Question 1

Which of the following is an example of an adverse supply shock?

Accepted Answer

A) a nationwide drought lasting for many months 
B) an outbreak of war among several of the Middle Eastern oil-producing countries 
C) an influenza virus that affects 50 percent of the labor force over a two month period 
D) a, b, and c 
E) a and c 
A) a nationwide drought lasting for many months 
B) an outbreak of war among several of the Middle Eastern oil-producing countries 
C) an influenza virus that affects 50 percent of the labor force over a two month period 
D) a, b, and c 
E) a and c

Question 2

An increase in labor productivity shifts the

Accepted Answer

A) AD curve rightward. 
B) AD curve leftward. 
C) short-run aggregate supply (SRAS) curve leftward. 
D) SRAS curve rightward. 
E) none of the above 
A) AD curve rightward. 
B) AD curve leftward. 
C) short-run aggregate supply (SRAS) curve leftward. 
D) SRAS curve rightward. 
E) none of the above

Question 3

If the price level remains constant but the wage rate increases, then there will be __________ in production and the SRAS curve will shift __________.

Accepted Answer

A) an increase; rightward 
B) a decrease; rightward 
C) an increase; leftward 
D) a decrease; leftward 
A) an increase; rightward 
B) a decrease; rightward 
C) an increase; leftward 
D) a decrease; leftward

Question 4

Suppose consumption increases at each price level. As a result, aggregate demand __________, and the AD curve shifts __________.

Accepted Answer

A) increases; leftward 
B) decreases; leftward 
C) increases; rightward 
D) decreases; rightward 
A) increases; leftward 
B) decreases; leftward 
C) increases; rightward 
D) decreases; rightward

Question 5

Individuals' expectations of higher future income is a

Accepted Answer

A) rightward shifter of the AD curve. 
B) leftward shifter of the AD curve. 
C) reason for moving up along a given AD curve. 
D) reason for moving down along a given AD curve. 
A) rightward shifter of the AD curve. 
B) leftward shifter of the AD curve. 
C) reason for moving up along a given AD curve. 
D) reason for moving down along a given AD curve.

Question 6

If aggregate quantity demanded is greater than aggregate quantity supplied at a particular price level, then

Accepted Answer

A) consumers will bid prices upward, and a greater quantity of output will be supplied. 
B) the shortage will likely be eliminated. 
C) a and b 
D) none of the above 
A) consumers will bid prices upward, and a greater quantity of output will be supplied. 
B) the shortage will likely be eliminated. 
C) a and b 
D) none of the above

Question 7

As the U.S. dollar appreciates and the Japanese yen depreciates,

Accepted Answer

A) U.S.-produced goods become more expensive for the Japanese and Japanese-produced goods become cheaper for Americans. 
B) U.S.-produced goods become cheaper for the Japanese and Japanese-produced goods become more expensive for Americans. 
C) U.S.-produced goods become cheaper for both the Japanese and Americans. 
D) Japanese-produced goods become more expensive for both the Japanese and Americans. 
E) none of the above 
A) U.S.-produced goods become more expensive for the Japanese and Japanese-produced goods become cheaper for Americans. 
B) U.S.-produced goods become cheaper for the Japanese and Japanese-produced goods become more expensive for Americans. 
C) U.S.-produced goods become cheaper for both the Japanese and Americans. 
D) Japanese-produced goods become more expensive for both the Japanese and Americans. 
E) none of the above

Question 8

The aggregate demand (AD) curve is the graphical representation of production in the short run.

Accepted Answer

A) True 
 B)False

Question 9

A decrease in the money supply may __________ total expenditures and thus __________ aggregate demand.

Accepted Answer

A) raise; raise 
B) raise; lower 
C) lower; raise 
D) lower; lower 
A) raise; raise 
B) raise; lower 
C) lower; raise 
D) lower; lower

Question 10

Starting from short-run equilibrium, the following occurs: labor productivity rises and individuals expect higher (future) incomes. What is the effect on the price level and Real GDP in the short run?

Accepted Answer

A) Real GDP falls and the price level necessarily rises. 
B) Real GDP rises and the effect on the price level cannot be determined. 
C) Real GDP rises and the price level necessarily falls. 
D) Real GDP falls and the effect on the price level cannot be determined. 
E) Real GDP rises and the price level necessarily rises. 
A) Real GDP falls and the price level necessarily rises. 
B) Real GDP rises and the effect on the price level cannot be determined. 
C) Real GDP rises and the price level necessarily falls. 
D) Real GDP falls and the effect on the price level cannot be determined. 
E) Real GDP rises and the price level necessarily rises.

Question 11

An increase in investment caused by a factor other than a change in the price level

Accepted Answer

A) shifts the AD curve to the right. 
B) shifts the AD curve to the left. 
C) causes an upward movement along the existing AD curve. 
D) causes a downward movement along the existing AD curve. 
E) none of the above 
A) shifts the AD curve to the right. 
B) shifts the AD curve to the left. 
C) causes an upward movement along the existing AD curve. 
D) causes a downward movement along the existing AD curve. 
E) none of the above

Question 12

Suppose a drop in prices in the stock market makes people feel less financially secure. This would cause __________ the economy's AD curve.

Accepted Answer

A) movement down along 
B) movement up along 
C) a rightward shift of 
D) a leftward shift of 
A) movement down along 
B) movement up along 
C) a rightward shift of 
D) a leftward shift of

Question 13

Greater wealth makes people _____________ willing to spend on consumption, causing __________ the economy's AD curve.

Accepted Answer

A) more; movement down along 
B) more; a rightward shift of 
C) less; movement up along 
D) less; a rightward shift of 
A) more; movement down along 
B) more; a rightward shift of 
C) less; movement up along 
D) less; a rightward shift of

Question 14

An increase in the money supply may __________ total expenditures, leading to a __________ shift of the AD curve.

Accepted Answer

A) increase; rightward 
B) increase; leftward 
C) decrease; rightward 
D) decrease; leftward 
A) increase; rightward 
B) increase; leftward 
C) decrease; rightward 
D) decrease; leftward

Question 15

Changes in which of the following will not cause the SRAS curve to shift?

Accepted Answer

A) the wage rate 
B) prices of nonlabor inputs 
C) the price level 
D) productivity 
E) All of the above will cause the SRAS curve to shift. 
A) the wage rate 
B) prices of nonlabor inputs 
C) the price level 
D) productivity 
E) All of the above will cause the SRAS curve to shift.

Question 16

Velocity is the average number of times a dollar is spent to buy

Accepted Answer

A) final goods and services in a year. 
B) final and intermediate goods and services in a year. 
C) final goods, but not services, in a year. 
D) services in a year. 
A) final goods and services in a year. 
B) final and intermediate goods and services in a year. 
C) final goods, but not services, in a year. 
D) services in a year.

Question 17

A decrease in the price level

Accepted Answer

A) shifts the SRAS curve to the right. 
B) shifts the SRAS curve to the left. 
C) causes an upward movement along the existing SRAS curve. 
D) causes a downward movement along the existing SRAS curve. 
E) none of the above 
A) shifts the SRAS curve to the right. 
B) shifts the SRAS curve to the left. 
C) causes an upward movement along the existing SRAS curve. 
D) causes a downward movement along the existing SRAS curve. 
E) none of the above

Question 18

A depreciation of the U.S. dollar against foreign currencies tends to __________ U.S. net exports and shift the U.S. AD curve to the __________.

Accepted Answer

A) raise; right 
B) raise; left 
C) lower; right 
D) lower; left 
A) raise; right 
B) raise; left 
C) lower; right 
D) lower; left

Question 19

In the short run, a decrease in wage rates, ceteris paribus, shifts the

Accepted Answer

A) AD curve to the right, causing equilibrium price level to rise and equilibrium Real GDP to increase. 
B) AD curve to the left, causing equilibrium price level to fall and equilibrium Real GDP to decrease. 
C) SRAS curve to the right, causing equilibrium price level to fall and equilibrium Real GDP to increase. 
D) SRAS curve to the left, causing equilibrium price level to rise and equilibrium Real GDP to decrease. 
A) AD curve to the right, causing equilibrium price level to rise and equilibrium Real GDP to increase. 
B) AD curve to the left, causing equilibrium price level to fall and equilibrium Real GDP to decrease. 
C) SRAS curve to the right, causing equilibrium price level to fall and equilibrium Real GDP to increase. 
D) SRAS curve to the left, causing equilibrium price level to rise and equilibrium Real GDP to decrease.

Question 20

Exhibit 8-1
  
-Refer to Exhibit 8-1. Assume that the economy is originally in equilibrium at point B. If businesses become pessimistic about future sales, at which point is the economy most likely to end up in the short run?

Accepted Answer

A) A 
B) B 
C) C 
D) D 
A) A 
B) B 
C) C 
D) D

Exam 8: Aggregate Demand and Aggregate Supply

Which of the following is an example of an adverse supply shock?

An increase in labor productivity shifts the

If the price level remains constant but the wage rate increases, then there will be __________ in production and the SRAS curve will shift __________.

Suppose consumption increases at each price level. As a result, aggregate demand __________, and the AD curve shifts __________.

Individuals' expectations of higher future income is a

If aggregate quantity demanded is greater than aggregate quantity supplied at a particular price level, then

As the U.S. dollar appreciates and the Japanese yen depreciates,

The aggregate demand (AD) curve is the graphical representation of production in the short run.

A decrease in the money supply may __________ total expenditures and thus __________ aggregate demand.

Starting from short-run equilibrium, the following occurs: labor productivity rises and individuals expect higher (future) incomes. What is the effect on the price level and Real GDP in the short run?

An increase in investment caused by a factor other than a change in the price level

Suppose a drop in prices in the stock market makes people feel less financially secure. This would cause __________ the economy's AD curve.

Greater wealth makes people _____________ willing to spend on consumption, causing __________ the economy's AD curve.

An increase in the money supply may __________ total expenditures, leading to a __________ shift of the AD curve.

Changes in which of the following will not cause the SRAS curve to shift?

Velocity is the average number of times a dollar is spent to buy

A decrease in the price level

A depreciation of the U.S. dollar against foreign currencies tends to __________ U.S. net exports and shift the U.S. AD curve to the __________.

In the short run, a decrease in wage rates, ceteris paribus, shifts the

Exhibit 8-1 -Refer to Exhibit 8-1. Assume that the economy is originally in equilibrium at point B. If businesses become pessimistic about future sales, at which point is the economy most likely to end up in the short run?

What Economics Is About

Production Possibilities Frontier Framework

Supply and Demand Theory

Prices Free Controlled and Relative

Supply Demand and Price Applications

Macroeconomic Measurements Part I Prices and Unemployment

Macroeconomic Measurements Part II Gdp and Real Gdp

Classical Macroeconomics and the Self Regulating Economy

Keynesian Macroeconomics and Economic Instability a Critique of the Self Regulating Economy

Fiscal Policy and the Federal Budget

Money Banking and the Financial System

The Federal Reserve System

Money and the Economy

Monetary Policy

Expectations Theory and the Economy

Economic Growth Resources Technology Ideas and Institutions

Debates in Macroeconomics Over the Role and Effects of Government

Elasticity

Consumer Choice and Behavioral Economics

Production and Costs

Perfect Competition

Monopoly

Monopolistic Competition Oligopoly and Game Theory

Government and Product Markets Antitrust and Regulation

Factor Markets With Emphasis on the Labor Market

Wages Unions and Labor

The Distribution of Income and Poverty

Interest Rent and Profit

Market Failure Externalities Public Goods and Asymmetric Information

Public Choice and Special Interest Group Politics

Building Theories to Explain Everyday Life From Observations to Questions to Theories to Predictions

International Trade

International Finance

The Economic Case for and Against Government Five Topics Considered

Stocks Bonds Futures and Options

Filters

If the price level remains constant but the wage rate increases, then there will be in production and the SRAS curve will shift .

Suppose consumption increases at each price level. As a result, aggregate demand , and the AD curve shifts .

A decrease in the money supply may total expenditures and thus aggregate demand.

Greater wealth makes people ___ willing to spend on consumption, causing the economy's AD curve.

An increase in the money supply may total expenditures, leading to a shift of the AD curve.

A depreciation of the U.S. dollar against foreign currencies tends to U.S. net exports and shift the U.S. AD curve to the .