Question 1

Figure 9.2
  
-Refer to Figure 9.2. A movement from point b to point c could be caused by a simultaneous ________ and ________.

Accepted Answer

A)  increase in the money supply; increase in the price of oil 
B)  decrease in taxes; decrease in the price of oil 
C)  increase in taxes; decrease in government spending 
D)  increase in the price of oil; massive crop failure 
A)  increase in the money supply; increase in the price of oil 
B)  decrease in taxes; decrease in the price of oil 
C)  increase in taxes; decrease in government spending 
D)  increase in the price of oil; massive crop failure

Question 2

When the price level is low and the demand for domestic goods increases, how does it affect international trade?

Accepted Answer

A)  Net exports will decrease. 
B)  Net exports will increase. 
C)  Prices of all international goods will decrease. 
D)  Prices of all international goods will increase. 
A)  Net exports will decrease. 
B)  Net exports will increase. 
C)  Prices of all international goods will decrease. 
D)  Prices of all international goods will increase.

Question 3

Figure 9.1 shows three aggregate demand curves. A movement from curve AD0 to curve AD1 could be caused by a(n)

Accepted Answer

A)  decrease in the money supply. 
B)  decrease in taxes. 
C)  decrease in the price level. 
D)  decrease in government spending. 
A)  decrease in the money supply. 
B)  decrease in taxes. 
C)  decrease in the price level. 
D)  decrease in government spending.

Question 4

Recall the Application about the behavior of prices in retail catalogs to answer the following question(s). Economist Anil Kashyap of the University of Chicago examined the prices of 12 selected goods from L.L. Bean, REI, and The Orvis Company, Inc. Kashyap tracked the prices from the companies' catalogs which were reissued every six months.
-This Application examines the concept of

Accepted Answer

A)  the wealth effect. 
B)  sticky prices. 
C)  consumer spending habits. 
D)  stagflation. 
A)  the wealth effect. 
B)  sticky prices. 
C)  consumer spending habits. 
D)  stagflation.

Question 5

In the long run

Accepted Answer

A)  price and output levels are mutually dependent. 
B)  the level of output depends on the price level. 
C)  the level of output is independent of the price level. 
D)  the price level depends on the level of output. 
A)  price and output levels are mutually dependent. 
B)  the level of output depends on the price level. 
C)  the level of output is independent of the price level. 
D)  the price level depends on the level of output.

Question 6

A supply shock is an ________ event that shifts the aggregate ________ curve.

Accepted Answer

A)  internal; supply 
B)  external; supply 
C)  internal; demand 
D)  external; demand 
A)  internal; supply 
B)  external; supply 
C)  internal; demand 
D)  external; demand

Question 7

An increase in government spending will shift the aggregate demand curve to the left.

Accepted Answer

A) True 
 B)False

Question 8

Prices for fresh fruit, vegetables and other food products are examples of

Accepted Answer

A)  custom prices. 
B)  auction prices. 
C)  sticky prices. 
D)  temporary prices. 
A)  custom prices. 
B)  auction prices. 
C)  sticky prices. 
D)  temporary prices.

Question 9

Adjustments in ________ take the economy from the short-run equilibrium to the long-run equilibrium.

Accepted Answer

A)  imports and exports 
B)  interest rates 
C)  wages and prices 
D)  the multiplier 
A)  imports and exports 
B)  interest rates 
C)  wages and prices 
D)  the multiplier

Question 10

If the government decreases its purchases of goods and services by $12,000 and the MPS is 0.5, GDP and income will eventually decrease by

Accepted Answer

A)  $2,400. 
B)  $6,000. 
C)  $24,000. 
D)  $60,000. 
A)  $2,400. 
B)  $6,000. 
C)  $24,000. 
D)  $60,000.

Question 11

Real business cycle theory emphasizes the role of

Accepted Answer

A)  demand shocks as a cause of economic fluctuations. 
B)  technology shocks as a cause of economic fluctuations. 
C)  shocks to the money supply as a cause of economic fluctuations. 
D)  government spending as a cause of economic fluctuations. 
A)  demand shocks as a cause of economic fluctuations. 
B)  technology shocks as a cause of economic fluctuations. 
C)  shocks to the money supply as a cause of economic fluctuations. 
D)  government spending as a cause of economic fluctuations.

Question 12

If prices are sticky

Accepted Answer

A)  economic activity will be coordinated efficiently. 
B)  economic activity will not be coordinated efficiently. 
C)  prices will quickly adjust to changes in demand. 
D)  quantity supplied will always equal quantity demand. 
A)  economic activity will be coordinated efficiently. 
B)  economic activity will not be coordinated efficiently. 
C)  prices will quickly adjust to changes in demand. 
D)  quantity supplied will always equal quantity demand.

Question 13

Adverse supply shocks can cause a recession with increasing price level.

Accepted Answer

A) True 
 B)False

Question 14

The ratio of the total shift in aggregate demand to the initial shift in aggregate demand is known as the multiplier.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following types of workers might have wages that change quickly?

Accepted Answer

A)  unskilled, low-wage workers 
B)  union workers 
C)  employees of state and local governments 
D)  movie stars and rock stars 
A)  unskilled, low-wage workers 
B)  union workers 
C)  employees of state and local governments 
D)  movie stars and rock stars

Question 16

Recall the Application about the factors involved in causing recessions, and the causes of recessions in the United States from 1893 to 1990 to answer the following question(s).
-According to this Application, the recessions in 1973 and 1979 were caused by

Accepted Answer

A)  supply shocks. 
B)  deflation. 
C)  foreign monetary developments. 
D)  arbitrage losses in the foreign exchange market. 
A)  supply shocks. 
B)  deflation. 
C)  foreign monetary developments. 
D)  arbitrage losses in the foreign exchange market.

Question 17

During an economic boom, output exceeds potential output.

Accepted Answer

A) True 
 B)False

Question 18

If the government decreased its purchases of goods and services by $4,000, and this resulted in an eventual decrease in GDP and income of $10,000, the MPC would be equal to

Accepted Answer

A)  2.5. 
B)  1.5. 
C)  0.6. 
D)  0.4. 
A)  2.5. 
B)  1.5. 
C)  0.6. 
D)  0.4.

Question 19

The purchasing power of money decreases as the price level increases.

Accepted Answer

A) True 
 B)False

Question 20

Explain how the wealth effect can affect aggregate demand.

Accepted Answer

As price levels change, the purchasing p

Figure 9.2 -Refer to Figure 9.2. A movement from point b to point c could be caused by a simultaneous and .

When the price level is low and the demand for domestic goods increases, how does it affect international trade?

Figure 9.1 shows three aggregate demand curves. A movement from curve AD0 to curve AD1 could be caused by a(n)

In the long run

A supply shock is an event that shifts the aggregate curve.

An increase in government spending will shift the aggregate demand curve to the left.

Prices for fresh fruit, vegetables and other food products are examples of

Adjustments in ________ take the economy from the short-run equilibrium to the long-run equilibrium.

If the government decreases its purchases of goods and services by $12,000 and the MPS is 0.5, GDP and income will eventually decrease by

Real business cycle theory emphasizes the role of

If prices are sticky

Adverse supply shocks can cause a recession with increasing price level.

The ratio of the total shift in aggregate demand to the initial shift in aggregate demand is known as the multiplier.

Which of the following types of workers might have wages that change quickly?

Recall the Application about the factors involved in causing recessions, and the causes of recessions in the United States from 1893 to 1990 to answer the following question(s). -According to this Application, the recessions in 1973 and 1979 were caused by

During an economic boom, output exceeds potential output.

If the government decreased its purchases of goods and services by $4,000, and this resulted in an eventual decrease in GDP and income of $10,000, the MPC would be equal to

The purchasing power of money decreases as the price level increases.

Explain how the wealth effect can affect aggregate demand.

Introduction: What Is Economics?

The Key Principles of Economics

Exchange and Markets

Demand, Supply, and Market Equilibrium

Measuring a Nation's Production and Income

Unemployment and Inflation

The Economy at Full Employment

Why Do Economies Grow?

Fiscal Policy

The Income-Expenditure Model

Investment and Financial Markets

Money and the Banking System

The Federal Reserve and Monetary Policy

Modern Macroeconomics: From the Short Run to the Long Run

The Dynamics of Inflation and Unemployment

Macroeconomic Policy Debates

International Trade and Public Policy

The World of International Finance

Filters

Exam 9: Aggregate Demand and Aggregate Supply

Figure 9.2 -Refer to Figure 9.2. A movement from point b to point c could be caused by a simultaneous ________ and ________.

When the price level is low and the demand for domestic goods increases, how does it affect international trade?

Figure 9.1 shows three aggregate demand curves. A movement from curve AD0 to curve AD1 could be caused by a(n)

In the long run

A supply shock is an ________ event that shifts the aggregate ________ curve.

An increase in government spending will shift the aggregate demand curve to the left.

Prices for fresh fruit, vegetables and other food products are examples of

Adjustments in ________ take the economy from the short-run equilibrium to the long-run equilibrium.

If the government decreases its purchases of goods and services by $12,000 and the MPS is 0.5, GDP and income will eventually decrease by

Real business cycle theory emphasizes the role of

If prices are sticky

Adverse supply shocks can cause a recession with increasing price level.

The ratio of the total shift in aggregate demand to the initial shift in aggregate demand is known as the multiplier.

Which of the following types of workers might have wages that change quickly?

Recall the Application about the factors involved in causing recessions, and the causes of recessions in the United States from 1893 to 1990 to answer the following question(s). -According to this Application, the recessions in 1973 and 1979 were caused by

During an economic boom, output exceeds potential output.

If the government decreased its purchases of goods and services by $4,000, and this resulted in an eventual decrease in GDP and income of $10,000, the MPC would be equal to

The purchasing power of money decreases as the price level increases.

Explain how the wealth effect can affect aggregate demand.

Introduction: What Is Economics?

The Key Principles of Economics

Exchange and Markets

Demand, Supply, and Market Equilibrium

Measuring a Nation's Production and Income

Unemployment and Inflation

The Economy at Full Employment

Why Do Economies Grow?

Fiscal Policy

The Income-Expenditure Model

Investment and Financial Markets

Money and the Banking System

The Federal Reserve and Monetary Policy

Modern Macroeconomics: From the Short Run to the Long Run

The Dynamics of Inflation and Unemployment

Macroeconomic Policy Debates

International Trade and Public Policy

The World of International Finance

Filters

Figure 9.2 -Refer to Figure 9.2. A movement from point b to point c could be caused by a simultaneous and .

A supply shock is an event that shifts the aggregate curve.