Question 1

The long-run aggregate supply curve (LRAS) is:

Accepted Answer

A)  a vertical curve that relates the level of real GDP produced to the price level in the long run. 
B)  an upward sloping curve that relates the level of real GDP produced to the price level in the long run. 
C)  an infinite curve that relates the level of real GDP produced to the price level in the long run. 
D)  none of the above are true. 
A)  a vertical curve that relates the level of real GDP produced to the price level in the long run. 
B)  an upward sloping curve that relates the level of real GDP produced to the price level in the long run. 
C)  an infinite curve that relates the level of real GDP produced to the price level in the long run. 
D)  none of the above are true.

Question 2

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 3

The intersection between the long-run aggregate supply and aggregate demand curves determines the:

Accepted Answer

A)  level of full-employment real GDP. 
B)  level of prices (CPI). 
C)  money supply. 
D)  marginal product. 
E)  both a and b. 
A)  level of full-employment real GDP. 
B)  level of prices (CPI). 
C)  money supply. 
D)  marginal product. 
E)  both a and b.

Question 4

Which of the following causes a leftward shift in the short-run aggregate supply curve?

Accepted Answer

A)  An increase of goods prices while nominal incomes are unchanged. 
B)  An increase in nominal incomes (wages and salaries). 
C)  An increase of full-employment real GDP. 
D)  An increase of personal consumption expenditures while the price level is unchanged. 
E)  An increase of personal consumption expenditures while full-employment real GDP is unchanged. 
A)  An increase of goods prices while nominal incomes are unchanged. 
B)  An increase in nominal incomes (wages and salaries). 
C)  An increase of full-employment real GDP. 
D)  An increase of personal consumption expenditures while the price level is unchanged. 
E)  An increase of personal consumption expenditures while full-employment real GDP is unchanged.

Question 5

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.

Question 6

Exhibit 14A-1  Aggregate demand and supply model   As shown in Exhibit 14A-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 7

Exhibit 14A-6  Aggregate demand and supply model   Given the shift of the aggregate demand curve from AD1 to AD2 in Exhibit 14A-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

Exhibit 14A-5  Macro AD-AS Model   Given the shift of the aggregate demand curve from AD1 to AD2 in Exhibit 14A-5, the real GDP and price level (CPI) in long-run equilibrium will be:

Accepted Answer

A)  P2, Y1. 
B)  P3, Yp. 
C)  P2,Yp. 
D)  P1, Yp. 
A)  P2, Y1. 
B)  P3, Yp. 
C)  P2,Yp. 
D)  P1, Yp.

Question 9

Exhibit 14A-1  Aggregate demand and supply model   As shown in Exhibit 14A-1, the economy's point of short-run equilibrium, given by the shift of the aggregate demand curve from AD1 to AD2 , is:

Accepted Answer

A)  E1. 
B)  E2. 
C)  E3. 
D)  unable to be determined. 
A)  E1. 
B)  E2. 
C)  E3. 
D)  unable to be determined.

Question 10

Exhibit 14A-6  Aggregate demand and supply model   Beginning from long-run equilibrium at point E1 in Exhibit 14A-6, the aggregate demand curve shifts to AD2. The real GDP and price level (CPI) in short-run equilibrium will be:

Accepted Answer

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

Question 11

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 12

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 13

Exhibit 14A-3  Macro AD-AS Model   In Exhibit 14A-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 14

If an economy is operating at short-run equilibrium below the level of real GDP, the self-correction model result is that:

Accepted Answer

A)  unemployment increases. 
B)  unemployment falls. 
C)  cyclical unemployment increases. 
D)  frictional and structural unemployment increase. 
A)  unemployment increases. 
B)  unemployment falls. 
C)  cyclical unemployment increases. 
D)  frictional and structural unemployment increase.

Question 15

The long-run aggregate supply curve (LRAS) corresponds to full-employment real GDP with zero frictional and structural unemployment.

Accepted Answer

A) True 
 B)False

Question 16

Exhibit 14A-6  Aggregate demand and supply model   Beginning from a point of short-run equilibrium at point E2 in Exhibit 14A-6, the economy's movement to a new position of long-run equilibrium from that point would best be described as:

Accepted Answer

A)  a movement along the AD2 curve caused by a shift in the SRAS1 curve to SRAS2. 
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 E3. 
D)  no shift of any kind. 
A)  a movement along the AD2 curve caused by a shift in the SRAS1 curve to SRAS2. 
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 E3. 
D)  no shift of any kind.

Question 17

In the long run, a decrease 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

Question 18

Exhibit 14A-2  Macro AD-AS Model   In Exhibit 14A-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 19

In long-run full-employment equilibrium, the CPI equals AD equals SRAS equals LRAS.

Accepted Answer

A) True 
 B)False

Question 20

Exhibit 14A-1  Aggregate demand and supply model   Based on Exhibit 14A-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.

Exam 14: Aggregate Demand and Supply

The long-run aggregate supply curve (LRAS) is:

Nominal wages are assumed fixed in the short run because:

The intersection between the long-run aggregate supply and aggregate demand curves determines the:

Which of the following causes a leftward shift in the short-run aggregate supply curve?

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

Exhibit 14A-1 Aggregate demand and supply model As shown in Exhibit 14A-1 and assuming the aggregate demand curve shifts from AD1 and AD2 , the full-employment level of real GDP is:

Exhibit 14A-6 Aggregate demand and supply model Given the shift of the aggregate demand curve from AD1 to AD2 in Exhibit 14A-6, the real GDP and price level (CPI) in long-run equilibrium will be:

Exhibit 14A-5 Macro AD-AS Model Given the shift of the aggregate demand curve from AD1 to AD2 in Exhibit 14A-5, the real GDP and price level (CPI) in long-run equilibrium will be:

Exhibit 14A-1 Aggregate demand and supply model As shown in Exhibit 14A-1, the economy's point of short-run equilibrium, given by the shift of the aggregate demand curve from AD1 to AD2 , is:

Exhibit 14A-6 Aggregate demand and supply model Beginning from long-run equilibrium at point E1 in Exhibit 14A-6, the aggregate demand curve shifts to AD2. The real GDP and price level (CPI) in short-run equilibrium will be:

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

Long-run full-employment equilibrium assumes:

Exhibit 14A-3 Macro AD-AS Model In Exhibit 14A-3, the level of real GDP represented by Yp:

If an economy is operating at short-run equilibrium below the level of real GDP, the self-correction model result is that:

The long-run aggregate supply curve (LRAS) corresponds to full-employment real GDP with zero frictional and structural unemployment.

Exhibit 14A-6 Aggregate demand and supply model Beginning from a point of short-run equilibrium at point E2 in Exhibit 14A-6, the economy's movement to a new position of long-run equilibrium from that point would best be described as:

In the long run, a decrease in aggregate demand causes the price level to ____ and the long-run aggregate supply curve to ____.

Exhibit 14A-2 Macro AD-AS Model In Exhibit 14A-2, the intersection of AD with SRAS indicates:

In long-run full-employment equilibrium, the CPI equals AD equals SRAS equals LRAS.

Exhibit 14A-1 Aggregate demand and supply model Based on Exhibit 14A-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:

Introducing the Economic Way of Thinking

Production Possibilities, Opportunity Cost, and Economic Growth

Market Demand and Supply

Markets in Action

Price Elasticity of Demand

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets and Income Distribution

Gross Domestic Product

Business Cycles and Unemployment

Inflation

Fiscal Policy

The Public Sector

Federal Deficits, Surpluses, and the National Debt

Money and the Federal Reserve System

Money Creation

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

International Trade and Finance

Economies in Transition

Growth and the Less-Developed Countries

Filters

Exhibit 14A-1 Aggregate demand and supply model As shown in Exhibit 14A-1 and assuming the aggregate demand curve shifts from AD₁ and AD₂ , the full-employment level of real GDP is:

Exhibit 14A-6 Aggregate demand and supply model Given the shift of the aggregate demand curve from AD₁ to AD₂ in Exhibit 14A-6, the real GDP and price level (CPI) in long-run equilibrium will be:

Exhibit 14A-5 Macro AD-AS Model Given the shift of the aggregate demand curve from AD₁ to AD₂ in Exhibit 14A-5, the real GDP and price level (CPI) in long-run equilibrium will be:

Exhibit 14A-1 Aggregate demand and supply model As shown in Exhibit 14A-1, the economy's point of short-run equilibrium, given by the shift of the aggregate demand curve from AD₁ to AD₂ , is:

Exhibit 14A-6 Aggregate demand and supply model Beginning from long-run equilibrium at point E₁ in Exhibit 14A-6, the aggregate demand curve shifts to AD₂. The real GDP and price level (CPI) in short-run equilibrium will be:

Exhibit 14A-3 Macro AD-AS Model In Exhibit 14A-3, the level of real GDP represented by Y_p:

Exhibit 14A-6 Aggregate demand and supply model Beginning from a point of short-run equilibrium at point E₂ in Exhibit 14A-6, the economy's movement to a new position of long-run equilibrium from that point would best be described as:

In the long run, a decrease in aggregate demand causes the price level to and the long-run aggregate supply curve to .

Exhibit 14A-1 Aggregate demand and supply model Based on Exhibit 14A-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: