Question 1

Which of the following statements is true?

Accepted Answer

A) A decrease in wage rates will shift the SRAS curve to the left. 
B) An adverse supply shock will shift the SRAS curve to the left. 
C) A fall in the prices of nonlabor inputs will shift the SRAS curve to the left. 
D) An increase in labor productivity will shift the SRAS curve to the left. 
E) c and d 
A) A decrease in wage rates will shift the SRAS curve to the left. 
B) An adverse supply shock will shift the SRAS curve to the left. 
C) A fall in the prices of nonlabor inputs will shift the SRAS curve to the left. 
D) An increase in labor productivity will shift the SRAS curve to the left. 
E) c and d

Question 2

Assume that the economy is currently in short-run equilibrium, then the U.S. dollar appreciates in the foreign exchange market. Describe the correct sequence of events that happens as the economy adjusts to a new short-run equilibrium.

Accepted Answer

As the dollar appreciates, foreign goods

Question 3

Real GDP and the unemployment rate are _________________, ceteris paribus.

Accepted Answer

A) directly related 
B) inversely related 
C) unrelated 
D) directly related when GDP is below its natural level and inversely related when GDP is above its natural level 
A) directly related 
B) inversely related 
C) unrelated 
D) directly related when GDP is below its natural level and inversely related when GDP is above its natural level

Question 4

Exhibit 8-2
  
-Refer to Exhibit 8-2. What word (rises or falls) should go in blank (11) and blank (12), respectively, to summarize the resulting impact on short run equilibrium of the given change in the economy?

Accepted Answer

A) rises; rises 
B) falls; falls 
C) rises; falls 
D) falls; rises 
A) rises; rises 
B) falls; falls 
C) rises; falls 
D) falls; rises

Question 5

The short-run aggregate supply curve is

Accepted Answer

A) downward sloping. 
B) upward sloping. 
C) vertical. 
D) horizontal. 
A) downward sloping. 
B) upward sloping. 
C) vertical. 
D) horizontal.

Question 6

A decrease 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 7

Which set of changes will definitely shift the aggregate demand (AD) curve to the right?

Accepted Answer

A) Business taxes decline and foreign real national income rises. 
B) Businesses become pessimistic about future sales and the U.S.dollar depreciates. 
C) Wealth increases and individuals expect higher (future) incomes. 
D) a and b 
E) a and c 
A) Business taxes decline and foreign real national income rises. 
B) Businesses become pessimistic about future sales and the U.S.dollar depreciates. 
C) Wealth increases and individuals expect higher (future) incomes. 
D) a and b 
E) a and c

Question 8

List and describe the three effects that help to explain why the aggregate demand (AD) curve slopes downward.

Accepted Answer

If the AD curve slopes downward, it mean

Question 9

Starting from short-run equilibrium, the following occurs: the money supply increases and labor productivity increases. 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 price level necessarily rises. 
C) Real GDP rises and the effect on the price level cannot be determined. 
D) Real GDP falls and the effect on the price level cannot be determined. 
E) none of the above 
A) Real GDP falls and the price level necessarily rises. 
B) Real GDP rises and the price level necessarily rises. 
C) Real GDP rises and the effect on the price level cannot be determined. 
D) Real GDP falls and the effect on the price level cannot be determined. 
E) none of the above

Question 10

As the U.S. dollar appreciates against foreign currencies, the U.S. ____________ curve shifts _____________ resulting in a(n) _________________ in the U.S. price level and a(n) _________________ in Real GDP in the United States.

Accepted Answer

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

Question 11

A rise in the price level prompts an increase in the demand for credit. This is relevant to the __________ effect.

Accepted Answer

A) international trade 
B) real balance 
C) aggregate demand 
D) interest rate 
E) b and c 
A) international trade 
B) real balance 
C) aggregate demand 
D) interest rate 
E) b and c

Question 12

As income taxes rise, disposable income __________, causing __________ the AD curve.

Accepted Answer

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

Question 13

The real balance effect works through a change in the value of

Accepted Answer

A) monetary assets in response to changes in the unemployment rate. 
B) nonmonetary assets in response to changes in the unemployment rate. 
C) monetary assets in response to changes in the price level. 
D) nonmonetary assets in response to changes in the price level. 
A) monetary assets in response to changes in the unemployment rate. 
B) nonmonetary assets in response to changes in the unemployment rate. 
C) monetary assets in response to changes in the price level. 
D) nonmonetary assets in response to changes in the price level.

Question 14

The interest rate effect is one of the

Accepted Answer

A) reasons why an AD curve is downward-sloping. 
B) shifters of an AD curve. 
C) reasons why a short-run aggregate supply curve can be derived. 
D) shifters of a short-run aggregate supply curve. 
A) reasons why an AD curve is downward-sloping. 
B) shifters of an AD curve. 
C) reasons why a short-run aggregate supply curve can be derived. 
D) shifters of a short-run aggregate supply curve.

Question 15

Which of the following statements is false?

Accepted Answer

A) Purchasing power and the price level are inversely related. 
B) The real balance effect refers to the change in the purchasing power of dollar-denominated assets as a result of a change in the price level. 
C) The aggregate demand curve slopes downward because of the real balance, interest rate, and international trade effects. 
D) A change in the quantity demanded of Real GDP is directly brought about by a change in interest rates. 
A) Purchasing power and the price level are inversely related. 
B) The real balance effect refers to the change in the purchasing power of dollar-denominated assets as a result of a change in the price level. 
C) The aggregate demand curve slopes downward because of the real balance, interest rate, and international trade effects. 
D) A change in the quantity demanded of Real GDP is directly brought about by a change in interest rates.

Question 16

An aggregate demand (AD) curve shows the

Accepted Answer

A) amount of a particular good people are willing and able to buy at a particular price, ceteris paribus. 
B) real output (Real GDP) people are willing and able to sell at different price levels, ceteris paribus. 
C) real output (Real (GDP) people are willing and able to buy and to sell at different price levels, ceteris paribus. 
D) real output (Real GDP) people are willing and able to buy at different price levels, ceteris paribus. 
A) amount of a particular good people are willing and able to buy at a particular price, ceteris paribus. 
B) real output (Real GDP) people are willing and able to sell at different price levels, ceteris paribus. 
C) real output (Real (GDP) people are willing and able to buy and to sell at different price levels, ceteris paribus. 
D) real output (Real GDP) people are willing and able to buy at different price levels, ceteris paribus.

Question 17

The AD curve shows that, as the price level falls the quantity of

Accepted Answer

A) GDP demanded increases. 
B) GDP demand decreases. 
C) Real GDP demanded increases. 
D) Real GDP demanded decreases. 
E) none of the above 
A) GDP demanded increases. 
B) GDP demand decreases. 
C) Real GDP demanded increases. 
D) Real GDP demanded decreases. 
E) none of the above

Question 18

An increase in the price of a nonlabor input such as oil will cause

Accepted Answer

A) a movement down the SRAS curve. 
B) a movement up the SRAS curve. 
C) a leftward shift in the SRAS curve. 
D) a rightward shift in the SRAS curve. 
E) no change regarding the SRAS curve. 
A) a movement down the SRAS curve. 
B) a movement up the SRAS curve. 
C) a leftward shift in the SRAS curve. 
D) a rightward shift in the SRAS curve. 
E) no change regarding the SRAS curve.

Question 19

In short-run equilibrium, the quantities supplied and demanded of Real GDP can be less than or greater than Natural Real GDP.

Accepted Answer

A) True 
 B)False

Question 20

Exhibit 8-3
  
-Refer to Exhibit 8-3. A movement from point B to point A on AD1 would have been the result of

Accepted Answer

A) a decrease in the price level. 
B) an increase in the price level. 
C) an increase in foreign real national income. 
D) a decrease in foreign real national income. 
A) a decrease in the price level. 
B) an increase in the price level. 
C) an increase in foreign real national income. 
D) a decrease in foreign real national income.

Exam 8: Aggregate Demand and Aggregate Supply

Which of the following statements is true?

Assume that the economy is currently in short-run equilibrium, then the U.S. dollar appreciates in the foreign exchange market. Describe the correct sequence of events that happens as the economy adjusts to a new short-run equilibrium.

Real GDP and the unemployment rate are _________________, ceteris paribus.

Exhibit 8-2 -Refer to Exhibit 8-2. What word (rises or falls) should go in blank (11) and blank (12), respectively, to summarize the resulting impact on short run equilibrium of the given change in the economy?

The short-run aggregate supply curve is

A decrease in the price level

Which set of changes will definitely shift the aggregate demand (AD) curve to the right?

List and describe the three effects that help to explain why the aggregate demand (AD) curve slopes downward.

Starting from short-run equilibrium, the following occurs: the money supply increases and labor productivity increases. What is the effect on the price level and Real GDP in the short run?

As the U.S. dollar appreciates against foreign currencies, the U.S. ____________ curve shifts _____________ resulting in a(n) _________________ in the U.S. price level and a(n) _________________ in Real GDP in the United States.

A rise in the price level prompts an increase in the demand for credit. This is relevant to the __________ effect.

As income taxes rise, disposable income __________, causing __________ the AD curve.

The real balance effect works through a change in the value of

The interest rate effect is one of the

Which of the following statements is false?

An aggregate demand (AD) curve shows the

The AD curve shows that, as the price level falls the quantity of

An increase in the price of a nonlabor input such as oil will cause

In short-run equilibrium, the quantities supplied and demanded of Real GDP can be less than or greater than Natural Real GDP.

Exhibit 8-3 -Refer to Exhibit 8-3. A movement from point B to point A on AD1 would have been the result of

What Economics Is About

Production Possibilities Frontier Framework

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Macroeconomic Measurements Part I Prices and Unemployment

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

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Filters

As the U.S. dollar appreciates against foreign currencies, the U.S. ______ curve shifts _ resulting in a(n) _ in the U.S. price level and a(n) _______ in Real GDP in the United States.

As income taxes rise, disposable income , causing the AD curve.

Exhibit 8-3 -Refer to Exhibit 8-3. A movement from point B to point A on AD₁ would have been the result of