Question 1

An economy currently has an inflationary gap. An increase in the money wage rate will ________ the inflationary gap and ________ the price level.

Accepted Answer

A)  decrease; decrease 
B)  increase; increase 
C)  increase; decrease 
D)  decrease; increase 
A)  decrease; decrease 
B)  increase; increase 
C)  increase; decrease 
D)  decrease; increase

Question 2

-In the above figure, the shift from AD1 to AD2 might have been the result of

Accepted Answer

A)  an increase in government expenditure. 
B)  a decrease in taxes. 
C)  an increase in the quantity of money. 
D)  All of the above answers are correct. 
A)  an increase in government expenditure. 
B)  a decrease in taxes. 
C)  an increase in the quantity of money. 
D)  All of the above answers are correct.

Question 3

The Keynesian theory of business cycle views volatile expectations of future sales and profits as the main source of economic fluctuations.

Accepted Answer

A) True 
 B)False

Question 4

The AD curve slopes

Accepted Answer

A)  downward due to the wealth and price effects. 
B)  downward due to the wealth and substitution effects. 
C)  upward due to the price and substitution effects. 
D)  upward due to the wealth and substitution effects. 
A)  downward due to the wealth and price effects. 
B)  downward due to the wealth and substitution effects. 
C)  upward due to the price and substitution effects. 
D)  upward due to the wealth and substitution effects.

Question 5

Other things constant, the economy's aggregate demand curve shows that

Accepted Answer

A)  as the price level falls, real GDP decreases. 
B)  any change in the price level shifts the aggregate demand curve. 
C)  the quantity of real GDP demanded decreases when the price level rises. 
D)  the quantity of real GDP demanded and the price level are not related. 
A)  as the price level falls, real GDP decreases. 
B)  any change in the price level shifts the aggregate demand curve. 
C)  the quantity of real GDP demanded decreases when the price level rises. 
D)  the quantity of real GDP demanded and the price level are not related.

Question 6

Which of the following increases aggregate demand and shifts the AD curve rightward?

Accepted Answer

A)  a fall in the price level 
B)  an increase in the quantity of money and a resulting fall in the interest rate 
C)  predictions of a recession that lead to expectations of lower future income 
D)  an increase in the exchange rate that makes imports less expensive 
A)  a fall in the price level 
B)  an increase in the quantity of money and a resulting fall in the interest rate 
C)  predictions of a recession that lead to expectations of lower future income 
D)  an increase in the exchange rate that makes imports less expensive

Question 7

When the price level in France increases while the exchange rate and the price level in the United States remain the same, the result is that

Accepted Answer

A)  U.S.-made goods become relatively cheaper compared to French-made goods. 
B)  French citizens are more likely to buy U.S.-made goods. 
C)  U.S. citizens are less likely to buy French-made goods. 
D)  All of the above answers are correct. 
A)  U.S.-made goods become relatively cheaper compared to French-made goods. 
B)  French citizens are more likely to buy U.S.-made goods. 
C)  U.S. citizens are less likely to buy French-made goods. 
D)  All of the above answers are correct.

Question 8

Which of the following shifts the aggregate demand curve rightward?

Accepted Answer

A)  raising taxes on the rich 
B)  increasing Medicare, Medicaid, and Social Security payments 
C)  loosening immigration policies 
D)  allowing more oil drilling on Federal lands 
A)  raising taxes on the rich 
B)  increasing Medicare, Medicaid, and Social Security payments 
C)  loosening immigration policies 
D)  allowing more oil drilling on Federal lands

Question 9

China is one of the world's largest exporters. As the world's economies slipped into a worldwide recession in 2008, there was a ________ China's aggregate demand curve as China's exports ________.

Accepted Answer

A)  rightward shift of; decreased 
B)  movement upward along; increased 
C)  leftward shift of; decreased 
D)  movement upward along; decreased 
A)  rightward shift of; decreased 
B)  movement upward along; increased 
C)  leftward shift of; decreased 
D)  movement upward along; decreased

Question 10

Short-run macroeconomic equilibrium occurs when the quantity of real GDP demanded

Accepted Answer

A)  equals potential GDP. 
B)  equals full-employment GDP. 
C)  does not equal full-employment GDP. 
D)  equals the quantity of real GDP supplied. 
A)  equals potential GDP. 
B)  equals full-employment GDP. 
C)  does not equal full-employment GDP. 
D)  equals the quantity of real GDP supplied.

Question 11

A short-run macroeconomic equilibrium occurs

Accepted Answer

A)  at the intersection of the short-run aggregate supply curve and the long-run aggregate supply curve. 
B)  at the intersection of the short-run aggregate supply curve and the aggregate demand curve. 
C)  at the intersection of the short-run aggregate supply curve, the long-run aggregate supply curve, and the aggregate demand curve. 
D)  when the rate at which prices of goods and services increase equals the rate at which money wage rates increase. 
A)  at the intersection of the short-run aggregate supply curve and the long-run aggregate supply curve. 
B)  at the intersection of the short-run aggregate supply curve and the aggregate demand curve. 
C)  at the intersection of the short-run aggregate supply curve, the long-run aggregate supply curve, and the aggregate demand curve. 
D)  when the rate at which prices of goods and services increase equals the rate at which money wage rates increase.

Question 12

Explain the relationship of the long-run aggregate supply curve, the short-run aggregate supply curve and the aggregate demand curve in determining a long-run and short-run macroeconomic equilibrium.

Accepted Answer

Short-run macroeconomic equilibrium occu

Question 13

-In the above figure, the economy is currently at point A. Suppose that the money wage rate and the price level both fall by 10 percent. Firms will be willing to supply output equal to

Accepted Answer

A)  less than $18.0 trillion. 
B)  $18.0 trillion. 
C)  more than $18.0 trillion. 
D)  Without more information, it is impossible to determine which of the above answers is correct. 
A)  less than $18.0 trillion. 
B)  $18.0 trillion. 
C)  more than $18.0 trillion. 
D)  Without more information, it is impossible to determine which of the above answers is correct.

Question 14

If aggregate demand grows only slightly faster than potential GDP, then the economy will

Accepted Answer

A)  experience economic growth with high inflation. 
B)  experience recession. 
C)  experience economic growth with low inflation. 
D)  be at a business-cycle peak. 
A)  experience economic growth with high inflation. 
B)  experience recession. 
C)  experience economic growth with low inflation. 
D)  be at a business-cycle peak.

Question 15

Which of the following does NOT shift the short-run aggregate supply curve?

Accepted Answer

A)  a change in the money wage rate 
B)  technological progress 
C)  a reduction in the price of a raw material 
D)  a change in the price level 
A)  a change in the money wage rate 
B)  technological progress 
C)  a reduction in the price of a raw material 
D)  a change in the price level

Question 16

A technological advance ________ the long-run aggregate supply curve and ________ the short-run aggregate supply curve.

Accepted Answer

A)  shifts; shifts 
B)  shifts; does not shift 
C)  does not shift; shifts 
D)  does not shift; does not shift 
A)  shifts; shifts 
B)  shifts; does not shift 
C)  does not shift; shifts 
D)  does not shift; does not shift

Question 17

-The data in the above table show that when the price level is 120, if aggregate demand does not change then the

Accepted Answer

A)  short-run aggregate supply curve will shift rightward. 
B)  short-run aggregate supply curve will shift leftward. 
C)  long-run aggregate supply curve will shift rightward. 
D)  long-run aggregate supply curve will shift leftward. 
A)  short-run aggregate supply curve will shift rightward. 
B)  short-run aggregate supply curve will shift leftward. 
C)  long-run aggregate supply curve will shift rightward. 
D)  long-run aggregate supply curve will shift leftward.

Question 18

-In the above figure, the economy is at point A when changes occur. If the new equilibrium has a price level of 100 and real GDP of $17.0 trillion, then it must be the case that

Accepted Answer

A)  aggregate demand has increased. 
B)  aggregate demand has decreased. 
C)  aggregate supply has decreased. 
D)  aggregate supply has increased. 
A)  aggregate demand has increased. 
B)  aggregate demand has decreased. 
C)  aggregate supply has decreased. 
D)  aggregate supply has increased.

Question 19

What are the factors that can shift the short-run aggregate supply curve but not the long-run aggregate supply curve? Explain your answer.

Accepted Answer

The only factor that shifts the short-ru

Question 20

The table below shows data for India's economy. Real GDP is measured in millions of rupees.   If potential GDP in India is ________ million rupees, India is experiencing ________.

Accepted Answer

A)  26,500; an inflationary gap 
B)  28,500; an above-full-employment gap 
C)  26,500; a recessionary gap 
D)  30,000; a potential GDP gap 
A)  26,500; an inflationary gap 
B)  28,500; an above-full-employment gap 
C)  26,500; a recessionary gap 
D)  30,000; a potential GDP gap

An economy currently has an inflationary gap. An increase in the money wage rate will the inflationary gap and the price level.

-In the above figure, the shift from AD₁ to AD₂ might have been the result of

The Keynesian theory of business cycle views volatile expectations of future sales and profits as the main source of economic fluctuations.

The AD curve slopes

Other things constant, the economy's aggregate demand curve shows that

Which of the following increases aggregate demand and shifts the AD curve rightward?

When the price level in France increases while the exchange rate and the price level in the United States remain the same, the result is that

Which of the following shifts the aggregate demand curve rightward?

China is one of the world's largest exporters. As the world's economies slipped into a worldwide recession in 2008, there was a China's aggregate demand curve as China's exports .

Short-run macroeconomic equilibrium occurs when the quantity of real GDP demanded

A short-run macroeconomic equilibrium occurs

Explain the relationship of the long-run aggregate supply curve, the short-run aggregate supply curve and the aggregate demand curve in determining a long-run and short-run macroeconomic equilibrium.

-In the above figure, the economy is currently at point A. Suppose that the money wage rate and the price level both fall by 10 percent. Firms will be willing to supply output equal to

If aggregate demand grows only slightly faster than potential GDP, then the economy will

Which of the following does NOT shift the short-run aggregate supply curve?

A technological advance the long-run aggregate supply curve and the short-run aggregate supply curve.

-The data in the above table show that when the price level is 120, if aggregate demand does not change then the

-In the above figure, the economy is at point A when changes occur. If the new equilibrium has a price level of 100 and real GDP of $17.0 trillion, then it must be the case that

What are the factors that can shift the short-run aggregate supply curve but not the long-run aggregate supply curve? Explain your answer.

The table below shows data for India's economy. Real GDP is measured in millions of rupees. If potential GDP in India is million rupees, India is experiencing .

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

An economy currently has an inflationary gap. An increase in the money wage rate will ________ the inflationary gap and ________ the price level.

-In the above figure, the shift from AD1 to AD2 might have been the result of

The Keynesian theory of business cycle views volatile expectations of future sales and profits as the main source of economic fluctuations.

The AD curve slopes

Other things constant, the economy's aggregate demand curve shows that

Which of the following increases aggregate demand and shifts the AD curve rightward?

When the price level in France increases while the exchange rate and the price level in the United States remain the same, the result is that

Which of the following shifts the aggregate demand curve rightward?

China is one of the world's largest exporters. As the world's economies slipped into a worldwide recession in 2008, there was a ________ China's aggregate demand curve as China's exports ________.

Short-run macroeconomic equilibrium occurs when the quantity of real GDP demanded

A short-run macroeconomic equilibrium occurs

Explain the relationship of the long-run aggregate supply curve, the short-run aggregate supply curve and the aggregate demand curve in determining a long-run and short-run macroeconomic equilibrium.

-In the above figure, the economy is currently at point A. Suppose that the money wage rate and the price level both fall by 10 percent. Firms will be willing to supply output equal to

If aggregate demand grows only slightly faster than potential GDP, then the economy will

Which of the following does NOT shift the short-run aggregate supply curve?

A technological advance ________ the long-run aggregate supply curve and ________ the short-run aggregate supply curve.

-The data in the above table show that when the price level is 120, if aggregate demand does not change then the

-In the above figure, the economy is at point A when changes occur. If the new equilibrium has a price level of 100 and real GDP of $17.0 trillion, then it must be the case that

What are the factors that can shift the short-run aggregate supply curve but not the long-run aggregate supply curve? Explain your answer.

The table below shows data for India's economy. Real GDP is measured in millions of rupees. If potential GDP in India is ________ million rupees, India is experiencing ________.

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

An economy currently has an inflationary gap. An increase in the money wage rate will the inflationary gap and the price level.

-In the above figure, the shift from AD₁ to AD₂ might have been the result of

China is one of the world's largest exporters. As the world's economies slipped into a worldwide recession in 2008, there was a China's aggregate demand curve as China's exports .

A technological advance the long-run aggregate supply curve and the short-run aggregate supply curve.

The table below shows data for India's economy. Real GDP is measured in millions of rupees. If potential GDP in India is million rupees, India is experiencing .