Question 1

A supply shock

Accepted Answer

A)  is usually caused by a change in the money supply 
B)  is any event that causes the aggregate supply curve to shift 
C)  is any event caused by a change in the price level 
D)  is usually good news for the economy 
E)  always leads to an increase in the interest rate 
A)  is usually caused by a change in the money supply 
B)  is any event that causes the aggregate supply curve to shift 
C)  is any event caused by a change in the price level 
D)  is usually good news for the economy 
E)  always leads to an increase in the interest rate

Question 2

Which of the following is an accurate description of the aggregate demand curve?

Accepted Answer

A)  It is the sum of all individual demand curves for all products 
B)  It shows all price levels at which firms' unit costs equal their percent markups. 
C)  It is the curve decided upon by the voters. 
D)  It shows the relationship between firms' unit costs and their percentage markups. 
E)  It shows the equilibrium level of GDP associated with price level. 
A)  It is the sum of all individual demand curves for all products 
B)  It shows all price levels at which firms' unit costs equal their percent markups. 
C)  It is the curve decided upon by the voters. 
D)  It shows the relationship between firms' unit costs and their percentage markups. 
E)  It shows the equilibrium level of GDP associated with price level.

Question 3

If the money demand curve shifts rightward,the AD curve also shifts rightward.

Accepted Answer

A) True 
 B)False

Question 4

A decrease in the price level will reduce business confidence and cause a decrease in equilibrium GDP.

Accepted Answer

A) True 
 B)False

Question 5

If the unit cost of output for a car is $8000 and the price is $10,000,what is the firms' markup over cost?

Accepted Answer

A)  125.0 percent 
B)  25.0 percent 
C)  80.0 percent 
D)  11.1 percent 
E)  20.0 percent. 
A)  125.0 percent 
B)  25.0 percent 
C)  80.0 percent 
D)  11.1 percent 
E)  20.0 percent.

Question 6

The aggregate demand curve tells us equilibrium real GDP at any level of income.

Accepted Answer

A) True 
 B)False

Question 7

The only requirement for short-run equilibrium is that the economy must be on the aggregate supply curve.

Accepted Answer

A) True 
 B)False

Question 8

The long-run aggregate supply curve

Accepted Answer

A)  is vertical 
B)  is upward sloping 
C)  is downward sloping 
D)  is horizontal 
E)  can have a variety of shapes depending on fiscal policy 
A)  is vertical 
B)  is upward sloping 
C)  is downward sloping 
D)  is horizontal 
E)  can have a variety of shapes depending on fiscal policy

Question 9

The average percentage markup in the economy

Accepted Answer

A)  is greater,the more competitive are market conditions 
B)  is greater,the less competitive are market conditions 
C)  is unaffected by the competitive conditions of the economy 
D)  tends to be highly unstable from year to year 
E)  tends to be stable from year to year,ensuring that the price level is stable from year to year 
A)  is greater,the more competitive are market conditions 
B)  is greater,the less competitive are market conditions 
C)  is unaffected by the competitive conditions of the economy 
D)  tends to be highly unstable from year to year 
E)  tends to be stable from year to year,ensuring that the price level is stable from year to year

Question 10

-Refer to Figure 15-10.Suppose that output in the economy is currently below full employment.If real GDP is $6.8 trillion and a demand shock lowers real GDP to $6.5 trillion,what would we expect to occur in the long run?

Accepted Answer

A)  The aggregate supply curve will shift upward as wages fall. 
B)  The aggregate supply curve will shift downward as wages fall. 
C)  The aggregate demand curve will shift rightward as wages fall. 
D)  The aggregate demand curve will shift leftward as wages fall. 
E)  No further changes in aggregate supply or aggregate demand without government intervention. 
A)  The aggregate supply curve will shift upward as wages fall. 
B)  The aggregate supply curve will shift downward as wages fall. 
C)  The aggregate demand curve will shift rightward as wages fall. 
D)  The aggregate demand curve will shift leftward as wages fall. 
E)  No further changes in aggregate supply or aggregate demand without government intervention.

Question 11

In the short run,a negative demand shock will

Accepted Answer

A)  decrease the price level but leave real GDP unchanged 
B)  increase the price level but leave real GDP unchanged 
C)  decrease both the price level and real GDP 
D)  increase the price level and decrease real GDP 
E)  decrease the wage rate 
A)  decrease the price level but leave real GDP unchanged 
B)  increase the price level but leave real GDP unchanged 
C)  decrease both the price level and real GDP 
D)  increase the price level and decrease real GDP 
E)  decrease the wage rate

Question 12

If the economy is on the aggregate supply curve but to the right of the aggregate demand curve,which of the following will be the first market force to lead the economy toward an equilibrium?

Accepted Answer

A)  At the current output level,prices will be too low and firms will increase their prices. 
B)  At the current price level,output will be too low,inventories will diminish,and firms will increase their production. 
C)  At the current output level,prices will be too low and firms will lower their prices. 
D)  At the current price level,output will be too high and so prices will drop so that output will drop. 
E)  At the current price level,output will be too high,inventories will pile up and firms will cut back on their production. 
A)  At the current output level,prices will be too low and firms will increase their prices. 
B)  At the current price level,output will be too low,inventories will diminish,and firms will increase their production. 
C)  At the current output level,prices will be too low and firms will lower their prices. 
D)  At the current price level,output will be too high and so prices will drop so that output will drop. 
E)  At the current price level,output will be too high,inventories will pile up and firms will cut back on their production.

Question 13

As there is a movement upward and leftward along the AD curve,

Accepted Answer

A)  aggregate expenditure decreases 
B)  the price level remains constant 
C)  equilibrium GDP increases 
D)  aggregate expenditure increases 
E)  the interest rate falls 
A)  aggregate expenditure decreases 
B)  the price level remains constant 
C)  equilibrium GDP increases 
D)  aggregate expenditure increases 
E)  the interest rate falls

Question 14

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

Question 15

With the self-correcting mechanism,if a negative demand shock occurs,

Accepted Answer

A)  a decrease in wage rates will lead to a decrease in the price level so that the economy returns to full employment 
B)  the price level will increase,causing equilibrium GDP to return to its original level 
C)  the wage rate will eventually increase,restoring GDP to its full-employment level 
D)  the price level will remain constant 
E)  there will be no effect in the long run 
A)  a decrease in wage rates will lead to a decrease in the price level so that the economy returns to full employment 
B)  the price level will increase,causing equilibrium GDP to return to its original level 
C)  the wage rate will eventually increase,restoring GDP to its full-employment level 
D)  the price level will remain constant 
E)  there will be no effect in the long run

Question 16

If equilibrium GDP is below potential,then

Accepted Answer

A)  unemployment is unusually low 
B)  the Fed will lower the money supply 
C)  the wage rate will fall as workers compete for scarce jobs 
D)  the aggregate supply curve will shift leftward 
E)  the wage rate will remain stable as labor productivity increases 
A)  unemployment is unusually low 
B)  the Fed will lower the money supply 
C)  the wage rate will fall as workers compete for scarce jobs 
D)  the aggregate supply curve will shift leftward 
E)  the wage rate will remain stable as labor productivity increases

Question 17

If a change in real GDP causes the price level to change,there will be a movement along the aggregate supply curve.

Accepted Answer

A) True 
 B)False

Question 18

-Refer to Figure 15-14.Suppose a supply shock moves the economy from point A to point B.In the long run,we would expect

Accepted Answer

A)  the increase in real GDP to increase wages and shift the aggregate demand curve to the right 
B)  the increase in real GDP to increase wages and shift the aggregate supply curve back to AS1 
C)  the decrease in the price level to encourage buying and shift the aggregate demand curve to the right 
D)  wages to fall,causing the aggregate supply curve to shift rightward until full employment is restored 
E)  the economy to remain at point B. 
A)  the increase in real GDP to increase wages and shift the aggregate demand curve to the right 
B)  the increase in real GDP to increase wages and shift the aggregate supply curve back to AS1 
C)  the decrease in the price level to encourage buying and shift the aggregate demand curve to the right 
D)  wages to fall,causing the aggregate supply curve to shift rightward until full employment is restored 
E)  the economy to remain at point B.

Question 19

Which of the following describes what would happen after an increase in oil prices?

Accepted Answer

A)  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 a leftward shift of the aggregate supply curve 
B)  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 leftward 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 a rightward 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 rightward shift of the aggregate supply curve 
E)  An upward shift of the aggregate supply curve as unit costs increase,followed by a gradual decrease in the wage as employment increases,leading to a rightward shift of the aggregate supply curve. 
A)  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 a leftward shift of the aggregate supply curve 
B)  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 leftward 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 a rightward 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 rightward shift of the aggregate supply curve 
E)  An upward shift of the aggregate supply curve as unit costs increase,followed by a gradual decrease in the wage as employment increases,leading to a rightward shift of the aggregate supply curve.

Question 20

The aggregate supply curve is

Accepted Answer

A)  the sum of all individual firms' supply curves. 
B)  vertical in the short run. 
C)  downward sloping in the short run. 
D)  upward sloping in the short run. 
E)  upward sloping both in the short run and the long run. 
A)  the sum of all individual firms' supply curves. 
B)  vertical in the short run. 
C)  downward sloping in the short run. 
D)  upward sloping in the short run. 
E)  upward sloping both in the short run and the long run.

A supply shock

Which of the following is an accurate description of the aggregate demand curve?

If the money demand curve shifts rightward,the AD curve also shifts rightward.

A decrease in the price level will reduce business confidence and cause a decrease in equilibrium GDP.

If the unit cost of output for a car is $8000 and the price is $10,000,what is the firms' markup over cost?

The aggregate demand curve tells us equilibrium real GDP at any level of income.

The only requirement for short-run equilibrium is that the economy must be on the aggregate supply curve.

The long-run aggregate supply curve

The average percentage markup in the economy

-Refer to Figure 15-10.Suppose that output in the economy is currently below full employment.If real GDP is $6.8 trillion and a demand shock lowers real GDP to $6.5 trillion,what would we expect to occur in the long run?

In the short run,a negative demand shock will

If the economy is on the aggregate supply curve but to the right of the aggregate demand curve,which of the following will be the first market force to lead the economy toward an equilibrium?

As there is a movement upward and leftward along the AD curve,

If output decreases,which of the following would occur?

With the self-correcting mechanism,if a negative demand shock occurs,

If equilibrium GDP is below potential,then

If a change in real GDP causes the price level to change,there will be a movement along the aggregate supply curve.

-Refer to Figure 15-14.Suppose a supply shock moves the economy from point A to point B.In the long run,we would expect

Which of the following describes what would happen after an increase in oil prices?

The aggregate supply curve is

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

A supply shock

Which of the following is an accurate description of the aggregate demand curve?

If the money demand curve shifts rightward,the AD curve also shifts rightward.

A decrease in the price level will reduce business confidence and cause a decrease in equilibrium GDP.

If the unit cost of output for a car is $8000 and the price is $10,000,what is the firms' markup over cost?

The aggregate demand curve tells us equilibrium real GDP at any level of income.

The only requirement for short-run equilibrium is that the economy must be on the aggregate supply curve.

The long-run aggregate supply curve

The average percentage markup in the economy

-Refer to Figure 15-10.Suppose that output in the economy is currently below full employment.If real GDP is $6.8 trillion and a demand shock lowers real GDP to $6.5 trillion,what would we expect to occur in the long run?

In the short run,a negative demand shock will

If the economy is on the aggregate supply curve but to the right of the aggregate demand curve,which of the following will be the first market force to lead the economy toward an equilibrium?

As there is a movement upward and leftward along the AD curve,

If output decreases,which of the following would occur?

With the self-correcting mechanism,if a negative demand shock occurs,

If equilibrium GDP is below potential,then

If a change in real GDP causes the price level to change,there will be a movement along the aggregate supply curve.

-Refer to Figure 15-14.Suppose a supply shock moves the economy from point A to point B.In the long run,we would expect

Which of the following describes what would happen after an increase in oil prices?

The aggregate supply curve is

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