Question 1

A decrease in short-run aggregate supply ________ the equilibrium price level and ________ the equilibrium quantity of real GDP.

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

Question 2

A rise in the price level changes aggregate demand because

Accepted Answer

A)  firms increase their investment when prices are higher. 
B)  the real value of people's wealth varies directly with the price level and so does their spending. 
C)  the real value of people's wealth decreases and so they decrease their consumption. 
D)  the more money people have, the more it is worth and hence the more goods and services they demand. 
A)  firms increase their investment when prices are higher. 
B)  the real value of people's wealth varies directly with the price level and so does their spending. 
C)  the real value of people's wealth decreases and so they decrease their consumption. 
D)  the more money people have, the more it is worth and hence the more goods and services they demand.

Question 3

-The data in the above table show that the economy will be in a short-run macroeconomic equilibrium at a price level of

Accepted Answer

A)  90. 
B)  110. 
C)  100. 
D)  120. 
A)  90. 
B)  110. 
C)  100. 
D)  120.

Question 4

-Based on the figure above, short-run equilibrium occurs at the price level of

Accepted Answer

A)  120 and real GDP of $5 trillion. 
B)  130 and real GDP of $10 trillion. 
C)  140 and real GDP of $15 trillion. 
D)  130 and real GDP of $15 trillion. 
A)  120 and real GDP of $5 trillion. 
B)  130 and real GDP of $10 trillion. 
C)  140 and real GDP of $15 trillion. 
D)  130 and real GDP of $15 trillion.

Question 5

-In the above figure, which movement illustrates the impact of a rising price level and a constant money wage rate?

Accepted Answer

A)  E to I 
B)  E to F 
C)  E to G 
D)  E to K 
A)  E to I 
B)  E to F 
C)  E to G 
D)  E to K

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

In the long run

Accepted Answer

A)  the aggregate supply curve is upward sloping. 
B)  real GDP is equal to potential GDP. 
C)  aggregate supply depends on the price level. 
D)  All of the above answers are correct. 
A)  the aggregate supply curve is upward sloping. 
B)  real GDP is equal to potential GDP. 
C)  aggregate supply depends on the price level. 
D)  All of the above answers are correct.

Question 8

In the aggregate demand-aggregate supply framework, how does an increase in the price level affect potential GDP?

Accepted Answer

An increase in the price level

Question 9

-The data in the above table indicate that when the price level is 120

Accepted Answer

A)  inventories fall and the price level rises. 
B)  the economy is in a long-run macroeconomic equilibrium. 
C)  inventories rise and the price level falls. 
D)  the unemployment rate is at its equilibrium level. 
A)  inventories fall and the price level rises. 
B)  the economy is in a long-run macroeconomic equilibrium. 
C)  inventories rise and the price level falls. 
D)  the unemployment rate is at its equilibrium level.

Question 10

The land of Mordor increases its capital stock. As a result, the long-run aggregate supply curve shifts ________ and so does the ________ curve.

Accepted Answer

A)  rightward; aggregate demand 
B)  leftward; aggregate demand 
C)  rightward; short-run aggregate supply 
D)  leftward; short-run aggregate supply 
A)  rightward; aggregate demand 
B)  leftward; aggregate demand 
C)  rightward; short-run aggregate supply 
D)  leftward; short-run aggregate supply

Question 11

The aggregate demand curve shows the ________ relationship between the price level and ________.

Accepted Answer

A)  positive; the quantity of real GDP demanded 
B)  negative; aggregate labor demanded 
C)  positive; aggregate labor demand 
D)  negative; the quantity of real GDP demanded 
A)  positive; the quantity of real GDP demanded 
B)  negative; aggregate labor demanded 
C)  positive; aggregate labor demand 
D)  negative; the quantity of real GDP demanded

Question 12

Which of the following can be said about economic growth?
I. Economic growth is the result of increases in long-run aggregate supply.
II. Economic growth is the result of increases in aggregate demand.

Accepted Answer

A)  I is true and II is false 
B)  I is false and II is true 
C)  I and II are both true 
D)  I and II are both false 
A)  I is true and II is false 
B)  I is false and II is true 
C)  I and II are both true 
D)  I and II are both false

Question 13

-In the above figure, the inflationary gap when AD2 is the aggregate demand curve equals

Accepted Answer

A)  the difference between 110 and 100. 
B)  the difference between $18.5 trillion and $18.0 trillion. 
C)  LAS minus SAS at a price level of 100. 
D)  AD1. 
A)  the difference between 110 and 100. 
B)  the difference between $18.5 trillion and $18.0 trillion. 
C)  LAS minus SAS at a price level of 100. 
D)  AD1.

Question 14

-Based on the data in the table above, at the short-run equilibrium

Accepted Answer

A)  the unemployment rate is less than the natural unemployment rate. 
B)  the unemployment rate is greater than the natural unemployment rate. 
C)  the money wage rate will rise in the long run. 
D)  the economy is at full employment. 
A)  the unemployment rate is less than the natural unemployment rate. 
B)  the unemployment rate is greater than the natural unemployment rate. 
C)  the money wage rate will rise in the long run. 
D)  the economy is at full employment.

Question 15

-The table above shows Yellowland's economy aggregate demand and supply schedules. Yellowland's potential GDP is $300 billion.
a) Plot the aggregate demand curve, the short-run aggregate supply curve, and the long-run aggregate supply curve.
b) What are the short-run equilibrium real GDP and price level in Yellowland?
c) What is the long-run equilibrium real GDP?
d) Is Yellowland's short-run macroeconomic equilibrium a full-employment equilibrium, below full-employment equilibrium, or above full-employment equilibrium? What is the recessionary gap (if any)? What is the inflationary gap (if any)?
e) Suppose aggregate supply decreases by $150 billion. Plot the new aggregate supply curve. How do real GDP and the price level change in the short run?
f) Is Yellowland's new short-run macroeconomic equilibrium a full-employment equilibrium, below full-employment equilibrium, or above full-employment equilibrium? What is the recessionary gap (if any)? What is the inflationary gap (if any)?

Accepted Answer

@#IMG-DLM& a) See the figure above. The short-run

Question 16

According to the intertemporal substitution effect, a fall in the price level will

Accepted Answer

A)  decrease the real value of wealth, which increases the quantity of real GDP demanded. 
B)  cause the interest rate to fall so that investment increases and the quantity of real GDP demanded increases. 
C)  increase net exports, which causes the quantity of real GDP demanded to increase. 
D)  increase the real value of wealth, which raises the interest rate so that the quantity of real GDP demanded decreases. 
A)  decrease the real value of wealth, which increases the quantity of real GDP demanded. 
B)  cause the interest rate to fall so that investment increases and the quantity of real GDP demanded increases. 
C)  increase net exports, which causes the quantity of real GDP demanded to increase. 
D)  increase the real value of wealth, which raises the interest rate so that the quantity of real GDP demanded decreases.

Question 17

In long-run macroeconomic equilibrium, the

Accepted Answer

A)  real wage rate has adjusted so that the economy is on the short-run aggregate supply curve but not on the long-run aggregate supply curve. 
B)  long-run aggregate supply curve has shifted in response to a money wage rate increase so that potential GDP equals real GDP. 
C)  aggregate demand curve adjusts to the point where the long-run aggregate supply curve and the short-run aggregate supply curve intersect. 
D)  None of the above answers is correct. 
A)  real wage rate has adjusted so that the economy is on the short-run aggregate supply curve but not on the long-run aggregate supply curve. 
B)  long-run aggregate supply curve has shifted in response to a money wage rate increase so that potential GDP equals real GDP. 
C)  aggregate demand curve adjusts to the point where the long-run aggregate supply curve and the short-run aggregate supply curve intersect. 
D)  None of the above answers is correct.

Question 18

A decrease in government expenditure shifts the AD curve ________ , while a decrease in taxes shifts the AD curve ________.

Accepted Answer

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

Question 19

Suppose the exchange rate falls from $1.20 Canadian per U.S. dollar to $1.10 Canadian per U.S. dollar. U.S. exports will ________, U.S. imports will ________, and U.S. aggregate demand will ________.

Accepted Answer

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

Question 20

The Great Depression, in which real GDP fell and unemployment rose, can be characterized as a

Accepted Answer

A)  inflationary gap. 
B)  long-run equilibrium. 
C)  recessionary gap. 
D)  full-employment equilibrium. 
A)  inflationary gap. 
B)  long-run equilibrium. 
C)  recessionary gap. 
D)  full-employment equilibrium.

A decrease in short-run aggregate supply the equilibrium price level and the equilibrium quantity of real GDP.

A rise in the price level changes aggregate demand because

-The data in the above table show that the economy will be in a short-run macroeconomic equilibrium at a price level of

-Based on the figure above, short-run equilibrium occurs at the price level of

-In the above figure, which movement illustrates the impact of a rising price level and a constant money wage rate?

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

In the long run

In the aggregate demand-aggregate supply framework, how does an increase in the price level affect potential GDP?

-The data in the above table indicate that when the price level is 120

The land of Mordor increases its capital stock. As a result, the long-run aggregate supply curve shifts and so does the curve.

The aggregate demand curve shows the relationship between the price level and .

Which of the following can be said about economic growth? I. Economic growth is the result of increases in long-run aggregate supply. II. Economic growth is the result of increases in aggregate demand.

-In the above figure, the inflationary gap when AD₂ is the aggregate demand curve equals

-Based on the data in the table above, at the short-run equilibrium

According to the intertemporal substitution effect, a fall in the price level will

In long-run macroeconomic equilibrium, the

A decrease in government expenditure shifts the AD curve , while a decrease in taxes shifts the AD curve .

Suppose the exchange rate falls from $1.20 Canadian per U.S. dollar to $1.10 Canadian per U.S. dollar. U.S. exports will , U.S. imports will , and U.S. aggregate demand will .

The Great Depression, in which real GDP fell and unemployment rose, can be characterized as a

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

A decrease in short-run aggregate supply ________ the equilibrium price level and ________ the equilibrium quantity of real GDP.

A rise in the price level changes aggregate demand because

-The data in the above table show that the economy will be in a short-run macroeconomic equilibrium at a price level of

-Based on the figure above, short-run equilibrium occurs at the price level of

-In the above figure, which movement illustrates the impact of a rising price level and a constant money wage rate?

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

In the long run

In the aggregate demand-aggregate supply framework, how does an increase in the price level affect potential GDP?

-The data in the above table indicate that when the price level is 120

The land of Mordor increases its capital stock. As a result, the long-run aggregate supply curve shifts ________ and so does the ________ curve.

The aggregate demand curve shows the ________ relationship between the price level and ________.

Which of the following can be said about economic growth? I. Economic growth is the result of increases in long-run aggregate supply. II. Economic growth is the result of increases in aggregate demand.

-In the above figure, the inflationary gap when AD2 is the aggregate demand curve equals

-Based on the data in the table above, at the short-run equilibrium

According to the intertemporal substitution effect, a fall in the price level will

In long-run macroeconomic equilibrium, the

A decrease in government expenditure shifts the AD curve ________ , while a decrease in taxes shifts the AD curve ________.

Suppose the exchange rate falls from $1.20 Canadian per U.S. dollar to $1.10 Canadian per U.S. dollar. U.S. exports will ________, U.S. imports will ________, and U.S. aggregate demand will ________.

The Great Depression, in which real GDP fell and unemployment rose, can be characterized as a

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 decrease in short-run aggregate supply the equilibrium price level and the equilibrium quantity of real GDP.

The land of Mordor increases its capital stock. As a result, the long-run aggregate supply curve shifts and so does the curve.

The aggregate demand curve shows the relationship between the price level and .

-In the above figure, the inflationary gap when AD₂ is the aggregate demand curve equals

A decrease in government expenditure shifts the AD curve , while a decrease in taxes shifts the AD curve .

Suppose the exchange rate falls from $1.20 Canadian per U.S. dollar to $1.10 Canadian per U.S. dollar. U.S. exports will , U.S. imports will , and U.S. aggregate demand will .