Question 1

What happens if technological change occurs in the economy?

Accepted Answer

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

Question 2

Use the dynamic aggregate demand and aggregate supply model to illustrate a supply shock that causes an increase in the price level and a decline in real GDP. Assume that potential GDP continues to grow due to other factors, and that the aggregate demand curve does not change.
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

The economy begins at the point P₁Y₁ on

Question 3

'Monetarism' is a school of thought put forth by Milton Friedman in the 1940s. He argued that the economy would most likely be:

Accepted Answer

A) below potential GDP. 
B) at potential GDP. 
C) unstable. 
D) above potential GDP. 
A) below potential GDP. 
B) at potential GDP. 
C) unstable. 
D) above potential GDP.

Question 4

List and explain the three reasons the aggregate demand curve slopes downward.
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

The three reasons are the wealth effect,

Question 5

What is the slope of the long-run aggregate supply curve?

Accepted Answer

A) negative slope 
B) steep but positive slope 
C) vertical slope 
D) flat slope 
A) negative slope 
B) steep but positive slope 
C) vertical slope 
D) flat slope

Question 6

Suppose the economy is at full employment and firms become more optimistic about the future profitability of new investment. In the short run:

Accepted Answer

A) output will decline. 
B) unemployment will decline. 
C) prices will decline. 
D) aggregate demand will shift to the left. 
A) output will decline. 
B) unemployment will decline. 
C) prices will decline. 
D) aggregate demand will shift to the left.

Question 7

How does an increase in the price level in Australia relative to the price level of other countries affect the aggregate demand curve, ceteris paribus?

Accepted Answer

A) This will move the economy up along a stationary aggregate demand curve. 
B) This will move the economy down along a stationary aggregate demand curve. 
C) This will shift the aggregate demand curve to the left. 
D) This will shift the aggregate demand curve to the right. 
A) This will move the economy up along a stationary aggregate demand curve. 
B) This will move the economy down along a stationary aggregate demand curve. 
C) This will shift the aggregate demand curve to the left. 
D) This will shift the aggregate demand curve to the right.

Question 8

'Stagflation' is often a result of:

Accepted Answer

A) a negative supply shock. 
B) a decrease in aggregate demand. 
C) an increase in aggregate demand. 
D) an increase in aggregate supply. 
A) a negative supply shock. 
B) a decrease in aggregate demand. 
C) an increase in aggregate demand. 
D) an increase in aggregate supply.

Question 9

Because of a supply shock, in the short-run:

Accepted Answer

A) the aggregate supply curve shifts to the left. 
B) the price level falls. 
C) unemployment falls. 
D) equilibrium real GDP rises. 
A) the aggregate supply curve shifts to the left. 
B) the price level falls. 
C) unemployment falls. 
D) equilibrium real GDP rises.

Question 10

What does the slope of the aggregate demand curve indicate?

Accepted Answer

A) That a decrease in the price level leads to a higher level of aggregate spending. 
B) That a decrease in the price level leads to a higher level of aggregate supply. 
C) That a decrease in the price level leads to a lower level of aggregate spending. 
D) That an increase in the price level leads to a higher level of aggregate spending. 
A) That a decrease in the price level leads to a higher level of aggregate spending. 
B) That a decrease in the price level leads to a higher level of aggregate supply. 
C) That a decrease in the price level leads to a lower level of aggregate spending. 
D) That an increase in the price level leads to a higher level of aggregate spending.

Question 11

Which of the following is true of the short-run aggregate supply curve?

Accepted Answer

A) it has a negative slope 
B) it has a vertical slope 
C) it has a positive slope 
D) it has a horizontal slope 
A) it has a negative slope 
B) it has a vertical slope 
C) it has a positive slope 
D) it has a horizontal slope

Question 12

A decrease in the price level results in a(n)________ in the quantity of real GDP demanded because a lower price level ________ consumption, investment and net exports.

Accepted Answer

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

Question 13

What is the result of a decrease in the price level?

Accepted Answer

A) It will shift the aggregate demand curve to the left. 
B) It will shift the aggregate demand curve to the right. 
C) It will move the economy down along a stationary aggregate demand curve. 
D) It will move the economy up along a stationary aggregate demand curve. 
A) It will shift the aggregate demand curve to the left. 
B) It will shift the aggregate demand curve to the right. 
C) It will move the economy down along a stationary aggregate demand curve. 
D) It will move the economy up along a stationary aggregate demand curve.

Question 14

Which of the following is true in the long run?

Accepted Answer

A) unemployment is above its natural state 
B) unemployment is below its natural rate 
C) LRAS and SRAS lie on the same line 
D) real GDP = potential GDP 
A) unemployment is above its natural state 
B) unemployment is below its natural rate 
C) LRAS and SRAS lie on the same line 
D) real GDP = potential GDP

Question 15

Refer to Figure 10.2 for the following questions.
Figure 10.2
  
-Refer to Figure 10.2. 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 16

Inflation is generally the result of total spending growing slower than total production.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following correctly describes the automatic mechanism through which the economy adjusts to long-run equilibrium?

Accepted Answer

A) The leftward shift in short-run aggregate supply that occurs after a recession. 
B) The rightward shift in short-run aggregate supply that occurs after a recession. 
C) The leftward shift in aggregate demand that occurs after a recession. 
D) The rightward shift in aggregate demand that occurs after a recession. 
A) The leftward shift in short-run aggregate supply that occurs after a recession. 
B) The rightward shift in short-run aggregate supply that occurs after a recession. 
C) The leftward shift in aggregate demand that occurs after a recession. 
D) The rightward shift in aggregate demand that occurs after a recession.

Question 18

The international-trade effect states that, ceteris paribus, an increase in the price level will:

Accepted Answer

A) increase net exports. 
B) decrease net exports. 
C) increase exports. 
D) decrease imports. 
A) increase net exports. 
B) decrease net exports. 
C) increase exports. 
D) decrease imports.

Question 19

When the price level in Australia rises relative to the price level of other countries, ceteris paribus, ________ will rise, ________ will fall, and ________ will fall.

Accepted Answer

A) imports; exports; net exports 
B) exports; imports; net exports 
C) net exports; exports; imports 
D) net exports; imports; exports 
A) imports; exports; net exports 
B) exports; imports; net exports 
C) net exports; exports; imports 
D) net exports; imports; exports

Question 20

What do the 'aggregate demand' and 'aggregate supply' models help explain?

Accepted Answer

A) long-run economic growth 
B) short-run fluctuations in real GDP and the price level 
C) price fluctuations in an individual market 
D) output fluctuations in an individual market 
A) long-run economic growth 
B) short-run fluctuations in real GDP and the price level 
C) price fluctuations in an individual market 
D) output fluctuations in an individual market

What happens if technological change occurs in the economy?

Use the dynamic aggregate demand and aggregate supply model to illustrate a supply shock that causes an increase in the price level and a decline in real GDP. Assume that potential GDP continues to grow due to other factors, and that the aggregate demand curve does not change. _ _

'Monetarism' is a school of thought put forth by Milton Friedman in the 1940s. He argued that the economy would most likely be:

List and explain the three reasons the aggregate demand curve slopes downward. _ _

What is the slope of the long-run aggregate supply curve?

Suppose the economy is at full employment and firms become more optimistic about the future profitability of new investment. In the short run:

How does an increase in the price level in Australia relative to the price level of other countries affect the aggregate demand curve, ceteris paribus?

'Stagflation' is often a result of:

Because of a supply shock, in the short-run:

What does the slope of the aggregate demand curve indicate?

Which of the following is true of the short-run aggregate supply curve?

A decrease in the price level results in a(n) in the quantity of real GDP demanded because a lower price level consumption, investment and net exports.

What is the result of a decrease in the price level?

Which of the following is true in the long run?

Refer to Figure 10.2 for the following questions. Figure 10.2 -Refer to Figure 10.2. 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?

Inflation is generally the result of total spending growing slower than total production.

Which of the following correctly describes the automatic mechanism through which the economy adjusts to long-run equilibrium?

The international-trade effect states that, ceteris paribus, an increase in the price level will:

When the price level in Australia rises relative to the price level of other countries, ceteris paribus, will rise, will fall, and will fall.

What do the 'aggregate demand' and 'aggregate supply' models help explain?

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

What happens if technological change occurs in the economy?

'Monetarism' is a school of thought put forth by Milton Friedman in the 1940s. He argued that the economy would most likely be:

List and explain the three reasons the aggregate demand curve slopes downward. _____________________________________________________________________________________________ _____________________________________________________________________________________________

What is the slope of the long-run aggregate supply curve?

Suppose the economy is at full employment and firms become more optimistic about the future profitability of new investment. In the short run:

How does an increase in the price level in Australia relative to the price level of other countries affect the aggregate demand curve, ceteris paribus?

'Stagflation' is often a result of:

Because of a supply shock, in the short-run:

What does the slope of the aggregate demand curve indicate?

Which of the following is true of the short-run aggregate supply curve?

A decrease in the price level results in a(n)________ in the quantity of real GDP demanded because a lower price level ________ consumption, investment and net exports.

What is the result of a decrease in the price level?

Which of the following is true in the long run?

Refer to Figure 10.2 for the following questions. Figure 10.2 -Refer to Figure 10.2. 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?

Inflation is generally the result of total spending growing slower than total production.

Which of the following correctly describes the automatic mechanism through which the economy adjusts to long-run equilibrium?

The international-trade effect states that, ceteris paribus, an increase in the price level will:

When the price level in Australia rises relative to the price level of other countries, ceteris paribus, ________ will rise, ________ will fall, and ________ will fall.

What do the 'aggregate demand' and 'aggregate supply' models help explain?

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

List and explain the three reasons the aggregate demand curve slopes downward. _ _

A decrease in the price level results in a(n) in the quantity of real GDP demanded because a lower price level consumption, investment and net exports.

When the price level in Australia rises relative to the price level of other countries, ceteris paribus, will rise, will fall, and will fall.