Question 1

When the economy is operating at an output beyond its full-employment potential, the

Accepted Answer

A)  actual level of unemployment will exceed the natural rate of unemployment. 
B)  actual level of unemployment will equal the natural rate of unemployment. 
C)  strong demand for resources will place upward pressure on resource prices. 
D)  aggregate demand will increase until full employment is restored. 
A)  actual level of unemployment will exceed the natural rate of unemployment. 
B)  actual level of unemployment will equal the natural rate of unemployment. 
C)  strong demand for resources will place upward pressure on resource prices. 
D)  aggregate demand will increase until full employment is restored.

Question 2

Which of the following will most likely increase aggregate demand?

Accepted Answer

A)  a decrease in stock market prices 
B)  a lower real interest rate 
C)  a decrease in the expected inflation rate 
D)  a decrease in real GDP 
A)  a decrease in stock market prices 
B)  a lower real interest rate 
C)  a decrease in the expected inflation rate 
D)  a decrease in real GDP

Question 3

An increase in the consumer sentiment index indicates that consumers are

Accepted Answer

A)  becoming more optimistic about their future income and employment prospects. 
B)  becoming less optimistic about their future income and employment prospects. 
C)  expecting the inflation rate to rise in the near future. 
D)  expecting the inflation rate to fall in the near future. 
A)  becoming more optimistic about their future income and employment prospects. 
B)  becoming less optimistic about their future income and employment prospects. 
C)  expecting the inflation rate to rise in the near future. 
D)  expecting the inflation rate to fall in the near future.

Question 4

An economic contraction caused by a shift in aggregate demand causes prices to

Accepted Answer

A)  rise in the short run, and rise even more in the long run. 
B)  rise in the short run, and fall back to their original level in the long run. 
C)  fall in the short run, and fall even more in the long run. 
D)  fall in the short run, and rise back to their original level in the long run. 
A)  rise in the short run, and rise even more in the long run. 
B)  rise in the short run, and fall back to their original level in the long run. 
C)  fall in the short run, and fall even more in the long run. 
D)  fall in the short run, and rise back to their original level in the long run.

Question 5

If there is an unanticipated increase in aggregate demand, which of the following is most likely to occur?

Accepted Answer

A)  a reduction in the price level 
B)  an increase in the rate of unemployment 
C)  an increase in employment 
D)  an expansion in the federal budget deficit 
A)  a reduction in the price level 
B)  an increase in the rate of unemployment 
C)  an increase in employment 
D)  an expansion in the federal budget deficit

Question 6

Use the figure below to answer the following question(s). Figure 10-7
  At what output level would the actual rate of unemployment equal the economy's natural rate of unemployment in Figure 10-7?

Accepted Answer

A)  y1 
B)  y2 
C)  at any output greater than y2 
D)  at any output less than y1 
A)  y1 
B)  y2 
C)  at any output greater than y2 
D)  at any output less than y1

Question 7

Which of the following factors would increase aggregate demand in the goods and services market?

Accepted Answer

A)  an decrease in stock prices 
B)  an increase in the real interest rate 
C)  a decrease in real incomes abroad 
D)  increased optimism on the part of consumers and businesses 
A)  an decrease in stock prices 
B)  an increase in the real interest rate 
C)  a decrease in real incomes abroad 
D)  increased optimism on the part of consumers and businesses

Question 8

When an economy is temporarily operating at an output that is beyond its full-employment rate,

Accepted Answer

A)  excess supply in resource markets will eventually lead to lower resource prices, which will decrease costs and direct the economy toward full employment. 
B)  excess demand in resource markets will lead to higher resource prices, which will increase costs and direct the economy toward full employment. 
C)  lower wages and prices will quickly restore full employment. 
D)  only restrictive fiscal policy will direct the economy back to full employment. 
A)  excess supply in resource markets will eventually lead to lower resource prices, which will decrease costs and direct the economy toward full employment. 
B)  excess demand in resource markets will lead to higher resource prices, which will increase costs and direct the economy toward full employment. 
C)  lower wages and prices will quickly restore full employment. 
D)  only restrictive fiscal policy will direct the economy back to full employment.

Question 9

The stability of consumption over the business cycle and the ability of changes in the real interest rate to redirect aggregate demand indicate that

Accepted Answer

A)  government policy can improve the performance of the economy. 
B)  market economies are inherently unstable. 
C)  a market economy has a self-correcting mechanism that will help guide it toward full employment. 
D)  recessions will be lengthy, and high rates of unemployment will persist for a period of time even after the economy recovers. 
A)  government policy can improve the performance of the economy. 
B)  market economies are inherently unstable. 
C)  a market economy has a self-correcting mechanism that will help guide it toward full employment. 
D)  recessions will be lengthy, and high rates of unemployment will persist for a period of time even after the economy recovers.

Question 10

Within the AD/AS model, an unanticipated increase in short-run aggregate supply will cause real output to

Accepted Answer

A)  increase and the general level of prices to fall. 
B)  decrease and the general level of prices to rise. 
C)  increase and the general level of prices to rise. 
D)  decrease and the general level of prices to fall. 
A)  increase and the general level of prices to fall. 
B)  decrease and the general level of prices to rise. 
C)  increase and the general level of prices to rise. 
D)  decrease and the general level of prices to fall.

Question 11

When the economy is operating at an output rate less than full-employment capacity,

Accepted Answer

A)  a strong demand for resources will cause resource prices to rise. 
B)  actual unemployment will be less than the natural rate of unemployment. 
C)  the rate of inflation will tend to rise. 
D)  weak demand for investment will place downward pressure on real interest rates. 
A)  a strong demand for resources will cause resource prices to rise. 
B)  actual unemployment will be less than the natural rate of unemployment. 
C)  the rate of inflation will tend to rise. 
D)  weak demand for investment will place downward pressure on real interest rates.

Question 12

Which of the following would cause prices to fall and output to rise in the short run?

Accepted Answer

A)  Short-run aggregate supply shifts right. 
B)  Short-run aggregate supply shifts left. 
C)  Aggregate demand shifts right. 
D)  Aggregate demand shifts left. 
A)  Short-run aggregate supply shifts right. 
B)  Short-run aggregate supply shifts left. 
C)  Aggregate demand shifts right. 
D)  Aggregate demand shifts left.

Question 13

Which of the following would be most likely to cause a reduction in current aggregate demand in the United States?

Accepted Answer

A)  Increased business optimism about the future. 
B)  The economies of key trading partners fall into a recession. 
C)  A sharp increase in the value of stocks owned by Americans. 
D)  An increase in the expected rate of inflation. 
A)  Increased business optimism about the future. 
B)  The economies of key trading partners fall into a recession. 
C)  A sharp increase in the value of stocks owned by Americans. 
D)  An increase in the expected rate of inflation.

When the economy is operating at an output beyond its full-employment potential, the

Which of the following will most likely increase aggregate demand?

An increase in the consumer sentiment index indicates that consumers are

An economic contraction caused by a shift in aggregate demand causes prices to

If there is an unanticipated increase in aggregate demand, which of the following is most likely to occur?

Use the figure below to answer the following question(s). Figure 10-7 At what output level would the actual rate of unemployment equal the economy's natural rate of unemployment in Figure 10-7?

Which of the following factors would increase aggregate demand in the goods and services market?

When an economy is temporarily operating at an output that is beyond its full-employment rate,

The stability of consumption over the business cycle and the ability of changes in the real interest rate to redirect aggregate demand indicate that

Within the AD/AS model, an unanticipated increase in short-run aggregate supply will cause real output to

When the economy is operating at an output rate less than full-employment capacity,

Which of the following would cause prices to fall and output to rise in the short run?

Which of the following would be most likely to cause a reduction in current aggregate demand in the United States?

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Taking the Nations Economic Pulse

Economic Fluctuations, Unemployment, and Inflation

An Introduction to Basic Macroeconomic Markets

Fiscal Policy: The Keynesian View and the Historical Development of Macroeconomics

Fiscal Policy: Incentives, and Secondary Effects

Money and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, Output, and Employment

Creating an Environment for Growth and Prosperity

Institutions, Policies, and Cross-Country Differences in Income and Growth

Gaining From International Trade

International Finance and the Foreign Exchange Market

Special Topics

Filters

Exam 10: Dynamic Change, Economic Fluctuations, and the Ad--As Model

When the economy is operating at an output beyond its full-employment potential, the

Which of the following will most likely increase aggregate demand?

An increase in the consumer sentiment index indicates that consumers are

An economic contraction caused by a shift in aggregate demand causes prices to

If there is an unanticipated increase in aggregate demand, which of the following is most likely to occur?

Use the figure below to answer the following question(s). Figure 10-7 At what output level would the actual rate of unemployment equal the economy's natural rate of unemployment in Figure 10-7?

Which of the following factors would increase aggregate demand in the goods and services market?

When an economy is temporarily operating at an output that is beyond its full-employment rate,

The stability of consumption over the business cycle and the ability of changes in the real interest rate to redirect aggregate demand indicate that

Within the AD/AS model, an unanticipated increase in short-run aggregate supply will cause real output to

When the economy is operating at an output rate less than full-employment capacity,

Which of the following would cause prices to fall and output to rise in the short run?

Which of the following would be most likely to cause a reduction in current aggregate demand in the United States?

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Taking the Nations Economic Pulse

Economic Fluctuations, Unemployment, and Inflation

An Introduction to Basic Macroeconomic Markets

Fiscal Policy: The Keynesian View and the Historical Development of Macroeconomics

Fiscal Policy: Incentives, and Secondary Effects

Money and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, Output, and Employment

Creating an Environment for Growth and Prosperity

Institutions, Policies, and Cross-Country Differences in Income and Growth

Gaining From International Trade

International Finance and the Foreign Exchange Market

Special Topics

Filters