Question 1

One factor which brought on the recession of 2007-2009 was the financial crisis in 2008.

Accepted Answer

A) True 
 B)False

Question 2

Figure 24-2
  
-Refer to Figure 24-2.Ceteris paribus,an increase in the capital stock 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 3

Workers and firms both expect that prices will be 3% higher next year than they are this year. As a result,

Accepted Answer

A)  workers will be willing to take lower wages next year. 
B)  the purchasing power of wages will rise if wages increase by 3%. 
C)  the short-run aggregate supply curve will shift to the left as wages increase. 
D)  aggregate demand will increase by 3% 
A)  workers will be willing to take lower wages next year. 
B)  the purchasing power of wages will rise if wages increase by 3%. 
C)  the short-run aggregate supply curve will shift to the left as wages increase. 
D)  aggregate demand will increase by 3%

Question 4

The level of real GDP in the long run is

Accepted Answer

A)  potential GDP. 
B)  affected by changes in the price level. 
C)  determined solely by aggregate demand. 
D)  the same as the level of nominal GDP in the long run. 
A)  potential GDP. 
B)  affected by changes in the price level. 
C)  determined solely by aggregate demand. 
D)  the same as the level of nominal GDP in the long run.

Question 5

Hurricane Katrina resulted in a decline in oil production infrastructure along the gulf coast. As a result there was an unexpected decline in oil and natural gas supplies in 2005. Suppose that this caused an increase in the price level and a decline in real GDP in 2006. Also assume that potential real GDP continued to grow due to other factors. You can assume the aggregate demand curve did not change. Show the macroeconomic equilibrium for 2005 and 2006 using the dynamic aggregate supply and aggregate demand model.

Accepted Answer

@#IMG-DLM& The economy began at the point (Y₁,P₁)o

Question 6

Figure 24-3
  
-Refer to Figure 24-3. Suppose the economy is at point C. If investment 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 7

Which of the following is not a reason why the wages of workers and the prices of inputs rise more slowly than the prices of final goods and services?

Accepted Answer

A)  Contracts make prices and wages "sticky." 
B)  Firms are often slow to adjust wages. 
C)  Menu costs make some prices sticky. 
D)  Unions are successful in pushing up wages. 
A)  Contracts make prices and wages "sticky." 
B)  Firms are often slow to adjust wages. 
C)  Menu costs make some prices sticky. 
D)  Unions are successful in pushing up wages.

Question 8

Figure 24-1
  
-Refer to Figure 24-1.Ceteris paribus,an increase in firms' expectations of the future profitability of investment spending would be represented by a movement from

Accepted Answer

A)  AD₁ to AD₂. 
B)  AD₂ to AD₁. 
C)  point A to point B. 
D)  point B to point A. 
A)  AD₁ to AD₂. 
B)  AD₂ to AD₁. 
C)  point A to point B. 
D)  point B to point A.

Question 9

The international trade effect states that a(n)________ in the price level will ________ net exports.

Accepted Answer

A)  increase; increase 
B)  increase; decrease 
C)  decrease; decrease 
D)  decrease; not affect 
A)  increase; increase 
B)  increase; decrease 
C)  decrease; decrease 
D)  decrease; not affect

Question 10

Short-run macroeconomic equilibrium occurs when

Accepted Answer

A)  aggregate demand and short-run aggregate supply intersect. 
B)  the equilibrium lies on the long-run aggregate supply curve. 
C)  structural and frictional unemployment equal zero. 
D)  A and B 
A)  aggregate demand and short-run aggregate supply intersect. 
B)  the equilibrium lies on the long-run aggregate supply curve. 
C)  structural and frictional unemployment equal zero. 
D)  A and B

Question 11

Proponents of the ________ model argue that the short-run supply curve is vertical.

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 12

Use the dynamic model of aggregate demand and supply to illustrate a situation where aggregate demand and short-run aggregate supply are both increasing from year 1 to year 2,resulting in a higher price level and higher level of real GDP at macroeconomic equilibrium in year 2.

Accepted Answer

@#IMG-DLM& AD₁,SRAS₁ and LRAS₁ all represent year

Question 13

Declines in spending on residential construction are often due to increases in interest rates.The collapse in residential construction prior to and during the recession of 2007-2009 was due more to ________ than to higher interest rates.

Accepted Answer

A)  the financial crisis that began in 2007 
B)  the rapid inflation of the early 2000s 
C)  increases in the price of lumber 
D)  rising wages in the construction industry 
A)  the financial crisis that began in 2007 
B)  the rapid inflation of the early 2000s 
C)  increases in the price of lumber 
D)  rising wages in the construction industry

Question 14

________ of unemployment during ________ make it easier for workers to ________ wages.

Accepted Answer

A)  High levels; a recession; accept lower 
B)  Low levels; an expansion; accept lower 
C)  Low levels; a recession; negotiate higher 
D)  High levels; an expansion; negotiate higher 
A)  High levels; a recession; accept lower 
B)  Low levels; an expansion; accept lower 
C)  Low levels; a recession; negotiate higher 
D)  High levels; an expansion; negotiate higher

Question 15

The basic aggregate demand and aggregate supply curve model helps explain ________ fluctuations in real GDP and the price level.

Accepted Answer

A)  short-term 
B)  long-term 
C)  both short-term and long-term 
D)  unrelated 
A)  short-term 
B)  long-term 
C)  both short-term and long-term 
D)  unrelated

Question 16

When the price level falls from 135 to 120,the aggregate level of GDP supplied falls from $140 billion to $125 billion. This ________ relationship represents the ________ relationship between GDP and the price level.

Accepted Answer

A)  negative; short-run 
B)  positive; short-run 
C)  negative; long-run 
D)  positive; long-run 
A)  negative; short-run 
B)  positive; short-run 
C)  negative; long-run 
D)  positive; long-run

Question 17

Explain whether FedEx's sales are likely to fluctuate more or less than the sales of each of the following firms as the economy moves from recession to expansion and back to recession.
Whirlpool Corporation (appliance manufacturer)
Taco Bell
The Boeing Company (aircraft manufacturer)
GameStop (video game sales and rentals)

Accepted Answer

FedEx's sales are likely to fluctuate du

Question 18

According to ________,entrepreneurship does not contribute anything of value to production.

Accepted Answer

A)  Robert Lucas and Thomas Sargent 
B)  Milton Friedman 
C)  John Maynard Keynes 
D)  Karl Marx 
A)  Robert Lucas and Thomas Sargent 
B)  Milton Friedman 
C)  John Maynard Keynes 
D)  Karl Marx

Question 19

Explain how each of the following events would affect the long-run aggregate supply curve.
a.A lower price level
b.A decrease in the labor force
c.A decrease in the quantity of capital goods
d.Technological change

Accepted Answer

a.A lower price level would cause a move

Question 20

Long-run macroeconomic equilibrium occurs when aggregate demand ________ short-run aggregate supply and they ________ the long-run supply curve.

Accepted Answer

A)  equals; intersect at a point to the right of 
B)  equals; intersect at a point on 
C)  is greater than; intersect at a point to the left of 
D)  is less than; intersect at a point to the right of 
A)  equals; intersect at a point to the right of 
B)  equals; intersect at a point on 
C)  is greater than; intersect at a point to the left of 
D)  is less than; intersect at a point to the right of

One factor which brought on the recession of 2007-2009 was the financial crisis in 2008.

Figure 24-2 -Refer to Figure 24-2.Ceteris paribus,an increase in the capital stock would be represented by a movement from

Workers and firms both expect that prices will be 3% higher next year than they are this year. As a result,

The level of real GDP in the long run is

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

Which of the following is not a reason why the wages of workers and the prices of inputs rise more slowly than the prices of final goods and services?

Figure 24-1 -Refer to Figure 24-1.Ceteris paribus,an increase in firms' expectations of the future profitability of investment spending would be represented by a movement from

The international trade effect states that a(n) in the price level will net exports.

Short-run macroeconomic equilibrium occurs when

Proponents of the ________ model argue that the short-run supply curve is vertical.

Use the dynamic model of aggregate demand and supply to illustrate a situation where aggregate demand and short-run aggregate supply are both increasing from year 1 to year 2,resulting in a higher price level and higher level of real GDP at macroeconomic equilibrium in year 2.

Declines in spending on residential construction are often due to increases in interest rates.The collapse in residential construction prior to and during the recession of 2007-2009 was due more to ________ than to higher interest rates.

of unemployment during make it easier for workers to wages.

The basic aggregate demand and aggregate supply curve model helps explain ________ fluctuations in real GDP and the price level.

When the price level falls from 135 to 120,the aggregate level of GDP supplied falls from $140 billion to $125 billion. This relationship represents the relationship between GDP and the price level.

According to ________,entrepreneurship does not contribute anything of value to production.

Explain how each of the following events would affect the long-run aggregate supply curve. a.A lower price level b.A decrease in the labor force c.A decrease in the quantity of capital goods d.Technological change

Long-run macroeconomic equilibrium occurs when aggregate demand short-run aggregate supply and they the long-run supply curve.

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

One factor which brought on the recession of 2007-2009 was the financial crisis in 2008.

Figure 24-2 -Refer to Figure 24-2.Ceteris paribus,an increase in the capital stock would be represented by a movement from

Workers and firms both expect that prices will be 3% higher next year than they are this year. As a result,

The level of real GDP in the long run is

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

Which of the following is not a reason why the wages of workers and the prices of inputs rise more slowly than the prices of final goods and services?

Figure 24-1 -Refer to Figure 24-1.Ceteris paribus,an increase in firms' expectations of the future profitability of investment spending would be represented by a movement from

The international trade effect states that a(n)________ in the price level will ________ net exports.

Short-run macroeconomic equilibrium occurs when

Proponents of the ________ model argue that the short-run supply curve is vertical.

Use the dynamic model of aggregate demand and supply to illustrate a situation where aggregate demand and short-run aggregate supply are both increasing from year 1 to year 2,resulting in a higher price level and higher level of real GDP at macroeconomic equilibrium in year 2.

Declines in spending on residential construction are often due to increases in interest rates.The collapse in residential construction prior to and during the recession of 2007-2009 was due more to ________ than to higher interest rates.

________ of unemployment during ________ make it easier for workers to ________ wages.

The basic aggregate demand and aggregate supply curve model helps explain ________ fluctuations in real GDP and the price level.

When the price level falls from 135 to 120,the aggregate level of GDP supplied falls from $140 billion to $125 billion. This ________ relationship represents the ________ relationship between GDP and the price level.

According to ________,entrepreneurship does not contribute anything of value to production.

Explain how each of the following events would affect the long-run aggregate supply curve. a.A lower price level b.A decrease in the labor force c.A decrease in the quantity of capital goods d.Technological change

Long-run macroeconomic equilibrium occurs when aggregate demand ________ short-run aggregate supply and they ________ the long-run supply curve.

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 international trade effect states that a(n) in the price level will net exports.

of unemployment during make it easier for workers to wages.

When the price level falls from 135 to 120,the aggregate level of GDP supplied falls from $140 billion to $125 billion. This relationship represents the relationship between GDP and the price level.

Long-run macroeconomic equilibrium occurs when aggregate demand short-run aggregate supply and they the long-run supply curve.