Question 1

How will an unanticipated decrease in aggregate demand influence equilibrium output in the goods and services market?

Accepted Answer

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

Question 2

Use the figure below to answer the following question(s). Figure 10-17
  Suppose an economy is currently operating at output Y1 associated with AD1 and SRAS1, shown in Figure 10-17. Initially, the output of this economy is

Accepted Answer

A)  above its potential, and the rate of unemployment is greater than the natural rate. 
B)  below its potential, and the rate of unemployment is greater than the natural rate. 
C)  above its potential, and the rate of unemployment is less than the natural rate. 
D)  below its potential, and the rate of unemployment is less than the natural rate. 
A)  above its potential, and the rate of unemployment is greater than the natural rate. 
B)  below its potential, and the rate of unemployment is greater than the natural rate. 
C)  above its potential, and the rate of unemployment is less than the natural rate. 
D)  below its potential, and the rate of unemployment is less than the natural rate.

Question 3

Once decision makers fully adjust to an increase in the general price level,

Accepted Answer

A)  the actual rate of unemployment will exceed the natural rate of unemployment. 
B)  the actual rate of unemployment will be less than the natural rate of unemployment. 
C)  the rate of output will exceed the economy's long-run capacity. 
D)  output will return to the full-employment level. 
A)  the actual rate of unemployment will exceed the natural rate of unemployment. 
B)  the actual rate of unemployment will be less than the natural rate of unemployment. 
C)  the rate of output will exceed the economy's long-run capacity. 
D)  output will return to the full-employment level.

Question 4

Which of the following will most likely result from an unanticipated decrease in aggregate supply due to unfavorable weather conditions in agricultural areas?

Accepted Answer

A)  a decrease in inflation 
B)  a decrease in unemployment 
C)  a decrease in the general level of prices 
D)  an increase in the general level of prices 
A)  a decrease in inflation 
B)  a decrease in unemployment 
C)  a decrease in the general level of prices 
D)  an increase in the general level of prices

Question 5

Use the figure below to answer the following question(s). Figure 10-10
  Figure 10-10 indicates the output of the economy, y1, is

Accepted Answer

A)  less than the economy's long-run capacity. 
B)  equal to the economy's long-run capacity. 
C)  greater than the economy's long-run capacity. 
D)  unattainable, even in the short run. 
A)  less than the economy's long-run capacity. 
B)  equal to the economy's long-run capacity. 
C)  greater than the economy's long-run capacity. 
D)  unattainable, even in the short run.

Question 6

Resource prices will fall and short-run aggregate supply will increase if

Accepted Answer

A)  current output exceeds the economy's full-employment level. 
B)  current output is less than the economy's full-employment level. 
C)  the actual rate of unemployment is less than the natural rate of unemployment. 
D)  exports exceed imports. 
A)  current output exceeds the economy's full-employment level. 
B)  current output is less than the economy's full-employment level. 
C)  the actual rate of unemployment is less than the natural rate of unemployment. 
D)  exports exceed imports.

Question 7

Which of the following was a contributing factor to the instability of 2002 to 2008?

Accepted Answer

A)  ideal weather from 2002 to 2006, followed by a severe drought in 2007 and 2008 
B)  falling housing prices leading to an expansion, followed by rising housing prices leading to a  sharp economic downturn 
C)  an increase in housing prices leading to an expansion, followed by a collapse in housing prices and a sharp economic downturn 
D)  falling stock prices leading to an expansion, followed by rising stock prices leading to a  sharp economic downturn 
A)  ideal weather from 2002 to 2006, followed by a severe drought in 2007 and 2008 
B)  falling housing prices leading to an expansion, followed by rising housing prices leading to a  sharp economic downturn 
C)  an increase in housing prices leading to an expansion, followed by a collapse in housing prices and a sharp economic downturn 
D)  falling stock prices leading to an expansion, followed by rising stock prices leading to a  sharp economic downturn

Question 8

Which is most likely to cause a temporary spurt in the growth of GDP that cannot be maintained in the long run?

Accepted Answer

A)  An unanticipated increase in aggregate demand. 
B)  An anticipated increase in aggregate demand. 
C)  An increase in long run aggregate supply (LRAS). 
D)  An increase in wage rates 
A)  An unanticipated increase in aggregate demand. 
B)  An anticipated increase in aggregate demand. 
C)  An increase in long run aggregate supply (LRAS). 
D)  An increase in wage rates

Question 9

The short-run effect of a sudden increase in stock prices will be

Accepted Answer

A)  an increase in output and a decrease in prices. 
B)  an increase in both output and prices. 
C)  a decrease in both output and prices. 
D)  a decrease in output and an increase in prices. 
A)  an increase in output and a decrease in prices. 
B)  an increase in both output and prices. 
C)  a decrease in both output and prices. 
D)  a decrease in output and an increase in prices.

Question 10

Figure 10-18   As shown in Figure 10-18, and assuming the aggregate demand curve shifts from AD1 to AD2, the full-employment level of real GDP is

Accepted Answer

A)  $10 billion. 
B)  $4 billion. 
C)  $100 billion. 
D)  unable to be determined. 
A)  $10 billion. 
B)  $4 billion. 
C)  $100 billion. 
D)  unable to be determined.

Question 11

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

Accepted Answer

A)  increased fear that the U.S. economy was going into a recession 
B)  an increase in the real interest rate 
C)  sharp increase in the value of stocks owned by Americans 
D)  a recession in Canada, Mexico, and Western Europe 
A)  increased fear that the U.S. economy was going into a recession 
B)  an increase in the real interest rate 
C)  sharp increase in the value of stocks owned by Americans 
D)  a recession in Canada, Mexico, and Western Europe

Question 12

Which of the following will most likely result from an unanticipated decrease in aggregate supply due to unfavorable weather conditions in agricultural areas?

Accepted Answer

A)  a decrease in inflation 
B)  a decrease in unemployment 
C)  an increase in the general level of prices 
D)  an increase in the natural rate of unemployment 
A)  a decrease in inflation 
B)  a decrease in unemployment 
C)  an increase in the general level of prices 
D)  an increase in the natural rate of unemployment

Question 13

When output is greater than the economy's long-run capacity, which of the following is most likely to occur?

Accepted Answer

A)  a reduction in the general level of prices 
B)  an abnormally high rate of unemployment 
C)  increases in real interest rates and real resource prices 
D)  a reduction in imports 
A)  a reduction in the general level of prices 
B)  an abnormally high rate of unemployment 
C)  increases in real interest rates and real resource prices 
D)  a reduction in imports

Question 14

When the economy is operating at an output rate below its full-employment level, the

Accepted Answer

A)  actual level of unemployment will exceed the natural rate of unemployment. 
B)  current rate of output will tend to persist into the future. 
C)  strong demand for resources will cause resource prices to rise. 
D)  actual unemployment rate will be less than the natural rate of unemployment. 
A)  actual level of unemployment will exceed the natural rate of unemployment. 
B)  current rate of output will tend to persist into the future. 
C)  strong demand for resources will cause resource prices to rise. 
D)  actual unemployment rate will be less than the natural rate of unemployment.

Question 15

Use the figure below to answer the following question(s). Figure 10-15
  The economy's short-run (SRAS ) and long-run (LRAS) aggregate supply curves are shown in Figure 10-15, along with three alternative aggregate demand curves and the accompanying equilibrium points. At which point will resource prices naturally tend to decrease?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
A)  A 
B)  B 
C)  C 
D)  D

Question 16

With regard to the business cycle, most modern economists believe that

Accepted Answer

A)  once a recession starts, market forces are incapable of preventing the economy from plunging deeper and deeper into a depression. 
B)  market economies will experience lengthy periods of recession pretty much regardless of what policy makers do. 
C)  the economy's self-corrective mechanism will quickly restore full employment regardless of the choices made by policy makers. 
D)  lower real interest rates and reductions in real resource prices will help direct an economy out of recession. 
A)  once a recession starts, market forces are incapable of preventing the economy from plunging deeper and deeper into a depression. 
B)  market economies will experience lengthy periods of recession pretty much regardless of what policy makers do. 
C)  the economy's self-corrective mechanism will quickly restore full employment regardless of the choices made by policy makers. 
D)  lower real interest rates and reductions in real resource prices will help direct an economy out of recession.

Question 17

During 2003-2007, the price of crude oil increased substantially on the world market. Other things constant, how will an unanticipated increase in oil prices influence the general level of prices and real output of oil-importing nations such as the United States and Japan?

Accepted Answer

A)  Both real output and the general level of prices will decrease. 
B)  Both real output and the general level of prices will increase. 
C)  Real output will increase, and the general level of prices will decrease. 
D)  Real output will decrease, and the general level of prices will increase. 
A)  Both real output and the general level of prices will decrease. 
B)  Both real output and the general level of prices will increase. 
C)  Real output will increase, and the general level of prices will decrease. 
D)  Real output will decrease, and the general level of prices will increase.

Question 18

If the economy is operating at an output level beyond its full-employment capacity, which of the following would most likely direct the economy back to long-run equilibrium?

Accepted Answer

A)  improvements in technology 
B)  a decrease in the real rate of interest 
C)  an increase in resource prices 
D)  a decrease in resource prices 
A)  improvements in technology 
B)  a decrease in the real rate of interest 
C)  an increase in resource prices 
D)  a decrease in resource prices

Question 19

If the consumer sentiment index turns down sharply over a period of several months, which of the following is most likely to occur in the near future?

Accepted Answer

A)  an increase in aggregate demand and expansion in real output 
B)  a reduction in aggregate demand and a contraction in real output 
C)  a reduction in aggregate demand and expansion in real output 
D)  an increase in aggregate demand and a contraction in real output 
A)  an increase in aggregate demand and expansion in real output 
B)  a reduction in aggregate demand and a contraction in real output 
C)  a reduction in aggregate demand and expansion in real output 
D)  an increase in aggregate demand and a contraction in real output

Question 20

A currency appreciation will be most likely to

Accepted Answer

A)  reduce net exports and therefore increase aggregate demand. 
B)  raise net exports and therefore decrease aggregate demand. 
C)  reduce net exports and therefore decrease aggregate demand. 
D)  raise net exports and therefore increase aggregate demand. 
A)  reduce net exports and therefore increase aggregate demand. 
B)  raise net exports and therefore decrease aggregate demand. 
C)  reduce net exports and therefore decrease aggregate demand. 
D)  raise net exports and therefore increase aggregate demand.

How will an unanticipated decrease in aggregate demand influence equilibrium output in the goods and services market?

Use the figure below to answer the following question(s). Figure 10-17 Suppose an economy is currently operating at output Y₁ associated with AD₁ and SRAS₁, shown in Figure 10-17. Initially, the output of this economy is

Once decision makers fully adjust to an increase in the general price level,

Which of the following will most likely result from an unanticipated decrease in aggregate supply due to unfavorable weather conditions in agricultural areas?

Use the figure below to answer the following question(s). Figure 10-10 Figure 10-10 indicates the output of the economy, y₁, is

Resource prices will fall and short-run aggregate supply will increase if

Which of the following was a contributing factor to the instability of 2002 to 2008?

Which is most likely to cause a temporary spurt in the growth of GDP that cannot be maintained in the long run?

The short-run effect of a sudden increase in stock prices will be

Figure 10-18 As shown in Figure 10-18, and assuming the aggregate demand curve shifts from AD₁ to AD₂, the full-employment level of real GDP is

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

Which of the following will most likely result from an unanticipated decrease in aggregate supply due to unfavorable weather conditions in agricultural areas?

When output is greater than the economy's long-run capacity, which of the following is most likely to occur?

When the economy is operating at an output rate below its full-employment level, the

With regard to the business cycle, most modern economists believe that

During 2003-2007, the price of crude oil increased substantially on the world market. Other things constant, how will an unanticipated increase in oil prices influence the general level of prices and real output of oil-importing nations such as the United States and Japan?

If the economy is operating at an output level beyond its full-employment capacity, which of the following would most likely direct the economy back to long-run equilibrium?

If the consumer sentiment index turns down sharply over a period of several months, which of the following is most likely to occur in the near future?

A currency appreciation will be most likely to

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

How will an unanticipated decrease in aggregate demand influence equilibrium output in the goods and services market?

Use the figure below to answer the following question(s). Figure 10-17 Suppose an economy is currently operating at output Y1 associated with AD1 and SRAS1, shown in Figure 10-17. Initially, the output of this economy is

Once decision makers fully adjust to an increase in the general price level,

Which of the following will most likely result from an unanticipated decrease in aggregate supply due to unfavorable weather conditions in agricultural areas?

Use the figure below to answer the following question(s). Figure 10-10 Figure 10-10 indicates the output of the economy, y1, is

Resource prices will fall and short-run aggregate supply will increase if

Which of the following was a contributing factor to the instability of 2002 to 2008?

Which is most likely to cause a temporary spurt in the growth of GDP that cannot be maintained in the long run?

The short-run effect of a sudden increase in stock prices will be

Figure 10-18 As shown in Figure 10-18, and assuming the aggregate demand curve shifts from AD1 to AD2, the full-employment level of real GDP is

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

Which of the following will most likely result from an unanticipated decrease in aggregate supply due to unfavorable weather conditions in agricultural areas?

When output is greater than the economy's long-run capacity, which of the following is most likely to occur?

When the economy is operating at an output rate below its full-employment level, the

With regard to the business cycle, most modern economists believe that

During 2003-2007, the price of crude oil increased substantially on the world market. Other things constant, how will an unanticipated increase in oil prices influence the general level of prices and real output of oil-importing nations such as the United States and Japan?

If the economy is operating at an output level beyond its full-employment capacity, which of the following would most likely direct the economy back to long-run equilibrium?

If the consumer sentiment index turns down sharply over a period of several months, which of the following is most likely to occur in the near future?

A currency appreciation will be most likely to

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

Use the figure below to answer the following question(s). Figure 10-17 Suppose an economy is currently operating at output Y₁ associated with AD₁ and SRAS₁, shown in Figure 10-17. Initially, the output of this economy is

Use the figure below to answer the following question(s). Figure 10-10 Figure 10-10 indicates the output of the economy, y₁, is

Figure 10-18 As shown in Figure 10-18, and assuming the aggregate demand curve shifts from AD₁ to AD₂, the full-employment level of real GDP is