Question 1

Explain the difference between the short-run and long-run aggregate supply curves.

Accepted Answer

In the long run, output moves toward ful

Question 2

New drilling technologies lead to a 50 percent increase in oil reserves. How will this impact equilibrium output and the price level?

Accepted Answer

The increase in oil reserves w

Question 3

Suppose a change in health care laws increases the cost of hiring an employee. We can expect output in the short run to_____ and output in the long run to _______.

Accepted Answer

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

Question 4

Suppose a country's population is aging and the size of the workforce is declining. In the long run, output will_____ and the price level will _____.

Accepted Answer

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

Question 5

Input prices affect the firm's________ , and output prices affect the firm's________ .

Accepted Answer

A)  revenue; costs 
B)  costs; costs 
C)  costs; revenue 
D)  revenue; revenue 
E)  decisions in the short run but not in the long run; decisions in the long run but not in the short run 
A)  revenue; costs 
B)  costs; costs 
C)  costs; revenue 
D)  revenue; revenue 
E)  decisions in the short run but not in the long run; decisions in the long run but not in the short run

Question 6

Aggregate demand is about______ and aggregate supply is about_____ .

Accepted Answer

A)  income; spending 
B)  spending; production 
C)  production; spending 
D)  production; income 
E)  saving; profit 
A)  income; spending 
B)  spending; production 
C)  production; spending 
D)  production; income 
E)  saving; profit

Question 7

Which of the following would cause a downward movement along the aggregate demand curve?

Accepted Answer

A)  A rise in the price level makes U.S. goods relatively more expensive than foreign goods. 
B)  The value of real wealth rises. 
C)  There is a decline in the expected price level. 
D)  A fall in the price level increases savings and lowers interest rates. 
E)  The value of the dollar decreases. 
A)  A rise in the price level makes U.S. goods relatively more expensive than foreign goods. 
B)  The value of real wealth rises. 
C)  There is a decline in the expected price level. 
D)  A fall in the price level increases savings and lowers interest rates. 
E)  The value of the dollar decreases.

Question 8

Suppose that the dictator of a small country decides that all prices both inputs and outputs) must be fixed by contract each year and then renegotiated at the end of each year. What does this imply about short-run aggregate supply SRAS)?

Accepted Answer

If all prices are fixed by con

Question 9

Consider shifts in aggregate demand that push the level of real GDP GDP) away from the level of potential output. Explain why, in the long run, RGDP will always return to potential output.

Accepted Answer

Suppose the economy begins in long-run e

Question 10

Consider the wealth effect, interest rate effect, and international trade effect. Of these, the____ effect is the most significant and the_____ effect is the least significant.

Accepted Answer

A)  wealth; international trade 
B)  wealth; interest rate 
C)  interest rate; wealth 
D)  interest rate; international trade 
E)  international trade; wealth 
A)  wealth; international trade 
B)  wealth; interest rate 
C)  interest rate; wealth 
D)  interest rate; international trade 
E)  international trade; wealth

Question 11

An increase in the value of the dollar will

Accepted Answer

A)  have no effect on aggregate demand or supply. 
B)  decrease aggregate supply. 
C)  increase aggregate supply. 
D)  increase aggregate demand. 
E)  decrease aggregate demand. 
A)  have no effect on aggregate demand or supply. 
B)  decrease aggregate supply. 
C)  increase aggregate supply. 
D)  increase aggregate demand. 
E)  decrease aggregate demand.

Question 12

The long-run output of an economy depends on

Accepted Answer

A)  the level of spending. 
B)  the level of unemployment. 
C)  the level of inflation. 
D)  the level of aggregate demand. 
E)  resources, technology, and institutions. 
A)  the level of spending. 
B)  the level of unemployment. 
C)  the level of inflation. 
D)  the level of aggregate demand. 
E)  resources, technology, and institutions.

Question 13

How does the international trade effect explain the slope of the aggregate demand curve?

Accepted Answer

A rise in the price level makes a countr

Question 14

Refer to the following figure to answer the next questions.
  
-Based on the figure, which of the following would cause the long-run equilibrium point to change from point B to point D?

Accepted Answer

A)  The population has aged and there are fewer people in the labor force. 
B)  Firms and workers expected the price level to rise. 
C)  The economy experienced an increase in government spending. 
D)  The economy was in an expansion and has adjusted. 
E)  The country's overall productivity increased. 
A)  The population has aged and there are fewer people in the labor force. 
B)  Firms and workers expected the price level to rise. 
C)  The economy experienced an increase in government spending. 
D)  The economy was in an expansion and has adjusted. 
E)  The country's overall productivity increased.

Question 15

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

Accepted Answer

A)  changes in labor productivity. 
B)  the wealth effect. 
C)  supply shocks. 
D)  changes in spending. 
E)  the interest rate effect. 
A)  changes in labor productivity. 
B)  the wealth effect. 
C)  supply shocks. 
D)  changes in spending. 
E)  the interest rate effect.

Question 16

All else being equal, as the population ages and many people leave the labor force,

Accepted Answer

A)  the unemployment rate will rise. 
B)  the price level will fall. 
C)  long-run aggregate supply will fall. 
D)  long-run aggregate supply will be unaffected. 
E)  aggregate demand must rise. 
A)  the unemployment rate will rise. 
B)  the price level will fall. 
C)  long-run aggregate supply will fall. 
D)  long-run aggregate supply will be unaffected. 
E)  aggregate demand must rise.

Question 17

You read in the paper that there has been a significant increase in the consumer confidence index. Having taken an economics class, you predict that spending in the economy will ________and aggregate demand will______ .

Accepted Answer

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

Question 18

What happens to net export spending when the price level rises? Explain.

Accepted Answer

When the price level rises, domestically

Question 19

Suppose interest rates increase from 1 percent to 3 percent. In the short run, one can expect output in the United States to _____and the price level to ____.

Accepted Answer

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

Question 20

Suppose housing values fall during a recession. In the short run,

Accepted Answer

A)  the price level will fall as we move down the aggregate demand curve. 
B)  the price level will fall as we move down the short-run aggregate supply curve. 
C)  short-run aggregate supply will decrease and the price level will fall. 
D)  short-run aggregate supply will increase because wages will fall. 
E)  aggregate demand will increase because the demand for houses will increase. 
A)  the price level will fall as we move down the aggregate demand curve. 
B)  the price level will fall as we move down the short-run aggregate supply curve. 
C)  short-run aggregate supply will decrease and the price level will fall. 
D)  short-run aggregate supply will increase because wages will fall. 
E)  aggregate demand will increase because the demand for houses will increase.

Explain the difference between the short-run and long-run aggregate supply curves.

New drilling technologies lead to a 50 percent increase in oil reserves. How will this impact equilibrium output and the price level?

Suppose a change in health care laws increases the cost of hiring an employee. We can expect output in the short run to_ and output in the long run to ___.

Suppose a country's population is aging and the size of the workforce is declining. In the long run, output will_ and the price level will _.

Input prices affect the firm's , and output prices affect the firm's .

Aggregate demand is about__ and aggregate supply is about_ .

Which of the following would cause a downward movement along the aggregate demand curve?

Suppose that the dictator of a small country decides that all prices both inputs and outputs) must be fixed by contract each year and then renegotiated at the end of each year. What does this imply about short-run aggregate supply SRAS)?

Consider shifts in aggregate demand that push the level of real GDP GDP) away from the level of potential output. Explain why, in the long run, RGDP will always return to potential output.

Consider the wealth effect, interest rate effect, and international trade effect. Of these, the effect is the most significant and the_ effect is the least significant.

An increase in the value of the dollar will

The long-run output of an economy depends on

How does the international trade effect explain the slope of the aggregate demand curve?

Refer to the following figure to answer the next questions. -Based on the figure, which of the following would cause the long-run equilibrium point to change from point B to point D?

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

All else being equal, as the population ages and many people leave the labor force,

You read in the paper that there has been a significant increase in the consumer confidence index. Having taken an economics class, you predict that spending in the economy will __and aggregate demand will .

What happens to net export spending when the price level rises? Explain.

Suppose interest rates increase from 1 percent to 3 percent. In the short run, one can expect output in the United States to _and the price level to .

Suppose housing values fall during a recession. In the short run,

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

Explain the difference between the short-run and long-run aggregate supply curves.

New drilling technologies lead to a 50 percent increase in oil reserves. How will this impact equilibrium output and the price level?

Suppose a change in health care laws increases the cost of hiring an employee. We can expect output in the short run to_____ and output in the long run to _______.

Suppose a country's population is aging and the size of the workforce is declining. In the long run, output will_____ and the price level will _____.

Input prices affect the firm's________ , and output prices affect the firm's________ .

Aggregate demand is about______ and aggregate supply is about_____ .

Which of the following would cause a downward movement along the aggregate demand curve?

Suppose that the dictator of a small country decides that all prices both inputs and outputs) must be fixed by contract each year and then renegotiated at the end of each year. What does this imply about short-run aggregate supply SRAS)?

Consider shifts in aggregate demand that push the level of real GDP GDP) away from the level of potential output. Explain why, in the long run, RGDP will always return to potential output.

Consider the wealth effect, interest rate effect, and international trade effect. Of these, the____ effect is the most significant and the_____ effect is the least significant.

An increase in the value of the dollar will

The long-run output of an economy depends on

How does the international trade effect explain the slope of the aggregate demand curve?

Refer to the following figure to answer the next questions. -Based on the figure, which of the following would cause the long-run equilibrium point to change from point B to point D?

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

All else being equal, as the population ages and many people leave the labor force,

You read in the paper that there has been a significant increase in the consumer confidence index. Having taken an economics class, you predict that spending in the economy will ________and aggregate demand will______ .

What happens to net export spending when the price level rises? Explain.

Suppose interest rates increase from 1 percent to 3 percent. In the short run, one can expect output in the United States to _____and the price level to ____.

Suppose housing values fall during a recession. In the short run,

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

Suppose a change in health care laws increases the cost of hiring an employee. We can expect output in the short run to_ and output in the long run to ___.

Suppose a country's population is aging and the size of the workforce is declining. In the long run, output will_ and the price level will _.

Input prices affect the firm's , and output prices affect the firm's .

Aggregate demand is about__ and aggregate supply is about_ .

Consider the wealth effect, interest rate effect, and international trade effect. Of these, the effect is the most significant and the_ effect is the least significant.

You read in the paper that there has been a significant increase in the consumer confidence index. Having taken an economics class, you predict that spending in the economy will __and aggregate demand will .

Suppose interest rates increase from 1 percent to 3 percent. In the short run, one can expect output in the United States to _and the price level to .