Question 1

How does the aggregate demand curve reflect an increase in aggregate demand?

Accepted Answer

A rightward shift of

Question 2

The long-run aggregate supply curve is upward sloping.

Accepted Answer

A) True 
 B)False

Question 3

Long-run macroeconomic equilibrium is achieved when the money wage rate has adjusted so that employment is such that real GDP equals potential GDP.

Accepted Answer

A) True 
 B)False

Question 4

The wealth effect points out that consumption decreases when people's real wealth decreases.

Accepted Answer

A) True 
 B)False

Question 5

How are potential GDP, full employment and the LAS curve related?

Accepted Answer

When the economy is at full em

Question 6

-Use the figure above to answer this question. At a price level of 110

Accepted Answer

A)  real GDP is greater than the aggregate quantity demanded and firms will cut production. 
B)  real GDP is less than the aggregate quantity demanded and firms will increase production. 
C)  inventories will decrease. 
D)  real GDP less than the aggregate quantity demanded and firms will increase prices. 
A)  real GDP is greater than the aggregate quantity demanded and firms will cut production. 
B)  real GDP is less than the aggregate quantity demanded and firms will increase production. 
C)  inventories will decrease. 
D)  real GDP less than the aggregate quantity demanded and firms will increase prices.

Question 7

A recessionary gap occurs when

Accepted Answer

A)  real GDP is less than potential GDP. 
B)  nominal GDP is less than potential GDP. 
C)  high rates of inflation occur. 
D)  nominal GDP is greater than potential GDP. 
A)  real GDP is less than potential GDP. 
B)  nominal GDP is less than potential GDP. 
C)  high rates of inflation occur. 
D)  nominal GDP is greater than potential GDP.

Question 8

A classical economist believes that

Accepted Answer

A)  if the economy was left alone, it would rarely operate at full employment. 
B)  the economy is self-regulating and always at full employment. 
C)  the economy is self-regulating and will normally, though not always, operate at full employment if monetary policy is not erratic. 
D)  the economy is self-regulating and will normally, though not always, operate at full employment if fiscal policy is not erratic. 
A)  if the economy was left alone, it would rarely operate at full employment. 
B)  the economy is self-regulating and always at full employment. 
C)  the economy is self-regulating and will normally, though not always, operate at full employment if monetary policy is not erratic. 
D)  the economy is self-regulating and will normally, though not always, operate at full employment if fiscal policy is not erratic.

Question 9

Which of the following changes while moving along the aggregate demand curve?

Accepted Answer

A)  future incomes of households 
B)  the price level 
C)  the amount of money in the economy 
D)  future profits from investment projects 
A)  future incomes of households 
B)  the price level 
C)  the amount of money in the economy 
D)  future profits from investment projects

Question 10

-In the above figure, if the economy is at point A, which of the following is TRUE?

Accepted Answer

A)  Point A is the long-run equilibrium point. 
B)  The economy is in a recession. 
C)  Money wages can be expected to fall. 
D)  The economy might be at point A as a result of a recent cut in the tax rate. 
A)  Point A is the long-run equilibrium point. 
B)  The economy is in a recession. 
C)  Money wages can be expected to fall. 
D)  The economy might be at point A as a result of a recent cut in the tax rate.

Question 11

Give examples of factors that decrease short-run aggregate supply. Which way does the SAS curve shift?

Accepted Answer

Aggregate supply decreases if potential

Question 12

The level of output when there is full employment is called actual GDP.

Accepted Answer

A) True 
 B)False

Question 13

In 2008, the Bank of England increased the country's money supply and lowered its interest rate. This policy was designed to

Accepted Answer

A)  encourage people to buy more goods and services. 
B)  shift the aggregate demand curve rightward. 
C)  cause a movement up along the aggregate demand curve. 
D)  Both A and B are correct. 
A)  encourage people to buy more goods and services. 
B)  shift the aggregate demand curve rightward. 
C)  cause a movement up along the aggregate demand curve. 
D)  Both A and B are correct.

Question 14

Which of the following directly shifts the short-run aggregate supply curve?

Accepted Answer

A)  a change in aggregate demand 
B)  a change in the price level 
C)  a change in resource prices 
D)  all of the above 
A)  a change in aggregate demand 
B)  a change in the price level 
C)  a change in resource prices 
D)  all of the above

Question 15

A change in the capital stock ________ the short-run aggregate supply curve and ________ the long-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 16

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

Accepted Answer

A)  an increase in the price level 
B)  an increase in technology 
C)  an increase in the quantity of capital 
D)  an increase in the money wage rate 
A)  an increase in the price level 
B)  an increase in technology 
C)  an increase in the quantity of capital 
D)  an increase in the money wage rate

Question 17

-The above figure illustrates

Accepted Answer

A)  a recessionary gap. 
B)  a full-employment equilibrium. 
C)  an inflationary gap. 
D)  an equilibrium at the economy's physical limits. 
A)  a recessionary gap. 
B)  a full-employment equilibrium. 
C)  an inflationary gap. 
D)  an equilibrium at the economy's physical limits.

Question 18

-In the above figure, the short-run aggregate supply curve is SAS and the aggregate demand curve is AD. A recessionary gap exists

Accepted Answer

A)  if the long-run aggregate supply curve is LAS1. 
B)  if the long-run aggregate supply curve is LAS2. 
C)  if the long-run aggregate supply curve is LAS3. 
D)  All of the above answers are correct. 
A)  if the long-run aggregate supply curve is LAS1. 
B)  if the long-run aggregate supply curve is LAS2. 
C)  if the long-run aggregate supply curve is LAS3. 
D)  All of the above answers are correct.

Question 19

What is the effect on the aggregate demand curve from an increase in the price level? In particular, does the aggregate demand curve shift leftward or rightward?

Accepted Answer

When the price level increases, there is

Question 20

As the price level falls, the quantity of real wealth ________ and the aggregate quantity of real GDP demanded ________.

Accepted Answer

A)  increases; increases 
B)  increases; decreases 
C)  decreases; increases 
D)  decreases; decreases 
A)  increases; increases 
B)  increases; decreases 
C)  decreases; increases 
D)  decreases; decreases

How does the aggregate demand curve reflect an increase in aggregate demand?

The long-run aggregate supply curve is upward sloping.

Long-run macroeconomic equilibrium is achieved when the money wage rate has adjusted so that employment is such that real GDP equals potential GDP.

The wealth effect points out that consumption decreases when people's real wealth decreases.

How are potential GDP, full employment and the LAS curve related?

-Use the figure above to answer this question. At a price level of 110

A recessionary gap occurs when

A classical economist believes that

Which of the following changes while moving along the aggregate demand curve?

-In the above figure, if the economy is at point A, which of the following is TRUE?

Give examples of factors that decrease short-run aggregate supply. Which way does the SAS curve shift?

The level of output when there is full employment is called actual GDP.

In 2008, the Bank of England increased the country's money supply and lowered its interest rate. This policy was designed to

Which of the following directly shifts the short-run aggregate supply curve?

A change in the capital stock the short-run aggregate supply curve and the long-run aggregate supply curve.

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

-The above figure illustrates

-In the above figure, the short-run aggregate supply curve is SAS and the aggregate demand curve is AD. A recessionary gap exists

What is the effect on the aggregate demand curve from an increase in the price level? In particular, does the aggregate demand curve shift leftward or rightward?

As the price level falls, the quantity of real wealth and the aggregate quantity of real GDP demanded .

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

How does the aggregate demand curve reflect an increase in aggregate demand?

The long-run aggregate supply curve is upward sloping.

Long-run macroeconomic equilibrium is achieved when the money wage rate has adjusted so that employment is such that real GDP equals potential GDP.

The wealth effect points out that consumption decreases when people's real wealth decreases.

How are potential GDP, full employment and the LAS curve related?

-Use the figure above to answer this question. At a price level of 110

A recessionary gap occurs when

A classical economist believes that

Which of the following changes while moving along the aggregate demand curve?

-In the above figure, if the economy is at point A, which of the following is TRUE?

Give examples of factors that decrease short-run aggregate supply. Which way does the SAS curve shift?

The level of output when there is full employment is called actual GDP.

In 2008, the Bank of England increased the country's money supply and lowered its interest rate. This policy was designed to

Which of the following directly shifts the short-run aggregate supply curve?

A change in the capital stock ________ the short-run aggregate supply curve and ________ the long-run aggregate supply curve.

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

-The above figure illustrates

-In the above figure, the short-run aggregate supply curve is SAS and the aggregate demand curve is AD. A recessionary gap exists

What is the effect on the aggregate demand curve from an increase in the price level? In particular, does the aggregate demand curve shift leftward or rightward?

As the price level falls, the quantity of real wealth ________ and the aggregate quantity of real GDP demanded ________.

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

A change in the capital stock the short-run aggregate supply curve and the long-run aggregate supply curve.

As the price level falls, the quantity of real wealth and the aggregate quantity of real GDP demanded .