Question 1

There has been a decrease in investment. As a result,real GDP will ________ in the short run,and ________ in the long run.

Accepted Answer

A)  increase; increases further 
B)  increase; decrease to its initial value 
C)  decrease; decrease further 
D)  decrease; increase to its initial level 
A)  increase; increases further 
B)  increase; decrease to its initial value 
C)  decrease; decrease further 
D)  decrease; increase to its initial level

Question 2

Using aggregate demand and aggregate supply,explain what happens in the short run if the Federal Reserve raises interest rates in the economy? Be sure to detail what happens to aggregate demand,the price level,the level of GDP,and unemployment. Assume that the economy is at full employment before the interest rate increase.

Accepted Answer

An increase in the interest rate will ca

Question 3

What is the relationship among the AD,SRAS and LRAS curves when the economy is in macroeconomic equilibrium?

Accepted Answer

When the economy is in long-ru

Question 4

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 5

Figure 24-2
  
-Refer to Figure 24-2.Ceteris paribus,an increase in workers and firms adjusting to having previously underestimated the price level would be represented by a movement from

Accepted Answer

A)  SRAS₁ to SRAS₂. 
B)  SRAS₂ to SRAS₁. 
C)  point A to point B. 
D)  point B to point A. 
A)  SRAS₁ to SRAS₂. 
B)  SRAS₂ to SRAS₁. 
C)  point A to point B. 
D)  point B to point A.

Question 6

Figure 24-4
  
-Refer to Figure 24-4. Given the economy is at point A in year 1,the unemployment rate will ________ and the price level will ________ in year 2.

Accepted Answer

A)  rise; rise 
B)  rise; fall 
C)  fall; rise 
D)  fall; fall 
A)  rise; rise 
B)  rise; fall 
C)  fall; rise 
D)  fall; fall

Question 7

An increase in aggregate demand in the economy will have what effect on macroeconomic equilibrium in the long run?

Accepted Answer

A)  The price level will fall, and the level of GDP will rise. 
B)  The price level will fall, and the level of GDP will fall. 
C)  The price level will rise, and the level of GDP will fall. 
D)  The price level will rise, and the level of GDP will be unaffected. 
A)  The price level will fall, and the level of GDP will rise. 
B)  The price level will fall, and the level of GDP will fall. 
C)  The price level will rise, and the level of GDP will fall. 
D)  The price level will rise, and the level of GDP will be unaffected.

Question 8

An increase in exports decreases aggregate demand.

Accepted Answer

A) True 
 B)False

Question 9

Hurricane Katrina destroyed oil and natural gas refining capacity in the Gulf of Mexico. This subsequently drove up natural gas,gasoline,and heating oil prices. As a result,this should

Accepted Answer

A)  shift the short-run aggregate supply curve to the left. 
B)  shift the short-run aggregate supply curve to the right. 
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 left. 
B)  shift the short-run aggregate supply curve to the right. 
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 10

German automobile exports were hurt in 2008 as a result of the recession. How would this decrease in exports have affected Germany's aggregate demand curve?

Accepted Answer

A)  The aggregate demand curve would have shifted to the right. 
B)  The aggregate demand curve would not have shifted, but there would have been a movement up the aggregate demand curve. 
C)  The aggregate demand curve would not have shifted, but there would have been a movement down the aggregate demand curve. 
D)  The aggregate demand curve would have shifted to the left. 
A)  The aggregate demand curve would have shifted to the right. 
B)  The aggregate demand curve would not have shifted, but there would have been a movement up the aggregate demand curve. 
C)  The aggregate demand curve would not have shifted, but there would have been a movement down the aggregate demand curve. 
D)  The aggregate demand curve would have shifted to the left.

Question 11

How do changes in income tax policies affect aggregate demand?

Accepted Answer

A)  Higher taxes increase disposable income, consumption, and aggregate demand. 
B)  Higher taxes reduce disposable income, consumption, and aggregate demand. 
C)  Higher taxes increase corporate investment and aggregate demand. 
D)  Higher taxes increase aggregate supply and thus increase aggregate demand as well. 
A)  Higher taxes increase disposable income, consumption, and aggregate demand. 
B)  Higher taxes reduce disposable income, consumption, and aggregate demand. 
C)  Higher taxes increase corporate investment and aggregate demand. 
D)  Higher taxes increase aggregate supply and thus increase aggregate demand as well.

Question 12

The level of real GDP in the long run is called

Accepted Answer

A)  potential GDP. 
B)  short-run GDP. 
C)  frictional GDP. 
D)  low-capacity GDP. 
A)  potential GDP. 
B)  short-run GDP. 
C)  frictional GDP. 
D)  low-capacity GDP.

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

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 15

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 16

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

Accepted Answer

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

Question 17

Economists and industry analysts pay close attention to the volume of air cargo shipments because changes in air cargo shipments have historically been good indicators of

Accepted Answer

A)  future oil prices. 
B)  future exchange rate changes. 
C)  future passenger travel. 
D)  past decreases in marginal tax rates. 
A)  future oil prices. 
B)  future exchange rate changes. 
C)  future passenger travel. 
D)  past decreases in marginal tax rates.

Question 18

A decrease in the price level will

Accepted Answer

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

Question 19

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 20

Why does the short-run aggregate supply curve slope upward?

Accepted Answer

The short-run aggregate supply curve slo

There has been a decrease in investment. As a result,real GDP will in the short run,and in the long run.

What is the relationship among the AD,SRAS and LRAS curves when the economy is in macroeconomic equilibrium?

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

Figure 24-2 -Refer to Figure 24-2.Ceteris paribus,an increase in workers and firms adjusting to having previously underestimated the price level would be represented by a movement from

Figure 24-4 -Refer to Figure 24-4. Given the economy is at point A in year 1,the unemployment rate will and the price level will in year 2.

An increase in aggregate demand in the economy will have what effect on macroeconomic equilibrium in the long run?

An increase in exports decreases aggregate demand.

Hurricane Katrina destroyed oil and natural gas refining capacity in the Gulf of Mexico. This subsequently drove up natural gas,gasoline,and heating oil prices. As a result,this should

German automobile exports were hurt in 2008 as a result of the recession. How would this decrease in exports have affected Germany's aggregate demand curve?

How do changes in income tax policies affect aggregate demand?

The level of real GDP in the long run is called

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

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

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

Economists and industry analysts pay close attention to the volume of air cargo shipments because changes in air cargo shipments have historically been good indicators of

A decrease in the price level will

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

Why does the short-run aggregate supply curve slope upward?

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, government Price Setting, and Taxes

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

Exam 13: Aggregate Demand and Aggregate Supply Analysis

There has been a decrease in investment. As a result,real GDP will ________ in the short run,and ________ in the long run.

What is the relationship among the AD,SRAS and LRAS curves when the economy is in macroeconomic equilibrium?

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

Figure 24-2 -Refer to Figure 24-2.Ceteris paribus,an increase in workers and firms adjusting to having previously underestimated the price level would be represented by a movement from

Figure 24-4 -Refer to Figure 24-4. Given the economy is at point A in year 1,the unemployment rate will ________ and the price level will ________ in year 2.

An increase in aggregate demand in the economy will have what effect on macroeconomic equilibrium in the long run?

An increase in exports decreases aggregate demand.

Hurricane Katrina destroyed oil and natural gas refining capacity in the Gulf of Mexico. This subsequently drove up natural gas,gasoline,and heating oil prices. As a result,this should

German automobile exports were hurt in 2008 as a result of the recession. How would this decrease in exports have affected Germany's aggregate demand curve?

How do changes in income tax policies affect aggregate demand?

The level of real GDP in the long run is called

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

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

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

Economists and industry analysts pay close attention to the volume of air cargo shipments because changes in air cargo shipments have historically been good indicators of

A decrease in the price level will

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

Why does the short-run aggregate supply curve slope upward?

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, government Price Setting, and Taxes

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

There has been a decrease in investment. As a result,real GDP will in the short run,and in the long run.

Figure 24-4 -Refer to Figure 24-4. Given the economy is at point A in year 1,the unemployment rate will and the price level will in year 2.

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.