Question 1

Which of the following statements about the long-run aggregate supply curve is true?

Accepted Answer

A)  It is upward sloping in the range where the nominal wage is sticky. 
B)  It is horizontal in the range where cyclical unemployment is present. 
C)  It is vertical at the level of potential GDP. 
D)  It is downward sloping in the range where the real wage is flexible. 
A)  It is upward sloping in the range where the nominal wage is sticky. 
B)  It is horizontal in the range where cyclical unemployment is present. 
C)  It is vertical at the level of potential GDP. 
D)  It is downward sloping in the range where the real wage is flexible.

Question 2

When _____ wages are sticky, _____ in the price level leads to a decrease in the profit earned by businesses.

Accepted Answer

A)  real; a decrease 
B)  nominal; a decrease 
C)  real; an increase 
D)  nominal; an increase 
A)  real; a decrease 
B)  nominal; a decrease 
C)  real; an increase 
D)  nominal; an increase

Question 3

Use Figure: Long-Run Aggregate Supply Curve. The figure shows two long-run aggregate supply curves for an economy. Which one of the following can lead to a shift from long-run aggregate supply curve 1 to long-run aggregate supply curve 2?
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Figure: Long-Run Aggregate Supply Curve

Accepted Answer

A)  The labor force increases. 
B)  The money supply increases. 
C)  Government spending increases. 
D)  Taxes decrease. 
A)  The labor force increases. 
B)  The money supply increases. 
C)  Government spending increases. 
D)  Taxes decrease.

Question 4

If an economy is operating on the Keynesian range of the short-run aggregate supply curve, which of the following will lead to a decrease in the equilibrium output?

Accepted Answer

A)  Consumers' expectations about future income increase. 
B)  The money supply increases. 
C)  The federal income tax increases. 
D)  Government spending increases. 
A)  Consumers' expectations about future income increase. 
B)  The money supply increases. 
C)  The federal income tax increases. 
D)  Government spending increases.

Question 5

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 $800. Given this scenario, which of the following statements is true for the economy?

Accepted Answer

A)  The marginal propensity to save is 0.5. 
B)  Savings are the only source of leakages. 
C)  The spending multiplier is 5. 
D)  The spending multiplier is less than 5. 
A)  The marginal propensity to save is 0.5. 
B)  Savings are the only source of leakages. 
C)  The spending multiplier is 5. 
D)  The spending multiplier is less than 5.

Which of the following statements about the long-run aggregate supply curve is true?

When _ wages are sticky, _ in the price level leads to a decrease in the profit earned by businesses.

Use Figure: Long-Run Aggregate Supply Curve. The figure shows two long-run aggregate supply curves for an economy. Which one of the following can lead to a shift from long-run aggregate supply curve 1 to long-run aggregate supply curve 2? Figure: Long-Run Aggregate Supply Curve

If an economy is operating on the Keynesian range of the short-run aggregate supply curve, which of the following will lead to a decrease in the equilibrium output?

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 $800. Given this scenario, which of the following statements is true for the economy?

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

Which of the following statements about the long-run aggregate supply curve is true?

When _____ wages are sticky, _____ in the price level leads to a decrease in the profit earned by businesses.

Use Figure: Long-Run Aggregate Supply Curve. The figure shows two long-run aggregate supply curves for an economy. Which one of the following can lead to a shift from long-run aggregate supply curve 1 to long-run aggregate supply curve 2? ​ Figure: Long-Run Aggregate Supply Curve

If an economy is operating on the Keynesian range of the short-run aggregate supply curve, which of the following will lead to a decrease in the equilibrium output?

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 $800. Given this scenario, which of the following statements is true for the economy?

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

When _ wages are sticky, _ in the price level leads to a decrease in the profit earned by businesses.

Use Figure: Long-Run Aggregate Supply Curve. The figure shows two long-run aggregate supply curves for an economy. Which one of the following can lead to a shift from long-run aggregate supply curve 1 to long-run aggregate supply curve 2? Figure: Long-Run Aggregate Supply Curve