Question 1

]Which of the following describes what would happen after a positive supply shock such as a decrease in world oil prices?

Accepted Answer

A)  An upward shift of the aggregate supply curve as unit costs increase,followed by a gradual decrease in the wage as employment decreases,leading to a downward shift of the aggregate supply curve. 
B)  A downward shift of the aggregate supply curve as unit costs decrease,followed by a gradual increase in the wage as employment increases,leading to an upward shift of the aggregate supply curve. 
C)  An upward shift of the aggregate supply curve as unit costs increase,followed by a gradual decrease in the wage as employment decreases,leading to an upward shift of the aggregate supply curve. 
D)  A downward shift of the aggregate supply curve as unit costs decrease,followed by a gradual decrease in the wage as employment decreases,leading to a downward shift of the aggregate supply curve. 
E)  An upward shift of the aggregate demand curve. 
A)  An upward shift of the aggregate supply curve as unit costs increase,followed by a gradual decrease in the wage as employment decreases,leading to a downward shift of the aggregate supply curve. 
B)  A downward shift of the aggregate supply curve as unit costs decrease,followed by a gradual increase in the wage as employment increases,leading to an upward shift of the aggregate supply curve. 
C)  An upward shift of the aggregate supply curve as unit costs increase,followed by a gradual decrease in the wage as employment decreases,leading to an upward shift of the aggregate supply curve. 
D)  A downward shift of the aggregate supply curve as unit costs decrease,followed by a gradual decrease in the wage as employment decreases,leading to a downward shift of the aggregate supply curve. 
E)  An upward shift of the aggregate demand curve.

Question 2

Which of the following would not cause a movement along the AD curve?

Accepted Answer

A)  An increase in the price level. 
B)  A decrease in the price level. 
C)  A change in the interest rate caused by a change in the price level. 
D)  A change in autonomous consumption 
E)  Both a change in the interest rate caused by a change in the price level,and a change in autonomous consumption. 
A)  An increase in the price level. 
B)  A decrease in the price level. 
C)  A change in the interest rate caused by a change in the price level. 
D)  A change in autonomous consumption 
E)  Both a change in the interest rate caused by a change in the price level,and a change in autonomous consumption.

Question 3

In the short run,the price level

Accepted Answer

A)  will increase if unit costs increase. 
B)  will increase if average markup decreases. 
C)  will increase if unit costs decrease. 
D)  is held constant by government decree. 
E)  will decrease if there is a negative supply shock. 
A)  will increase if unit costs increase. 
B)  will increase if average markup decreases. 
C)  will increase if unit costs decrease. 
D)  is held constant by government decree. 
E)  will decrease if there is a negative supply shock.

Question 4

If output increases,which of the following would occur?

Accepted Answer

A)  Prices of non-labor inputs,input requirements per unit of output,and unit costs would all increase,and the economy would move downward along the aggregate supply curve. 
B)  Prices of non-labor inputs,input requirements per unit of output,and unit costs would all decrease,and the economy would move downward along the aggregate supply curve. 
C)  Prices of non-labor inputs,input requirements per unit of output,and unit costs would all decrease,and the economy would move upward along the aggregate supply curve. 
D)  Prices of non-labor inputs,input requirements per unit of output,and unit costs would all increase,and the economy would move upward along the aggregate supply curve. 
E)  Prices of non-labor inputs and input requirements per unit of output would increase,unit costs would decrease,and the economy would move downward along the aggregate supply curve. 
A)  Prices of non-labor inputs,input requirements per unit of output,and unit costs would all increase,and the economy would move downward along the aggregate supply curve. 
B)  Prices of non-labor inputs,input requirements per unit of output,and unit costs would all decrease,and the economy would move downward along the aggregate supply curve. 
C)  Prices of non-labor inputs,input requirements per unit of output,and unit costs would all decrease,and the economy would move upward along the aggregate supply curve. 
D)  Prices of non-labor inputs,input requirements per unit of output,and unit costs would all increase,and the economy would move upward along the aggregate supply curve. 
E)  Prices of non-labor inputs and input requirements per unit of output would increase,unit costs would decrease,and the economy would move downward along the aggregate supply curve.

Question 5

A short-run decrease in real GDP will

Accepted Answer

A)  increase the price of non-labor inputs,increase input requirements per unit of output,and increase the price level 
B)  increase the price of non-labor inputs,decrease input requirements per unit of output,and decrease the price level 
C)  decrease the price of non-labor inputs,decrease input requirements per unit of output,and decrease the price level 
D)  increase the price of non-labor inputs,decrease input requirements per unit of output,and increase the price level 
E)  decrease the price of non-labor inputs,increase input requirements per unit of output,and increase the price level 
A)  increase the price of non-labor inputs,increase input requirements per unit of output,and increase the price level 
B)  increase the price of non-labor inputs,decrease input requirements per unit of output,and decrease the price level 
C)  decrease the price of non-labor inputs,decrease input requirements per unit of output,and decrease the price level 
D)  increase the price of non-labor inputs,decrease input requirements per unit of output,and increase the price level 
E)  decrease the price of non-labor inputs,increase input requirements per unit of output,and increase the price level

Question 6

If autonomous consumption decreases,which of the following combinations of events would be most likely to occur?

Accepted Answer

A)  An upward shift of the aggregate expenditure line,a rightward shift of the money demand curve,and a leftward shift of the aggregate demand curve 
B)  A downward shift of the aggregate expenditure line,a leftward shift of the money demand curve,and a leftward shift of the aggregate demand curve 
C)  A downward shift of the aggregate expenditure line,a leftward shift of the money demand curve,and a rightward shift of the aggregate demand curve 
D)  A downward shift of the aggregate expenditure line,a rightward shift of the money demand curve,and a rightward shift of the aggregate demand curve 
E)  An upward shift of the aggregate expenditure line,a rightward shift of the money demand curve,and a rightward shift of the aggregate demand curve. 
A)  An upward shift of the aggregate expenditure line,a rightward shift of the money demand curve,and a leftward shift of the aggregate demand curve 
B)  A downward shift of the aggregate expenditure line,a leftward shift of the money demand curve,and a leftward shift of the aggregate demand curve 
C)  A downward shift of the aggregate expenditure line,a leftward shift of the money demand curve,and a rightward shift of the aggregate demand curve 
D)  A downward shift of the aggregate expenditure line,a rightward shift of the money demand curve,and a rightward shift of the aggregate demand curve 
E)  An upward shift of the aggregate expenditure line,a rightward shift of the money demand curve,and a rightward shift of the aggregate demand curve.

Question 7

An increase in the price level will lead to which of the following sequences?

Accepted Answer

A)  The money demand curve shifts leftward,the interest rate drops,the aggregate expenditure line shifts upward,and there is movement downward along the aggregate demand curve. 
B)  The money demand curve shifts rightward,the interest rate increases,the aggregate expenditure line shifts downward,and there is movement upward along the aggregate demand curve. 
C)  The money demand curve shifts leftward,the interest rate drops,the aggregate expenditure line shifts downward,and there is movement upward along the aggregate demand curve. 
D)  The money demand curve shifts rightward,the interest rate increases,the aggregate expenditure line shifts upward,and there is movement downward along the aggregate demand curve. 
E)  the money demand curve shifts leftward,the interest rate drops,the aggregate expenditure line shifts upward,and there is movement upward along the aggregate demand curve. 
A)  The money demand curve shifts leftward,the interest rate drops,the aggregate expenditure line shifts upward,and there is movement downward along the aggregate demand curve. 
B)  The money demand curve shifts rightward,the interest rate increases,the aggregate expenditure line shifts downward,and there is movement upward along the aggregate demand curve. 
C)  The money demand curve shifts leftward,the interest rate drops,the aggregate expenditure line shifts downward,and there is movement upward along the aggregate demand curve. 
D)  The money demand curve shifts rightward,the interest rate increases,the aggregate expenditure line shifts upward,and there is movement downward along the aggregate demand curve. 
E)  the money demand curve shifts leftward,the interest rate drops,the aggregate expenditure line shifts upward,and there is movement upward along the aggregate demand curve.

Question 8

A decrease in the price level leads to which of the following sequences?

Accepted Answer

A)  The money demand curve shifts leftward,the interest rate drops,the aggregate expenditure line shifts upward,and there is movement downward along the aggregate demand curve. 
B)  The money demand curve shifts rightward,the interest rate increases,the aggregate expenditure line shifts downward,and there is movement upward along the aggregate demand curve. 
C)  The money demand curve shifts leftward,the interest rate drops,the aggregate expenditure line shifts downward,and there is movement upward along the aggregate demand curve. 
D)  The money demand curve shifts rightward,the interest rate increases,the aggregate expenditure line shifts upward,and there is movement downward along the aggregate demand curve. 
E)  The money demand curve shifts leftward,the interest rate drops,the aggregate expenditure line shifts upward,and there is movement upward along the aggregate demand curve. 
A)  The money demand curve shifts leftward,the interest rate drops,the aggregate expenditure line shifts upward,and there is movement downward along the aggregate demand curve. 
B)  The money demand curve shifts rightward,the interest rate increases,the aggregate expenditure line shifts downward,and there is movement upward along the aggregate demand curve. 
C)  The money demand curve shifts leftward,the interest rate drops,the aggregate expenditure line shifts downward,and there is movement upward along the aggregate demand curve. 
D)  The money demand curve shifts rightward,the interest rate increases,the aggregate expenditure line shifts upward,and there is movement downward along the aggregate demand curve. 
E)  The money demand curve shifts leftward,the interest rate drops,the aggregate expenditure line shifts upward,and there is movement upward along the aggregate demand curve.

Question 9

The aggregate demand curve

Accepted Answer

A)  represents the relationship between prices and quantities of all goods produced in an economy 
B)  is derived from equilibrium conditions in the labor and money markets 
C)  gives the equilibrium level of real GDP corresponding to a given price level 
D)  is the sum of an economy's individual demand curves 
E)  plots the interest rate as a function of output 
A)  represents the relationship between prices and quantities of all goods produced in an economy 
B)  is derived from equilibrium conditions in the labor and money markets 
C)  gives the equilibrium level of real GDP corresponding to a given price level 
D)  is the sum of an economy's individual demand curves 
E)  plots the interest rate as a function of output

Question 10

If there is a positive demand shock,which of the following would represent the most likely short and long-run outcomes? (Assume the economy was initially at full employment)

Accepted Answer

A)  In the short run,real GDP and the price level would increase;in the long run,real GDP would return to its original level while the price level would rise even further. 
B)  In the short run,real GDP and the price level would increase;in the long run,real GDP and the price level would return to their original level. 
C)  In the short run,real GDP would increase and the price level would decrease;in the long run,real GDP would return to its original level while the price level would rise even further. 
D)  In the short run,real GDP and the price level would decrease;in the long run,real GDP would return to its original level while the price level would rise even further. 
E)  In the short run,real GDP and the price level would increase;in the long run,real GDP would increase while the price level would return to its original level. 
A)  In the short run,real GDP and the price level would increase;in the long run,real GDP would return to its original level while the price level would rise even further. 
B)  In the short run,real GDP and the price level would increase;in the long run,real GDP and the price level would return to their original level. 
C)  In the short run,real GDP would increase and the price level would decrease;in the long run,real GDP would return to its original level while the price level would rise even further. 
D)  In the short run,real GDP and the price level would decrease;in the long run,real GDP would return to its original level while the price level would rise even further. 
E)  In the short run,real GDP and the price level would increase;in the long run,real GDP would increase while the price level would return to its original level.

Question 11

Which of the following mechanisms helps output to return to potential after a demand shock?

Accepted Answer

A)  Change in business mentality 
B)  Change in nominal wage rate 
C)  Large changes in the capital stock 
D)  Inability of the price level to change 
E)  Change in inventories. 
A)  Change in business mentality 
B)  Change in nominal wage rate 
C)  Large changes in the capital stock 
D)  Inability of the price level to change 
E)  Change in inventories.

Question 12

The 2008-2009 recession began as oil prices increased,and then was followed by a negative demand shock..

Accepted Answer

A) True 
 B)False

Question 13

If the government increases taxes,which of the following will occur in the short run?

Accepted Answer

A)  An increase in GDP,an increase in the price level,an increase in money demand and an increase in the interest rate. 
B)  An increase in GDP,an increase in the price level,a decrease in money demand and an increase in the interest rate. 
C)  An increase in GDP,a decrease in the price level,an increase in money demand and an increase in the interest rate. 
D)  A decrease in GDP,a decrease in the price level,a decrease in money demand and a decrease in the interest rate. 
E)  A decrease in GDP,an increase in the price level,an increase in money demand and a decrease in the interest rate. 
A)  An increase in GDP,an increase in the price level,an increase in money demand and an increase in the interest rate. 
B)  An increase in GDP,an increase in the price level,a decrease in money demand and an increase in the interest rate. 
C)  An increase in GDP,a decrease in the price level,an increase in money demand and an increase in the interest rate. 
D)  A decrease in GDP,a decrease in the price level,a decrease in money demand and a decrease in the interest rate. 
E)  A decrease in GDP,an increase in the price level,an increase in money demand and a decrease in the interest rate.

Question 14

Which of the following is not a reason why wages respond slowly to changes in output?

Accepted Answer

A)  Many labor contracts specify wages for up to three years. 
B)  The process of wage setting in large corporations is slow moving. 
C)  Frequent wage changes can reduce worker morale and reduce productivity. 
D)  Firms benefit from having a reputation of paying stable wages. 
E)  The labor supply and demand curves move rapidly to clear labor markets. 
A)  Many labor contracts specify wages for up to three years. 
B)  The process of wage setting in large corporations is slow moving. 
C)  Frequent wage changes can reduce worker morale and reduce productivity. 
D)  Firms benefit from having a reputation of paying stable wages. 
E)  The labor supply and demand curves move rapidly to clear labor markets.

Question 15

If a demand shock causes the economy to move to a real GDP level that is below its full employment level,then

Accepted Answer

A)  we refer to this as a positive demand shock. 
B)  the economy will remain at this point in the long run. 
C)  the AS curve will adjust in the long run until the economy returns to full employment. 
D)  the AD curve will move back to its original position in the long run. 
E)  the unemployment rate will decline. 
A)  we refer to this as a positive demand shock. 
B)  the economy will remain at this point in the long run. 
C)  the AS curve will adjust in the long run until the economy returns to full employment. 
D)  the AD curve will move back to its original position in the long run. 
E)  the unemployment rate will decline.

Question 16

If the government decreases taxes,which of the following would occur?

Accepted Answer

A)  An increase in GDP,an increase in the price level,an increase in money demand,and an increase in the interest rate 
B)  An increase in GDP,a decrease in the price level,an increase in money demand,and a decrease in the interest rate 
C)  A decrease in GDP,a decrease in the price level,a decrease in money demand,and a decrease in the interest rate 
D)  A decrease in GDP,a decrease in the price level,an increase in money demand,and an increase in the interest rate 
E)  An increase in GDP,an increase in the price level,a decrease in money demand,and a decrease in the interest rate. 
A)  An increase in GDP,an increase in the price level,an increase in money demand,and an increase in the interest rate 
B)  An increase in GDP,a decrease in the price level,an increase in money demand,and a decrease in the interest rate 
C)  A decrease in GDP,a decrease in the price level,a decrease in money demand,and a decrease in the interest rate 
D)  A decrease in GDP,a decrease in the price level,an increase in money demand,and an increase in the interest rate 
E)  An increase in GDP,an increase in the price level,a decrease in money demand,and a decrease in the interest rate.

Question 17

-Refer to Figure 15-11.Suppose the economy is currently at point D where it is producing its full-employment level of real GDP ($6.8 trillion).We would expect that,in the long run,

Accepted Answer

A)  the economy will return to point D unless a demand or supply shock occurred 
B)  wages will fall and aggregate demand will decrease 
C)  wages will rise and aggregate demand will increase 
D)  wages will fall and aggregate supply will increase as the economy moves to point C 
E)  the full-employment level of real GDP would fall to the equilibrium level of real GDP. 
A)  the economy will return to point D unless a demand or supply shock occurred 
B)  wages will fall and aggregate demand will decrease 
C)  wages will rise and aggregate demand will increase 
D)  wages will fall and aggregate supply will increase as the economy moves to point C 
E)  the full-employment level of real GDP would fall to the equilibrium level of real GDP.

Question 18

If the cost per unit of output for a particular product is $50 and the product sells for $55,what is the percentage markup over cost per unit?

Accepted Answer

A)  200 percent 
B)  10 percent 
C)  100 percent 
D)  20 percent 
E)  50 percent. 
A)  200 percent 
B)  10 percent 
C)  100 percent 
D)  20 percent 
E)  50 percent.

Question 19

What effect did the Iraqi invasion of Kuwait have on the U.S.economy?

Accepted Answer

A)  A rightward shift of the aggregate demand curve 
B)  It had no effect 
C)  A downward shift of the aggregate supply curve 
D)  A leftward shift of the aggregate demand curve 
E)  An upward shift of the aggregate supply curve. 
A)  A rightward shift of the aggregate demand curve 
B)  It had no effect 
C)  A downward shift of the aggregate supply curve 
D)  A leftward shift of the aggregate demand curve 
E)  An upward shift of the aggregate supply curve.

Question 20

All of the following are examples of demand shocks,except one.Which is the exception?

Accepted Answer

A)  A spontaneous decrease in money demand 
B)  A tax increase 
C)  A contraction of the money supply by the Fed 
D)  An increase in the price level 
E)  A reduction in government spending. 
A)  A spontaneous decrease in money demand 
B)  A tax increase 
C)  A contraction of the money supply by the Fed 
D)  An increase in the price level 
E)  A reduction in government spending.

]Which of the following describes what would happen after a positive supply shock such as a decrease in world oil prices?

Which of the following would not cause a movement along the AD curve?

In the short run,the price level

If output increases,which of the following would occur?

A short-run decrease in real GDP will

If autonomous consumption decreases,which of the following combinations of events would be most likely to occur?

An increase in the price level will lead to which of the following sequences?

A decrease in the price level leads to which of the following sequences?

The aggregate demand curve

If there is a positive demand shock,which of the following would represent the most likely short and long-run outcomes? (Assume the economy was initially at full employment)

Which of the following mechanisms helps output to return to potential after a demand shock?

The 2008-2009 recession began as oil prices increased,and then was followed by a negative demand shock..

If the government increases taxes,which of the following will occur in the short run?

Which of the following is not a reason why wages respond slowly to changes in output?

If a demand shock causes the economy to move to a real GDP level that is below its full employment level,then

If the government decreases taxes,which of the following would occur?

-Refer to Figure 15-11.Suppose the economy is currently at point D where it is producing its full-employment level of real GDP ($6.8 trillion).We would expect that,in the long run,

If the cost per unit of output for a particular product is $50 and the product sells for $55,what is the percentage markup over cost per unit?

What effect did the Iraqi invasion of Kuwait have on the U.S.economy?

All of the following are examples of demand shocks,except one.Which is the exception?

What is Economics?

Scarcity, Choice, and Economic Systems

Supply and Demand

Working With Supply and Demand

What Macroeconomics Tries to Explain

Production, Income, and Employment

The Price Level and Inflation

The Classical Long run Model

Economic Growth and Rising Living Standards

Economic Fluctuations

The Short-run Macro Model

Fiscal Policy

Money, Banks, and the Federal Reserve

The Money Market and Monetary Policy

Inflation and Monetary Policy

Exchange Rates and Macroeconomic Policy

Filters

Exam 15: Aggregate Demand and Aggregate Supply

]Which of the following describes what would happen after a positive supply shock such as a decrease in world oil prices?

Which of the following would not cause a movement along the AD curve?

In the short run,the price level

If output increases,which of the following would occur?

A short-run decrease in real GDP will

If autonomous consumption decreases,which of the following combinations of events would be most likely to occur?

An increase in the price level will lead to which of the following sequences?

A decrease in the price level leads to which of the following sequences?

The aggregate demand curve

If there is a positive demand shock,which of the following would represent the most likely short and long-run outcomes? (Assume the economy was initially at full employment)

Which of the following mechanisms helps output to return to potential after a demand shock?

The 2008-2009 recession began as oil prices increased,and then was followed by a negative demand shock..

If the government increases taxes,which of the following will occur in the short run?

Which of the following is not a reason why wages respond slowly to changes in output?

If a demand shock causes the economy to move to a real GDP level that is below its full employment level,then

If the government decreases taxes,which of the following would occur?

-Refer to Figure 15-11.Suppose the economy is currently at point D where it is producing its full-employment level of real GDP ($6.8 trillion).We would expect that,in the long run,

If the cost per unit of output for a particular product is $50 and the product sells for $55,what is the percentage markup over cost per unit?

What effect did the Iraqi invasion of Kuwait have on the U.S.economy?

All of the following are examples of demand shocks,except one.Which is the exception?

What is Economics?

Scarcity, Choice, and Economic Systems

Supply and Demand

Working With Supply and Demand

What Macroeconomics Tries to Explain

Production, Income, and Employment

The Price Level and Inflation

The Classical Long run Model

Economic Growth and Rising Living Standards

Economic Fluctuations

The Short-run Macro Model

Fiscal Policy

Money, Banks, and the Federal Reserve

The Money Market and Monetary Policy

Inflation and Monetary Policy

Exchange Rates and Macroeconomic Policy

Filters