Question 1

Within the AD/AS model,if an unanticipated reduction in aggregate demand results in less than the full-employment rate of output,

Accepted Answer

A) the natural rate of unemployment will increase. 
B) long-run aggregate supply will increase. 
C) lower resource prices and declining interest rates will direct the economy back to full employment. 
D) higher resource prices and rising interest rates will direct the economy back to full employment. 
A) the natural rate of unemployment will increase. 
B) long-run aggregate supply will increase. 
C) lower resource prices and declining interest rates will direct the economy back to full employment. 
D) higher resource prices and rising interest rates will direct the economy back to full employment.

Question 2

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 3

Within the AD/AS model,if consumers increase their savings and cut back on their spending,the

Accepted Answer

A) natural rate of unemployment will increase. 
B) real interest rate will decrease and,thereby,cushion the reduction in consumption spending. 
C) real interest rate will increase because of the higher rate of saving. 
D) long-run aggregate supply will decrease to restore equilibrium. 
A) natural rate of unemployment will increase. 
B) real interest rate will decrease and,thereby,cushion the reduction in consumption spending. 
C) real interest rate will increase because of the higher rate of saving. 
D) long-run aggregate supply will decrease to restore equilibrium.

Question 4

Use the figure below to answer the following question(s).
Figure 10-9
  
-If the economy were operating at point a in Figure 10-9,resource prices would tend to

Accepted Answer

A) decrease and move the economy toward point c. 
B) decrease and move the economy toward point b. 
C) increase and move the economy toward point c. 
D) increase and move the economy toward point b. 
A) decrease and move the economy toward point c. 
B) decrease and move the economy toward point b. 
C) increase and move the economy toward point c. 
D) increase and move the economy toward point b.

Question 5

Which of the following will most likely occur in the short run if long-run equilibrium is disturbed by an unanticipated decrease in aggregate demand?

Accepted Answer

A) a decrease in output and a higher price level 
B) an increase in output and a higher price level 
C) a decrease in output and a lower price level 
D) an increase in output,while prices remain unchanged 
A) a decrease in output and a higher price level 
B) an increase in output and a higher price level 
C) a decrease in output and a lower price level 
D) an increase in output,while prices remain unchanged

Question 6

An increase in the consumer sentiment index indicates that consumers are

Accepted Answer

A) becoming more optimistic about their future income and employment prospects. 
B) becoming less optimistic about their future income and employment prospects. 
C) expecting the inflation rate to rise in the near future. 
D) expecting the inflation rate to fall in the near future. 
A) becoming more optimistic about their future income and employment prospects. 
B) becoming less optimistic about their future income and employment prospects. 
C) expecting the inflation rate to rise in the near future. 
D) expecting the inflation rate to fall in the near future.

Question 7

Which of the following would cause prices to fall and output to rise in the short run?

Accepted Answer

A) Short-run aggregate supply shifts right. 
B) Short-run aggregate supply shifts left. 
C) Aggregate demand shifts right. 
D) Aggregate demand shifts left. 
A) Short-run aggregate supply shifts right. 
B) Short-run aggregate supply shifts left. 
C) Aggregate demand shifts right. 
D) Aggregate demand shifts left.

Question 8

Which of the following will cause an increase in aggregate demand within the AS/AD model?

Accepted Answer

A) a decrease in prices 
B) a decrease in the real interest rate 
C) a decrease in consumer optimism as measured by the consumer sentiment index 
D) a decrease in foreign incomes abroad 
A) a decrease in prices 
B) a decrease in the real interest rate 
C) a decrease in consumer optimism as measured by the consumer sentiment index 
D) a decrease in foreign incomes abroad

Question 9

Use the figure below to answer the following question(s).
Figure 10-1
  
-At which point in Figure 10-1 is the economy experiencing an economic recession?

Accepted Answer

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

Question 10

Suppose there was a sharp reduction in stock prices and a sharp increase in the world price of crude oil.Within the framework of the AD/AS model,how would these two changes influence the U.S.economy?

Accepted Answer

A) The lower stock prices would increase SRAS,and the higher crude oil prices would reduce AD;as a result,there would be downward pressure on the general level of prices. 
B) The lower stock prices would reduce SRAS,and the higher crude oil prices would increase AD;as a result,there would be upward pressure on the general level of prices. 
C) The lower stock prices would increase AD,and the higher crude oil prices would increase SRAS;as a result,output would tend to increase. 
D) The lower stock prices would reduce AD,and the higher crude oil prices would reduce SRAS;as a result,output would tend to decline. 
A) The lower stock prices would increase SRAS,and the higher crude oil prices would reduce AD;as a result,there would be downward pressure on the general level of prices. 
B) The lower stock prices would reduce SRAS,and the higher crude oil prices would increase AD;as a result,there would be upward pressure on the general level of prices. 
C) The lower stock prices would increase AD,and the higher crude oil prices would increase SRAS;as a result,output would tend to increase. 
D) The lower stock prices would reduce AD,and the higher crude oil prices would reduce SRAS;as a result,output would tend to decline.

Question 11

Suppose the economy is initially in long-run equilibrium and aggregate demand rises.In the long run prices

Accepted Answer

A) and output are higher than in the original long-run equilibrium. 
B) and output are lower than in the original long-run equilibrium. 
C) are higher and output is the same as the original long-run equilibrium. 
D) are the same and output is lower than in the original long-run equilibrium. 
A) and output are higher than in the original long-run equilibrium. 
B) and output are lower than in the original long-run equilibrium. 
C) are higher and output is the same as the original long-run equilibrium. 
D) are the same and output is lower than in the original long-run equilibrium.

Question 12

Over the last 60 years,the average annual growth of real GDP in the United States has been approximately

Accepted Answer

A) 1 percent. 
B) 3 percent. 
C) 5 percent. 
D) 9 percent. 
A) 1 percent. 
B) 3 percent. 
C) 5 percent. 
D) 9 percent.

Question 13

Use the figure below to answer the following question(s).
Figure 10-7
  
-The economy depicted in Figure 10-8 is in

Accepted Answer

A) short-run equilibrium at less than the full-employment output level. 
B) short-run equilibrium at an output level beyond full employment. 
C) long-run equilibrium at point a. 
D) long-run equilibrium at point b. 
A) short-run equilibrium at less than the full-employment output level. 
B) short-run equilibrium at an output level beyond full employment. 
C) long-run equilibrium at point a. 
D) long-run equilibrium at point b.

Question 14

Which of the following will reduce aggregate demand?

Accepted Answer

A) an increase in real wealth 
B) lower real incomes of the country's foreign trade partners 
C) increased consumer and business optimism about the future 
D) an increase in the expected rate of inflation 
A) an increase in real wealth 
B) lower real incomes of the country's foreign trade partners 
C) increased consumer and business optimism about the future 
D) an increase in the expected rate of inflation

Question 15

If business decision makers expect that the inflation rate will increase in the near future,

Accepted Answer

A) long-run aggregate supply will increase. 
B) long-run aggregate supply will decrease. 
C) short-run aggregate supply will increase. 
D) short-run aggregate supply will decrease. 
A) long-run aggregate supply will increase. 
B) long-run aggregate supply will decrease. 
C) short-run aggregate supply will increase. 
D) short-run aggregate supply will decrease.

Question 16

Which of the following will decrease the short-run aggregate supply of the United States?

Accepted Answer

A) a decrease in wage rates 
B) a decrease in interest rates 
C) a drought that destroys the crops in the California vegetable growing region 
D) a reduction in resource prices 
A) a decrease in wage rates 
B) a decrease in interest rates 
C) a drought that destroys the crops in the California vegetable growing region 
D) a reduction in resource prices

Question 17

Which of the following shifts both short-run and long-run aggregate supply to the left?

Accepted Answer

A) a decrease in the actual rate of inflation 
B) a decrease in the expected rate of inflation 
C) a decrease in the capital stock 
D) a drought in the Midwest agricultural areas. 
A) a decrease in the actual rate of inflation 
B) a decrease in the expected rate of inflation 
C) a decrease in the capital stock 
D) a drought in the Midwest agricultural areas.

Question 18

Explain how each of the following factors would influence aggregate demand in the United States.Be sure to explain which component of aggregate demand would be affected.
a.a stock market crash
b.an increase in the personal income tax rate
c.a decrease in the real interest rate
d.an increase in government purchases
e.a decline in income in Canada

Accepted Answer

a.A stock market crash would decrease we

Question 19

Which of the following will most likely occur in the short run when the long-run equilibrium of an economy is disturbed by an unanticipated decrease in aggregate demand?

Accepted Answer

A) a decrease in output and a higher price level 
B) an increase in output and a higher price level 
C) a decrease in output and a lower price level 
D) an increase in output while prices remain unchanged 
A) a decrease in output and a higher price level 
B) an increase in output and a higher price level 
C) a decrease in output and a lower price level 
D) an increase in output while prices remain unchanged

Question 20

If the general level of prices is lower than business decision makers anticipated when they entered into long-term contracts for raw materials and other resources,which of the following is most likely to occur?

Accepted Answer

A) An economic boom. 
B) Highly attractive profit margins. 
C) An actual rate of unemployment that is greater than the natural rate of unemployment 
D) A sharp increase in imports. 
A) An economic boom. 
B) Highly attractive profit margins. 
C) An actual rate of unemployment that is greater than the natural rate of unemployment 
D) A sharp increase in imports.

Exam 10: Dynamic Change, economic Fluctuations, and the Ad-As Model

Within the AD/AS model,if an unanticipated reduction in aggregate demand results in less than the full-employment rate of output,

Within the AD/AS model,if consumers increase their savings and cut back on their spending,the

Use the figure below to answer the following question(s). Figure 10-9 -If the economy were operating at point a in Figure 10-9,resource prices would tend to

Which of the following will most likely occur in the short run if long-run equilibrium is disturbed by an unanticipated decrease in aggregate demand?

An increase in the consumer sentiment index indicates that consumers are

Which of the following would cause prices to fall and output to rise in the short run?

Which of the following will cause an increase in aggregate demand within the AS/AD model?

Use the figure below to answer the following question(s). Figure 10-1 -At which point in Figure 10-1 is the economy experiencing an economic recession?

Suppose there was a sharp reduction in stock prices and a sharp increase in the world price of crude oil.Within the framework of the AD/AS model,how would these two changes influence the U.S.economy?

Suppose the economy is initially in long-run equilibrium and aggregate demand rises.In the long run prices

Over the last 60 years,the average annual growth of real GDP in the United States has been approximately

Use the figure below to answer the following question(s). Figure 10-7 -The economy depicted in Figure 10-8 is in

Which of the following will reduce aggregate demand?

If business decision makers expect that the inflation rate will increase in the near future,

Which of the following will decrease the short-run aggregate supply of the United States?

Which of the following shifts both short-run and long-run aggregate supply to the left?

Which of the following will most likely occur in the short run when the long-run equilibrium of an economy is disturbed by an unanticipated decrease in aggregate demand?

If the general level of prices is lower than business decision makers anticipated when they entered into long-term contracts for raw materials and other resources,which of the following is most likely to occur?

The Economic Approach

Asome Tools of the Economist

Asupply,demand,and the Market Process

Asupply and Demand: Applications and Extensions

Difficult Cases for the Market and the Role of Government

The Economics of Collective Decision-Making

Ataking the Nations Economic Pulse

Economic Fluctuations, unemployment, and Inflation

Aan Introduction to Basic Macroeconomic Markets

Fiscal Policy: the Keynesian View and Historical Perspective

Fiscal Policy, incentives, and Secondary Effects

Amoney 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

Consumer Choice and Elasticity

Acosts and the Supply of Goods

Aprice Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

Aprice-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Government Spending and Taxation

The Economics of Social Security

The Stock Market: Its Function, Performance, and Potential As an Investment Opportunity

Great Debates in Economics: Keynes Versus Hayek

The Crisis of 2008: Causes and Lessons for the Future

Lessons From the Great Depression

Lessons From Japan and Canada

The Federal Budget and the National Debt

The Economics of Healthcare

Education: Problems and Performance

Earnings Differences Between Men and Women

Do Labor Unions Increase the Wages of Workers

The Question of Resource Exhaustion

Difficult Environmental Cases and the Role of Government

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