Question 1

Which of the following would shift aggregate demand to the left?

Accepted Answer

A)  A study predicts that the recent drought will increase food prices this winter. 
B)  There is a rise in the median price of houses. 
C)  A rise in the price level reduces saving and increases interest rates. 
D)  The value of the dollar increases. 
E)  The European Union emerges from recession. 
A)  A study predicts that the recent drought will increase food prices this winter. 
B)  There is a rise in the median price of houses. 
C)  A rise in the price level reduces saving and increases interest rates. 
D)  The value of the dollar increases. 
E)  The European Union emerges from recession. D

Question 2

An increase in short-run aggregate supply immediately leads to a(n)

Accepted Answer

A)  increase in real wealth and a shift of the aggregate demand curve. 
B)  increase in real wealth and a movement along the aggregate demand curve. 
C)  shift of the aggregate demand curve caused by menu costs. 
D)  shift of the aggregate demand curve caused by money illusion. 
E)  increase in money illusion and a movement along the aggregate demand curve. 
A)  increase in real wealth and a shift of the aggregate demand curve. 
B)  increase in real wealth and a movement along the aggregate demand curve. 
C)  shift of the aggregate demand curve caused by menu costs. 
D)  shift of the aggregate demand curve caused by money illusion. 
E)  increase in money illusion and a movement along the aggregate demand curve. B

Question 3

An increase in _____can be expected to shift the aggregate demand curve to the right.

Accepted Answer

A)  taxes 
B)  the price of oil 
C)  expected future income 
D)  interest rates 
E)  the exchange rate value of the dollar 
A)  taxes 
B)  the price of oil 
C)  expected future income 
D)  interest rates 
E)  the exchange rate value of the dollar C

Question 4

If the economy is in a recession caused by lower aggregate demand, then in the absence of policy action, the price level will _______, output will_____ , and employment will ____in the long run.

Accepted Answer

A)  increase; remain unchanged; increase 
B)  remain unchanged; increase; increase 
C)  decrease; increase; increase 
D)  decrease; decrease; increase 
E)  increase; increase; increase 
A)  increase; remain unchanged; increase 
B)  remain unchanged; increase; increase 
C)  decrease; increase; increase 
D)  decrease; decrease; increase 
E)  increase; increase; increase

Question 5

Suppose that you have the following information about the economy, where all figures are in millions of dollars:
 Full employment output = $2,000 
Consumption = $1,200 
Investment = $400
Government spending = $500 
Net exports = -$200
Because short-run output is_____ full-employment output, in the long run we would expect the price level to_______ .

Accepted Answer

A)  less than; rise 
B)  less than; fall 
C)  greater than; rise 
D)  greater than; fall 
E)  equal to; remain unchanged 
A)  less than; rise 
B)  less than; fall 
C)  greater than; rise 
D)  greater than; fall 
E)  equal to; remain unchanged

Question 6

Increases in productivity will

Accepted Answer

A)  cause the price level to rise. 
B)  impact short-run aggregate supply but not long-run aggregate supply. 
C)  impact aggregate demand but not aggregate supply. 
D)  increase long-run aggregate supply. 
E)  increase the price level and aggregate supply. 
A)  cause the price level to rise. 
B)  impact short-run aggregate supply but not long-run aggregate supply. 
C)  impact aggregate demand but not aggregate supply. 
D)  increase long-run aggregate supply. 
E)  increase the price level and aggregate supply.

Question 7

Which of the following would cause an increase in employment in the short run?

Accepted Answer

A)  The minimum wage increases. 
B)  Exports decrease. 
C)  There is a negative supply shock. 
D)  There is an increase in the expected price level. 
E)  There is an increase in government spending. 
A)  The minimum wage increases. 
B)  Exports decrease. 
C)  There is a negative supply shock. 
D)  There is an increase in the expected price level. 
E)  There is an increase in government spending.

Question 8

Suppose the majority of students who are graduating in May from a large university have found jobs and signed employment contracts by February. Starting in February, these students are likely to____ spending, and aggregate demand will ________.

Accepted Answer

A)  increase; increase 
B)  decrease; decrease 
C)  decrease; increase 
D)  increase; decrease 
E)  not change their rate of; not change 
A)  increase; increase 
B)  decrease; decrease 
C)  decrease; increase 
D)  increase; decrease 
E)  not change their rate of; not change

Question 9

Which of the following would shift aggregate demand to the right?

Accepted Answer

A)  College graduates are having a difficult time finding jobs. 
B)  There is a decline in consumer confidence. 
C)  Stock market values increase by 20 percent. 
D)  A fall in the price level increases the value of real wealth. 
E)  The value of the dollar increases. 
A)  College graduates are having a difficult time finding jobs. 
B)  There is a decline in consumer confidence. 
C)  Stock market values increase by 20 percent. 
D)  A fall in the price level increases the value of real wealth. 
E)  The value of the dollar increases.

Question 10

Suppose that after living through the great recession of 2007-2009, people decide to save a greater percentage of their incomes. How does this impact the loanable funds market and the aggregate demand curve?

Accepted Answer

If people save a greater percentage of t

Question 11

When prices in the economy have not fully adjusted, we say that

Accepted Answer

A)  we are in the short run. 
B)  we are in the long run. 
C)  it is a period of time less than one year. 
D)  it is a period of time less than five years. 
E)  the market is not in equilibrium. 
A)  we are in the short run. 
B)  we are in the long run. 
C)  it is a period of time less than one year. 
D)  it is a period of time less than five years. 
E)  the market is not in equilibrium.

Question 12

How does the interest rate effect explain the slope of the aggregate demand curve?

Accepted Answer

A rise in the price level will reduce sa

Question 13

When a change in the price level leads to a change in the quantity of net exports demanded, it is called the ______effect.

Accepted Answer

A)  international trade 
B)  export 
C)  import 
D)  net export 
E)  interest rate 
A)  international trade 
B)  export 
C)  import 
D)  net export 
E)  interest rate

Question 14

Suppose a hurricane destroys 20 percent of the capital stock in a country. In the long run, output will_____ and the price level will______ .

Accepted Answer

A)  decrease; decrease 
B)  decrease; increase 
C)  decrease; remain unchanged 
D)  remain unchanged; remain unchanged 
E)  remain unchanged; increase 
A)  decrease; decrease 
B)  decrease; increase 
C)  decrease; remain unchanged 
D)  remain unchanged; remain unchanged 
E)  remain unchanged; increase

Question 15

If there is a shift in the long-run aggregate supply LRAS) curve, does the short-run aggregate supply SRAS) curve also shift? What if the SRAS curve shifts? Does this cause a shift in LRAS?

Accepted Answer

Changes in resources, technology, and in

Question 16

When the general price level rises and firms decide not to change their prices in the short run, this can be attributed to

Accepted Answer

A)  menu costs. 
B)  legally binding contracts. 
C)  inflexible input prices. 
D)  money illusion. 
E)  a decline in revenues. 
A)  menu costs. 
B)  legally binding contracts. 
C)  inflexible input prices. 
D)  money illusion. 
E)  a decline in revenues.

Question 17

The long-run aggregate supply curve is

Accepted Answer

A)  vertical because full-employment output is independent of the price level. 
B)  upward sloping because the economy grows over time. 
C)  horizontal because full-employment output is independent of the price level. 
D)  upward sloping because as the price level rises, firms will increase output. 
E)  downward sloping because rising prices reduce real wealth and spending. 
A)  vertical because full-employment output is independent of the price level. 
B)  upward sloping because the economy grows over time. 
C)  horizontal because full-employment output is independent of the price level. 
D)  upward sloping because as the price level rises, firms will increase output. 
E)  downward sloping because rising prices reduce real wealth and spending.

Question 18

You read a study that predicts that rising oil prices projected for this summer are certain to fuel inflation. Having taken an economics class, due to this expected change in prices, you predict that spending today will__________ and aggregate demand today will_______ .

Accepted Answer

A)  be unaffected; be unaffected 
B)  increase; increase 
C)  decrease; decrease 
D)  decrease; increase 
E)  increase; decrease 
A)  be unaffected; be unaffected 
B)  increase; increase 
C)  decrease; decrease 
D)  decrease; increase 
E)  increase; decrease

Question 19

Shifts in the short-run aggregate supply curve are caused by

Accepted Answer

A)  supply shocks. 
B)  menu costs. 
C)  money illusion. 
D)  changes in labor productivity. 
E)  changes in spending. 
A)  supply shocks. 
B)  menu costs. 
C)  money illusion. 
D)  changes in labor productivity. 
E)  changes in spending.

Question 20

When an economy has a more stable and well-developed financial system, it is reasonable to expect

Accepted Answer

A)  an upward movement along the long-run aggregate supply curve. 
B)  a downward movement along the long-run aggregate supply curve. 
C)  a leftward shift of the long-run aggregate supply curve. 
D)  a rightward shift of the long-run aggregate supply curve. 
E)  no change in the long-run aggregate supply curve. 
A)  an upward movement along the long-run aggregate supply curve. 
B)  a downward movement along the long-run aggregate supply curve. 
C)  a leftward shift of the long-run aggregate supply curve. 
D)  a rightward shift of the long-run aggregate supply curve. 
E)  no change in the long-run aggregate supply curve.

Which of the following would shift aggregate demand to the left?

An increase in short-run aggregate supply immediately leads to a(n)

An increase in _____can be expected to shift the aggregate demand curve to the right.

If the economy is in a recession caused by lower aggregate demand, then in the absence of policy action, the price level will _____, output will_ , and employment will __in the long run.

Increases in productivity will

Which of the following would cause an increase in employment in the short run?

Suppose the majority of students who are graduating in May from a large university have found jobs and signed employment contracts by February. Starting in February, these students are likely to spending, and aggregate demand will ____.

Which of the following would shift aggregate demand to the right?

Suppose that after living through the great recession of 2007-2009, people decide to save a greater percentage of their incomes. How does this impact the loanable funds market and the aggregate demand curve?

When prices in the economy have not fully adjusted, we say that

How does the interest rate effect explain the slope of the aggregate demand curve?

When a change in the price level leads to a change in the quantity of net exports demanded, it is called the ______effect.

Suppose a hurricane destroys 20 percent of the capital stock in a country. In the long run, output will_ and the price level will__ .

If there is a shift in the long-run aggregate supply LRAS) curve, does the short-run aggregate supply SRAS) curve also shift? What if the SRAS curve shifts? Does this cause a shift in LRAS?

When the general price level rises and firms decide not to change their prices in the short run, this can be attributed to

The long-run aggregate supply curve is

You read a study that predicts that rising oil prices projected for this summer are certain to fuel inflation. Having taken an economics class, due to this expected change in prices, you predict that spending today will____ and aggregate demand today will_ .

Shifts in the short-run aggregate supply curve are caused by

When an economy has a more stable and well-developed financial system, it is reasonable to expect

Five Foundations of Economics

Model Building and Gains From Trade

The Market at Work: Supply and Demand Y

Market Outcomes and Tax Incidence

Price Controls

Introduction to Macroeconomics and Gross Domestic Product

Unemployment

The Price Level and Inflation

Savings, Interest Rates, and the Market for Loanable Funds

Financial Markets and Securities

Economic Growth and the Wealth of Nations

Growth Theory

Recessions, Expansions, and the Debate Over How to Manage Them

Federal Budgets: the Tools of Fiscal Policy

Fiscal Policy

Money and the Federal Reserve

Monetary Policy

International Trade

International Finance

Filters

Exam 13: The Aggregate Demandaggregate Supply Model

Which of the following would shift aggregate demand to the left?

An increase in short-run aggregate supply immediately leads to a(n)

An increase in _____can be expected to shift the aggregate demand curve to the right.

If the economy is in a recession caused by lower aggregate demand, then in the absence of policy action, the price level will _______, output will_____ , and employment will ____in the long run.

Increases in productivity will

Which of the following would cause an increase in employment in the short run?

Suppose the majority of students who are graduating in May from a large university have found jobs and signed employment contracts by February. Starting in February, these students are likely to____ spending, and aggregate demand will ________.

Which of the following would shift aggregate demand to the right?

Suppose that after living through the great recession of 2007-2009, people decide to save a greater percentage of their incomes. How does this impact the loanable funds market and the aggregate demand curve?

When prices in the economy have not fully adjusted, we say that

How does the interest rate effect explain the slope of the aggregate demand curve?

When a change in the price level leads to a change in the quantity of net exports demanded, it is called the ______effect.

Suppose a hurricane destroys 20 percent of the capital stock in a country. In the long run, output will_____ and the price level will______ .

If there is a shift in the long-run aggregate supply LRAS) curve, does the short-run aggregate supply SRAS) curve also shift? What if the SRAS curve shifts? Does this cause a shift in LRAS?

When the general price level rises and firms decide not to change their prices in the short run, this can be attributed to

The long-run aggregate supply curve is

You read a study that predicts that rising oil prices projected for this summer are certain to fuel inflation. Having taken an economics class, due to this expected change in prices, you predict that spending today will__________ and aggregate demand today will_______ .

Shifts in the short-run aggregate supply curve are caused by

When an economy has a more stable and well-developed financial system, it is reasonable to expect

Five Foundations of Economics

Model Building and Gains From Trade

The Market at Work: Supply and Demand Y

Market Outcomes and Tax Incidence

Price Controls

Introduction to Macroeconomics and Gross Domestic Product

Unemployment

The Price Level and Inflation

Savings, Interest Rates, and the Market for Loanable Funds

Financial Markets and Securities

Economic Growth and the Wealth of Nations

Growth Theory

Recessions, Expansions, and the Debate Over How to Manage Them

Federal Budgets: the Tools of Fiscal Policy

Fiscal Policy

Money and the Federal Reserve

Monetary Policy

International Trade

International Finance

Filters

If the economy is in a recession caused by lower aggregate demand, then in the absence of policy action, the price level will _____, output will_ , and employment will __in the long run.

Suppose the majority of students who are graduating in May from a large university have found jobs and signed employment contracts by February. Starting in February, these students are likely to spending, and aggregate demand will ____.

Suppose a hurricane destroys 20 percent of the capital stock in a country. In the long run, output will_ and the price level will__ .

You read a study that predicts that rising oil prices projected for this summer are certain to fuel inflation. Having taken an economics class, due to this expected change in prices, you predict that spending today will____ and aggregate demand today will_ .