Question 1

The recession of 2007-2009 began in ________,with the end of the economic expansion that had begun in ________.

Accepted Answer

A)  January 2007; April; 1984 
B)  December 2007; November 2001 
C)  July 2007; August 2006 
D)  March 2007; March 1995 
A)  January 2007; April; 1984 
B)  December 2007; November 2001 
C)  July 2007; August 2006 
D)  March 2007; March 1995

Question 2

Spending on the war in Afghanistan is essentially categorized as government purchases. How do increases in spending on the war in Afghanistan affect the aggregate demand curve?

Accepted Answer

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

Question 3

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

Question 4

An increase in investment causes the price level to ________ in the short run and ________ in the long run.

Accepted Answer

A)  increase; increase further 
B)  increase; decrease 
C)  decrease; decrease further 
D)  decrease; increase 
A)  increase; increase further 
B)  increase; decrease 
C)  decrease; decrease further 
D)  decrease; increase

Question 5

All of the following are assumptions made by the dynamic model of aggregate demand and aggregate supply except

Accepted Answer

A)  aggregate demand and potential real GDP decrease continuously. 
B)  the aggregate demand curve shifts to the right during most periods. 
C)  potential real GDP increases continuously. 
D)  the short-run aggregate supply curve shifts to the right except during periods when workers and firms expect higher wages. 
A)  aggregate demand and potential real GDP decrease continuously. 
B)  the aggregate demand curve shifts to the right during most periods. 
C)  potential real GDP increases continuously. 
D)  the short-run aggregate supply curve shifts to the right except during periods when workers and firms expect higher wages.

Question 6

Last week,13 Mexican pesos could purchase one U.S.dollar. This week,it takes 11 Mexican pesos to purchase one U.S.dollar. This change in the value of the dollar will ________ exports from the United States to Mexico and ________ U.S.aggregate demand.

Accepted Answer

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

Question 7

The aggregate demand 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 demanded 
D)  price level; quantity of real GDP demanded 
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 demanded 
D)  price level; quantity of real GDP demanded

Question 8

Which of the following could explain why there is an increase in potential GDP but the equilibrium level of GDP falls?

Accepted Answer

A)  SRAS shifted to the right by more than LRAS. 
B)  AD shifted to the right by more than SRAS. 
C)  AD shifted to the right by less than SRAS. 
D)  AD did not shift and SRAS shifted to the left. 
A)  SRAS shifted to the right by more than LRAS. 
B)  AD shifted to the right by more than SRAS. 
C)  AD shifted to the right by less than SRAS. 
D)  AD did not shift and SRAS shifted to the left.

Question 9

Which of the following would not be considered a positive addition to household wealth?

Accepted Answer

A)  the equity in one's home 
B)  1,000 shares of Microsoft stock 
C)  a credit card balance 
D)  the balance in your checking account 
A)  the equity in one's home 
B)  1,000 shares of Microsoft stock 
C)  a credit card balance 
D)  the balance in your checking account

Question 10

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)  Short-run aggregate supply will shift to the left. 
A)  Output will increase. 
B)  Prices will decline. 
C)  Unemployment will decline. 
D)  Short-run aggregate supply will shift to the left.

Question 11

Figure 24-3
  
-Refer to Figure 24-3. Suppose the economy is at point A. If government spending increases 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 12

Using an aggregate demand graph,illustrate the impact of an increase in the growth rate of U.S.GDP relative to the growth rate of foreign GDP.

Accepted Answer

@#IMG-DLM& The increase in the growth rate of U.S.

Question 13

New Keynesian macroeconomic theory emphasizes the role of "sticky" prices in the economy.

Accepted Answer

A) True 
 B)False

Question 14

Lower personal income taxes

Accepted Answer

A)  increase aggregate demand. 
B)  decrease disposable income. 
C)  decrease aggregate demand. 
D)  increase transfer payments. 
A)  increase aggregate demand. 
B)  decrease disposable income. 
C)  decrease aggregate demand. 
D)  increase transfer payments.

Question 15

Figure 24-2
  
-Refer to Figure 24-2.Ceteris paribus,a decrease in the expected future 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 16

If the economy receives an influx of new workers from immigration,

Accepted Answer

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

Question 17

Most economists agree that an automatic mechanism brings the economy back to potential GDP in the long run.In mid-2011,two years after the recession of 2007-2009 had ended,real GDP in the United States

Accepted Answer

A)  had returned to potential GDP. 
B)  had exceeded potential GDP by 1.5 percent. 
C)  remained more than 7 percent below potential GDP. 
D)  was predicted to never return to potential GDP. 
A)  had returned to potential GDP. 
B)  had exceeded potential GDP by 1.5 percent. 
C)  remained more than 7 percent below potential GDP. 
D)  was predicted to never return to potential GDP.

Question 18

When the price of oil falls unexpectedly,the equilibrium 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 19

The ________ curve is vertical.

Accepted Answer

A)  short-run aggregate supply 
B)  short-run aggregate demand 
C)  long-run aggregate supply 
D)  long-run aggregate demand 
A)  short-run aggregate supply 
B)  short-run aggregate demand 
C)  long-run aggregate supply 
D)  long-run aggregate demand

Question 20

Which of the following is one reason for the decline in aggregate demand that led to the recession of 2007-2009?

Accepted Answer

A)  falling oil prices 
B)  an increase in net exports 
C)  the end of the housing bubble 
D)  a decline in government spending 
A)  falling oil prices 
B)  an increase in net exports 
C)  the end of the housing bubble 
D)  a decline in government spending

The recession of 2007-2009 began in ,with the end of the economic expansion that had begun in .

Spending on the war in Afghanistan is essentially categorized as government purchases. How do increases in spending on the war in Afghanistan affect the aggregate demand curve?

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

An increase in investment causes the price level to in the short run and in the long run.

All of the following are assumptions made by the dynamic model of aggregate demand and aggregate supply except

Last week,13 Mexican pesos could purchase one U.S.dollar. This week,it takes 11 Mexican pesos to purchase one U.S.dollar. This change in the value of the dollar will exports from the United States to Mexico and U.S.aggregate demand.

The aggregate demand curve shows the relationship between the and .

Which of the following could explain why there is an increase in potential GDP but the equilibrium level of GDP falls?

Which of the following would not be considered a positive addition to household wealth?

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?

Figure 24-3 -Refer to Figure 24-3. Suppose the economy is at point A. If government spending increases in the economy,where will the eventual long-run equilibrium be?

Using an aggregate demand graph,illustrate the impact of an increase in the growth rate of U.S.GDP relative to the growth rate of foreign GDP.

New Keynesian macroeconomic theory emphasizes the role of "sticky" prices in the economy.

Lower personal income taxes

Figure 24-2 -Refer to Figure 24-2.Ceteris paribus,a decrease in the expected future price level would be represented by a movement from

If the economy receives an influx of new workers from immigration,

Most economists agree that an automatic mechanism brings the economy back to potential GDP in the long run.In mid-2011,two years after the recession of 2007-2009 had ended,real GDP in the United States

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

The ________ curve is vertical.

Which of the following is one reason for the decline in aggregate demand that led to the recession of 2007-2009?

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

The recession of 2007-2009 began in ________,with the end of the economic expansion that had begun in ________.

Spending on the war in Afghanistan is essentially categorized as government purchases. How do increases in spending on the war in Afghanistan affect the aggregate demand curve?

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

An increase in investment causes the price level to ________ in the short run and ________ in the long run.

All of the following are assumptions made by the dynamic model of aggregate demand and aggregate supply except

Last week,13 Mexican pesos could purchase one U.S.dollar. This week,it takes 11 Mexican pesos to purchase one U.S.dollar. This change in the value of the dollar will ________ exports from the United States to Mexico and ________ U.S.aggregate demand.

The aggregate demand curve shows the relationship between the ________ and ________.

Which of the following could explain why there is an increase in potential GDP but the equilibrium level of GDP falls?

Which of the following would not be considered a positive addition to household wealth?

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?

Figure 24-3 -Refer to Figure 24-3. Suppose the economy is at point A. If government spending increases in the economy,where will the eventual long-run equilibrium be?

Using an aggregate demand graph,illustrate the impact of an increase in the growth rate of U.S.GDP relative to the growth rate of foreign GDP.

New Keynesian macroeconomic theory emphasizes the role of "sticky" prices in the economy.

Lower personal income taxes

Figure 24-2 -Refer to Figure 24-2.Ceteris paribus,a decrease in the expected future price level would be represented by a movement from

If the economy receives an influx of new workers from immigration,

Most economists agree that an automatic mechanism brings the economy back to potential GDP in the long run.In mid-2011,two years after the recession of 2007-2009 had ended,real GDP in the United States

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

The ________ curve is vertical.

Which of the following is one reason for the decline in aggregate demand that led to the recession of 2007-2009?

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

The recession of 2007-2009 began in ,with the end of the economic expansion that had begun in .

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

An increase in investment causes the price level to in the short run and in the long run.

Last week,13 Mexican pesos could purchase one U.S.dollar. This week,it takes 11 Mexican pesos to purchase one U.S.dollar. This change in the value of the dollar will exports from the United States to Mexico and U.S.aggregate demand.

The aggregate demand curve shows the relationship between the and .

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