Question 1

Temporary supply shocks:

Accepted Answer

A)  affect prices only. 
B)  shift the short-run aggregate supply curve. 
C)  shift the aggregate demand curve. 
D)  shift the long-run aggregate supply curve. 
A)  affect prices only. 
B)  shift the short-run aggregate supply curve. 
C)  shift the aggregate demand curve. 
D)  shift the long-run aggregate supply curve.

Question 2

Which of the following events would cause a long-run supply shock?

Accepted Answer

A)  Refinery capacity in the United States drops permanently. 
B)  A new pest destroys much of the alfalfa crop in a given year. 
C)  The government spends less on infrastructure maintenance. 
D)  Housing prices fall. 
A)  Refinery capacity in the United States drops permanently. 
B)  A new pest destroys much of the alfalfa crop in a given year. 
C)  The government spends less on infrastructure maintenance. 
D)  Housing prices fall.

Question 3

Which of the following scenarios would likely cause the aggregate demand curve to shift to the right?

Accepted Answer

A)  Consumer confidence increases. 
B)  The government issues a tax credit for small businesses. 
C)  The government builds new highways. 
D)  All of these would likely cause the aggregate demand curve to shift to the right. 
A)  Consumer confidence increases. 
B)  The government issues a tax credit for small businesses. 
C)  The government builds new highways. 
D)  All of these would likely cause the aggregate demand curve to shift to the right.

Question 4

The long-run aggregate supply curve will shift to the right if the:

Accepted Answer

A)  potential output of the economy expands. 
B)  economy loses productive capacity. 
C)  economy experiences a supply shock. 
D)  profit levels of firms increase. 
A)  potential output of the economy expands. 
B)  economy loses productive capacity. 
C)  economy experiences a supply shock. 
D)  profit levels of firms increase.

Question 5

An increase in the level of immigration into a nation would cause the _______ aggregate supply curve to _______.

Accepted Answer

A)  long-run; shift to the right 
B)  long-run; shift to the left 
C)  short-run; shift to the left 
D)  long-run; remain fixed 
A)  long-run; shift to the right 
B)  long-run; shift to the left 
C)  short-run; shift to the left 
D)  long-run; remain fixed

Question 6

If the prices of goods and services increase, long-run aggregate _______ will _______.

Accepted Answer

A)  supply; increase 
B)  supply; decrease 
C)  supply; stay the same 
D)  demand; increase 
A)  supply; increase 
B)  supply; decrease 
C)  supply; stay the same 
D)  demand; increase

Question 7

When the prices of final goods and services increase more quickly than the prices of inputs:

Accepted Answer

A)  the prices of some inputs are sticky. 
B)  labor costs are increasing. 
C)  producers are making short-run decisions. 
D)  technology is improving. 
A)  the prices of some inputs are sticky. 
B)  labor costs are increasing. 
C)  producers are making short-run decisions. 
D)  technology is improving.

Question 8

The quantity measure in the aggregate demand relationship is the:

Accepted Answer

A)  total quantity of goods and services demanded in the economy. 
B)  total quantity of goods and services supplied in the economy. 
C)  market value of the total quantity of goods and services demanded in the economy. 
D)  market value of the total quantity of goods and services supplied in the economy. 
A)  total quantity of goods and services demanded in the economy. 
B)  total quantity of goods and services supplied in the economy. 
C)  market value of the total quantity of goods and services demanded in the economy. 
D)  market value of the total quantity of goods and services supplied in the economy.

Question 9

Assuming an economy starts in long-run equilibrium, if the aggregate demand curve were to shift to the left:

Accepted Answer

A)  prices in the economy would increase. 
B)  output in the economy would increase. 
C)  the short-run aggregate supply curve would shift to the left. 
D)  the long-run effect would be a lower price level. 
A)  prices in the economy would increase. 
B)  output in the economy would increase. 
C)  the short-run aggregate supply curve would shift to the left. 
D)  the long-run effect would be a lower price level.

Question 10

When the economy is creating less output than its potential, it means:

Accepted Answer

A)  some resources are unemployed. 
B)  the economy is expanding. 
C)  contractionary policy needs to be enacted. 
D)  the government will reduce its spending. 
A)  some resources are unemployed. 
B)  the economy is expanding. 
C)  contractionary policy needs to be enacted. 
D)  the government will reduce its spending.

Question 11

If a positive permanent supply shock were to occur, the resulting equilibrium would occur at a _______ level of output and _______ price level.

Accepted Answer

A)  higher; higher 
B)  lower; lower 
C)  higher; lower 
D)  lower; higher 
A)  higher; higher 
B)  lower; lower 
C)  higher; lower 
D)  lower; higher

Question 12

Higher interest rates cause:

Accepted Answer

A)  firms to invest less in new factories and working capital. 
B)  firms to invest more in human capital. 
C)  individuals to spend more on consumption goods. 
D)  individuals to spend more on housing. 
A)  firms to invest less in new factories and working capital. 
B)  firms to invest more in human capital. 
C)  individuals to spend more on consumption goods. 
D)  individuals to spend more on housing.

Question 13

During a recession, analysts at the CBO project that the economy is operating $750 billion below potential output. Assuming the MPC is 0.6, by how much would the government have to increase spending to restore potential output?

Accepted Answer

A)  $333 billion 
B)  $300 billion 
C)  $250 billion 
D)  $750 billion 
A)  $333 billion 
B)  $300 billion 
C)  $250 billion 
D)  $750 billion

Question 14

A drop in government spending would cause which type of shock?

Accepted Answer

A)  Long-run supply shock 
B)  Short-run supply shock 
C)  Demand shock 
D)  Change in price level 
A)  Long-run supply shock 
B)  Short-run supply shock 
C)  Demand shock 
D)  Change in price level

Question 15

When the long-run aggregate supply curve shifts to the right, it represents:

Accepted Answer

A)  economic growth. 
B)  the economy being pushed beyond normal capacity. 
C)  an unemployment rate of zero. 
D)  a lower rate of inflation. 
A)  economic growth. 
B)  the economy being pushed beyond normal capacity. 
C)  an unemployment rate of zero. 
D)  a lower rate of inflation.

Question 16

In the short run, the aggregate supply curve reacts to:

Accepted Answer

A)  input price changes. 
B)  government stimulus. 
C)  an increase in consumption. 
D)  changes in the price level. 
A)  input price changes. 
B)  government stimulus. 
C)  an increase in consumption. 
D)  changes in the price level.

Question 17

The figure shown displays various economic outcomes.   If the aggregate demand curve shifts from AD3 to AD2, the resulting price and output in the long run would be:

Accepted Answer

A)  P 1 and Y 2. 
B)  P 3 and Y 2. 
C)  P 2 and Y 1. 
D)  P 3 and Y 1. 
A)  P 1 and Y 2. 
B)  P 3 and Y 2. 
C)  P 2 and Y 1. 
D)  P 3 and Y 1.

Question 18

What is the long-run result of government intervention in response to a recession?

Accepted Answer

A)  The same level of output at higher prices 
B)  A higher level of output at higher prices 
C)  A higher level of output at lower prices 
D)  A lower level of output at the same prices 
A)  The same level of output at higher prices 
B)  A higher level of output at higher prices 
C)  A higher level of output at lower prices 
D)  A lower level of output at the same prices

Question 19

Which of the following is a basic factor of production that is used to produce output?

Accepted Answer

A)  Technology 
B)  Labor 
C)  Capital 
D)  All of these are factor inputs. 
A)  Technology 
B)  Labor 
C)  Capital 
D)  All of these are factor inputs.

Question 20

The long-run aggregate supply curve would shift to the right if:

Accepted Answer

A)  the unemployment rate decreased. 
B)  faster 5G mobile technology was widely implemented. 
C)  the inflation rate decreased. 
D)  The long-run aggregate supply curve is fixed and does not shift. 
A)  the unemployment rate decreased. 
B)  faster 5G mobile technology was widely implemented. 
C)  the inflation rate decreased. 
D)  The long-run aggregate supply curve is fixed and does not shift.

Temporary supply shocks:

Which of the following events would cause a long-run supply shock?

Which of the following scenarios would likely cause the aggregate demand curve to shift to the right?

The long-run aggregate supply curve will shift to the right if the:

An increase in the level of immigration into a nation would cause the _ aggregate supply curve to _.

If the prices of goods and services increase, long-run aggregate _ will _.

When the prices of final goods and services increase more quickly than the prices of inputs:

The quantity measure in the aggregate demand relationship is the:

Assuming an economy starts in long-run equilibrium, if the aggregate demand curve were to shift to the left:

When the economy is creating less output than its potential, it means:

If a positive permanent supply shock were to occur, the resulting equilibrium would occur at a _ level of output and _ price level.

Higher interest rates cause:

During a recession, analysts at the CBO project that the economy is operating $750 billion below potential output. Assuming the MPC is 0.6, by how much would the government have to increase spending to restore potential output?

A drop in government spending would cause which type of shock?

When the long-run aggregate supply curve shifts to the right, it represents:

In the short run, the aggregate supply curve reacts to:

The figure shown displays various economic outcomes. If the aggregate demand curve shifts from AD₃ to AD₂, the resulting price and output in the long run would be:

What is the long-run result of government intervention in response to a recession?

Which of the following is a basic factor of production that is used to produce output?

The long-run aggregate supply curve would shift to the right if:

Economicsand Life

Specializationand Exchange

Markets

Elasticity

Efficiency

Governmentintervention

Measuringgdp

Thecost of Living

Unemploymentand the Labor Market

Economicgrowth

Aggregateexpenditures

Fiscalpolicy

Thebasics of Finance

Moneyand the Monetary System

Inflation

Financialcrisis

Open-Marketmacroeconomics

Developmenteconomics

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Exam 12: Aggregatedemand and Aggregate Supply

Temporary supply shocks:

Which of the following events would cause a long-run supply shock?

Which of the following scenarios would likely cause the aggregate demand curve to shift to the right?

The long-run aggregate supply curve will shift to the right if the:

An increase in the level of immigration into a nation would cause the _______ aggregate supply curve to _______.

If the prices of goods and services increase, long-run aggregate _______ will _______.

When the prices of final goods and services increase more quickly than the prices of inputs:

The quantity measure in the aggregate demand relationship is the:

Assuming an economy starts in long-run equilibrium, if the aggregate demand curve were to shift to the left:

When the economy is creating less output than its potential, it means:

If a positive permanent supply shock were to occur, the resulting equilibrium would occur at a _______ level of output and _______ price level.

Higher interest rates cause:

During a recession, analysts at the CBO project that the economy is operating $750 billion below potential output. Assuming the MPC is 0.6, by how much would the government have to increase spending to restore potential output?

A drop in government spending would cause which type of shock?

When the long-run aggregate supply curve shifts to the right, it represents:

In the short run, the aggregate supply curve reacts to:

The figure shown displays various economic outcomes. If the aggregate demand curve shifts from AD3 to AD2, the resulting price and output in the long run would be:

What is the long-run result of government intervention in response to a recession?

Which of the following is a basic factor of production that is used to produce output?

The long-run aggregate supply curve would shift to the right if:

Economicsand Life

Specializationand Exchange

Markets

Elasticity

Efficiency

Governmentintervention

Measuringgdp

Thecost of Living

Unemploymentand the Labor Market

Economicgrowth

Aggregateexpenditures

Fiscalpolicy

Thebasics of Finance

Moneyand the Monetary System

Inflation

Financialcrisis

Open-Marketmacroeconomics

Developmenteconomics

Filters

An increase in the level of immigration into a nation would cause the _ aggregate supply curve to _.

If the prices of goods and services increase, long-run aggregate _ will _.

If a positive permanent supply shock were to occur, the resulting equilibrium would occur at a _ level of output and _ price level.

The figure shown displays various economic outcomes. If the aggregate demand curve shifts from AD₃ to AD₂, the resulting price and output in the long run would be: