Question 1

In the short run, a supply shock that shifts the short-run aggregate supply curve leftward ________ real GDP and ________ the price level.

Accepted Answer

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

Question 2

Which of the following statements is INCORRECT?

Accepted Answer

A)  A monetarist believes that recessions are the result of erratic monetary policy. 
B)  A new classical macroeconomist believes the business cycle is the efficient response to the uneven pace of technological change. 
C)  A Keynesian believes the business cycle is mainly influenced by changes in people's expectations. 
D)  A classical macroeconomist believes that the money wage rate adjusts slowly. 
A)  A monetarist believes that recessions are the result of erratic monetary policy. 
B)  A new classical macroeconomist believes the business cycle is the efficient response to the uneven pace of technological change. 
C)  A Keynesian believes the business cycle is mainly influenced by changes in people's expectations. 
D)  A classical macroeconomist believes that the money wage rate adjusts slowly.

Question 3

-In the above figure, the economy is initially at point B. If taxes increase, there is

Accepted Answer

A)  a movement to point C. 
B)  a movement to point A. 
C)  a shift to AD2. 
D)  a shift to AD1. 
A)  a movement to point C. 
B)  a movement to point A. 
C)  a shift to AD2. 
D)  a shift to AD1.

Question 4

An increase in foreign incomes

Accepted Answer

A)  increases aggregate demand in the United States. 
B)  increases the aggregate quantity demanded in the United States. 
C)  decreases the aggregate quantity demanded in the United States. 
D)  decreases aggregate demand in the United States. 
A)  increases aggregate demand in the United States. 
B)  increases the aggregate quantity demanded in the United States. 
C)  decreases the aggregate quantity demanded in the United States. 
D)  decreases aggregate demand in the United States.

Question 5

Suppose the economy is experiencing a recessionary gap. In the long run, if aggregate demand does not change, the following events happen: the money wage rate ________, unemployment ________, and the price level ________.

Accepted Answer

A)  falls; rises; falls 
B)  falls; falls; falls 
C)  rises; rises; rises 
D)  rises; falls; rises 
A)  falls; rises; falls 
B)  falls; falls; falls 
C)  rises; rises; rises 
D)  rises; falls; rises

Question 6

In long-run macroeconomic equilibrium

Accepted Answer

A)  real GDP equals potential GDP. 
B)  the price level is fixed and aggregate demand determines real GDP. 
C)  real GDP and the price level are determined by short-run aggregate supply and aggregate demand, while long-run aggregate supply is irrelevant. 
D)  real GDP is less than potential GDP. 
A)  real GDP equals potential GDP. 
B)  the price level is fixed and aggregate demand determines real GDP. 
C)  real GDP and the price level are determined by short-run aggregate supply and aggregate demand, while long-run aggregate supply is irrelevant. 
D)  real GDP is less than potential GDP.

Question 7

-In the above figure, the short-run aggregate supply curve is SAS and the aggregate demand curve is AD. An inflationary 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 8

-In the figure above, the economy is at point A when the price level falls to 100. Money wage rates and all other resource prices remain constant. Firms are willing to supply output equal to

Accepted Answer

A)  $17.5 trillion. 
B)  $18.0 trillion. 
C)  $18.5 trillion. 
D)  None of the above answers is correct. 
A)  $17.5 trillion. 
B)  $18.0 trillion. 
C)  $18.5 trillion. 
D)  None of the above answers is correct.

Question 9

Suppose the current situation is such that the price level is 120, real GDP is $17 trillion, and GDP along the long-run aggregate supply curve is $16.6 trillion. What will take place to restore the long-run equilibrium?

Accepted Answer

A)  The price level will fall until long-run aggregate supply increases to $17 trillion. 
B)  The price level will fall and money wage rates will rise until real GDP along the long-run aggregate supply curve is $17 trillion. 
C)  Money wage rates will rise until real GDP reaches $16.6 trillion. 
D)  Aggregate demand will increase until both short-run and long-run aggregate supply equal $17 trillion. 
A)  The price level will fall until long-run aggregate supply increases to $17 trillion. 
B)  The price level will fall and money wage rates will rise until real GDP along the long-run aggregate supply curve is $17 trillion. 
C)  Money wage rates will rise until real GDP reaches $16.6 trillion. 
D)  Aggregate demand will increase until both short-run and long-run aggregate supply equal $17 trillion.

Question 10

Your real wealth is measured as the

Accepted Answer

A)  amount of assets you have in dollar terms. 
B)  amount of money you have. 
C)  amount of goods and services your wealth will buy. 
D)  amount of goods you have divided by the price level. 
A)  amount of assets you have in dollar terms. 
B)  amount of money you have. 
C)  amount of goods and services your wealth will buy. 
D)  amount of goods you have divided by the price level.

Question 11

Full-employment equilibrium occurs when

Accepted Answer

A)  real GDP exceeds potential GDP. 
B)  real GDP equals potential GDP. 
C)  potential GDP exceeds real GDP. 
D)  None of the above answers are correct. 
A)  real GDP exceeds potential GDP. 
B)  real GDP equals potential GDP. 
C)  potential GDP exceeds real GDP. 
D)  None of the above answers are correct.

Question 12

The long-run aggregate supply (LAS) curve

Accepted Answer

A)  has a positive slope. 
B)  has a negative slope. 
C)  is vertical. 
D)  is horizontal. 
A)  has a positive slope. 
B)  has a negative slope. 
C)  is vertical. 
D)  is horizontal.

Question 13

-From the data in the above table, when the economy is in short-run equilibrium, if aggregate demand does not change, then as time passes the

Accepted Answer

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

Question 14

If the money wage rate increases, the short-run aggregate supply curve shifts rightward.

Accepted Answer

A) True 
 B)False

Question 15

In November, 2012, U.S. lawmakers were faced with a "fiscal cliff:" if they did not agree on how to reduce the federal deficit, automatic tax increases and drastic cuts in government spending would take effect. What would be the result if the fiscal cliff occurred?

Accepted Answer

A)  a recessionary gap 
B)  an inflationary gap 
C)  stagflation 
D)  nothing 
A)  a recessionary gap 
B)  an inflationary gap 
C)  stagflation 
D)  nothing

Question 16

According to the intertemporal substitution effect, a higher price level

Accepted Answer

A)  decreases the quantity of real GDP demanded. 
B)  lowers the costs of building new plants and equipment. 
C)  increases the quantity of real GDP demanded. 
D)  makes it less costly for people to buy houses and cars. 
A)  decreases the quantity of real GDP demanded. 
B)  lowers the costs of building new plants and equipment. 
C)  increases the quantity of real GDP demanded. 
D)  makes it less costly for people to buy houses and cars.

Question 17

In the United States, of the following decades economic growth was most rapid during the

Accepted Answer

A)  1960s. 
B)  1990s. 
C)  1970s. 
D)  2000s. 
A)  1960s. 
B)  1990s. 
C)  1970s. 
D)  2000s.

Question 18

The long-run aggregate supply curve is vertical at $18 trillion but the short-run aggregate supply curve intersects the aggregate demand curve at $19 trillion. We know that

Accepted Answer

A)  the economy is producing below full employment in the short run, and will adjust by hiring more workers, thus decreasing unemployment. 
B)  the price level is too high. The long-run equilibrium will occur with a lower price level. 
C)  adjustments will occur so that the long-run aggregate supply equals $19 trillion. 
D)  adjustments will occur so that the short-run aggregate supply eventually intersects the aggregate demand curve at $16 trillion. 
A)  the economy is producing below full employment in the short run, and will adjust by hiring more workers, thus decreasing unemployment. 
B)  the price level is too high. The long-run equilibrium will occur with a lower price level. 
C)  adjustments will occur so that the long-run aggregate supply equals $19 trillion. 
D)  adjustments will occur so that the short-run aggregate supply eventually intersects the aggregate demand curve at $16 trillion.

Question 19

If the full-employment quantity of labor increases, then the

Accepted Answer

A)  LAS curve shifts rightward and the SAS curve does not shift. 
B)  SAS curve shifts rightward and the LAS curve does not shift. 
C)  SAS curve shifts rightward and the LAS curve shifts rightward. 
D)  SAS curve shifts rightward and the LAS curve shifts leftward. 
A)  LAS curve shifts rightward and the SAS curve does not shift. 
B)  SAS curve shifts rightward and the LAS curve does not shift. 
C)  SAS curve shifts rightward and the LAS curve shifts rightward. 
D)  SAS curve shifts rightward and the LAS curve shifts leftward.

Question 20

What happens to the aggregate demand curve in the United States if the exchange rate increases so that U.S.-made products become more expensive?

Accepted Answer

Net exports decrease

In the short run, a supply shock that shifts the short-run aggregate supply curve leftward real GDP and the price level.

Which of the following statements is INCORRECT?

-In the above figure, the economy is initially at point B. If taxes increase, there is

An increase in foreign incomes

Suppose the economy is experiencing a recessionary gap. In the long run, if aggregate demand does not change, the following events happen: the money wage rate , unemployment , and the price level .

In long-run macroeconomic equilibrium

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

-In the figure above, the economy is at point A when the price level falls to 100. Money wage rates and all other resource prices remain constant. Firms are willing to supply output equal to

Suppose the current situation is such that the price level is 120, real GDP is $17 trillion, and GDP along the long-run aggregate supply curve is $16.6 trillion. What will take place to restore the long-run equilibrium?

Your real wealth is measured as the

Full-employment equilibrium occurs when

The long-run aggregate supply (LAS) curve

-From the data in the above table, when the economy is in short-run equilibrium, if aggregate demand does not change, then as time passes the

If the money wage rate increases, the short-run aggregate supply curve shifts rightward.

In November, 2012, U.S. lawmakers were faced with a "fiscal cliff:" if they did not agree on how to reduce the federal deficit, automatic tax increases and drastic cuts in government spending would take effect. What would be the result if the fiscal cliff occurred?

According to the intertemporal substitution effect, a higher price level

In the United States, of the following decades economic growth was most rapid during the

The long-run aggregate supply curve is vertical at $18 trillion but the short-run aggregate supply curve intersects the aggregate demand curve at $19 trillion. We know that

If the full-employment quantity of labor increases, then the

What happens to the aggregate demand curve in the United States if the exchange rate increases so that U.S.-made products become more expensive?

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

In the short run, a supply shock that shifts the short-run aggregate supply curve leftward ________ real GDP and ________ the price level.

Which of the following statements is INCORRECT?

-In the above figure, the economy is initially at point B. If taxes increase, there is

An increase in foreign incomes

Suppose the economy is experiencing a recessionary gap. In the long run, if aggregate demand does not change, the following events happen: the money wage rate ________, unemployment ________, and the price level ________.

In long-run macroeconomic equilibrium

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

-In the figure above, the economy is at point A when the price level falls to 100. Money wage rates and all other resource prices remain constant. Firms are willing to supply output equal to

Suppose the current situation is such that the price level is 120, real GDP is $17 trillion, and GDP along the long-run aggregate supply curve is $16.6 trillion. What will take place to restore the long-run equilibrium?

Your real wealth is measured as the

Full-employment equilibrium occurs when

The long-run aggregate supply (LAS) curve

-From the data in the above table, when the economy is in short-run equilibrium, if aggregate demand does not change, then as time passes the

If the money wage rate increases, the short-run aggregate supply curve shifts rightward.

In November, 2012, U.S. lawmakers were faced with a "fiscal cliff:" if they did not agree on how to reduce the federal deficit, automatic tax increases and drastic cuts in government spending would take effect. What would be the result if the fiscal cliff occurred?

According to the intertemporal substitution effect, a higher price level

In the United States, of the following decades economic growth was most rapid during the

The long-run aggregate supply curve is vertical at $18 trillion but the short-run aggregate supply curve intersects the aggregate demand curve at $19 trillion. We know that

If the full-employment quantity of labor increases, then the

What happens to the aggregate demand curve in the United States if the exchange rate increases so that U.S.-made products become more expensive?

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 short run, a supply shock that shifts the short-run aggregate supply curve leftward real GDP and the price level.

Suppose the economy is experiencing a recessionary gap. In the long run, if aggregate demand does not change, the following events happen: the money wage rate , unemployment , and the price level .