price of oil; decreases 
E) technology; decreases

Question 8

-
In the figure above, the shift in the aggregate demand curve from AD1 to AD3 could be the result of

Accepted Answer

A) a decrease in the foreign exchange rate. 
B) a decrease in the real interest rate. 
C) an increased expectation of a recession that lowers the expected rate of profit from investment. 
D) an increase in the price level. 
E) a decrease in the buying power of money. 
A) a decrease in the foreign exchange rate. 
B) a decrease in the real interest rate. 
C) an increased expectation of a recession that lowers the expected rate of profit from investment. 
D) an increase in the price level. 
E) a decrease in the buying power of money.

Question 9

Which of the following statements is correct?

Accepted Answer

A) An increase in exports shifts the aggregate demand curve leftward. 
B) A increase in people's expected future income shifts the aggregate demand curve leftward. 
C) A tax increase shifts the aggregate demand curve leftward. 
D) An increase in potential GDP shifts the aggregate demand curve rightward. 
E) The higher the price level, the larger is the quantity of real GDP demanded. 
A) An increase in exports shifts the aggregate demand curve leftward. 
B) A increase in people's expected future income shifts the aggregate demand curve leftward. 
C) A tax increase shifts the aggregate demand curve leftward. 
D) An increase in potential GDP shifts the aggregate demand curve rightward. 
E) The higher the price level, the larger is the quantity of real GDP demanded.

Question 10

Moving along the aggregate supply curve, when the price level rises, the

Accepted Answer

A) the quantity supplied decreases. 
B) the quantity supplied increases. 
C) the aggregate demand curve shifts rightward. 
D) the aggregate demand curve shifts leftward. 
E) quantity supplied does not change because the aggregate supply curve is a vertical line. 
A) the quantity supplied decreases. 
B) the quantity supplied increases. 
C) the aggregate demand curve shifts rightward. 
D) the aggregate demand curve shifts leftward. 
E) quantity supplied does not change because the aggregate supply curve is a vertical line.

Question 11

An increase in the quantity of money--------------------aggregate demand and--------------------  	.

Accepted Answer

A) decreases; shifts the aggregate demand curve leftward 
B) increases; rotates the aggregate demand curve so it is steeper 
C) increases; shifts the aggregate demand curve leftward 
D) decreases; shifts the aggregate demand curve rightward 
E) increases; shifts the aggregate demand curve rightward 
A) decreases; shifts the aggregate demand curve leftward 
B) increases; rotates the aggregate demand curve so it is steeper 
C) increases; shifts the aggregate demand curve leftward 
D) decreases; shifts the aggregate demand curve rightward 
E) increases; shifts the aggregate demand curve rightward

Question 12

-

The aggregate demand curve in the figure above shifts rightward if

Accepted Answer

A) taxes are raised. 
B) the Federal Reserve raises the interest rate. 
C) potential GDP increases. 
D) government expenditure increases. 
E) the money wage rate falls. 
A) taxes are raised. 
B) the Federal Reserve raises the interest rate. 
C) potential GDP increases. 
D) government expenditure increases. 
E) the money wage rate falls.

Question 13

If the economy is at macroeconomic equilibrium, then real GDP

Accepted Answer

A) might be equal to, greater than, or less than potential GDP 
B) must be less than potential GDP. 
C) must equal potential GDP. 
D) must be great than potential GDP. 
E) cannot be compared to potential GDP. 
A) might be equal to, greater than, or less than potential GDP 
B) must be less than potential GDP. 
C) must equal potential GDP. 
D) must be great than potential GDP. 
E) cannot be compared to potential GDP.

Question 14

Macroeconomic equilibrium occurs when

Accepted Answer

A) there is no inflation. 
B) the economy is fully employed. 
C) the price level equals the potential price level. 
D) the aggregate quantity demanded is equal to the aggregate quantity supplied. 
E) real GDP is equal to potential GDP. 
A) there is no inflation. 
B) the economy is fully employed. 
C) the price level equals the potential price level. 
D) the aggregate quantity demanded is equal to the aggregate quantity supplied. 
E) real GDP is equal to potential GDP.

Question 15

The AS curve shifts leftward if

Accepted Answer

A) the money wage rate increases. 
B) good weather increases agricultural harvests. 
C) OPEC reduces world oil prices. 
D) government expenditure increases. 
E) tax cuts stimulate labor supply. 
A) the money wage rate increases. 
B) good weather increases agricultural harvests. 
C) OPEC reduces world oil prices. 
D) government expenditure increases. 
E) tax cuts stimulate labor supply.

Question 16

Increases in the quantity of money can start a --------------------inflation and an increase in government expenditure can start a-------------------- inflation.

Accepted Answer

A) cost-push; demand-pull 
B) demand-pull; demand-pull 
C) demand-pull; cost-push 
D) cost-push; cost-push 
E) None of the above is correct because increases in the quantity of money are necessary to continue an inflation but cannot start an inflation. 
A) cost-push; demand-pull 
B) demand-pull; demand-pull 
C) demand-pull; cost-push 
D) cost-push; cost-push 
E) None of the above is correct because increases in the quantity of money are necessary to continue an inflation but cannot start an inflation.

Question 17

$\begin{array} { c c c c } 
\hline \begin{array} { c } 
\text { Price level } \
\text { (GDP deflator) }
\end{array} & \begin{array} { c } 
\text { Potential GDP } \
\text { (billions of 2005 dollars) }
\end{array} & \begin{array} { c } 
\text { Real GDP supplied } \
\text { (billions of 2005 dollars) }
\end{array} & \begin{array} { c } 
\text { Real GDP demanded } \
\text { (billions of 2005 dollars) }
\end{array} \
\hline 150 & 25 & 34 & 16 \
140 & 25 & 31 & 19 \
130 & 25 & 28 & 22 \
120 & 25 & 25 & 25 \
110 & 25 & 23 & 28 \
\hline
\end{array}$
The table above gives data for the nation of Pearl, a small island in the South Pacific.
- If aggregate demand increases so that the quantity of real GDP demanded is $6 billion more at each price level, the new equilibrium real GDP is

Accepted Answer

A) $34 billion. 
B) $25 billion. 
C) $31 billion. 
D) $28 billion. 
E) $23 billion. 
A) $34 billion. 
B) $25 billion. 
C) $31 billion. 
D) $28 billion. 
E) $23 billion.

Question 18

When the price level rises and the money wage rate does not change,

Accepted Answer

A) existing businesses do not change their level of output. 
B) the quantity of potential GDP increases because the quantity of real GDP supplied increases. 
C) profits fall and more businesses fail. 
D) the quantity of real GDP supplied increases as more businesses start up and potential GDP does not change. 
E) the quantity of real GDP supplied decreases as more businesses fail and potential GDP does not change. 
A) existing businesses do not change their level of output. 
B) the quantity of potential GDP increases because the quantity of real GDP supplied increases. 
C) profits fall and more businesses fail. 
D) the quantity of real GDP supplied increases as more businesses start up and potential GDP does not change. 
E) the quantity of real GDP supplied decreases as more businesses fail and potential GDP does not change.

Question 19

Cost-push inflation might initially result from

Accepted Answer

A) the use of new technology. 
B) an increase in government expenditure. 
C) an increase in the cost of resources. 
D) an increase in the quantity of money. 
E) a decrease in the quantity of money. 
A) the use of new technology. 
B) an increase in government expenditure. 
C) an increase in the cost of resources. 
D) an increase in the quantity of money. 
E) a decrease in the quantity of money.

Question 20

A decrease in investment leads to--------------------in aggregate demand and  -------------------- in real GDP.

Accepted Answer

A) a decrease; an increase 
B) a decrease; a decrease 
C) an increase; a decrease 
D) an increase; an increase 
E) no change; a decrease 
A) a decrease; an increase 
B) a decrease; a decrease 
C) an increase; a decrease 
D) an increase; an increase 
E) no change; a decrease

Which of the following could result in a recession?

During an inflationary gap,

If potential GDP increases,

An increase in technology_{--------------------}potential GDP and_{--------------------} aggregate supply.

The government passes a law which doubles the wages of all workers. aggregate supply will _{--------------------}, and real GDP will _{--------------------}, and the price level will_{--------------------} .

If the quantity of real GDP demanded is less than the quantity of real GDP supplied, then

An increase in_{--------------------}increases potential GDP and_{--------------------} aggregate supply

- In the figure above, the shift in the aggregate demand curve from AD1 to AD3 could be the result of

Which of the following statements is correct?

Moving along the aggregate supply curve, when the price level rises, the

An increase in the quantity of money_{--------------------}aggregate demand and_{--------------------} .

- The aggregate demand curve in the figure above shifts rightward if

If the economy is at macroeconomic equilibrium, then real GDP

Macroeconomic equilibrium occurs when

The AS curve shifts leftward if

Increases in the quantity of money can start a _{--------------------}inflation and an increase in government expenditure can start a_{--------------------} inflation.

When the price level rises and the money wage rate does not change,

Cost-push inflation might initially result from

A decrease in investment leads to_{--------------------}in aggregate demand and _{--------------------} in real GDP.

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

Which of the following could result in a recession?

During an inflationary gap,

If potential GDP increases,

An increase in technology--------------------potential GDP and-------------------- aggregate supply.

The government passes a law which doubles the wages of all workers. aggregate supply will --------------------, and real GDP will --------------------, and the price level will-------------------- .

If the quantity of real GDP demanded is less than the quantity of real GDP supplied, then

An increase in--------------------increases potential GDP and-------------------- aggregate supply

- In the figure above, the shift in the aggregate demand curve from AD1 to AD3 could be the result of

Which of the following statements is correct?

Moving along the aggregate supply curve, when the price level rises, the

An increase in the quantity of money--------------------aggregate demand and-------------------- .

- The aggregate demand curve in the figure above shifts rightward if

If the economy is at macroeconomic equilibrium, then real GDP

Macroeconomic equilibrium occurs when

The AS curve shifts leftward if

Increases in the quantity of money can start a --------------------inflation and an increase in government expenditure can start a-------------------- inflation.

When the price level rises and the money wage rate does not change,

Cost-push inflation might initially result from

A decrease in investment leads to--------------------in aggregate demand and -------------------- in real GDP.

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

An increase in technology_{--------------------}potential GDP and_{--------------------} aggregate supply.

The government passes a law which doubles the wages of all workers. aggregate supply will _{--------------------}, and real GDP will _{--------------------}, and the price level will_{--------------------} .

An increase in_{--------------------}increases potential GDP and_{--------------------} aggregate supply

An increase in the quantity of money_{--------------------}aggregate demand and_{--------------------} .

Increases in the quantity of money can start a _{--------------------}inflation and an increase in government expenditure can start a_{--------------------} inflation.

A decrease in investment leads to_{--------------------}in aggregate demand and _{--------------------} in real GDP.