Question 1

According to the real business cycle model, increases in aggregate demand:

Accepted Answer

A) raise GDP. 
B) lower GDP. 
C) do not affect GDP. 
D) lower the price level. 
A) raise GDP. 
B) lower GDP. 
C) do not affect GDP. 
D) lower the price level.

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

The distinction between the short-run and long-run aggregate supply curve is necessary because in the long run:

Accepted Answer

A) technology is fixed, but in the short run it changes. 
B) changes in the price level do not affect the level of real GDP but do in the short run. 
C) the aggregate supply curve is horizontal, but in the short run it is upward sloping. 
D) the price level is constant, but in the short run it fluctuates. 
A) technology is fixed, but in the short run it changes. 
B) changes in the price level do not affect the level of real GDP but do in the short run. 
C) the aggregate supply curve is horizontal, but in the short run it is upward sloping. 
D) the price level is constant, but in the short run it fluctuates.

Question 4

What is a 'supply shock', and why might a supply shock lead to 'stagflation'?
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

A supply shock is an unexpected event th

Question 5

What do proponents of the real business cycle model argue about the short-run aggregate supply curve?

Accepted Answer

A) that it is vertical 
B) that it is positively sloped 
C) that it is flat 
D) that it is negatively sloped 
A) that it is vertical 
B) that it is positively sloped 
C) that it is flat 
D) that it is negatively sloped

Question 6

What does the long-run aggregate supply curve show?
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

The relationship in

Question 7

In the dynamic aggregate demand and aggregate supply model, what is the result of aggregate demand increasing faster than potential GDP?
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

Aggregate demand inc

Question 8

Along a short-run aggregate supply curve, a decrease in the price level causes:

Accepted Answer

A) firms to increase their production levels, as the lower prices will increase consumer demand. 
B) no change in output to occur, as at the macroeconomic level, the price level does not affect supply. 
C) firms to reduce their production levels. 
D) production levels to rise as the price of inputs become cheaper. 
A) firms to increase their production levels, as the lower prices will increase consumer demand. 
B) no change in output to occur, as at the macroeconomic level, the price level does not affect supply. 
C) firms to reduce their production levels. 
D) production levels to rise as the price of inputs become cheaper.

Question 9

Which of the following is considered a 'supply shock'?

Accepted Answer

A) the increasing investment in the economy causing the capital stock to rise 
B) an unexpected large increase in the price of natural gas 
C) a decline in wages 
D) an improvement in technology 
A) the increasing investment in the economy causing the capital stock to rise 
B) an unexpected large increase in the price of natural gas 
C) a decline in wages 
D) an improvement in technology

Question 10

When the short-run aggregate supply curve and the aggregate demand curve intersect, the economy is at full employment equilibrium.

Accepted Answer

A) True 
 B)False

Question 11

Technological change can reduce the inflationary effects of total spending rising over time.

Accepted Answer

A) True 
 B)False

Question 12

The dynamic aggregate demand and aggregate supply model assumes that potential GDP is constant across time.

Accepted Answer

A) True 
 B)False

Question 13

Workers and firms both expect that prices will be 4% higher next year than they are this year. As a result:

Accepted Answer

A) workers will be willing to take lower wages next year. 
B) the purchasing power of wages will rise if wages increase by 4%. 
C) the short-run aggregate supply curve will shift to the left as wages increase. 
D) aggregate demand will increase by 4%. 
A) workers will be willing to take lower wages next year. 
B) the purchasing power of wages will rise if wages increase by 4%. 
C) the short-run aggregate supply curve will shift to the left as wages increase. 
D) aggregate demand will increase by 4%.

Question 14

The wealth effect occurs when the price level falls, causing the:

Accepted Answer

A) real value of household wealth to fall. 
B) nominal value of household wealth to fall. 
C) nominal value of household wealth to rise. 
D) real value of household wealth to rise. 
A) real value of household wealth to fall. 
B) nominal value of household wealth to fall. 
C) nominal value of household wealth to rise. 
D) real value of household wealth to rise.

Question 15

The interest-rate effect is described as an increase in the price level which:

Accepted Answer

A) raises the interest rate, thereby reducing government spending. 
B) lowers the interest rate, thereby reducing government spending. 
C) raises the interest rate, thereby reducing investment and consumption spending. 
D) lowers the interest rate, thereby reducing investment and consumption spending. 
A) raises the interest rate, thereby reducing government spending. 
B) lowers the interest rate, thereby reducing government spending. 
C) raises the interest rate, thereby reducing investment and consumption spending. 
D) lowers the interest rate, thereby reducing investment and consumption spending.

Question 16

The wide-spread recessions of 2007-2009 caused a reduction in German exports and reduction in net exports for Germany, shifting the German aggregate demand curve. Which of the following factors would also cause a reduction in Germany's net exports and shift Germany's aggregate demand curve?

Accepted Answer

A) real GDP in Germany increasing faster than real GDP in other countries 
B) a decrease in the exchange rate of the Euro relative to other currencies 
C) a decrease in the price level in Germany 
D) an increase in the price level in Germany 
A) real GDP in Germany increasing faster than real GDP in other countries 
B) a decrease in the exchange rate of the Euro relative to other currencies 
C) a decrease in the price level in Germany 
D) an increase in the price level in Germany

Question 17

If more workers leave Australia to seek out better opportunities in another country than new workers arriving into Australia, then this will:

Accepted Answer

A) shift the short-run aggregate supply curve of Australia to the left. 
B) shift the short-run aggregate supply curve of Australia to the right. 
C) move the Australian economy up along a stationary short-run aggregate supply curve. 
D) move the Australian economy down along a stationary short-run aggregate supply curve. 
A) shift the short-run aggregate supply curve of Australia to the left. 
B) shift the short-run aggregate supply curve of Australia to the right. 
C) move the Australian economy up along a stationary short-run aggregate supply curve. 
D) move the Australian economy down along a stationary short-run aggregate supply curve.

Question 18

Suppose a developing country receives more machinery and capital equipment as foreign entrepreneurs increase the amount of investment in the economy. As a result, the:

Accepted Answer

A) long-run aggregate supply curve will shift to the right. 
B) long-run aggregate supply curve will shift to the left. 
C) economy will move up along the long-run aggregate supply curve. 
D) economy will move down along the long-run aggregate supply curve. 
A) long-run aggregate supply curve will shift to the right. 
B) long-run aggregate supply curve will shift to the left. 
C) economy will move up along the long-run aggregate supply curve. 
D) economy will move down along the long-run aggregate supply curve.

Question 19

Refer to Figure 10.2 for the following questions.
Figure 10.2
  
-In Figure 10.2, given the economy is at point A in year 1 and point B in year 2, what is the growth rate in potential GDP between those two years?

Accepted Answer

A) 9.1% 
B) 8% 
C) 12% 
D) 10% 
A) 9.1% 
B) 8% 
C) 12% 
D) 10%

Question 20

Why is the long-run aggregate supply curve vertical?
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

The curve is vertical because

According to the real business cycle model, increases in aggregate demand:

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

The distinction between the short-run and long-run aggregate supply curve is necessary because in the long run:

What is a 'supply shock', and why might a supply shock lead to 'stagflation'? _ _

What do proponents of the real business cycle model argue about the short-run aggregate supply curve?

What does the long-run aggregate supply curve show? _ _

In the dynamic aggregate demand and aggregate supply model, what is the result of aggregate demand increasing faster than potential GDP? _ _

Along a short-run aggregate supply curve, a decrease in the price level causes:

Which of the following is considered a 'supply shock'?

When the short-run aggregate supply curve and the aggregate demand curve intersect, the economy is at full employment equilibrium.

Technological change can reduce the inflationary effects of total spending rising over time.

The dynamic aggregate demand and aggregate supply model assumes that potential GDP is constant across time.

Workers and firms both expect that prices will be 4% higher next year than they are this year. As a result:

The wealth effect occurs when the price level falls, causing the:

The interest-rate effect is described as an increase in the price level which:

The wide-spread recessions of 2007-2009 caused a reduction in German exports and reduction in net exports for Germany, shifting the German aggregate demand curve. Which of the following factors would also cause a reduction in Germany's net exports and shift Germany's aggregate demand curve?

If more workers leave Australia to seek out better opportunities in another country than new workers arriving into Australia, then this will:

Suppose a developing country receives more machinery and capital equipment as foreign entrepreneurs increase the amount of investment in the economy. As a result, the:

Refer to Figure 10.2 for the following questions. Figure 10.2 -In Figure 10.2, given the economy is at point A in year 1 and point B in year 2, what is the growth rate in potential GDP between those two years?

Why is the long-run aggregate supply curve vertical? _ _

Economics: Foundations and Models

Choices and Trade Offs in the Market

Where Prices Come From: the Interaction of Demand and Supply

Gdp: Measuring Total Production, Income and Economic Growth

Economic Growth, the Financial System and Business Cycles

Long-Run Economic Growth: Sources and Policies

Unemployment

Inflation

Aggregate Expenditure and Output in the Short Run

Money, Banks and the Reserve Bank of Australia

Monetary Policy

Fiscal Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

Exam 10: Aggregate Demand and Aggregate Supply Analysis

According to the real business cycle model, increases in aggregate demand:

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

The distinction between the short-run and long-run aggregate supply curve is necessary because in the long run:

What is a 'supply shock', and why might a supply shock lead to 'stagflation'? _____________________________________________________________________________________________ _____________________________________________________________________________________________

What do proponents of the real business cycle model argue about the short-run aggregate supply curve?

What does the long-run aggregate supply curve show? _____________________________________________________________________________________________ _____________________________________________________________________________________________

Along a short-run aggregate supply curve, a decrease in the price level causes:

Which of the following is considered a 'supply shock'?

When the short-run aggregate supply curve and the aggregate demand curve intersect, the economy is at full employment equilibrium.

Technological change can reduce the inflationary effects of total spending rising over time.

The dynamic aggregate demand and aggregate supply model assumes that potential GDP is constant across time.

Workers and firms both expect that prices will be 4% higher next year than they are this year. As a result:

The wealth effect occurs when the price level falls, causing the:

The interest-rate effect is described as an increase in the price level which:

The wide-spread recessions of 2007-2009 caused a reduction in German exports and reduction in net exports for Germany, shifting the German aggregate demand curve. Which of the following factors would also cause a reduction in Germany's net exports and shift Germany's aggregate demand curve?

If more workers leave Australia to seek out better opportunities in another country than new workers arriving into Australia, then this will:

Suppose a developing country receives more machinery and capital equipment as foreign entrepreneurs increase the amount of investment in the economy. As a result, the:

Refer to Figure 10.2 for the following questions. Figure 10.2 -In Figure 10.2, given the economy is at point A in year 1 and point B in year 2, what is the growth rate in potential GDP between those two years?

Why is the long-run aggregate supply curve vertical? _____________________________________________________________________________________________ _____________________________________________________________________________________________

Economics: Foundations and Models

Choices and Trade Offs in the Market

Where Prices Come From: the Interaction of Demand and Supply

Gdp: Measuring Total Production, Income and Economic Growth

Economic Growth, the Financial System and Business Cycles

Long-Run Economic Growth: Sources and Policies

Unemployment

Inflation

Aggregate Expenditure and Output in the Short Run

Money, Banks and the Reserve Bank of Australia

Monetary Policy

Fiscal Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

What is a 'supply shock', and why might a supply shock lead to 'stagflation'? _ _

What does the long-run aggregate supply curve show? _ _

Why is the long-run aggregate supply curve vertical? _ _