Question 1

In the dynamic aggregate demand and aggregate supply model, the rate of inflation will increase if:

Accepted Answer

A) AD shifts faster than AS. 
B) AD shifts slower than AS. 
C) AS shifts faster than AD. 
D) the price level rises. 
A) AD shifts faster than AS. 
B) AD shifts slower than AS. 
C) AS shifts faster than AD. 
D) the price level rises.

Question 2

The model that relies on emphasising the importance of sticky wages and prices is the:

Accepted Answer

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

Question 3

Use the dynamic model of aggregate demand and aggregate supply to illustrate a situation where the economy is growing but experiencing inflation in the long run.
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

If the aggregate demand curve shifts to

Question 4

Workers expect the rate of inflation to fall from 5% to 2% next year. As a result, 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.

Question 5

If the Australian dollar increases in value relative to other currencies, how does this 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 6

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

Question 7

What is another term for 'potential GDP'?

Accepted Answer

A) realised GDP 
B) unemployment GDP 
C) full-employment GDP 
D) balanced-budget GDP 
A) realised GDP 
B) unemployment GDP 
C) full-employment GDP 
D) balanced-budget GDP

Question 8

What variables will shift the short-run aggregate supply curve?
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

Expected changes in the future price lev

Question 9

When the price level rises, the interest rate effect states that wealth levels fall for all consumers as they have to withdraw more funds from banks to pay for their goods and services.

Accepted Answer

A) True 
 B)False

Question 10

What does the term 'Keynesian revolution' refer to?
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

The Keynesian revolution is th

Question 11

'Stickiness' of wages and prices is considered unimportant in which of the following economic models?

Accepted Answer

A) Keynesian supply and demand model 
B) Monetarist model 
C) New classical model 
D) Real business cycle model 
A) Keynesian supply and demand model 
B) Monetarist model 
C) New classical model 
D) Real business cycle model

Question 12

The short-run aggregate supply curve is upward sloping because wages rise more slowly than output prices.

Accepted Answer

A) True 
 B)False

Question 13

Monetarists believe that the quantity of money should be increased at a constant rate.

Accepted Answer

A) True 
 B)False

Question 14

The proponents of rational expectations and monetarism think that central banks 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 15

Why might the short-run aggregate supply curve shift to the right in the long run, following a decrease in aggregate demand?

Accepted Answer

A) Workers and firms adjust their expectations of wages and prices downward and they accept lower wages and prices. 
B) Workers and firms adjust their expectations of wages and prices downward and they push for higher wages and prices. 
C) Workers and firms adjust their expectations of wages and prices upward and they push for higher wages and prices. 
D) Workers and firms adjust their expectations of wages and prices upward and they accept lower wages and prices. 
A) Workers and firms adjust their expectations of wages and prices downward and they accept lower wages and prices. 
B) Workers and firms adjust their expectations of wages and prices downward and they push for higher wages and prices. 
C) Workers and firms adjust their expectations of wages and prices upward and they push for higher wages and prices. 
D) Workers and firms adjust their expectations of wages and prices upward and they accept lower wages and prices.

Question 16

Changes in the price level:

Accepted Answer

A) increase the level of aggregate supply in the long run. 
B) decrease the level of aggregate supply in the long run. 
C) do not affect the level of aggregate supply in the long run. 
D) increase the level of aggregate supply in the long run only at very high levels of output. 
A) increase the level of aggregate supply in the long run. 
B) decrease the level of aggregate supply in the long run. 
C) do not affect the level of aggregate supply in the long run. 
D) increase the level of aggregate supply in the long run only at very high levels of output.

Question 17

When potential GDP increases, short-run aggregate supply also increases, but long-run aggregate supply does not change.

Accepted Answer

A) True 
 B)False

Question 18

When does long-run macroeconomic equilibrium occur?

Accepted Answer

A) When aggregate demand equals short-run aggregate supply and they intersect at a point on the long-run supply curve. 
B) When aggregate demand equals short-run aggregate supply. 
C) When unemployment equals zero. 
D) When output is above potential GDP. 
A) When aggregate demand equals short-run aggregate supply and they intersect at a point on the long-run supply curve. 
B) When aggregate demand equals short-run aggregate supply. 
C) When unemployment equals zero. 
D) When output is above potential GDP.

Question 19

Which of the following is one of the explanations as to why the aggregate demand curve slopes downward?

Accepted Answer

A) Increases in the price level lower the interest rate and decrease consumption spending. 
B) Increases in the price level lower the interest rate and decrease investment spending. 
C) Increases in Australia's price level relative to the price level in other countries lowers net exports. 
D) Increases in the price level raise real wealth and lowers consumption spending. 
A) Increases in the price level lower the interest rate and decrease consumption spending. 
B) Increases in the price level lower the interest rate and decrease investment spending. 
C) Increases in Australia's price level relative to the price level in other countries lowers net exports. 
D) Increases in the price level raise real wealth and lowers consumption spending.

Question 20

Which of the following will not shift the short-run aggregate supply curve?

Accepted Answer

A) a change in the price level 
B) technological change 
C) a reduction in the price of raw materials 
D) a change in the wage rate 
A) a change in the price level 
B) technological change 
C) a reduction in the price of raw materials 
D) a change in the wage rate

In the dynamic aggregate demand and aggregate supply model, the rate of inflation will increase if:

The model that relies on emphasising the importance of sticky wages and prices is the:

Use the dynamic model of aggregate demand and aggregate supply to illustrate a situation where the economy is growing but experiencing inflation in the long run. _ _

Workers expect the rate of inflation to fall from 5% to 2% next year. As a result, this should:

If the Australian dollar increases in value relative to other currencies, how does this affect the aggregate demand curve, ceteris paribus?

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

What is another term for 'potential GDP'?

What variables will shift the short-run aggregate supply curve? _ _

When the price level rises, the interest rate effect states that wealth levels fall for all consumers as they have to withdraw more funds from banks to pay for their goods and services.

What does the term 'Keynesian revolution' refer to? _ _

'Stickiness' of wages and prices is considered unimportant in which of the following economic models?

The short-run aggregate supply curve is upward sloping because wages rise more slowly than output prices.

Monetarists believe that the quantity of money should be increased at a constant rate.

The proponents of rational expectations and monetarism think that central banks should adopt:

Why might the short-run aggregate supply curve shift to the right in the long run, following a decrease in aggregate demand?

Changes in the price level:

When potential GDP increases, short-run aggregate supply also increases, but long-run aggregate supply does not change.

When does long-run macroeconomic equilibrium occur?

Which of the following is one of the explanations as to why the aggregate demand curve slopes downward?

Which of the following will not shift the short-run aggregate supply curve?

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

In the dynamic aggregate demand and aggregate supply model, the rate of inflation will increase if:

The model that relies on emphasising the importance of sticky wages and prices is the:

Workers expect the rate of inflation to fall from 5% to 2% next year. As a result, this should:

If the Australian dollar increases in value relative to other currencies, how does this affect the aggregate demand curve, ceteris paribus?

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

What is another term for 'potential GDP'?

What variables will shift the short-run aggregate supply curve? _____________________________________________________________________________________________ _____________________________________________________________________________________________

When the price level rises, the interest rate effect states that wealth levels fall for all consumers as they have to withdraw more funds from banks to pay for their goods and services.

What does the term 'Keynesian revolution' refer to? _____________________________________________________________________________________________ _____________________________________________________________________________________________

'Stickiness' of wages and prices is considered unimportant in which of the following economic models?

The short-run aggregate supply curve is upward sloping because wages rise more slowly than output prices.

Monetarists believe that the quantity of money should be increased at a constant rate.

The proponents of rational expectations and monetarism think that central banks should adopt:

Why might the short-run aggregate supply curve shift to the right in the long run, following a decrease in aggregate demand?

Changes in the price level:

When potential GDP increases, short-run aggregate supply also increases, but long-run aggregate supply does not change.

When does long-run macroeconomic equilibrium occur?

Which of the following is one of the explanations as to why the aggregate demand curve slopes downward?

Which of the following will not shift the short-run aggregate supply curve?

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

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

What variables will shift the short-run aggregate supply curve? _ _

What does the term 'Keynesian revolution' refer to? _ _