Question 1

Which of the following will most likely increase aggregate supply in the long run?

Accepted Answer

A) unfavorable weather conditions in agricultural areas 
B) an increase in the expected inflation rate 
C) higher real interest rates 
D) an increase in the rate of capital formation 
A) unfavorable weather conditions in agricultural areas 
B) an increase in the expected inflation rate 
C) higher real interest rates 
D) an increase in the rate of capital formation

Question 2

Which of the following will most likely increase long-run aggregate supply?

Accepted Answer

A) an increase in the rate of investment 
B) an increase in resource prices 
C) an increase in the minimum wage 
D) an increase in the expected inflation rate 
A) an increase in the rate of investment 
B) an increase in resource prices 
C) an increase in the minimum wage 
D) an increase in the expected inflation rate

Question 3

Which of the following would be most likely to cause a reduction in current aggregate demand in the United States?

Accepted Answer

A) increased fear of a recession 
B) an increase in the expected rate of inflation 
C) a sharp increase in the value of stocks owned by Americans 
D) a rapid increase in the growth of income in Canada,Mexico,and Western Europe 
A) increased fear of a recession 
B) an increase in the expected rate of inflation 
C) a sharp increase in the value of stocks owned by Americans 
D) a rapid increase in the growth of income in Canada,Mexico,and Western Europe

Question 4

When an economy is temporarily operating at an output that is beyond its full-employment rate,

Accepted Answer

A) excess supply in resource markets will eventually lead to lower resource prices,which will decrease costs and direct the economy toward full employment. 
B) excess demand in resource markets will lead to higher resource prices,which will increase costs and direct the economy toward full employment. 
C) lower wages and prices will quickly restore full employment. 
D) only restrictive fiscal policy will direct the economy back to full employment. 
A) excess supply in resource markets will eventually lead to lower resource prices,which will decrease costs and direct the economy toward full employment. 
B) excess demand in resource markets will lead to higher resource prices,which will increase costs and direct the economy toward full employment. 
C) lower wages and prices will quickly restore full employment. 
D) only restrictive fiscal policy will direct the economy back to full employment.

Question 5

Use the figure below to answer the following question(s).
Figure 10-7
  
-Given the aggregate demand and aggregate supply curves for the economy depicted in Figure 10-7,the economy's output and price level are

Accepted Answer

A) output Y₁ and price level P₁. 
B) output Y₂ and price level P₂ 
C) output Y₁ and price level P₃. 
D) output Y₂ and price level P₁. 
A) output Y₁ and price level P₁. 
B) output Y₂ and price level P₂ 
C) output Y₁ and price level P₃. 
D) output Y₂ and price level P₁.

Question 6

Use the figure below to answer the following question(s).
Figure 10-4
  
-Starting from long-run equilibrium at point F in Figure 10-4,at which of the following points would short-run equilibrium occur following a drought in the Midwestern states?

Accepted Answer

A) I 
B) F 
C) G 
D) H 
A) I 
B) F 
C) G 
D) H

Question 7

If an unanticipated decrease in aggregate demand results in an output below the economy's long-run capacity,long-run equilibrium will eventually be restored by

Accepted Answer

A) an increase in the rate of inflation. 
B) lower resource prices and lower real interest rates. 
C) higher resource prices and higher real interest rates. 
D) a decrease in the natural rate of unemployment. 
A) an increase in the rate of inflation. 
B) lower resource prices and lower real interest rates. 
C) higher resource prices and higher real interest rates. 
D) a decrease in the natural rate of unemployment.

Question 8

If a currency depreciates,a country's net exports

Accepted Answer

A) fall and AD increases. 
B) rise and AD increases. 
C) fall and AD decreases. 
D) rise and AD decreases. 
A) fall and AD increases. 
B) rise and AD increases. 
C) fall and AD decreases. 
D) rise and AD decreases.

Question 9

Use the figure below to answer the following question(s).
Figure 10-14
  
-The economy's initial aggregate demand (AD₀)and aggregate supply (SRAS₀ and LRAS)curves are illustrated in Figure 10-14.Which of the following is true?

Accepted Answer

A) The profits of business firms are higher at I than J. 
B) H is a point of long-run equilibrium. 
C) Downward pressure on prices occurs at point G. 
D) Point F is consistent with long-run equilibrium. 
A) The profits of business firms are higher at I than J. 
B) H is a point of long-run equilibrium. 
C) Downward pressure on prices occurs at point G. 
D) Point F is consistent with long-run equilibrium.

Question 10

Which of the following will most likely increase short-run aggregate supply?

Accepted Answer

A) unfavorable weather conditions in the nation's agricultural areas 
B) an increase in income tax rates 
C) an increase in the expected inflation rate 
D) a reduction in resource prices 
A) unfavorable weather conditions in the nation's agricultural areas 
B) an increase in income tax rates 
C) an increase in the expected inflation rate 
D) a reduction in resource prices

Question 11

An anticipated change is an economic occurrence that

Accepted Answer

A) catches most people by surprise. 
B) is foreseen by most economic participants. 
C) is anticipated by economists but unforeseen by other people. 
D) is foreseen by policy makers but unforeseen by the public. 
A) catches most people by surprise. 
B) is foreseen by most economic participants. 
C) is anticipated by economists but unforeseen by other people. 
D) is foreseen by policy makers but unforeseen by the public.

Question 12

If the economy is simultaneously in long-run and short-run equilibrium,which of the following is true?

Accepted Answer

A) Aggregate quantity supplied is greater than potential output. 
B) Aggregate quantity demanded is less than potential output. 
C) Aggregate quantity demanded is equal to potential output. 
D) The aggregate demand curve is horizontal at the potential output level. 
A) Aggregate quantity supplied is greater than potential output. 
B) Aggregate quantity demanded is less than potential output. 
C) Aggregate quantity demanded is equal to potential output. 
D) The aggregate demand curve is horizontal at the potential output level.

Question 13

During an economic contraction,housing and stock prices generally

Accepted Answer

A) fall,leading to a reduction in aggregate demand. 
B) fall,leading to an increase in aggregate demand. 
C) rise,leading to a reduction in aggregate demand. 
D) rise,leading to an increase in aggregate demand. 
A) fall,leading to a reduction in aggregate demand. 
B) fall,leading to an increase in aggregate demand. 
C) rise,leading to a reduction in aggregate demand. 
D) rise,leading to an increase in aggregate demand.

Question 14

Use the figure below to answer the following question(s).
Figure 10-1
  
-At which point in Figure 10-1 is the economy at long-run equilibrium?

Accepted Answer

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

Question 15

Use the figure below to answer the following question(s).
Figure 10-7
  
-If the economy were operating at point a in Figure 10-8,the real rate of interest 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 16

Suppose the economy is initially in long-run equilibrium and then it experiences a supply shock in the form of sharply higher energy prices.Which of the following is true?

Accepted Answer

A) The short-run aggregate supply curve shifts leftward and the long-run supply curve shifts rightward. 
B) The short-run aggregate supply curve shifts rightward and there is a movement along the aggregate demand curve. 
C) The short-run aggregate supply curve does not shift and the long-run aggregate supply curve shifts rightward. 
D) The short-run aggregate supply curve shifts rightward but the long-run aggregate supply curve does not shift. 
E) The short-run aggregate supply curve shifts leftward and there is a movement along the aggregate demand curve. 
A) The short-run aggregate supply curve shifts leftward and the long-run supply curve shifts rightward. 
B) The short-run aggregate supply curve shifts rightward and there is a movement along the aggregate demand curve. 
C) The short-run aggregate supply curve does not shift and the long-run aggregate supply curve shifts rightward. 
D) The short-run aggregate supply curve shifts rightward but the long-run aggregate supply curve does not shift. 
E) The short-run aggregate supply curve shifts leftward and there is a movement along the aggregate demand curve.

Question 17

Figure 10-18
  
-Beginning from long-run equilibrium at point E₁ in Figure 10-18,the aggregate demand curve shifts to AD₂.The real GDP and price level (CPI)in short-run equilibrium will be

Accepted Answer

A) $10 billion and 200. 
B) $10 billion and 150. 
C) $10 billion and 100. 
D) $4 billion and 150. 
A) $10 billion and 200. 
B) $10 billion and 150. 
C) $10 billion and 100. 
D) $4 billion and 150.

Question 18

Which of the following will most likely increase the economy's long-run aggregate supply?

Accepted Answer

A) advances in technology 
B) unfavorable weather conditions in agricultural areas 
C) an increase in the expected inflation rate 
D) a low rate of investment 
A) advances in technology 
B) unfavorable weather conditions in agricultural areas 
C) an increase in the expected inflation rate 
D) a low rate of investment

Question 19

Use the figure below to answer the following question(s).
Figure 10-11
  
-In Figure 10-11,which of the following would most likely cause the movement from point E₁ to point E₂?

Accepted Answer

A) an increase in the expected inflation rate 
B) a decrease in the expected inflation rate 
C) a major technological advance 
D) a temporary reduction in oil prices 
A) an increase in the expected inflation rate 
B) a decrease in the expected inflation rate 
C) a major technological advance 
D) a temporary reduction in oil prices

Question 20

How does the self-correcting mechanism act to pull the economy out of a recession?

Accepted Answer

During a recession (when actual output i

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

Which of the following will most likely increase aggregate supply in the long run?

Which of the following will most likely increase long-run aggregate supply?

Which of the following would be most likely to cause a reduction in current aggregate demand in the United States?

When an economy is temporarily operating at an output that is beyond its full-employment rate,

Use the figure below to answer the following question(s). Figure 10-7 -Given the aggregate demand and aggregate supply curves for the economy depicted in Figure 10-7,the economy's output and price level are

Use the figure below to answer the following question(s). Figure 10-4 -Starting from long-run equilibrium at point F in Figure 10-4,at which of the following points would short-run equilibrium occur following a drought in the Midwestern states?

If an unanticipated decrease in aggregate demand results in an output below the economy's long-run capacity,long-run equilibrium will eventually be restored by

If a currency depreciates,a country's net exports

Use the figure below to answer the following question(s). Figure 10-14 -The economy's initial aggregate demand (AD₀)and aggregate supply (SRAS₀ and LRAS)curves are illustrated in Figure 10-14.Which of the following is true?

Which of the following will most likely increase short-run aggregate supply?

An anticipated change is an economic occurrence that

If the economy is simultaneously in long-run and short-run equilibrium,which of the following is true?

During an economic contraction,housing and stock prices generally

Use the figure below to answer the following question(s). Figure 10-1 -At which point in Figure 10-1 is the economy at long-run equilibrium?

Use the figure below to answer the following question(s). Figure 10-7 -If the economy were operating at point a in Figure 10-8,the real rate of interest would tend to

Suppose the economy is initially in long-run equilibrium and then it experiences a supply shock in the form of sharply higher energy prices.Which of the following is true?

Figure 10-18 -Beginning from long-run equilibrium at point E₁ in Figure 10-18,the aggregate demand curve shifts to AD₂.The real GDP and price level (CPI)in short-run equilibrium will be

Which of the following will most likely increase the economy's long-run aggregate supply?

Use the figure below to answer the following question(s). Figure 10-11 -In Figure 10-11,which of the following would most likely cause the movement from point E₁ to point E₂?

How does the self-correcting mechanism act to pull the economy out of a recession?

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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