Question 1

Which of the following would produce a rightward shift in the short-run aggregate supply curve?

Accepted Answer

A) An increase in consumption spending. 
B) A decrease in investment. 
C) A decrease in government spending. 
D) A decrease in net exports. 
E) None of the above. 
A) An increase in consumption spending. 
B) A decrease in investment. 
C) A decrease in government spending. 
D) A decrease in net exports. 
E) None of the above. E

Question 2

In the short run, a price increase in the goods and services market measured by the CPI will:

Accepted Answer

A) increase the purchasing power of money. 
B) improve producer profits and, thereby, induce suppliers to expand output. 
C) increase resource prices, lower profits, and lead to a decline in output. 
D) reduce the natural rate of unemployment. 
A) increase the purchasing power of money. 
B) improve producer profits and, thereby, induce suppliers to expand output. 
C) increase resource prices, lower profits, and lead to a decline in output. 
D) reduce the natural rate of unemployment. B

Question 3

The short-run aggregate supply curve (SRAS)is the amount of real GDP:

Accepted Answer

A) produced at various price levels. 
B) produced at various savings rate levels. 
C) purchased at various price levels. 
D) purchased at various saving rate levels. 
A) produced at various price levels. 
B) produced at various savings rate levels. 
C) purchased at various price levels. 
D) purchased at various saving rate levels. A

Question 4

A short-run aggregate supply curve (SRAS)assumes:

Accepted Answer

A) the CPI is fixed. 
B) each point on the SRAS is potential real GDP. 
C) fixed or sticky nominal wages. 
D) nominal wages vary directly with price changes. 
A) the CPI is fixed. 
B) each point on the SRAS is potential real GDP. 
C) fixed or sticky nominal wages. 
D) nominal wages vary directly with price changes.

Question 5

Nominal wages are assumed fixed in the short run because:

Accepted Answer

A) workers have wages stated in their contracts. 
B) of minimum wage laws. 
C) workers are unaware of short-run changes in their real wages. 
D) all of the above are true. 
E) none of the above are true. 
A) workers have wages stated in their contracts. 
B) of minimum wage laws. 
C) workers are unaware of short-run changes in their real wages. 
D) all of the above are true. 
E) none of the above are true.

Question 6

A decrease in nominal incomes causes a leftward shift in the short-run aggregate supply curve (SRAS).

Accepted Answer

A) True 
 B)False

Question 7

Given the shift of the aggregate demand curve from AD1 to AD2 in Exhibit 6, the real GDP and price level (CPI)in long-run equilibrium will be:

Accepted Answer

A) $10 billion and 200. 
B) $4 billion and 150. 
C) $10 billion and 150. 
D) $10 billion and 100. 
A) $10 billion and 200. 
B) $4 billion and 150. 
C) $10 billion and 150. 
D) $10 billion and 100.

Question 8

In Exhibit 4, point P2, Y1 represents:

Accepted Answer

A) that the economy needs policies to reduce unemployment. 
B) a long-run equilibrium. 
C) a short-run equilibrium. 
D) that the economy is at full employment. 
A) that the economy needs policies to reduce unemployment. 
B) a long-run equilibrium. 
C) a short-run equilibrium. 
D) that the economy is at full employment.

Question 9

An explanation for why the short-run aggregate supply curve is upward-sloping is because:

Accepted Answer

A) the quantity of real output supplied is inversely related to the aggregate supply curve. 
B) nominal incomes are fixed. 
C) the capital-output ratio is fixed. 
D) an increase in price will increase the marginal aggregate output. 
A) the quantity of real output supplied is inversely related to the aggregate supply curve. 
B) nominal incomes are fixed. 
C) the capital-output ratio is fixed. 
D) an increase in price will increase the marginal aggregate output.

Question 10

The long-run aggregate supply curve is:

Accepted Answer

A) upward-sloping. 
B) downward-sloping. 
C) horizontal. 
D) vertical. 
E) none of the above. 
A) upward-sloping. 
B) downward-sloping. 
C) horizontal. 
D) vertical. 
E) none of the above.

Question 11

Beginning from the full-employment level of real GDP, an increase in one of the components of the aggregate demand curve will increase the:

Accepted Answer

A) average level of prices (CPI). 
B) unemployment rate. 
C) natural level of real GDP. 
D) level of investment spending. 
E) level of government spending. 
A) average level of prices (CPI). 
B) unemployment rate. 
C) natural level of real GDP. 
D) level of investment spending. 
E) level of government spending.

Question 12

In long-run full-employment equilibrium, which of the following is true ?

Accepted Answer

A) The CPI equals AD equals the peak of the production function curve. 
B) The horizontal LRAS curve equals the intersection of the demand and supply curves in the labor market. 
C) The CPI equals the aggregate production function at the equilibrium wage rates. 
D) The CPI equals AD equals SRAS equals LRAS. 
A) The CPI equals AD equals the peak of the production function curve. 
B) The horizontal LRAS curve equals the intersection of the demand and supply curves in the labor market. 
C) The CPI equals the aggregate production function at the equilibrium wage rates. 
D) The CPI equals AD equals SRAS equals LRAS.

Question 13

Which of the following would cause an increase (rightward shift)in the short-run aggregate supply curve (SRAS)?

Accepted Answer

A) An increase in the long-run aggregate supply curve (LRAS). 
B) A decrease in the CPI. 
C) An increase in the CPI. 
D) A decrease in oil prices. 
A) An increase in the long-run aggregate supply curve (LRAS). 
B) A decrease in the CPI. 
C) An increase in the CPI. 
D) A decrease in oil prices.

Question 14

An aggregate supply curve with a positive slope is associated with an economy in which:

Accepted Answer

A) input prices and final goods prices always change by the same amount. 
B) firms expect output prices to be unaffected by changes in input prices. 
C) nominal wages and salaries do not change much in the short run. 
D) firms expect consumer demand to be unaffected by changes in prices of final goods. 
A) input prices and final goods prices always change by the same amount. 
B) firms expect output prices to be unaffected by changes in input prices. 
C) nominal wages and salaries do not change much in the short run. 
D) firms expect consumer demand to be unaffected by changes in prices of final goods.

Question 15

Long-run full-employment equilibrium assumes:

Accepted Answer

A) a downward-sloping production function. 
B) a downward-sloping long-run supply curve (LRAS). 
C) the CPI index price level equals the equilibrium wage rate. 
D) the CPI equals aggregate demand (A
D) equals short-run aggregate supply (SRAS)equals long-run aggregate supply (LRAS). 
A) a downward-sloping production function. 
B) a downward-sloping long-run supply curve (LRAS). 
C) the CPI index price level equals the equilibrium wage rate. 
D) the CPI equals aggregate demand (A
D) equals short-run aggregate supply (SRAS)equals long-run aggregate supply (LRAS).

Question 16

Beginning from full-employment macro equilibrium, increase in government spending will cause real GDP to:

Accepted Answer

A) increase in the short run. 
B) decline in the long run. 
C) decline in the short run. 
D) increase in the long run. 
A) increase in the short run. 
B) decline in the long run. 
C) decline in the short run. 
D) increase in the long run.

Question 17

Economic growth can be represented by a (an):

Accepted Answer

A) percentage change in real GDP. 
B) rightward shift of the long-run aggregate supply curve (LRAS). 
C) outward shift of a production possibilities curve. 
D) all of the above. 
A) percentage change in real GDP. 
B) rightward shift of the long-run aggregate supply curve (LRAS). 
C) outward shift of a production possibilities curve. 
D) all of the above.

Question 18

Exhibit 4  Macro AD-AS Model   In Exhibit 4, the level of real GDP represented by Yp:

Accepted Answer

A) would be associated with considerable unemployment. 
B) indicates that the economy is experiencing zero inflation. 
C) indicates that the economy is experiencing a recessionary gap. 
D) is potential real GDP for this economy. 
A) would be associated with considerable unemployment. 
B) indicates that the economy is experiencing zero inflation. 
C) indicates that the economy is experiencing a recessionary gap. 
D) is potential real GDP for this economy.

Question 19

Based on Exhibit 6, when the aggregate demand curve is in the position AD1, the economy's position of long-run equilibrium corresponds to point:

Accepted Answer

A) E1. 
B) E2. 
C) E3. 
D) E1 or E2. 
A) E1. 
B) E2. 
C) E3. 
D) E1 or E2.

Question 20

Exhibit 2 Macro AD-AS Model   In Exhibit 2, the long-run aggregate supply curve represents:

Accepted Answer

A) potential real GDP output for this economy. 
B) that the economy is experiencing zero inflation. 
C) that the economy is experiencing a recessionary gap. 
D) the level of real GDP where the unemployment rate is zero. 
A) potential real GDP output for this economy. 
B) that the economy is experiencing zero inflation. 
C) that the economy is experiencing a recessionary gap. 
D) the level of real GDP where the unemployment rate is zero.

Exam 23: the Self-Correcting Aggregate Demand and Supply Model

Which of the following would produce a rightward shift in the short-run aggregate supply curve?

In the short run, a price increase in the goods and services market measured by the CPI will:

The short-run aggregate supply curve (SRAS)is the amount of real GDP:

A short-run aggregate supply curve (SRAS)assumes:

Nominal wages are assumed fixed in the short run because:

A decrease in nominal incomes causes a leftward shift in the short-run aggregate supply curve (SRAS).

Given the shift of the aggregate demand curve from AD1 to AD2 in Exhibit 6, the real GDP and price level (CPI)in long-run equilibrium will be:

In Exhibit 4, point P2, Y1 represents:

An explanation for why the short-run aggregate supply curve is upward-sloping is because:

The long-run aggregate supply curve is:

Beginning from the full-employment level of real GDP, an increase in one of the components of the aggregate demand curve will increase the:

In long-run full-employment equilibrium, which of the following is true ?

Which of the following would cause an increase (rightward shift)in the short-run aggregate supply curve (SRAS)?

An aggregate supply curve with a positive slope is associated with an economy in which:

Long-run full-employment equilibrium assumes:

Beginning from full-employment macro equilibrium, increase in government spending will cause real GDP to:

Economic growth can be represented by a (an):

Exhibit 4 Macro AD-AS Model In Exhibit 4, the level of real GDP represented by Yp:

Based on Exhibit 6, when the aggregate demand curve is in the position AD1, the economy's position of long-run equilibrium corresponds to point:

Exhibit 2 Macro AD-AS Model In Exhibit 2, the long-run aggregate supply curve represents:

Introducing the Economic Way of Thinking

Production Possibilities, Opportunity Cost, and Economic Growth

Market Demand and Supply

Markets in Action

Gross Domestic Product

Business Cycles and Unemployment

Inflation

The Keynesian Model

The Keynesian Model in Action

Aggregate Demand and Supply

Fiscal Policy

The Public Sector

Federal Deficits, Surpluses, and the National Debt

Money and the Federal Reserve System

Money Creation

Monetary Policy

The Phillips Curve and Expectations Theory

International Trade and Finance

Economies in Transition

Growth and the Less-Developed Countries

Applying Graphs to Economics

Consumer Surplus, Producer Surplus, and Market Efficiency

Policy Disputes Using the Self-Correcting Aggregate Demand and Supply Model

Filters

Given the shift of the aggregate demand curve from AD₁ to AD₂in Exhibit 6, the real GDP and price level (CPI)in long-run equilibrium will be:

In Exhibit 4, point P₂, Y₁ represents:

Exhibit 4 Macro AD-AS Model In Exhibit 4, the level of real GDP represented by Y_p:

Based on Exhibit 6, when the aggregate demand curve is in the position AD₁, the economy's position of long-run equilibrium corresponds to point: