Question 1

Which of the following is not an economic model that is an alternative to the aggregate demand and aggregate supply model?

Accepted Answer

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

Question 2

Which of the following will shift the aggregate demand curve to the left, ceteris paribus?

Accepted Answer

A) an increase in interest rates 
B) an increase in disposable income 
C) an increase in expected profits for firms 
D) an increase in net exports 
A) an increase in interest rates 
B) an increase in disposable income 
C) an increase in expected profits for firms 
D) an increase in net exports

Question 3

Refer to Figure 10.1 for the following questions.
Figure 10.1
  
-Which of the points in Figure 10.1 are possible short-run equilibriums but not long-run equilibriums?

Accepted Answer

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

Question 4

New Keynesian macroeconomic theory emphasises the role of 'sticky' prices in the economy.

Accepted Answer

A) True 
 B)False

Question 5

Briefly explain the schools of thought that dispute Keynesian or New Keynesian aggregate demand and aggregate supply modelling.
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

Supporters of the monetarist model argue

Question 6

What are sticky prices or wages, and how can contracts make them 'sticky'?
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

Prices or wages are said to be 'sticky'

Question 7

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 labour force.
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

a.A lower price level would cause a move

Question 8

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 real GDP between those two years?

Accepted Answer

A) 2.5% 
B) 7.3% 
C) 8.0% 
D) 10.0% 
A) 2.5% 
B) 7.3% 
C) 8.0% 
D) 10.0%

Question 9

When the price of oil rises unexpectedly, the price level ________ and the unemployment rate ________ in the short run.

Accepted Answer

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

Question 10

Why does the short-run aggregate supply (SRAS)curve slope upward?
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

The short-run aggregate supply (SRAS)cur

Question 11

The short-run aggregate supply curve has a ________ slope because as prices of ________ rise, prices of ________ rise more slowly.

Accepted Answer

A) positive; final goods and services; inputs 
B) vertical; final goods and services; inputs 
C) positive; inputs; final goods and services 
D) vertical; inputs; final goods and services 
A) positive; final goods and services; inputs 
B) vertical; final goods and services; inputs 
C) positive; inputs; final goods and services 
D) vertical; inputs; final goods and services

Question 12

Which of the following is an assumption of the basis (static)aggregate demand and aggregate supply model?

Accepted Answer

A) Potential GDP increases continuously. 
B) The economy does not experience continuing inflation. 
C) The economy does not experience long-run growth. 
D) The economy's aggregate demand curve shifts to the right in most periods. 
A) Potential GDP increases continuously. 
B) The economy does not experience continuing inflation. 
C) The economy does not experience long-run growth. 
D) The economy's aggregate demand curve shifts to the right in most periods.

Question 13

Refer to Figure 10.1 for the following questions.
Figure 10.1
  
-Suppose the economy is at point C in Figure 10.1. If government spending decreases in the economy, where will the eventual long-run equilibrium be?

Accepted Answer

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

Question 14

Suppose the economy is at a short-run equilibrium GDP that lies above potential GDP. Which of the following will occur because of the automatic mechanism adjusting the economy back to potential GDP?

Accepted Answer

A) output will increase 
B) prices will decline 
C) unemployment will decline 
D) aggregate supply will shift to the left 
A) output will increase 
B) prices will decline 
C) unemployment will decline 
D) aggregate supply will shift to the left

Question 15

An adverse supply shock causes the short-run aggregate supply curve to shift left, increasing the price level.

Accepted Answer

A) True 
 B)False

Question 16

Explain how each of the following events would affect the aggregate demand curve.
a.Lower interest rates
b.A decrease in net exports
c.A decrease in the price level
d.Slower income growth in other countries
e.A decrease in imports
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

a.Lower interest rates would increase in

Question 17

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

Accepted Answer

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

Question 18

The long-run aggregate supply curve shows the relationship between the ________ and ________.

Accepted Answer

A) inflation rate; quantity of real GDP demanded 
B) real interest rate; quantity of real GDP supplied 
C) nominal interest rate; quantity of real GDP supplied 
D) price level; quantity of real GDP supplied 
A) inflation rate; quantity of real GDP demanded 
B) real interest rate; quantity of real GDP supplied 
C) nominal interest rate; quantity of real GDP supplied 
D) price level; quantity of real GDP supplied

Question 19

After an unexpected increase in the price of oil, the long-run adjustment ________ the price level and ________ the unemployment rate as they return to their original levels.

Accepted Answer

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

Question 20

If workers expect the rate of inflation to rise from 4% to 6% next year, this should:

Accepted Answer

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

Which of the following is not an economic model that is an alternative to the aggregate demand and aggregate supply model?

Which of the following will shift the aggregate demand curve to the left, ceteris paribus?

Refer to Figure 10.1 for the following questions. Figure 10.1 -Which of the points in Figure 10.1 are possible short-run equilibriums but not long-run equilibriums?

New Keynesian macroeconomic theory emphasises the role of 'sticky' prices in the economy.

Briefly explain the schools of thought that dispute Keynesian or New Keynesian aggregate demand and aggregate supply modelling. _ _

What are sticky prices or wages, and how can contracts make them 'sticky'? _ _

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 real GDP between those two years?

When the price of oil rises unexpectedly, the price level and the unemployment rate in the short run.

Why does the short-run aggregate supply (SRAS)curve slope upward? _ _

The short-run aggregate supply curve has a slope because as prices of rise, prices of rise more slowly.

Which of the following is an assumption of the basis (static)aggregate demand and aggregate supply model?

Refer to Figure 10.1 for the following questions. Figure 10.1 -Suppose the economy is at point C in Figure 10.1. If government spending decreases in the economy, where will the eventual long-run equilibrium be?

Suppose the economy is at a short-run equilibrium GDP that lies above potential GDP. Which of the following will occur because of the automatic mechanism adjusting the economy back to potential GDP?

An adverse supply shock causes the short-run aggregate supply curve to shift left, increasing the price level.

Explain how each of the following events would affect the aggregate demand curve. a.Lower interest rates b.A decrease in net exports c.A decrease in the price level d.Slower income growth in other countries e.A decrease in imports _ _

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

The long-run aggregate supply curve shows the relationship between the and .

After an unexpected increase in the price of oil, the long-run adjustment the price level and the unemployment rate as they return to their original levels.

If workers expect the rate of inflation to rise from 4% to 6% next year, this should:

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

Which of the following is not an economic model that is an alternative to the aggregate demand and aggregate supply model?

Which of the following will shift the aggregate demand curve to the left, ceteris paribus?

Refer to Figure 10.1 for the following questions. Figure 10.1 -Which of the points in Figure 10.1 are possible short-run equilibriums but not long-run equilibriums?

New Keynesian macroeconomic theory emphasises the role of 'sticky' prices in the economy.

What are sticky prices or wages, and how can contracts make them 'sticky'? _____________________________________________________________________________________________ _____________________________________________________________________________________________

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 real GDP between those two years?

When the price of oil rises unexpectedly, the price level ________ and the unemployment rate ________ in the short run.

Why does the short-run aggregate supply (SRAS)curve slope upward? _____________________________________________________________________________________________ _____________________________________________________________________________________________

The short-run aggregate supply curve has a ________ slope because as prices of ________ rise, prices of ________ rise more slowly.

Which of the following is an assumption of the basis (static)aggregate demand and aggregate supply model?

Refer to Figure 10.1 for the following questions. Figure 10.1 -Suppose the economy is at point C in Figure 10.1. If government spending decreases in the economy, where will the eventual long-run equilibrium be?

Suppose the economy is at a short-run equilibrium GDP that lies above potential GDP. Which of the following will occur because of the automatic mechanism adjusting the economy back to potential GDP?

An adverse supply shock causes the short-run aggregate supply curve to shift left, increasing the price level.

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

The long-run aggregate supply curve shows the relationship between the ________ and ________.

After an unexpected increase in the price of oil, the long-run adjustment ________ the price level and ________ the unemployment rate as they return to their original levels.

If workers expect the rate of inflation to rise from 4% to 6% next year, this should:

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 are sticky prices or wages, and how can contracts make them 'sticky'? _ _

When the price of oil rises unexpectedly, the price level and the unemployment rate in the short run.

Why does the short-run aggregate supply (SRAS)curve slope upward? _ _

The short-run aggregate supply curve has a slope because as prices of rise, prices of rise more slowly.

The long-run aggregate supply curve shows the relationship between the and .

After an unexpected increase in the price of oil, the long-run adjustment the price level and the unemployment rate as they return to their original levels.