Question 1

What is potential GDP?

Accepted Answer

A) It is the level of real GDP in the long run. 
B) It is the difference between current GDP and maximum GDP. 
C) It is the level of real GDP in the short run. 
D) It is the level of GDP at which inflation is constant. 
A) It is the level of real GDP in the long run. 
B) It is the difference between current GDP and maximum GDP. 
C) It is the level of real GDP in the short run. 
D) It is the level of GDP at which inflation is constant. A

Question 2

If aggregate demand just decreased,which of the following may have caused the decrease?

Accepted Answer

A) a decrease in exports 
B) a decrease in the interest rate 
C) a decrease in the price level 
D) a decrease in imports 
A) a decrease in exports 
B) a decrease in the interest rate 
C) a decrease in the price level 
D) a decrease in imports A

Question 3

Last week,13 Mexican pesos could purchase one U.S.dollar.This week,it takes 11 Mexican pesos to purchase one U.S.dollar.This change in the value of the dollar will ________ exports from the United States to Mexico and ________ U.S.aggregate demand.

Accepted Answer

A) increase; increase 
B) decrease; decrease 
C) increase; decrease 
D) decrease; increase 
A) increase; increase 
B) decrease; decrease 
C) increase; decrease 
D) decrease; increase A

Question 4

The long-run aggregate supply curve will shift to the right if the economy

Accepted Answer

A) experiences technological change. 
B) has a decrease in population. 
C) experiences high levels of inflation. 
D) net exports decrease. 
A) experiences technological change. 
B) has a decrease in population. 
C) experiences high levels of inflation. 
D) net exports decrease.

Question 5

An increase in imports increases aggregate demand.

Accepted Answer

A) True 
 B)False

Question 6

A decrease in aggregate demand in the economy will have what effect on macroeconomic equilibrium in the long run?

Accepted Answer

A) The price level will fall, and the level of GDP will be unaffected. 
B) The price level will fall, and the level of GDP will fall. 
C) The price level will rise, and the level of GDP will fall. 
D) The price level will rise, and the level of GDP will be unaffected. 
A) The price level will fall, and the level of GDP will be unaffected. 
B) The price level will fall, and the level of GDP will fall. 
C) The price level will rise, and the level of GDP will fall. 
D) The price level will rise, and the level of GDP will be unaffected.

Question 7

The automatic mechanism ________ the price level in the case of ________ and ________ the price level in the case of ________.

Accepted Answer

A) raises; recession; lowers; expansion 
B) lowers; expansion; lowers; recession 
C) raises; expansion; raises; recession 
D) lowers; recession; raises; expansion 
A) raises; recession; lowers; expansion 
B) lowers; expansion; lowers; recession 
C) raises; expansion; raises; recession 
D) lowers; recession; raises; expansion

Question 8

The proponents of rational expectations and monetarism think that the Federal Reserve should adopt

Accepted Answer

A) an inflation target. 
B) a monetary aggregate target. 
C) a constant monetary growth rule. 
D) an interest rate target. 
A) an inflation target. 
B) a monetary aggregate target. 
C) a constant monetary growth rule. 
D) an interest rate target.

Question 9

The long-run aggregate supply curve is vertical.

Accepted Answer

A) True 
 B)False

Question 10

Because of the slope(s)of the ________,we can say that a decrease in the price level leads to a higher level of real GDP demanded.

Accepted Answer

A) aggregate demand curve 
B) short-run aggregate supply curve 
C) long-run aggregate supply curve 
D) short-run and long-run aggregate supply curves 
A) aggregate demand curve 
B) short-run aggregate supply curve 
C) long-run aggregate supply curve 
D) short-run and long-run aggregate supply curves

Question 11

Figure 15-2
  
-Refer to Figure 15-2.Ceteris paribus,an increase in the labor force would be represented by a movement from

Accepted Answer

A) SRAS₁ to SRAS₂. 
B) SRAS₂ to SRAS₁. 
C) point A to point B. 
D) point B to point A. 
A) SRAS₁ to SRAS₂. 
B) SRAS₂ to SRAS₁. 
C) point A to point B. 
D) point B to point A.

Question 12

Most recessions in the United States since World War II have begun with

Accepted Answer

A) a decline in residential construction. 
B) a rapid increase in the price level. 
C) a substantial number of bank failures. 
D) a stock market crash. 
A) a decline in residential construction. 
B) a rapid increase in the price level. 
C) a substantial number of bank failures. 
D) a stock market crash.

Question 13

Explain how each of the following events would affect the short-run aggregate supply curve.
a.A decrease in the price level
b.A decrease in what the price level is expected to be in the future
c.A price level that is currently lower than expected
d.An unexpected decrease in the price of an important raw material
e.A decrease in the labor force

Accepted Answer

a.A lower price level would cause a move

Question 14

The dynamic aggregate demand and aggregate supply model assumes that potential GDP increases over time.

Accepted Answer

A) True 
 B)False

Question 15

Suppose there has been an increase in investment.As a result,real GDP will ________ in the short run,and ________ in the long run.

Accepted Answer

A) increase; increases further 
B) increase; decrease to its initial value 
C) decrease; decrease further 
D) decrease; increase to its initial level 
A) increase; increases further 
B) increase; decrease to its initial value 
C) decrease; decrease further 
D) decrease; increase to its initial level

Question 16

What does the phrase "Keynesian revolution" refer to?

Accepted Answer

The Keynesian revolution is th

Question 17

The short-run aggregate supply curve is vertical.

Accepted Answer

A) True 
 B)False

Question 18

Figure 15-4
  
-Refer to Figure 15-4.Given the economy is at point A in year 1,what is the difference between the actual growth rate in GDP in year 2 and the potential growth rate in GDP in year 2?

Accepted Answer

A) 0.3% 
B) 1.1% 
C) 2.7% 
D) 3.7% 
A) 0.3% 
B) 1.1% 
C) 2.7% 
D) 3.7%

Question 19

Which of the following best describes the "wealth effect"?

Accepted Answer

A) When the price level falls, the real value of household wealth falls. 
B) When the price level falls, the nominal value of household wealth falls. 
C) When the price level falls, the nominal value of household wealth rises. 
D) When the price level falls, the real value of household wealth rises. 
A) When the price level falls, the real value of household wealth falls. 
B) When the price level falls, the nominal value of household wealth falls. 
C) When the price level falls, the nominal value of household wealth rises. 
D) When the price level falls, the real value of household wealth rises.

Question 20

Interest rates in the economy have risen.How will this affect aggregate demand and equilibrium in the short run?

Accepted Answer

A) Aggregate demand will fall, the equilibrium price level will fall, and the equilibrium level of GDP will fall. 
B) Aggregate demand will fall, the equilibrium price level will rise, and the equilibrium level of GDP will fall. 
C) Aggregate demand will rise, the equilibrium price level will rise, and the equilibrium level of GDP will rise. 
D) Aggregate demand will rise, the equilibrium price level will fall, and the equilibrium level of GDP will rise. 
A) Aggregate demand will fall, the equilibrium price level will fall, and the equilibrium level of GDP will fall. 
B) Aggregate demand will fall, the equilibrium price level will rise, and the equilibrium level of GDP will fall. 
C) Aggregate demand will rise, the equilibrium price level will rise, and the equilibrium level of GDP will rise. 
D) Aggregate demand will rise, the equilibrium price level will fall, and the equilibrium level of GDP will rise.

What is potential GDP?

If aggregate demand just decreased,which of the following may have caused the decrease?

Last week,13 Mexican pesos could purchase one U.S.dollar.This week,it takes 11 Mexican pesos to purchase one U.S.dollar.This change in the value of the dollar will exports from the United States to Mexico and U.S.aggregate demand.

The long-run aggregate supply curve will shift to the right if the economy

An increase in imports increases aggregate demand.

A decrease in aggregate demand in the economy will have what effect on macroeconomic equilibrium in the long run?

The automatic mechanism the price level in the case of and the price level in the case of .

The proponents of rational expectations and monetarism think that the Federal Reserve should adopt

The long-run aggregate supply curve is vertical.

Because of the slope(s)of the ________,we can say that a decrease in the price level leads to a higher level of real GDP demanded.

Figure 15-2 -Refer to Figure 15-2.Ceteris paribus,an increase in the labor force would be represented by a movement from

Most recessions in the United States since World War II have begun with

The dynamic aggregate demand and aggregate supply model assumes that potential GDP increases over time.

Suppose there has been an increase in investment.As a result,real GDP will in the short run,and in the long run.

What does the phrase "Keynesian revolution" refer to?

The short-run aggregate supply curve is vertical.

Figure 15-4 -Refer to Figure 15-4.Given the economy is at point A in year 1,what is the difference between the actual growth rate in GDP in year 2 and the potential growth rate in GDP in year 2?

Which of the following best describes the "wealth effect"?

Interest rates in the economy have risen.How will this affect aggregate demand and equilibrium in the short run?

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Consumer Choice and Elasticity

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust Policy

Monopolistic Competition and Oligopoly

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, international Trade, and Exchange Rates

Filters

Exam 15: Aggregate Demand and Aggregate Supply Analysis

What is potential GDP?

If aggregate demand just decreased,which of the following may have caused the decrease?

Last week,13 Mexican pesos could purchase one U.S.dollar.This week,it takes 11 Mexican pesos to purchase one U.S.dollar.This change in the value of the dollar will ________ exports from the United States to Mexico and ________ U.S.aggregate demand.

The long-run aggregate supply curve will shift to the right if the economy

An increase in imports increases aggregate demand.

A decrease in aggregate demand in the economy will have what effect on macroeconomic equilibrium in the long run?

The automatic mechanism ________ the price level in the case of ________ and ________ the price level in the case of ________.

The proponents of rational expectations and monetarism think that the Federal Reserve should adopt

The long-run aggregate supply curve is vertical.

Because of the slope(s)of the ________,we can say that a decrease in the price level leads to a higher level of real GDP demanded.

Figure 15-2 -Refer to Figure 15-2.Ceteris paribus,an increase in the labor force would be represented by a movement from

Most recessions in the United States since World War II have begun with

The dynamic aggregate demand and aggregate supply model assumes that potential GDP increases over time.

Suppose there has been an increase in investment.As a result,real GDP will ________ in the short run,and ________ in the long run.

What does the phrase "Keynesian revolution" refer to?

The short-run aggregate supply curve is vertical.

Figure 15-4 -Refer to Figure 15-4.Given the economy is at point A in year 1,what is the difference between the actual growth rate in GDP in year 2 and the potential growth rate in GDP in year 2?

Which of the following best describes the "wealth effect"?

Interest rates in the economy have risen.How will this affect aggregate demand and equilibrium in the short run?

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Consumer Choice and Elasticity

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust Policy

Monopolistic Competition and Oligopoly

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, international Trade, and Exchange Rates

Filters

Last week,13 Mexican pesos could purchase one U.S.dollar.This week,it takes 11 Mexican pesos to purchase one U.S.dollar.This change in the value of the dollar will exports from the United States to Mexico and U.S.aggregate demand.

The automatic mechanism the price level in the case of and the price level in the case of .

Suppose there has been an increase in investment.As a result,real GDP will in the short run,and in the long run.