Question 1

On the long-run aggregate supply curve

Accepted Answer

A) an increase in the price level increases the aggregate quantity of GDP supplied. 
B) an increase in the price level reduces the aggregate quantity of GDP supplied. 
C) an increase in the price level has no effect on the aggregate quantity of GDP supplied. 
D) an increase in the price level increases the level of potential GDP. 
A) an increase in the price level increases the aggregate quantity of GDP supplied. 
B) an increase in the price level reduces the aggregate quantity of GDP supplied. 
C) an increase in the price level has no effect on the aggregate quantity of GDP supplied. 
D) an increase in the price level increases the level of potential GDP.

Question 2

If potential GDP is equal to $600 billion,what does the long-run aggregate supply curve look like?

Accepted Answer

A) It is a horizontal line at $600 billion of GDP. 
B) It is a vertical line at a level of GDP below $600 billion. 
C) It is a vertical line at $600 billion of GDP. 
D) It is a vertical line at a level of GDP above $600 billion. 
A) It is a horizontal line at $600 billion of GDP. 
B) It is a vertical line at a level of GDP below $600 billion. 
C) It is a vertical line at $600 billion of GDP. 
D) It is a vertical line at a level of GDP above $600 billion.

Question 3

Which of the following would cause the short-run aggregate supply curve to shift to the left?

Accepted Answer

A) an increase in the price level 
B) an increase in inflation expectations 
C) a technological advance 
D) a decrease in interest rates 
A) an increase in the price level 
B) an increase in inflation expectations 
C) a technological advance 
D) a decrease in interest rates

Question 4

Suppose the economy is at full employment and firms become more pessimistic about the future profitability of new investment.Which of the following will happen in the short run?

Accepted Answer

A) Output will rise. 
B) Prices will rise. 
C) Unemployment will rise. 
D) The aggregate demand curve will shift to the right. 
A) Output will rise. 
B) Prices will rise. 
C) Unemployment will rise. 
D) The aggregate demand curve will shift to the right.

Question 5

When people became less concerned with the underlying value of their houses and instead focused on the expectations of the prices of their houses increasing,________ occurred.

Accepted Answer

A) stagflation 
B) an automatic destabilizer 
C) a housing bubble 
D) a supply shock 
A) stagflation 
B) an automatic destabilizer 
C) a housing bubble 
D) a supply shock

Question 6

When people became ________ concerned with the underlying value of their houses and became ________ with the expectations of the prices of their houses increasing,a housing bubble occurred.

Accepted Answer

A) less; less 
B) less; more 
C) more; less 
D) more; more 
A) less; less 
B) less; more 
C) more; less 
D) more; more

Question 7

What variables cause the short-run aggregate supply curve to shift? For each variable,identify whether an increase in that variable will cause the short-run aggregate supply curve to shift to the right or to the left.

Accepted Answer

The variables that will cause the short-

Question 8

Which of the following models has as its central idea that workers and firms have rational expectations?

Accepted Answer

A) the monetarist model 
B) the new classical model 
C) the real business cycle model 
D) the new Keynesian model 
A) the monetarist model 
B) the new classical model 
C) the real business cycle model 
D) the new Keynesian model

Question 9

The recession of 2007-2009 began in ________,with the end of the economic expansion that had begun in ________.

Accepted Answer

A) January 2007; April 1984 
B) December 2007; November 2001 
C) July 2007; August 2006 
D) March 2007; March 1995 
A) January 2007; April 1984 
B) December 2007; November 2001 
C) July 2007; August 2006 
D) March 2007; March 1995

Question 10

Stagflation occurs when inflation ________ and GDP ________.

Accepted Answer

A) rises; rises 
B) rises; falls 
C) falls; rises 
D) falls; falls 
A) rises; rises 
B) rises; falls 
C) falls; rises 
D) falls; falls

Question 11

Figure 15-1
  
-Refer to Figure 15-1.Ceteris paribus,an increase in firms' expectations of the future profitability of investment spending would be represented by a movement from

Accepted Answer

A) AD₁ to AD₂. 
B) AD₂ to AD₁. 
C) point A to point B. 
D) point B to point A. 
A) AD₁ to AD₂. 
B) AD₂ to AD₁. 
C) point A to point B. 
D) point B to point A.

Question 12

Just before,during,and after the recession of 2007-2009,net exports in the United States

Accepted Answer

A) fell and remained negative 
B) fell, but remained positive 
C) rose and became positive. 
D) rose, but remained negative. 
A) fell and remained negative 
B) fell, but remained positive 
C) rose and became positive. 
D) rose, but remained negative.

Question 13

Stagflation occurs when aggregate supply and aggregate demand both increase.

Accepted Answer

A) True 
 B)False

Question 14

The monetary growth rule is a plan for increasing the quantity of money

Accepted Answer

A) at a fixed rate that does not respond to changes in the economic condition. 
B) at a rate which increases as the economy grows. 
C) at a rate which decreases as the economy declines. 
D) at a rate which increases during recessions and decreases during expansions. 
A) at a fixed rate that does not respond to changes in the economic condition. 
B) at a rate which increases as the economy grows. 
C) at a rate which decreases as the economy declines. 
D) at a rate which increases during recessions and decreases during expansions.

Question 15

In the long run,

Accepted Answer

A) GDP > potential GDP. 
B) unemployment is at its natural rate. 
C) LRAS and SRAS lie on the same line. 
D) the inflation rate is zero. 
A) GDP > potential GDP. 
B) unemployment is at its natural rate. 
C) LRAS and SRAS lie on the same line. 
D) the inflation rate is zero.

Question 16

At a short-run macroeconomic equilibrium,real GDP is always equal to potential GDP.

Accepted Answer

A) True 
 B)False

Question 17

Figure 15-3
  
-Refer to Figure 15-3.Which of the points in the above graph are possible long-run equilibria?

Accepted Answer

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

Question 18

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

Accepted Answer

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

Question 19

A decrease in aggregate demand causes a decrease in ________ only in the short run,but causes a decrease in ________ in both the short run and the long run.

Accepted Answer

A) the price level; real GDP 
B) real GDP; real GDP 
C) the price level; the price level 
D) real GDP; the price level 
A) the price level; real GDP 
B) real GDP; real GDP 
C) the price level; the price level 
D) real GDP; the price level

Question 20

Hurricane Katrina resulted in a decline in oil production infrastructure along the gulf coast.As a result there was an unexpected decline in oil and natural gas supplies in 2005.Suppose that this caused an increase in the price level and a decline in real GDP in 2006.Also assume that potential real GDP continued to grow due to other factors.You can assume the aggregate demand curve did not change.Show the macroeconomic equilibrium for 2005 and 2006 using the dynamic aggregate supply and aggregate demand model.

Accepted Answer

@#IMG-DLM& The economy began at the point (Y₁,P₁)o

On the long-run aggregate supply curve

If potential GDP is equal to $600 billion,what does the long-run aggregate supply curve look like?

Which of the following would cause the short-run aggregate supply curve to shift to the left?

Suppose the economy is at full employment and firms become more pessimistic about the future profitability of new investment.Which of the following will happen in the short run?

When people became less concerned with the underlying value of their houses and instead focused on the expectations of the prices of their houses increasing,________ occurred.

When people became concerned with the underlying value of their houses and became with the expectations of the prices of their houses increasing,a housing bubble occurred.

What variables cause the short-run aggregate supply curve to shift? For each variable,identify whether an increase in that variable will cause the short-run aggregate supply curve to shift to the right or to the left.

Which of the following models has as its central idea that workers and firms have rational expectations?

The recession of 2007-2009 began in ,with the end of the economic expansion that had begun in .

Stagflation occurs when inflation and GDP .

Figure 15-1 -Refer to Figure 15-1.Ceteris paribus,an increase in firms' expectations of the future profitability of investment spending would be represented by a movement from

Just before,during,and after the recession of 2007-2009,net exports in the United States

Stagflation occurs when aggregate supply and aggregate demand both increase.

The monetary growth rule is a plan for increasing the quantity of money

In the long run,

At a short-run macroeconomic equilibrium,real GDP is always equal to potential GDP.

Figure 15-3 -Refer to Figure 15-3.Which of the points in the above graph are possible long-run equilibria?

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

A decrease in aggregate demand causes a decrease in only in the short run,but causes a decrease in in both the short run and the long 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

On the long-run aggregate supply curve

If potential GDP is equal to $600 billion,what does the long-run aggregate supply curve look like?

Which of the following would cause the short-run aggregate supply curve to shift to the left?

Suppose the economy is at full employment and firms become more pessimistic about the future profitability of new investment.Which of the following will happen in the short run?

When people became less concerned with the underlying value of their houses and instead focused on the expectations of the prices of their houses increasing,________ occurred.

When people became ________ concerned with the underlying value of their houses and became ________ with the expectations of the prices of their houses increasing,a housing bubble occurred.

What variables cause the short-run aggregate supply curve to shift? For each variable,identify whether an increase in that variable will cause the short-run aggregate supply curve to shift to the right or to the left.

Which of the following models has as its central idea that workers and firms have rational expectations?

The recession of 2007-2009 began in ________,with the end of the economic expansion that had begun in ________.

Stagflation occurs when inflation ________ and GDP ________.

Figure 15-1 -Refer to Figure 15-1.Ceteris paribus,an increase in firms' expectations of the future profitability of investment spending would be represented by a movement from

Just before,during,and after the recession of 2007-2009,net exports in the United States

Stagflation occurs when aggregate supply and aggregate demand both increase.

The monetary growth rule is a plan for increasing the quantity of money

In the long run,

At a short-run macroeconomic equilibrium,real GDP is always equal to potential GDP.

Figure 15-3 -Refer to Figure 15-3.Which of the points in the above graph are possible long-run equilibria?

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

A decrease in aggregate demand causes a decrease in ________ only in the short run,but causes a decrease in ________ in both the short run and the long 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

When people became concerned with the underlying value of their houses and became with the expectations of the prices of their houses increasing,a housing bubble occurred.

The recession of 2007-2009 began in ,with the end of the economic expansion that had begun in .

Stagflation occurs when inflation and GDP .

A decrease in aggregate demand causes a decrease in only in the short run,but causes a decrease in in both the short run and the long run.