Question 1

A decrease in nominal incomes cause a:

Accepted Answer

A)  rightward shift in the short-run aggregate supply curve. 
B)  leftward shift in the short-run aggregate supply curve. 
C)  rightward shift in the long-run aggregate supply curve. 
D)  leftward shift in the long-run aggregate supply curve. 
A)  rightward shift in the short-run aggregate supply curve. 
B)  leftward shift in the short-run aggregate supply curve. 
C)  rightward shift in the long-run aggregate supply curve. 
D)  leftward shift in the long-run aggregate supply curve.

Question 2

If an economy is operating at short-run equilibrium below the full-employment 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 3

Macro AD-AS Model
In Exhibit 14A-4, the self-correction argument is that in the long run, competition:

Accepted Answer

A)  from unemployed workers causes an increase in nominal wages and a leftward shift in SRAS. 
B)  from unemployed workers causes a rightward shift in SRAS. 
C)  among firms for workers increases nominal wages and this causes a leftward shift in SRAS. 
D)  among consumers causes an increase in the CPI and a rightward shift in SRAS. 
A)  from unemployed workers causes an increase in nominal wages and a leftward shift in SRAS. 
B)  from unemployed workers causes a rightward shift in SRAS. 
C)  among firms for workers increases nominal wages and this causes a leftward shift in SRAS. 
D)  among consumers causes an increase in the CPI and a rightward shift in SRAS.

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 
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

Question 5

The pre-Keynesian or classical economic theory viewed the long-run aggregate supply curve for the economy to be:

Accepted Answer

A)  horizontal at the full-employment level of real GDP. 
B)  positively sloped at the full-employment level of real GDP. 
C)  vertical at the full-employment level of real GDP. 
D)  backward bending at the full-employment level of real GDP. 
A)  horizontal at the full-employment level of real GDP. 
B)  positively sloped at the full-employment level of real GDP. 
C)  vertical at the full-employment level of real GDP. 
D)  backward bending at the full-employment level of real GDP.

Question 6

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. 
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.

Question 7

Exhibit 14A-1 Aggregate demand and supply model
 
Beginning from long-run equilibrium at point E1 in Exhibit 14A-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 8

Which of the following is true , other things equal?

Accepted Answer

A)  A reduction in prices will increase the real wealth of those holding a fixed quantity of money. 
B)  A reduction in prices will lead to a decline in net exports. 
C)  A reduction in prices will increase the scarcity of money, raise the real interest rate, and, thereby, encourage investment and consumption. 
D)  A reduction in prices will increase profit margins and, thereby, stimulate additional investment. 
A)  A reduction in prices will increase the real wealth of those holding a fixed quantity of money. 
B)  A reduction in prices will lead to a decline in net exports. 
C)  A reduction in prices will increase the scarcity of money, raise the real interest rate, and, thereby, encourage investment and consumption. 
D)  A reduction in prices will increase profit margins and, thereby, stimulate additional investment.

Question 9

Which of the following is not a reason for the downward slope of the aggregate demand curve?

Accepted Answer

A)  Real balances effect 
B)  Interest-rate effect 
C)  Net exports effect 
D)  Government spending effect 
A)  Real balances effect 
B)  Interest-rate effect 
C)  Net exports effect 
D)  Government spending effect

Question 10

The net exports effect is the ____ relationship between net exports and the price level of an economy.

Accepted Answer

A)  inverse 
B)  independent 
C)  direct 
D)  linear 
A)  inverse 
B)  independent 
C)  direct 
D)  linear

Question 11

According to the net exports effect, as the price level falls relative to the rest of the world,

Accepted Answer

A)  foreigners buy fewer goods. 
B)  foreigners buy more U.S. goods. 
C)  the aggregate demand curve shifts to the left. 
D)  the aggregate demand curve shifts to the right. 
A)  foreigners buy fewer goods. 
B)  foreigners buy more U.S. goods. 
C)  the aggregate demand curve shifts to the left. 
D)  the aggregate demand curve shifts to the right.

Question 12

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 
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

Question 13

The aggregate demand curve shows how real GDP purchased varies with changes in:

Accepted Answer

A)  unemployment. 
B)  the price of a particular good. 
C)  the overall price level. 
D)  the interest rate. 
A)  unemployment. 
B)  the price of a particular good. 
C)  the overall price level. 
D)  the interest rate.

Question 14

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 15

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 16

Other factors held constant, a decrease in resource prices will shift the aggregate:

Accepted Answer

A)  demand curve leftward. 
B)  demand curve rightward. 
C)  supply curve leftward. 
D)  supply curve rightward. 
A)  demand curve leftward. 
B)  demand curve rightward. 
C)  supply curve leftward. 
D)  supply curve rightward.

Question 17

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)  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)  aggregate demand (A
D)  equals short-run aggregate supply (SRAS) equals long-run aggregate supply (LRAS).

Question 18

The aggregate supply curve will shift to the right when the:

Accepted Answer

A)  amount of labor in the society decreases. 
B)  capital stock of the society shrinks. 
C)  amount of natural resources in the society gets smaller. 
D)  amount of labor in the society increases. 
A)  amount of labor in the society decreases. 
B)  capital stock of the society shrinks. 
C)  amount of natural resources in the society gets smaller. 
D)  amount of labor in the society increases.

Question 19

Along the classical or vertical range of the aggregate supply curve, an increase in the aggregate demand curve will increase:

Accepted Answer

A)  both the price level and real GDP. 
B)  only real GDP. 
C)  only the price level. 
D)  real GDP and reduce the price level. 
A)  both the price level and real GDP. 
B)  only real GDP. 
C)  only the price level. 
D)  real GDP and reduce the price level.

Question 20

Suppose an increase in government spending stimulates real GDP without affecting the price level. What is the relevant range of the aggregate supply curve in this case?

Accepted Answer

A)  the classical range 
B)  the intermediate range 
C)  the Keynesian range 
D)  the monetarist range 
A)  the classical range 
B)  the intermediate range 
C)  the Keynesian range 
D)  the monetarist range

Exam 14: Aggregate Demand and Supply

A decrease in nominal incomes cause a:

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

Macro AD-AS Model In Exhibit 14A-4, the self-correction argument is that in the long run, competition:

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

The pre-Keynesian or classical economic theory viewed the long-run aggregate supply curve for the economy to be:

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

Exhibit 14A-1 Aggregate demand and supply model Beginning from long-run equilibrium at point E1 in Exhibit 14A-1, the aggregate demand curve shifts to AD2 . The real GDP and price level (CPI) in short-run equilibrium will be:

Which of the following is true , other things equal?

Which of the following is not a reason for the downward slope of the aggregate demand curve?

The net exports effect is the ____ relationship between net exports and the price level of an economy.

According to the net exports effect, as the price level falls relative to the rest of the world,

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

The aggregate demand curve shows how real GDP purchased varies with changes in:

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:

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

Other factors held constant, a decrease in resource prices will shift the aggregate:

Long-run full-employment equilibrium assumes:

The aggregate supply curve will shift to the right when the:

Along the classical or vertical range of the aggregate supply curve, an increase in the aggregate demand curve will increase:

Suppose an increase in government spending stimulates real GDP without affecting the price level. What is the relevant range of the aggregate supply curve in this case?

Introducing the Economic Way of Thinking

Production Possibilities Opportunity Cost and Economic Growth

Market Demand and Supply

Markets in Action

Price Elasticity of Demand and Supply

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

Monetary Policy

International Trade and Finance

Economies in Transition

Growth and the Less Developed Countries

Filters

Exhibit 14A-1 Aggregate demand and supply model Beginning from long-run equilibrium at point E₁ in Exhibit 14A-1, the aggregate demand curve shifts to AD₂ . The real GDP and price level (CPI) in short-run equilibrium will be:

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: