Question 1

Economic growth is represented in Exhibit 5 by a:

Accepted Answer

A) leftward shift in the long-run aggregate supply curve (LRAS). 
B) inward shift of the production possibilities curve. 
C) rightward shift in the long-run aggregate supply curve (LRAS). 
D) movement along the long-run aggregate supply curve (LRAS). 
A) leftward shift in the long-run aggregate supply curve (LRAS). 
B) inward shift of the production possibilities curve. 
C) rightward shift in the long-run aggregate supply curve (LRAS). 
D) movement along the long-run aggregate supply curve (LRAS).

Question 2

Economic growth is represented by a:

Accepted Answer

A) leftward shift of a production possibilities curve. 
B) rightward shift of the long-run aggregate supply curve (LRAS). 
C) horizontal long-run aggregate supply curve (LRAS). 
D) downward shift of an aggregate production function. 
A) leftward shift of a production possibilities curve. 
B) rightward shift of the long-run aggregate supply curve (LRAS). 
C) horizontal long-run aggregate supply curve (LRAS). 
D) downward shift of an aggregate production function.

Question 3

The short-run aggregate supply curve (SRAS)is based on the theory that wages are flexible.

Accepted Answer

A) True 
 B)False

Question 4

Beginning in Exhibit 6 from long-run equilibrium at point E1, the aggregate demand curve shifts to AD2. The economy's path to a new long-run equilibrium is represented by a movement from:

Accepted Answer

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

Question 5

Based on Exhibit 1, when the aggregate demand curve shifts to the position AD2 and the economy is operating at point E2, the economy's position of long-run equilibrium corresponds to point:

Accepted Answer

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

Question 6

In Exhibit 3, the level of real GDP associated with Y1:

Accepted Answer

A) is equal to potential real GDP. 
B) is an inflationary gap real GDP. 
C) is a long-run equilibrium. 
D) is caused by flexible wages and prices. 
A) is equal to potential real GDP. 
B) is an inflationary gap real GDP. 
C) is a long-run equilibrium. 
D) is caused by flexible wages and prices.

Question 7

Exhibit 1  Aggregate demand and supply model   As shown in Exhibit 1 and assuming the aggregate demand curve shifts from AD1 and AD2 , the full-employment level of real GDP is:

Accepted Answer

A) $12 billion. 
B) $8 billion. 
C) $150 billion. 
D) unable to be determined. 
A) $12 billion. 
B) $8 billion. 
C) $150 billion. 
D) unable to be determined.

Question 8

A decrease in the aggregate demand curve along the LRAS curve, all other things unchanged, will generate ______ in potential real GDP and _______ in the price level.

Accepted Answer

A) an increase; no change 
B) a decrease; no change 
C) no change; an increase 
D) no change; a decrease 
A) an increase; no change 
B) a decrease; no change 
C) no change; an increase 
D) no change; a decrease

Question 9

In the long run, wages and prices are considered to be:

Accepted Answer

A) fixed. 
B) sticky. 
C) flexible. 
D) unstable. 
A) fixed. 
B) sticky. 
C) flexible. 
D) unstable.

Question 10

Beginning from a position of long-run equilibrium at the full-employment level of real GDP, the economy's short-run response to a decrease in the aggregate demand curve would be a:

Accepted Answer

A) movement upward along the short-run aggregate supply curve. 
B) movement upward along the long-run aggregate supply curve. 
C) downward shift in the short-run aggregate supply curve. 
D) movement downward along the short-run aggregate supply curve. 
A) movement upward along the short-run aggregate supply curve. 
B) movement upward along the long-run aggregate supply curve. 
C) downward shift in the short-run aggregate supply curve. 
D) movement downward along the short-run aggregate supply curve.

Question 11

In the self-correcting AD-AS model, the economy's short-run equilibrium position is indicated by the intersection of which two curves?

Accepted Answer

A) Short-run aggregate supply and long-run aggregate supply. 
B) Short-run aggregate supply and aggregate demand. 
C) Long-run aggregate supply and aggregate demand. 
D) Long-run aggregate demand and short-run personal consumption expenditures curve. 
E) Short-run aggregate demand and long-run personal consumption expenditures curve. 
A) Short-run aggregate supply and long-run aggregate supply. 
B) Short-run aggregate supply and aggregate demand. 
C) Long-run aggregate supply and aggregate demand. 
D) Long-run aggregate demand and short-run personal consumption expenditures curve. 
E) Short-run aggregate demand and long-run personal consumption expenditures curve.

Question 12

The position of the long-run aggregate supply curve corresponds to the economy's:

Accepted Answer

A) full-employment real GDP. 
B) maximum possible level of employment. 
C) natural level of personal consumption expenditure. 
D) maximum possible level of personal consumption expenditures. 
E) maximum possible price level. 
A) full-employment real GDP. 
B) maximum possible level of employment. 
C) natural level of personal consumption expenditure. 
D) maximum possible level of personal consumption expenditures. 
E) maximum possible price level.

Question 13

In Exhibit 2, the intersection of AD with SRAS indicates:

Accepted Answer

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

Question 14

Beginning from a position of long-run equilibrium, suppose there is an increase in the aggregate demand curve. After adjustment and comparing the economy's new long-run equilibrium with its original long-run position, the result would be an increase in:

Accepted Answer

A) real GDP. 
B) the price level (CPI). 
C) the unemployment rate. 
D) a and b, but not c. 
A) real GDP. 
B) the price level (CPI). 
C) the unemployment rate. 
D) a and b, but not c.

Question 15

In the self-correcting AD-AS model, a point where the economy's long-run AS curve, short-run AS curve, and AD curve all intersect at a single point represents a point where:

Accepted Answer

A) real GDP is equal to its full-employment level. 
B) the conditions of short-run equilibrium are fulfilled. 
C) the conditions of long-run equilibrium are fulfilled. 
D) all of the above. 
E) a and c, but not b. 
A) real GDP is equal to its full-employment level. 
B) the conditions of short-run equilibrium are fulfilled. 
C) the conditions of long-run equilibrium are fulfilled. 
D) all of the above. 
E) a and c, but not b.

Question 16

The adjustment of nominal incomes to changes in the price level (CPI)is fixed because of the:

Accepted Answer

A) volatility of investment spending. 
B) existence of long-term contracts. 
C) complete information possessed by workers. 
D) all of the above. 
A) volatility of investment spending. 
B) existence of long-term contracts. 
C) complete information possessed by workers. 
D) all of the above.

Question 17

Beginning from short-run equilibrium at point E2 in Exhibit 1, the economy's movement to a new position of long-run equilibrium would best be described as:

Accepted Answer

A) a movement along the AD2 curve with a shift in the SRAS1 curve. 
B) a movement along the SRAS2 curve with a shift in the AD2 curve. 
C) a shift in the LRAS curve to an intersection at E1. 
D) no shift of any kind. 
A) a movement along the AD2 curve with a shift in the SRAS1 curve. 
B) a movement along the SRAS2 curve with a shift in the AD2 curve. 
C) a shift in the LRAS curve to an intersection at E1. 
D) no shift of any kind.

Question 18

Exhibit 3 Macro AD-AS Model       In Exhibit 3, the level of real GDP represented by Yp:

Accepted Answer

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

Question 19

Beginning from long-run equilibrium at point E1 in Exhibit 1, the aggregate demand curve shifts to AD2 . The real GDP and price level (CPI)in short-run equilibrium will be:

Accepted Answer

A) $12 billion and 200. 
B) $8 billion and 250. 
C) $8 billion and 150. 
D) $12 billion and 250. 
A) $12 billion and 200. 
B) $8 billion and 250. 
C) $8 billion and 150. 
D) $12 billion and 250.

Question 20

In the long run, an increase in aggregate demand causes the price level to _______ and the long-run aggregate supply curve to _____________.

Accepted Answer

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

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

Economic growth is represented in Exhibit 5 by a:

Economic growth is represented by a:

The short-run aggregate supply curve (SRAS)is based on the theory that wages are flexible.

Beginning in Exhibit 6 from long-run equilibrium at point E1, the aggregate demand curve shifts to AD2. The economy's path to a new long-run equilibrium is represented by a movement from:

Based on Exhibit 1, when the aggregate demand curve shifts to the position AD2 and the economy is operating at point E2, the economy's position of long-run equilibrium corresponds to point:

In Exhibit 3, the level of real GDP associated with Y1:

Exhibit 1 Aggregate demand and supply model As shown in Exhibit 1 and assuming the aggregate demand curve shifts from AD1 and AD2 , the full-employment level of real GDP is:

A decrease in the aggregate demand curve along the LRAS curve, all other things unchanged, will generate ______ in potential real GDP and _______ in the price level.

In the long run, wages and prices are considered to be:

Beginning from a position of long-run equilibrium at the full-employment level of real GDP, the economy's short-run response to a decrease in the aggregate demand curve would be a:

In the self-correcting AD-AS model, the economy's short-run equilibrium position is indicated by the intersection of which two curves?

The position of the long-run aggregate supply curve corresponds to the economy's:

In Exhibit 2, the intersection of AD with SRAS indicates:

Beginning from a position of long-run equilibrium, suppose there is an increase in the aggregate demand curve. After adjustment and comparing the economy's new long-run equilibrium with its original long-run position, the result would be an increase in:

In the self-correcting AD-AS model, a point where the economy's long-run AS curve, short-run AS curve, and AD curve all intersect at a single point represents a point where:

The adjustment of nominal incomes to changes in the price level (CPI)is fixed because of the:

Beginning from short-run equilibrium at point E2 in Exhibit 1, the economy's movement to a new position of long-run equilibrium would best be described as:

Exhibit 3 Macro AD-AS Model In Exhibit 3, the level of real GDP represented by Yp:

Beginning from long-run equilibrium at point E1 in Exhibit 1, the aggregate demand curve shifts to AD2 . The real GDP and price level (CPI)in short-run equilibrium will be:

In the long run, an increase in aggregate demand causes the price level to _______ and the long-run aggregate supply curve to _____________.

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

Beginning in Exhibit 6 from long-run equilibrium at point E₁, the aggregate demand curve shifts to AD₂. The economy's path to a new long-run equilibrium is represented by a movement from:

Based on Exhibit 1, when the aggregate demand curve shifts to the position AD₂and the economy is operating at point E₂, the economy's position of long-run equilibrium corresponds to point:

In Exhibit 3, the level of real GDP associated with Y₁:

Exhibit 1 Aggregate demand and supply model As shown in Exhibit 1 and assuming the aggregate demand curve shifts from AD₁ and AD₂, the full-employment level of real GDP is:

A decrease in the aggregate demand curve along the LRAS curve, all other things unchanged, will generate in potential real GDP and _ in the price level.

Beginning from short-run equilibrium at point E₂ in Exhibit 1, the economy's movement to a new position of long-run equilibrium would best be described as:

Exhibit 3 Macro AD-AS Model In Exhibit 3, the level of real GDP represented by Y_p:

Beginning from long-run equilibrium at point E₁ in Exhibit 1, the aggregate demand curve shifts to AD₂. The real GDP and price level (CPI)in short-run equilibrium will be:

In the long run, an increase in aggregate demand causes the price level to _ and the long-run aggregate supply curve to _______.