Question 1

The business cycle occurs because aggregate demand and aggregate supply change at uneven rates.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following occurs while moving along a short-run aggregate supply curve?

Accepted Answer

A)  The money wage rate and the price level change by the same percentage. 
B)  The money wage rate changes and the price level is constant. 
C)  The price level changes and the money wage rate is constant. 
D)  Neither the price level nor the money wage rate changes. 
A)  The money wage rate and the price level change by the same percentage. 
B)  The money wage rate changes and the price level is constant. 
C)  The price level changes and the money wage rate is constant. 
D)  Neither the price level nor the money wage rate changes.

Question 3

-In the above figure, the aggregate demand curve is AD2, so the long-run equilibrium level of real GDP is

Accepted Answer

A)  $18 trillion. 
B)  $18.5 trillion. 
C)  more than $18 and less than $18.5 trillion. 
D)  None of the above answers is correct. 
A)  $18 trillion. 
B)  $18.5 trillion. 
C)  more than $18 and less than $18.5 trillion. 
D)  None of the above answers is correct.

Question 4

An economy is at full employment. Which of the following events can create a recessionary gap?

Accepted Answer

A)  an increase in foreign income 
B)  an increase in taxes 
C)  a decrease in the quantity of capital 
D)  a decrease in money wages 
A)  an increase in foreign income 
B)  an increase in taxes 
C)  a decrease in the quantity of capital 
D)  a decrease in money wages

Question 5

If the expected future inflation rate decreases, then

Accepted Answer

A)  aggregate demand increases. 
B)  short-run aggregate supply increases. 
C)  aggregate demand decreases. 
D)  long-run aggregate supply decreases. 
A)  aggregate demand increases. 
B)  short-run aggregate supply increases. 
C)  aggregate demand decreases. 
D)  long-run aggregate supply decreases.

Question 6

-In the above figure, which movement illustrates the impact of the price level and money wage rate falling at the same rate?

Accepted Answer

A)  E to H 
B)  E to K 
C)  E to J 
D)  E to G 
A)  E to H 
B)  E to K 
C)  E to J 
D)  E to G

Question 7

Assume that the economy is at a long run equilibrium and oil prices rise. As a result, the ________ shifts ________.

Accepted Answer

A)  AD; rightward 
B)  AD; leftward 
C)  SAS; rightward 
D)  SAS; leftward 
A)  AD; rightward 
B)  AD; leftward 
C)  SAS; rightward 
D)  SAS; leftward

Question 8

A decrease in the money wage rate increases ________ and an increase in the full-employment quantity of labor increases ________.

Accepted Answer

A)  both the SAS and the LAS; only the SAS 
B)  both the SAS and the LAS; only the LAS 
C)  only the SAS; both the SAS and the LAS 
D)  only the LAS; both the SAS and the LAS 
A)  both the SAS and the LAS; only the SAS 
B)  both the SAS and the LAS; only the LAS 
C)  only the SAS; both the SAS and the LAS 
D)  only the LAS; both the SAS and the LAS

Question 9

In the short run, the intersection of the aggregate demand and the short-run aggregate supply curves,

Accepted Answer

A)  determines the equilibrium price level. 
B)  is a point where there is neither a surplus nor a shortage of goods. 
C)  determines the equilibrium level of real GDP. 
D)  All of the above answers are correct. 
A)  determines the equilibrium price level. 
B)  is a point where there is neither a surplus nor a shortage of goods. 
C)  determines the equilibrium level of real GDP. 
D)  All of the above answers are correct.

Question 10

-Suppose the economy is at point B. If a recession in another country decreases exports, to what point might the economy move in the short run?

Accepted Answer

A)  It stays at point B. 
B)  It shifts to a point such as A. 
C)  It shifts to a point such as C. 
D)  None of the above answers are correct because it is the SAS curve that shifts, not the AD curve. 
A)  It stays at point B. 
B)  It shifts to a point such as A. 
C)  It shifts to a point such as C. 
D)  None of the above answers are correct because it is the SAS curve that shifts, not the AD curve.

Question 11

-In the figure above, in the short-run macroeconomic equilibrium

Accepted Answer

A)  there is no structural unemployment. 
B)  real GDP is greater than potential GDP. 
C)  real GDP equals potential GDP. 
D)  real GDP is less than potential GDP. 
A)  there is no structural unemployment. 
B)  real GDP is greater than potential GDP. 
C)  real GDP equals potential GDP. 
D)  real GDP is less than potential GDP.

Question 12

-Using the data in the above table, in the short-run macroeconomic equilibrium, there is

Accepted Answer

A)  an inflationary gap of $1 trillion. 
B)  an inflationary gap of $2 trillion. 
C)  a recessionary gap of $1 trillion. 
D)  a recessionary gap of $2 trillion. 
A)  an inflationary gap of $1 trillion. 
B)  an inflationary gap of $2 trillion. 
C)  a recessionary gap of $1 trillion. 
D)  a recessionary gap of $2 trillion.

Question 13

A change in ________ creates a movement along the aggregate demand curve, while a change in ________ shifts the aggregate demand curve.

Accepted Answer

A)  expected profits; tax rates 
B)  the price level; government expenditures 
C)  foreign income; the foreign exchange rate 
D)  real wealth; human capital 
A)  expected profits; tax rates 
B)  the price level; government expenditures 
C)  foreign income; the foreign exchange rate 
D)  real wealth; human capital

Question 14

Economic growth

Accepted Answer

A)  occurs when the long-run aggregate supply curve shifts upward. 
B)  is an increase in potential GDP as the long-run aggregate supply curve shifts rightward. 
C)  requires a compensating decrease in aggregate demand to offset the increase in aggregate supply. 
D)  All of the above answers are correct. 
A)  occurs when the long-run aggregate supply curve shifts upward. 
B)  is an increase in potential GDP as the long-run aggregate supply curve shifts rightward. 
C)  requires a compensating decrease in aggregate demand to offset the increase in aggregate supply. 
D)  All of the above answers are correct.

Question 15

Moving along the short-run aggregate supply curve,

Accepted Answer

A)  the real wage rate is constant. 
B)  real GDP equals potential GDP. 
C)  the money wage rate, the prices of other resources, and potential GDP remain constant. 
D)  real GDP equals nominal GDP. 
A)  the real wage rate is constant. 
B)  real GDP equals potential GDP. 
C)  the money wage rate, the prices of other resources, and potential GDP remain constant. 
D)  real GDP equals nominal GDP.

Question 16

-The table above gives the aggregate demand and aggregate supply schedules in Lotus Land. In short-run equilibrium, there is

Accepted Answer

A)  an inflationary gap of $100. 
B)  a recessionary gap of $100. 
C)  a recessionary gap of $200. 
D)  an inflationary gap of $200. 
A)  an inflationary gap of $100. 
B)  a recessionary gap of $100. 
C)  a recessionary gap of $200. 
D)  an inflationary gap of $200.

Question 17

What are the substitution effects that affect aggregate demand?

Accepted Answer

There are two substitution effects that

Question 18

All of the following shift the LAS curve EXCEPT

Accepted Answer

A)  a change in the capital stock. 
B)  an increase in the money wage rate. 
C)  an increase in the stock of human capital. 
D)  technological progress. 
A)  a change in the capital stock. 
B)  an increase in the money wage rate. 
C)  an increase in the stock of human capital. 
D)  technological progress.

Question 19

The intertemporal substitution effect refers to substitution of

Accepted Answer

A)  goods for services. 
B)  goods and services for less expensive goods and services. 
C)  goods and services today for goods and services in the future. 
D)  goods and services produced domestically for goods and services produced in another country. 
A)  goods for services. 
B)  goods and services for less expensive goods and services. 
C)  goods and services today for goods and services in the future. 
D)  goods and services produced domestically for goods and services produced in another country.

Question 20

A change in the price level does not shift the aggregate demand curve.

Accepted Answer

A) True 
 B)False

The business cycle occurs because aggregate demand and aggregate supply change at uneven rates.

Which of the following occurs while moving along a short-run aggregate supply curve?

-In the above figure, the aggregate demand curve is AD₂, so the long-run equilibrium level of real GDP is

An economy is at full employment. Which of the following events can create a recessionary gap?

If the expected future inflation rate decreases, then

-In the above figure, which movement illustrates the impact of the price level and money wage rate falling at the same rate?

Assume that the economy is at a long run equilibrium and oil prices rise. As a result, the shifts .

A decrease in the money wage rate increases and an increase in the full-employment quantity of labor increases .

In the short run, the intersection of the aggregate demand and the short-run aggregate supply curves,

-Suppose the economy is at point B. If a recession in another country decreases exports, to what point might the economy move in the short run?

-In the figure above, in the short-run macroeconomic equilibrium

-Using the data in the above table, in the short-run macroeconomic equilibrium, there is

A change in creates a movement along the aggregate demand curve, while a change in shifts the aggregate demand curve.

Economic growth

Moving along the short-run aggregate supply curve,

-The table above gives the aggregate demand and aggregate supply schedules in Lotus Land. In short-run equilibrium, there is

What are the substitution effects that affect aggregate demand?

All of the following shift the LAS curve EXCEPT

The intertemporal substitution effect refers to substitution of

A change in the price level does not shift the aggregate demand curve.

What Is Economics

The Economic Problem

Demand and Supply

Measuring Gdp and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Expenditure Multipliers

The Business Cycle, Inflation, and Deflation

Fiscal Policy

Monetary Policy

International Trade Policy

Filters

Exam 10: Aggregate Supply and Aggregate Demand

The business cycle occurs because aggregate demand and aggregate supply change at uneven rates.

Which of the following occurs while moving along a short-run aggregate supply curve?

-In the above figure, the aggregate demand curve is AD2, so the long-run equilibrium level of real GDP is

An economy is at full employment. Which of the following events can create a recessionary gap?

If the expected future inflation rate decreases, then

-In the above figure, which movement illustrates the impact of the price level and money wage rate falling at the same rate?

Assume that the economy is at a long run equilibrium and oil prices rise. As a result, the ________ shifts ________.

A decrease in the money wage rate increases ________ and an increase in the full-employment quantity of labor increases ________.

In the short run, the intersection of the aggregate demand and the short-run aggregate supply curves,

-Suppose the economy is at point B. If a recession in another country decreases exports, to what point might the economy move in the short run?

-In the figure above, in the short-run macroeconomic equilibrium

-Using the data in the above table, in the short-run macroeconomic equilibrium, there is

A change in ________ creates a movement along the aggregate demand curve, while a change in ________ shifts the aggregate demand curve.

Economic growth

Moving along the short-run aggregate supply curve,

-The table above gives the aggregate demand and aggregate supply schedules in Lotus Land. In short-run equilibrium, there is

What are the substitution effects that affect aggregate demand?

All of the following shift the LAS curve EXCEPT

The intertemporal substitution effect refers to substitution of

A change in the price level does not shift the aggregate demand curve.

What Is Economics

The Economic Problem

Demand and Supply

Measuring Gdp and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Expenditure Multipliers

The Business Cycle, Inflation, and Deflation

Fiscal Policy

Monetary Policy

International Trade Policy

Filters

-In the above figure, the aggregate demand curve is AD₂, so the long-run equilibrium level of real GDP is

Assume that the economy is at a long run equilibrium and oil prices rise. As a result, the shifts .

A decrease in the money wage rate increases and an increase in the full-employment quantity of labor increases .

A change in creates a movement along the aggregate demand curve, while a change in shifts the aggregate demand curve.