Question 1

An abnormally large grain crop due to highly favorable weather conditions in the Midwest is an example of a(n)

Accepted Answer

A) technological improvement that will increase long-run aggregate supply. 
B) supply shock that will increase short-run aggregate supply. 
C) unexpected development that will reduce the natural rate of unemployment. 
D) unexpected development that will lead to excess supply and widespread unemployment. 
A) technological improvement that will increase long-run aggregate supply. 
B) supply shock that will increase short-run aggregate supply. 
C) unexpected development that will reduce the natural rate of unemployment. 
D) unexpected development that will lead to excess supply and widespread unemployment.

Question 2

The usual results of an adverse supply shock are

Accepted Answer

A) a rise in prices and a fall in output. 
B) a fall in prices and a rise in output. 
C) increased growth and lower inflation. 
D) a rise in prices and a rise in output. 
A) a rise in prices and a fall in output. 
B) a fall in prices and a rise in output. 
C) increased growth and lower inflation. 
D) a rise in prices and a rise in output.

Question 3

Which of the following statements is most consistent with the view that the economy has a self-corrective mechanism?

Accepted Answer

A) When the economy is in a recession,it will remain there until the government steps in to bring the economy out of the recession. 
B) When the economy is in a recession,falling resource prices and declining interest rates will direct the economy back to full employment. 
C) During economic booms,interest rates will fall,causing the economy to fall into a recession. 
D) In a market economy,resource prices,such as wages,can only increase;they can never decrease. 
A) When the economy is in a recession,it will remain there until the government steps in to bring the economy out of the recession. 
B) When the economy is in a recession,falling resource prices and declining interest rates will direct the economy back to full employment. 
C) During economic booms,interest rates will fall,causing the economy to fall into a recession. 
D) In a market economy,resource prices,such as wages,can only increase;they can never decrease.

Question 4

Resource prices will fall and short-run aggregate supply will increase if

Accepted Answer

A) current output exceeds the economy's full-employment level. 
B) current output is less than the economy's full-employment level. 
C) the actual rate of unemployment is less than the natural rate of unemployment. 
D) exports exceed imports. 
A) current output exceeds the economy's full-employment level. 
B) current output is less than the economy's full-employment level. 
C) the actual rate of unemployment is less than the natural rate of unemployment. 
D) exports exceed imports.

Question 5

Which of the following is most likely to accompany an unanticipated reduction in aggregate demand?

Accepted Answer

A) an increase in the price level 
B) a decrease in unemployment 
C) an increase in real GDP 
D) an increase in the unemployment rate 
A) an increase in the price level 
B) a decrease in unemployment 
C) an increase in real GDP 
D) an increase in the unemployment rate

Question 6

When the U.S.dollar appreciates,

Accepted Answer

A) U.S.exports rise. 
B) U.S.imports decline. 
C) aggregate demand shifts leftward. 
D) aggregate demand shifts rightward. 
A) U.S.exports rise. 
B) U.S.imports decline. 
C) aggregate demand shifts leftward. 
D) aggregate demand shifts rightward.

Question 7

Which of the following would cause prices and real GDP 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

When an economy is experiencing an economic boom and operating beyond its long-run capacity,

Accepted Answer

A) strong demand for investment funds will push interest rates upward. 
B) weak demand for resources will push the prices of resources downward. 
C) weak demand for investment funds will cause the real interest rate to decline. 
D) the unemployment rate will be greater than its natural rate. 
A) strong demand for investment funds will push interest rates upward. 
B) weak demand for resources will push the prices of resources downward. 
C) weak demand for investment funds will cause the real interest rate to decline. 
D) the unemployment rate will be greater than its natural rate.

Question 9

For an oil-importing country such as the United States,the immediate effect of a supply shock caused by an increase in the price of imported oil would tend to be

Accepted Answer

A) an increase in real output and a decrease in the general level of prices. 
B) a decrease in real output and an increase in the general level of prices. 
C) a decrease in both the general level of prices and real output. 
D) an increase in both the general level of prices and real output. 
A) an increase in real output and a decrease in the general level of prices. 
B) a decrease in real output and an increase in the general level of prices. 
C) a decrease in both the general level of prices and real output. 
D) an increase in both the general level of prices and real output.

Question 10

Which of the following will lead to an increase in aggregate demand in the United States?

Accepted Answer

A) a higher price level 
B) an increase in the real interest rate 
C) an increase in wealth due to a substantial appreciation in the value of stocks 
D) a decrease in real income in Japan and Western Europe 
A) a higher price level 
B) an increase in the real interest rate 
C) an increase in wealth due to a substantial appreciation in the value of stocks 
D) a decrease in real income in Japan and Western Europe

Question 11

An increase in the long-run aggregate supply curve indicates that

Accepted Answer

A) the natural rate of unemployment has increased. 
B) unemployment has increased. 
C) the general level of prices has increased. 
D) potential real GDP has increased. 
A) the natural rate of unemployment has increased. 
B) unemployment has increased. 
C) the general level of prices has increased. 
D) potential real GDP has increased.

Question 12

From mid-year 2006 to year-end 2008,housing prices

Accepted Answer

A) fell by approximately 30 percent,leading to a sharp reduction in aggregate demand. 
B) increased by approximately 30 percent leading to a sharp increase in aggregate demand. 
C) declined by a smaller about than in previous recessions. 
D) were unchanged,but a sharp decline in stock prices reduced aggregate demand. 
A) fell by approximately 30 percent,leading to a sharp reduction in aggregate demand. 
B) increased by approximately 30 percent leading to a sharp increase in aggregate demand. 
C) declined by a smaller about than in previous recessions. 
D) were unchanged,but a sharp decline in stock prices reduced aggregate demand.

Question 13

For the following question(s),assume that the economy is in long-run equilibrium in the aggregate demand/aggregate supply model and that some sort of event takes place.In each case,mark the most likely impact of the event on the aggregate demand/aggregate supply diagram given below.
Figure 10-19
  
-Refer to Figure 10-19.A major technological advance occurs.

Accepted Answer

A) The aggregate demand curve would shift to the right. 
B) The aggregate demand curve would shift to the left. 
C) Both the short-run and the long-run aggregate supply curves would shift to the right. 
D) Both the short-run and the long-run aggregate supply curves would shift to the left. 
A) The aggregate demand curve would shift to the right. 
B) The aggregate demand curve would shift to the left. 
C) Both the short-run and the long-run aggregate supply curves would shift to the right. 
D) Both the short-run and the long-run aggregate supply curves would shift to the left.

Question 14

The expected price level is important because

Accepted Answer

A) it is the equilibrium price level in the short run 
B) it determines the actual price level in the short run 
C) it determines the actual price level in the long run 
D) firms and resource owners make long-term agreements based on the expected price level 
A) it is the equilibrium price level in the short run 
B) it determines the actual price level in the short run 
C) it determines the actual price level in the long run 
D) firms and resource owners make long-term agreements based on the expected price level

Question 15

Other things constant,an increase in the real interest rate will

Accepted Answer

A) cause consumers to reduce their purchases of durable items like appliances and automobiles. 
B) induce businesses to increase their level of investment. 
C) make borrowing money more attractive. 
D) increase the natural rate of unemployment. 
A) cause consumers to reduce their purchases of durable items like appliances and automobiles. 
B) induce businesses to increase their level of investment. 
C) make borrowing money more attractive. 
D) increase the natural rate of unemployment.

Question 16

Construct a graph of the aggregate goods and services market for an economy experiencing the following.
a.a recession
b.full employment
c.an economic boom

Accepted Answer

a.An economy experiencing a recession is

Question 17

If there is an unanticipated decrease in aggregate demand,which of the following is most likely to occur?

Accepted Answer

A) an increase in the price level 
B) a reduction in employment 
C) an increase in the growth rate of real GDP 
D) an increase in consumption 
A) an increase in the price level 
B) a reduction in employment 
C) an increase in the growth rate of real GDP 
D) an increase in consumption

Question 18

During the 1990s,a financial crisis spread throughout Asia causing those economies to drop into recessions.Other things constant,how would such a decrease in the income of foreign trading partners have influenced the price level and output of the United States?

Accepted Answer

A) Both real output and the price level would have fallen. 
B) Both real output and the price level would have risen. 
C) Real output would have fallen,and the price level would have risen. 
D) Real output would have risen,and the price level would have fallen. 
A) Both real output and the price level would have fallen. 
B) Both real output and the price level would have risen. 
C) Real output would have fallen,and the price level would have risen. 
D) Real output would have risen,and the price level would have fallen.

Question 19

Which of the following will most likely occur in the United States as the result of an unexpected rapid growth in real income in Canada and Mexico?

Accepted Answer

A) an increase in aggregate demand and output in the short run 
B) an reduction in aggregate demand and output in the short run 
C) a reduction in the price level 
D) a decrease in the natural rate of unemployment in the United States 
A) an increase in aggregate demand and output in the short run 
B) an reduction in aggregate demand and output in the short run 
C) a reduction in the price level 
D) a decrease in the natural rate of unemployment in the United States

Question 20

During the crisis of 2008 housing prices ________ and stock prices ________.(Fill in the blank)

Accepted Answer

A) rose sharply;fell sharply 
B) fell sharply;rose sharply 
C) fell sharply;fell sharply 
D) rose sharply;rose sharply 
A) rose sharply;fell sharply 
B) fell sharply;rose sharply 
C) fell sharply;fell sharply 
D) rose sharply;rose sharply

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

An abnormally large grain crop due to highly favorable weather conditions in the Midwest is an example of a(n)

The usual results of an adverse supply shock are

Which of the following statements is most consistent with the view that the economy has a self-corrective mechanism?

Resource prices will fall and short-run aggregate supply will increase if

Which of the following is most likely to accompany an unanticipated reduction in aggregate demand?

When the U.S.dollar appreciates,

Which of the following would cause prices and real GDP to rise in the short run?

When an economy is experiencing an economic boom and operating beyond its long-run capacity,

For an oil-importing country such as the United States,the immediate effect of a supply shock caused by an increase in the price of imported oil would tend to be

Which of the following will lead to an increase in aggregate demand in the United States?

An increase in the long-run aggregate supply curve indicates that

From mid-year 2006 to year-end 2008,housing prices

The expected price level is important because

Other things constant,an increase in the real interest rate will

Construct a graph of the aggregate goods and services market for an economy experiencing the following. a.a recession b.full employment c.an economic boom

If there is an unanticipated decrease in aggregate demand,which of the following is most likely to occur?

During the 1990s,a financial crisis spread throughout Asia causing those economies to drop into recessions.Other things constant,how would such a decrease in the income of foreign trading partners have influenced the price level and output of the United States?

Which of the following will most likely occur in the United States as the result of an unexpected rapid growth in real income in Canada and Mexico?

During the crisis of 2008 housing prices ________ and stock prices ________.(Fill in the blank)

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

Filters

During the crisis of 2008 housing prices and stock prices .(Fill in the blank)