Question 1

An increase in aggregate demand in the long run will most likely result in:

Accepted Answer

A)  a decrease in price and output levels. 
B)  an increase in price and output levels. 
C)  an increase in the price level and a decrease in output. 
D)  a decrease in the price level and an increase in output. 
E)  an increase in the price level but no change in output. 
A)  a decrease in price and output levels. 
B)  an increase in price and output levels. 
C)  an increase in the price level and a decrease in output. 
D)  a decrease in the price level and an increase in output. 
E)  an increase in the price level but no change in output.

Question 2

Suppose the actual and expected price levels in an economy are initially equal. However, the actual price level becomes higher due to some change in economic conditions. Which of the following will occur eventually?

Accepted Answer

A)  The economy will move rightward along the short-run aggregate supply curve. 
B)  The economy will move leftward along the short-run aggregate supply curve. 
C)  The short-run aggregate supply curve will shift to the right. 
D)  The short-run aggregate supply curve will shift to the left. 
E)  The short-run aggregate supply curve will become flatter. 
A)  The economy will move rightward along the short-run aggregate supply curve. 
B)  The economy will move leftward along the short-run aggregate supply curve. 
C)  The short-run aggregate supply curve will shift to the right. 
D)  The short-run aggregate supply curve will shift to the left. 
E)  The short-run aggregate supply curve will become flatter.

Question 3

Which of the following types of unemployment is likely to exist in an economy that is at its potential output level?

Accepted Answer

A)  Cyclical unemployment only 
B)  Structural unemployment only 
C)  Frictional, cyclical, and seasonal unemployment only 
D)  Frictional, seasonal, and structural unemployment only 
E)  Seasonal unemployment only 
A)  Cyclical unemployment only 
B)  Structural unemployment only 
C)  Frictional, cyclical, and seasonal unemployment only 
D)  Frictional, seasonal, and structural unemployment only 
E)  Seasonal unemployment only

Question 4

In the aggregate demand-aggregate supply model, which of these changes is most likely when the cost of production increases in the long run?

Accepted Answer

A)  A leftward shift of the short-run aggregate supply curve 
B)  A leftward shift of the short-run aggregate demand curve 
C)  A rightward shift of the short-run aggregate supply curve 
D)  An increase in the potential output level increases. 
E)  A decrease in the actual price level decreases. 
A)  A leftward shift of the short-run aggregate supply curve 
B)  A leftward shift of the short-run aggregate demand curve 
C)  A rightward shift of the short-run aggregate supply curve 
D)  An increase in the potential output level increases. 
E)  A decrease in the actual price level decreases.

Question 5

Which of the following is most likely to cause the long-run aggregate supply curve to shift rightward?

Accepted Answer

A)  A rise in energy prices 
B)  A drop in the actual price level 
C)  An increase in the demand for leisure hours 
D)  An increase in the level of investment spending that is less than the depreciation of the capital stock 
E)  A technological breakthrough with widespread practical applications 
A)  A rise in energy prices 
B)  A drop in the actual price level 
C)  An increase in the demand for leisure hours 
D)  An increase in the level of investment spending that is less than the depreciation of the capital stock 
E)  A technological breakthrough with widespread practical applications

Question 6

The longer the unemployment rate remains above the natural rate, the higher the natural rate. This theory is known as historical analysis.

Accepted Answer

A) True 
 B)False

Question 7

The short-run aggregate supply curve:

Accepted Answer

A)  is positively sloped. 
B)  is negatively sloped. 
C)  is a vertical line parallel to the price level axis. 
D)  is a horizontal line parallel to the output axis. 
E)  is a ray from the origin with slope exactly equal to 1. 
A)  is positively sloped. 
B)  is negatively sloped. 
C)  is a vertical line parallel to the price level axis. 
D)  is a horizontal line parallel to the output axis. 
E)  is a ray from the origin with slope exactly equal to 1.

Question 8

For the aggregate demand and aggregate supply listed in schedule #3 of the table given below, the equilibrium output level and price level are:

Accepted Answer

A)  $7.0 and 110, respectively. 
B)  $6.5 and 120, respectively. 
C)  $6.0 and 130, respectively. 
D)  $5.5 and 140, respectively. 
E)  $5.0 and 150, respectively. 
A)  $7.0 and 110, respectively. 
B)  $6.5 and 120, respectively. 
C)  $6.0 and 130, respectively. 
D)  $5.5 and 140, respectively. 
E)  $5.0 and 150, respectively.

Question 9

The figure below shows equilibrium in an aggregate demand-aggregate supply model. The shift from AS to AS' in this figure represents a(n):

Accepted Answer

A)  increase in short-run aggregate supply. 
B)  increase in long-run aggregate supply. 
C)  decrease in short-run aggregate supply. 
D)  decrease in long-run aggregate supply. 
E)  decrease in the aggregate quantity demanded. 
A)  increase in short-run aggregate supply. 
B)  increase in long-run aggregate supply. 
C)  decrease in short-run aggregate supply. 
D)  decrease in long-run aggregate supply. 
E)  decrease in the aggregate quantity demanded.

Question 10

Which of the following explains the shape of the short-run aggregate supply curve?

Accepted Answer

A)  The inverse relationship between the quantity supplied and the cost per 
B)  The direct relationship between the quantity supplied and the cost per unit 
C)  The direct relationship between the quantity supplied and the price level 
D)  The inverse relationship between quantity supplied and GDP 
E)  The inverse relationship between quantity supplied and the profit per unit 
A)  The inverse relationship between the quantity supplied and the cost per 
B)  The direct relationship between the quantity supplied and the cost per unit 
C)  The direct relationship between the quantity supplied and the price level 
D)  The inverse relationship between quantity supplied and GDP 
E)  The inverse relationship between quantity supplied and the profit per unit

Question 11

The figure below shows the short-run aggregate demand and supply curves of an economy. When real GDP is at Y2, _____.

Accepted Answer

A)  potential output is greater than actual output. 
B)  there is a recessionary gap. 
C)  the price level is likely to fall. 
D)  the actual unemployment rate is less than the natural rate of unemployment. 
E)  aggregate demand is likely to increase to restore equilibrium. 
A)  potential output is greater than actual output. 
B)  there is a recessionary gap. 
C)  the price level is likely to fall. 
D)  the actual unemployment rate is less than the natural rate of unemployment. 
E)  aggregate demand is likely to increase to restore equilibrium.

Question 12

Suppose the actual and expected price levels in an economy are initially equal. However, the actual price level falls eventually due to a change in economic conditions. Which of the following will occur over the long run?

Accepted Answer

A)  The economy will move rightward along the short-run aggregate supply curve. 
B)  The economy will move leftward along the short-run aggregate supply curve. 
C)  The short-run aggregate supply curve will shift to the right. 
D)  The short-run aggregate supply curve will shift to the left. 
E)  The short-run aggregate supply curve will become flatter. 
A)  The economy will move rightward along the short-run aggregate supply curve. 
B)  The economy will move leftward along the short-run aggregate supply curve. 
C)  The short-run aggregate supply curve will shift to the right. 
D)  The short-run aggregate supply curve will shift to the left. 
E)  The short-run aggregate supply curve will become flatter.

Question 13

The natural rate of unemployment includes frictional, cyclical, and structural unemployment.

Accepted Answer

A) True 
 B)False

Question 14

The figure below shows equilibrium in an aggregate demand-aggregate supply model. Which of these situations will be experienced by the economy as it moves from point e to point e'?

Accepted Answer

A)  An expansionary gap 
B)  A decline in potential GDP 
C)  Overutilization of resources 
D)  Deflation 
E)  Cost-push inflation 
A)  An expansionary gap 
B)  A decline in potential GDP 
C)  Overutilization of resources 
D)  Deflation 
E)  Cost-push inflation

Question 15

If the actual price level is less than the expected price level reflected in long-term contracts, _____.

Accepted Answer

A)  firms will find production more profitable in the short run than they had expected and will decrease the quantity of output supplied 
B)  firms will find production less profitable in the short run than they had expected and will decrease the quantity of output supplied 
C)  firms will find production more profitable in the short run than they had expected and will increase the quantity of output supplied 
D)  resource owners will earn higher returns in the short run than they had expected and will decrease the quantity of resources supplied 
E)  unemployment will increase in the short run as firms will substitute labor with capital inputs 
A)  firms will find production more profitable in the short run than they had expected and will decrease the quantity of output supplied 
B)  firms will find production less profitable in the short run than they had expected and will decrease the quantity of output supplied 
C)  firms will find production more profitable in the short run than they had expected and will increase the quantity of output supplied 
D)  resource owners will earn higher returns in the short run than they had expected and will decrease the quantity of resources supplied 
E)  unemployment will increase in the short run as firms will substitute labor with capital inputs

Question 16

The long run is the period of time during which:

Accepted Answer

A)  real wage is exactly equal to nominal wage. 
B)  inflation is zero. 
C)  excess aggregate demand leads to a shortage. 
D)  real wages are constant. 
E)  all resource prices can be varied. 
A)  real wage is exactly equal to nominal wage. 
B)  inflation is zero. 
C)  excess aggregate demand leads to a shortage. 
D)  real wages are constant. 
E)  all resource prices can be varied.

Question 17

At the potential level of output, there is no seasonal unemployment.

Accepted Answer

A) True 
 B)False

Question 18

Consider schedule #1 in the aggregate demand and aggregate supply table given below. The equilibrium output and price level for the economy described on this schedule are:

Accepted Answer

A)  $7.0 and 110, respectively. 
B)  $6.5 and 120, respectively. 
C)  $6.0 and 130, respectively. 
D)  $5.5 and 140, respectively. 
E)  $5.0 and 150, respectively. 
A)  $7.0 and 110, respectively. 
B)  $6.5 and 120, respectively. 
C)  $6.0 and 130, respectively. 
D)  $5.5 and 140, respectively. 
E)  $5.0 and 150, respectively.

Question 19

During a particular year, nominal wages increased by 4 percent but real wages declined by 2 percent. This implies that the price level increased by 6 percent.

Accepted Answer

A) True 
 B)False

Question 20

The figure given below depicts long-run equilibrium in the aggregate demand-aggregate supply model. The movement from Y1 to Y2 in this figure could have been caused by a:

Accepted Answer

A)  decrease in the size of the labor force. 
B)  decrease in the price level. 
C)  positive level of net investment. 
D)  increase in autonomous consumption. 
E)  decrease in autonomous consumption. 
A)  decrease in the size of the labor force. 
B)  decrease in the price level. 
C)  positive level of net investment. 
D)  increase in autonomous consumption. 
E)  decrease in autonomous consumption.

An increase in aggregate demand in the long run will most likely result in:

Suppose the actual and expected price levels in an economy are initially equal. However, the actual price level becomes higher due to some change in economic conditions. Which of the following will occur eventually?

Which of the following types of unemployment is likely to exist in an economy that is at its potential output level?

In the aggregate demand-aggregate supply model, which of these changes is most likely when the cost of production increases in the long run?

Which of the following is most likely to cause the long-run aggregate supply curve to shift rightward?

The longer the unemployment rate remains above the natural rate, the higher the natural rate. This theory is known as historical analysis.

The short-run aggregate supply curve:

For the aggregate demand and aggregate supply listed in schedule #3 of the table given below, the equilibrium output level and price level are:

The figure below shows equilibrium in an aggregate demand-aggregate supply model. The shift from AS to AS' in this figure represents a(n):

Which of the following explains the shape of the short-run aggregate supply curve?

The figure below shows the short-run aggregate demand and supply curves of an economy. When real GDP is at Y₂, _____.

Suppose the actual and expected price levels in an economy are initially equal. However, the actual price level falls eventually due to a change in economic conditions. Which of the following will occur over the long run?

The natural rate of unemployment includes frictional, cyclical, and structural unemployment.

The figure below shows equilibrium in an aggregate demand-aggregate supply model. Which of these situations will be experienced by the economy as it moves from point e to point e'?

If the actual price level is less than the expected price level reflected in long-term contracts, _____.

The long run is the period of time during which:

At the potential level of output, there is no seasonal unemployment.

Consider schedule #1 in the aggregate demand and aggregate supply table given below. The equilibrium output and price level for the economy described on this schedule are:

During a particular year, nominal wages increased by 4 percent but real wages declined by 2 percent. This implies that the price level increased by 6 percent.

The figure given below depicts long-run equilibrium in the aggregate demand-aggregate supply model. The movement from Y₁ to Y₂ in this figure could have been caused by a:

The Art and Science of Economic Analysis

Some Tools of Economic Analysis

Economic Decision Makers

Demand, Supply, and Markets

Introduction to Macroeconomics

Tracking the U S Economy

Unemployment and Inflation

Us Productivity and Growth

Aggregate Demand

Fiscal Policy

Federal Budgets and Public Policy

Money and the Financial System

Banking and the Money Supply

Monetary Theory and Policy

The Policy Debate: Active or Passive

International Trade

International Finance

Economic Development

Filters

Exam 10: Aggregate Supply

An increase in aggregate demand in the long run will most likely result in:

Suppose the actual and expected price levels in an economy are initially equal. However, the actual price level becomes higher due to some change in economic conditions. Which of the following will occur eventually?

Which of the following types of unemployment is likely to exist in an economy that is at its potential output level?

In the aggregate demand-aggregate supply model, which of these changes is most likely when the cost of production increases in the long run?

Which of the following is most likely to cause the long-run aggregate supply curve to shift rightward?

The longer the unemployment rate remains above the natural rate, the higher the natural rate. This theory is known as historical analysis.

The short-run aggregate supply curve:

For the aggregate demand and aggregate supply listed in schedule #3 of the table given below, the equilibrium output level and price level are:

The figure below shows equilibrium in an aggregate demand-aggregate supply model. The shift from AS to AS' in this figure represents a(n):

Which of the following explains the shape of the short-run aggregate supply curve?

The figure below shows the short-run aggregate demand and supply curves of an economy. When real GDP is at Y2, _____.

Suppose the actual and expected price levels in an economy are initially equal. However, the actual price level falls eventually due to a change in economic conditions. Which of the following will occur over the long run?

The natural rate of unemployment includes frictional, cyclical, and structural unemployment.

The figure below shows equilibrium in an aggregate demand-aggregate supply model. Which of these situations will be experienced by the economy as it moves from point e to point e'?

If the actual price level is less than the expected price level reflected in long-term contracts, _____.

The long run is the period of time during which:

At the potential level of output, there is no seasonal unemployment.

Consider schedule #1 in the aggregate demand and aggregate supply table given below. The equilibrium output and price level for the economy described on this schedule are:

During a particular year, nominal wages increased by 4 percent but real wages declined by 2 percent. This implies that the price level increased by 6 percent.

The figure given below depicts long-run equilibrium in the aggregate demand-aggregate supply model. The movement from Y1 to Y2 in this figure could have been caused by a:

The Art and Science of Economic Analysis

Some Tools of Economic Analysis

Economic Decision Makers

Demand, Supply, and Markets

Introduction to Macroeconomics

Tracking the U S Economy

Unemployment and Inflation

Us Productivity and Growth

Aggregate Demand

Fiscal Policy

Federal Budgets and Public Policy

Money and the Financial System

Banking and the Money Supply

Monetary Theory and Policy

The Policy Debate: Active or Passive

International Trade

International Finance

Economic Development

Filters

The figure below shows the short-run aggregate demand and supply curves of an economy. When real GDP is at Y₂, _____.

The figure given below depicts long-run equilibrium in the aggregate demand-aggregate supply model. The movement from Y₁ to Y₂ in this figure could have been caused by a: