Question 1

If short-run output is greater than potential output, then:

Accepted Answer

A)  the unemployment rate in the economy is zero. 
B)  frictional unemployment is less than its natural rate. 
C)  frictional unemployment is greater than its natural rate. 
D)  structural unemployment is greater than frictional unemployment. 
A)  the unemployment rate in the economy is zero. 
B)  frictional unemployment is less than its natural rate. 
C)  frictional unemployment is greater than its natural rate. 
D)  structural unemployment is greater than frictional unemployment.

Question 2

If short-run output is less than the potential output, then:

Accepted Answer

A)  the unemployment rate in the economy is zero. 
B)  frictional unemployment is less than its natural rate. 
C)  frictional unemployment is greater than its natural rate. 
D)  structural unemployment is greater than frictional unemployment. 
A)  the unemployment rate in the economy is zero. 
B)  frictional unemployment is less than its natural rate. 
C)  frictional unemployment is greater than its natural rate. 
D)  structural unemployment is greater than frictional unemployment.

Question 3

According to the interest rate effect, a higher price level implies a _____ demand for money, which leads to a _____ interest rate and a lower planned investment spending.

Accepted Answer

A)  higher; higher 
B)  higher; lower 
C)  lower; higher 
D)  lower; lower 
A)  higher; higher 
B)  higher; lower 
C)  lower; higher 
D)  lower; lower

Question 4

Use Figure: Macroeconomic Equilibrium. This figure shows four different macroeconomic equilibria for an economy. Which of the following can shift the macroeconomic equilibrium from point A to point B?
​
Figure: Macroeconomic Equilibrium

Accepted Answer

A)  The money supply increases. 
B)  The income tax rate increases. 
C)  Input prices increase. 
D)  Business taxes increase. 
A)  The money supply increases. 
B)  The income tax rate increases. 
C)  Input prices increase. 
D)  Business taxes increase.

Question 5

The long-run aggregate supply curve is:

Accepted Answer

A)  horizontal. 
B)  upward sloping. 
C)  downward sloping. 
D)  vertical. 
A)  horizontal. 
B)  upward sloping. 
C)  downward sloping. 
D)  vertical.

Question 6

The total investment spending in an economy decreases as a result of an increase in the interest rate, which is driven by an increase in the overall price level. This will be represented as a:

Accepted Answer

A)  rightward shift of the aggregate demand curve. 
B)  leftward shift of the aggregate demand curve. 
C)  movement along the aggregate demand curve. 
D)  leftward shift of the short-run aggregate supply curve. 
A)  rightward shift of the aggregate demand curve. 
B)  leftward shift of the aggregate demand curve. 
C)  movement along the aggregate demand curve. 
D)  leftward shift of the short-run aggregate supply curve.

Question 7

The short-run aggregate supply curve is:

Accepted Answer

A)  upward sloping in the classical range. 
B)  downward sloping in the Keynesian range. 
C)  vertical in the Keynesian range. 
D)  vertical in the classical range. 
A)  upward sloping in the classical range. 
B)  downward sloping in the Keynesian range. 
C)  vertical in the Keynesian range. 
D)  vertical in the classical range.

Question 8

Economic growth is depicted by a:

Accepted Answer

A)  rightward shift in the aggregate demand curve. 
B)  rightward shift in the upward-sloping range of the short-run aggregate supply curve. 
C)  downward shift in the Keynesian range of the short-run aggregate supply curve. 
D)  rightward shift in the long-run aggregate supply curve. 
A)  rightward shift in the aggregate demand curve. 
B)  rightward shift in the upward-sloping range of the short-run aggregate supply curve. 
C)  downward shift in the Keynesian range of the short-run aggregate supply curve. 
D)  rightward shift in the long-run aggregate supply curve.

Question 9

Which one of the following will increase aggregate supply, thereby shifting the curve right?

Accepted Answer

A)  Nominal wages increase as a result of a decreased labor supply. 
B)  The productivity of workers increases as a result of technological improvements. 
C)  A new government policy increases business taxes. 
D)  The price of oil, which is a major input into most production activities, increases. 
A)  Nominal wages increase as a result of a decreased labor supply. 
B)  The productivity of workers increases as a result of technological improvements. 
C)  A new government policy increases business taxes. 
D)  The price of oil, which is a major input into most production activities, increases.

Question 10

When an economy is operating on the classical range on the short-run aggregate supply curve, a decrease in _____ will NOT lead to a decrease in equilibrium price.

Accepted Answer

A)  money supply 
B)  income taxes 
C)  discretionary government spending 
D)  exports to foreign countries 
A)  money supply 
B)  income taxes 
C)  discretionary government spending 
D)  exports to foreign countries

Question 11

If the short-run output is more than the potential output, then in the long run, the nominal wage will _____ and output will:

Accepted Answer

A)  fall; fall. 
B)  rise; fall. 
C)  fall; rise. 
D)  rise; rise. 
A)  fall; fall. 
B)  rise; fall. 
C)  fall; rise. 
D)  rise; rise.

Question 12

Which one of the following can lead to a rightward shift of the long-run aggregate supply curve?

Accepted Answer

A)  The money supply increases. 
B)  Discretionary government spending increases. 
C)  The labor force increases. 
D)  Consumer expectations about future income increase. 
A)  The money supply increases. 
B)  Discretionary government spending increases. 
C)  The labor force increases. 
D)  Consumer expectations about future income increase.

Question 13

If the short-run macroeconomic equilibrium occurs in the upward-sloping range of the short-run aggregate supply curve, then an increase in government spending will lead to:

Accepted Answer

A)  an increase in output. 
B)  a decrease in output. 
C)  no change in price. 
D)  a decrease in price. 
A)  an increase in output. 
B)  a decrease in output. 
C)  no change in price. 
D)  a decrease in price.

Question 14

The short-run aggregate supply curve is perfectly inelastic in the classical range because:

Accepted Answer

A)  large amounts of unused labor and other inputs can be obtained at no additional cost. 
B)  nominal wages are sticky, so firms can supply additional output at higher price. 
C)  input and output prices change at the same rate, so there is no incentive to produce extra output. 
D)  a higher price leads to lower demand, so there is no incentive to produce extra output. 
A)  large amounts of unused labor and other inputs can be obtained at no additional cost. 
B)  nominal wages are sticky, so firms can supply additional output at higher price. 
C)  input and output prices change at the same rate, so there is no incentive to produce extra output. 
D)  a higher price leads to lower demand, so there is no incentive to produce extra output.

Question 15

Which one of the following would constitute a positive supply shock?

Accepted Answer

A)  The supply of money in the economy increases. 
B)  Discretionary government spending increases. 
C)  The price of oil decreases as a result of conflict or war. 
D)  The federal income tax decreases. 
A)  The supply of money in the economy increases. 
B)  Discretionary government spending increases. 
C)  The price of oil decreases as a result of conflict or war. 
D)  The federal income tax decreases.

Question 16

The marginal propensity to consume for an economy is 0.8. When the government injects $200 into the economy by purchasing military equipment, the total spending in the economy increases by $1,000. Given this scenario, which of the following statements is FALSE for the economy?

Accepted Answer

A)  The marginal propensity to save is 0.2. 
B)  Savings are not the only source of leakage. 
C)  The spending multiplier is 5. 
D)  The spending multiplier is more than 5. 
A)  The marginal propensity to save is 0.2. 
B)  Savings are not the only source of leakage. 
C)  The spending multiplier is 5. 
D)  The spending multiplier is more than 5.

Question 17

If the marginal propensity to save for an economy is 0.2, then the marginal propensity to consume for the economy is:

Accepted Answer

A)  0.5. 
B)  0.6. 
C)  0.7. 
D)  0.8. 
A)  0.5. 
B)  0.6. 
C)  0.7. 
D)  0.8.

Question 18

In an economy that has no leakages except savings, the government injects $200 of new spending into the economy, and the total spending in the economy increases by $1,000. The spending multiplier in the economy is _____, and the marginal propensity to consume is:

Accepted Answer

A)  0.8; 0.2. 
B)  5; 0.8. 
C)  0.2; 0.8. 
D)  0.8; 5. 
A)  0.8; 0.2. 
B)  5; 0.8. 
C)  0.2; 0.8. 
D)  0.8; 5.

Question 19

Use Figure: Long-Run Aggregate Supply Curve. The figure shows two long-run aggregate supply curves for an economy. Which of the following CANNOT lead to a shift from long-run aggregate supply curve 1 to long-run aggregate supply curve 2?
​
Figure: Long-Run Aggregate Supply Curve

Accepted Answer

A)  The labor force increases. 
B)  The money supply increases. 
C)  The educational attainment of the population improves. 
D)  Technology improves. 
A)  The labor force increases. 
B)  The money supply increases. 
C)  The educational attainment of the population improves. 
D)  Technology improves.

Question 20

Aggregate demand includes the demand for all goods and services in an economy EXCEPT the goods and service that are:

Accepted Answer

A)  purchased by the government. 
B)  purchased by firms. 
C)  exported to other countries. 
D)  imported from other countries. 
A)  purchased by the government. 
B)  purchased by firms. 
C)  exported to other countries. 
D)  imported from other countries.

If short-run output is greater than potential output, then:

If short-run output is less than the potential output, then:

According to the interest rate effect, a higher price level implies a _ demand for money, which leads to a _ interest rate and a lower planned investment spending.

Use Figure: Macroeconomic Equilibrium. This figure shows four different macroeconomic equilibria for an economy. Which of the following can shift the macroeconomic equilibrium from point A to point B? Figure: Macroeconomic Equilibrium

The long-run aggregate supply curve is:

The total investment spending in an economy decreases as a result of an increase in the interest rate, which is driven by an increase in the overall price level. This will be represented as a:

The short-run aggregate supply curve is:

Economic growth is depicted by a:

Which one of the following will increase aggregate supply, thereby shifting the curve right?

When an economy is operating on the classical range on the short-run aggregate supply curve, a decrease in _____ will NOT lead to a decrease in equilibrium price.

If the short-run output is more than the potential output, then in the long run, the nominal wage will _____ and output will:

Which one of the following can lead to a rightward shift of the long-run aggregate supply curve?

If the short-run macroeconomic equilibrium occurs in the upward-sloping range of the short-run aggregate supply curve, then an increase in government spending will lead to:

The short-run aggregate supply curve is perfectly inelastic in the classical range because:

Which one of the following would constitute a positive supply shock?

The marginal propensity to consume for an economy is 0.8. When the government injects $200 into the economy by purchasing military equipment, the total spending in the economy increases by $1,000. Given this scenario, which of the following statements is FALSE for the economy?

If the marginal propensity to save for an economy is 0.2, then the marginal propensity to consume for the economy is:

In an economy that has no leakages except savings, the government injects $200 of new spending into the economy, and the total spending in the economy increases by $1,000. The spending multiplier in the economy is _____, and the marginal propensity to consume is:

Use Figure: Long-Run Aggregate Supply Curve. The figure shows two long-run aggregate supply curves for an economy. Which of the following CANNOT lead to a shift from long-run aggregate supply curve 1 to long-run aggregate supply curve 2? Figure: Long-Run Aggregate Supply Curve

Aggregate demand includes the demand for all goods and services in an economy EXCEPT the goods and service that are:

Foundations of Economics

Extension: Understanding Graphs

Markets and Economies

Demand

Supply

Market Equilibrium

Elasticity

Consumer Behavior

Production Costs

Perfect Competition

Market Power

Factor Markets

Market Failure and Government Failure

Measuring an Economys Performance

Fiscal Policy

Money and Banking

Monetary Policy

Economic Growth and Development

International Trade and Finance

Filters

Exam 14: Aggregate Demand and Aggregate Supply

If short-run output is greater than potential output, then:

If short-run output is less than the potential output, then:

According to the interest rate effect, a higher price level implies a _____ demand for money, which leads to a _____ interest rate and a lower planned investment spending.

Use Figure: Macroeconomic Equilibrium. This figure shows four different macroeconomic equilibria for an economy. Which of the following can shift the macroeconomic equilibrium from point A to point B? ​ Figure: Macroeconomic Equilibrium

The long-run aggregate supply curve is:

The total investment spending in an economy decreases as a result of an increase in the interest rate, which is driven by an increase in the overall price level. This will be represented as a:

The short-run aggregate supply curve is:

Economic growth is depicted by a:

Which one of the following will increase aggregate supply, thereby shifting the curve right?

When an economy is operating on the classical range on the short-run aggregate supply curve, a decrease in _____ will NOT lead to a decrease in equilibrium price.

If the short-run output is more than the potential output, then in the long run, the nominal wage will _____ and output will:

Which one of the following can lead to a rightward shift of the long-run aggregate supply curve?

If the short-run macroeconomic equilibrium occurs in the upward-sloping range of the short-run aggregate supply curve, then an increase in government spending will lead to:

The short-run aggregate supply curve is perfectly inelastic in the classical range because:

Which one of the following would constitute a positive supply shock?

The marginal propensity to consume for an economy is 0.8. When the government injects $200 into the economy by purchasing military equipment, the total spending in the economy increases by $1,000. Given this scenario, which of the following statements is FALSE for the economy?

If the marginal propensity to save for an economy is 0.2, then the marginal propensity to consume for the economy is:

In an economy that has no leakages except savings, the government injects $200 of new spending into the economy, and the total spending in the economy increases by $1,000. The spending multiplier in the economy is _____, and the marginal propensity to consume is:

Use Figure: Long-Run Aggregate Supply Curve. The figure shows two long-run aggregate supply curves for an economy. Which of the following CANNOT lead to a shift from long-run aggregate supply curve 1 to long-run aggregate supply curve 2? ​ Figure: Long-Run Aggregate Supply Curve

Aggregate demand includes the demand for all goods and services in an economy EXCEPT the goods and service that are:

Foundations of Economics

Extension: Understanding Graphs

Markets and Economies

Demand

Supply

Market Equilibrium

Elasticity

Consumer Behavior

Production Costs

Perfect Competition

Market Power

Factor Markets

Market Failure and Government Failure

Measuring an Economys Performance

Fiscal Policy

Money and Banking

Monetary Policy

Economic Growth and Development

International Trade and Finance

Filters

According to the interest rate effect, a higher price level implies a _ demand for money, which leads to a _ interest rate and a lower planned investment spending.

Use Figure: Macroeconomic Equilibrium. This figure shows four different macroeconomic equilibria for an economy. Which of the following can shift the macroeconomic equilibrium from point A to point B? Figure: Macroeconomic Equilibrium

Use Figure: Long-Run Aggregate Supply Curve. The figure shows two long-run aggregate supply curves for an economy. Which of the following CANNOT lead to a shift from long-run aggregate supply curve 1 to long-run aggregate supply curve 2? Figure: Long-Run Aggregate Supply Curve