Question 1

A change in the price level produces a ________ the aggregate demand curve. i. shift in
Ii) change in the slope of
Iii) movement along

Accepted Answer

A)  i only 
B)  ii only 
C)  iii only 
D)  i and iii 
E)  i and ii 
A)  i only 
B)  ii only 
C)  iii only 
D)  i and iii 
E)  i and ii

Question 2

Which of the following is true?

Accepted Answer

A)  Aggregate supply is another name for potential GDP. 
B)  Potential GDP increases as the price level increases. 
C)  At full employment, aggregate supply is equal to potential GDP. 
D)  Potential GDP decreases as the price level increases. 
E)  The potential GDP line has a negative slope. 
A)  Aggregate supply is another name for potential GDP. 
B)  Potential GDP increases as the price level increases. 
C)  At full employment, aggregate supply is equal to potential GDP. 
D)  Potential GDP decreases as the price level increases. 
E)  The potential GDP line has a negative slope.

Question 3

________ decreases aggregate supply.

Accepted Answer

A)  An increase in potential GDP 
B)  An increase the quantity of capital 
C)  A rise in the price level 
D)  A rise in the money wage rate 
E)  A fall in the money wage rate 
A)  An increase in potential GDP 
B)  An increase the quantity of capital 
C)  A rise in the price level 
D)  A rise in the money wage rate 
E)  A fall in the money wage rate

Question 4

13.4 Chapter Figures
   
The figure above shows the aggregate supply curve and potential GDP.
-If potential GDP increases, then in the figure above the potential GDP line ________ and the aggregate supply curve ________.

Accepted Answer

A)  shifts rightward; does not shift 
B)  does not shift; shifts rightward 
C)  shifts rightward; shifts rightward 
D)  shifts rightward; shifts leftward 
E)  does not shift; does not shift 
A)  shifts rightward; does not shift 
B)  does not shift; shifts rightward 
C)  shifts rightward; shifts rightward 
D)  shifts rightward; shifts leftward 
E)  does not shift; does not shift

Question 5

-Based on the table above,
a. What is the equilibrium price level and real GDP?
b. If potential GDP is $11.0 trillion, what does that imply about the economy's level of employment?
c. If potential GDP is $9.0 trillion, what does that imply about the economy's level of employment?

Accepted Answer

a. The equilibrium price level is 105; t

Question 6

The line showing potential GDP is a vertical straight line because

Accepted Answer

A)  there is only one level of full employment at any point in time. 
B)  economists are unsure about how to determine potential GDP 
C)  it represents the minimum level of real GDP in a recession. 
D)  when nothing else changes, a higher price level has no effect on real GDP. 
E)  the aggregate supply curve is upward sloping. 
A)  there is only one level of full employment at any point in time. 
B)  economists are unsure about how to determine potential GDP 
C)  it represents the minimum level of real GDP in a recession. 
D)  when nothing else changes, a higher price level has no effect on real GDP. 
E)  the aggregate supply curve is upward sloping.

Question 7

$$\begin{array} { c c c } 
\begin{array} { c } 
\text { Price level } \
\text { (GDP deflator) }
\end{array} & \begin{array} { c } 
\text { Real GDP demanded } \
\text { (trillions of 2005 } \
\text { dollars) }
\end{array} & \begin{array} { c } 
\text { Real GDP supplied } \
\text { (trillions of 2005 } \
\text { dollars) }
\end{array} \
\hline 80 & 10 & 2 \
90 & 9 & 4 \
100 & 8 & 6 \
110 & 7 & 7 \
120 & 6 & 8 \
130 & 4 & 9 \
\hline
\end{array}$$ 
The table gives the aggregate demand and aggregate supply schedules for a nation.
-The equilibrium price level is

Accepted Answer

A)  130. 
B)  120. 
C)  110. 
D)  100. 
E)  90. 
A)  130. 
B)  120. 
C)  110. 
D)  100. 
E)  90.

Question 8

All of the following actions shift the aggregate demand curve to the right EXCEPT

Accepted Answer

A)  the Fed raises the interest rate. 
B)  an increase in government transfer payments. 
C)  inflation is expected to rise next year. 
D)  an increase in expected future profit. 
E)  a decrease in taxes. 
A)  the Fed raises the interest rate. 
B)  an increase in government transfer payments. 
C)  inflation is expected to rise next year. 
D)  an increase in expected future profit. 
E)  a decrease in taxes.

Question 9

The ________ the ________ is the quantity of real GDP supplied.

Accepted Answer

A)  lower the price level; greater 
B)  higher the price level; greater 
C)  greater the demand for labor; smaller 
D)  lower the supply of labor; greater 
E)  lower aggregate demand; greater 
A)  lower the price level; greater 
B)  higher the price level; greater 
C)  greater the demand for labor; smaller 
D)  lower the supply of labor; greater 
E)  lower aggregate demand; greater

Question 10

When the macroeconomic equilibrium is such that real GDP is less than potential real GDP, the economy is suffering from ________ and the government policy to eliminate this gap will ________ real GDP and to ________ the price level.

Accepted Answer

A)  a recessionary gap; decrease; decrease 
B)  an inflationary gap; increase; decrease 
C)  a recessionary gap; increase; increase 
D)  an inflationary gap; decrease; increase 
E)  a recessionary gap; decrease; increase 
A)  a recessionary gap; decrease; decrease 
B)  an inflationary gap; increase; decrease 
C)  a recessionary gap; increase; increase 
D)  an inflationary gap; decrease; increase 
E)  a recessionary gap; decrease; increase

Question 11

What factor changes the quantity of real GDP supplied and results in a movement along the AS curve?

Accepted Answer

Changes in the price level cha

Question 12

According to the AS-AD model

Accepted Answer

A)  the aggregate quantity supplied is typically greater than the aggregate quantity demanded, thereby leading to unemployment. 
B)  the equilibrium is where the AS curve crosses the AD curve but the amount of real GDP at this point is not always equal to potential GDP. 
C)  the aggregate quantity demanded is typically greater than the aggregate quantity supplied, thereby leading to inflation. 
D)  the AS curve is always equal to potential GDP. 
E)  changes in the amount of potential GDP is the only factor that shifts both the aggregate supply curve and the aggregate demand curve. 
A)  the aggregate quantity supplied is typically greater than the aggregate quantity demanded, thereby leading to unemployment. 
B)  the equilibrium is where the AS curve crosses the AD curve but the amount of real GDP at this point is not always equal to potential GDP. 
C)  the aggregate quantity demanded is typically greater than the aggregate quantity supplied, thereby leading to inflation. 
D)  the AS curve is always equal to potential GDP. 
E)  changes in the amount of potential GDP is the only factor that shifts both the aggregate supply curve and the aggregate demand curve.

Question 13

How does a cut in interest rates that increases investment affect the quantity of real GDP demanded, the aggregate demand curve, real GDP, and the price level?

Accepted Answer

The increase in investment inc

Question 14

An increase in the price of oil ________ aggregate supply, shifting the aggregate supply curve ________ and potentially bringing the ________ phase of the business cycle.

Accepted Answer

A)  decreases; rightward; expansion 
B)  increases; rightward; recession 
C)  increases; rightward; expansion 
D)  decreases; leftward; recession 
E)  decreases; rightward; recession 
A)  decreases; rightward; expansion 
B)  increases; rightward; recession 
C)  increases; rightward; expansion 
D)  decreases; leftward; recession 
E)  decreases; rightward; recession

Question 15

The aggregate supply curve shows the relationship between

Accepted Answer

A)  potential GDP and the price level. 
B)  potential GDP and real GDP. 
C)  the quantity of real GDP supplied and the price level. 
D)  the quantity of real GDP supplied and the interest rate. 
E)  potential GDP and the aggregate demand curve. 
A)  potential GDP and the price level. 
B)  potential GDP and real GDP. 
C)  the quantity of real GDP supplied and the price level. 
D)  the quantity of real GDP supplied and the interest rate. 
E)  potential GDP and the aggregate demand curve.

Question 16

-In the figure above, the economy is at an equilibrium with real GDP of $13 trillion and a price level of 110.At this point there is

Accepted Answer

A)  an inflationary gap. 
B)  a recessionary gap. 
C)  price stability. 
D)  a full-employment equilibrium. 
E)  a below full-employment equilibrium. 
A)  an inflationary gap. 
B)  a recessionary gap. 
C)  price stability. 
D)  a full-employment equilibrium. 
E)  a below full-employment equilibrium.

Question 17

The aggregate supply curve slopes ________ because a ________ in the price level brings a ________ in the real wage rate.

Accepted Answer

A)  upward; rise; rise 
B)  downward; fall; rise 
C)  upward; rise; fall 
D)  upward; fall; fall 
E)  downward; rise; rise 
A)  upward; rise; rise 
B)  downward; fall; rise 
C)  upward; rise; fall 
D)  upward; fall; fall 
E)  downward; rise; rise

Question 18

-In the figure above, the shift in the aggregate demand curve from AD₁ to AD₃ could be the result of

Accepted Answer

A)  a fall in the price level. 
B)  a tax cut. 
C)  an increased expectation of a recession that lowers people's expected future incomes 
D)  a decrease in the foreign exchange rate. 
E)  a rise in the price level. 
A)  a fall in the price level. 
B)  a tax cut. 
C)  an increased expectation of a recession that lowers people's expected future incomes 
D)  a decrease in the foreign exchange rate. 
E)  a rise in the price level.

Question 19

What is the effect on aggregate supply and potential GDP of an increase in the money wage rate?

Accepted Answer

An increase in the money wage

Question 20

Sherri lives in Canada and is considering buying a new sofa.If the price level in Canada falls and the price level in the United States does not change, Canadian manufactured sofas are relatively

Accepted Answer

A)  more expensive, so Sherri will likely purchase a U.S.manufactured sofa. 
B)  more expensive, so Sherri will likely purchase a Canadian manufactured sofa. 
C)  less expensive, so Sherri will likely purchase a U.S.manufactured sofa. 
D)  less expensive, so Sherri will likely purchase a Canadian manufactured sofa. 
E)  Both answers B and D could be correct depending on whether U.S.manufactured sofas were initially more expensive or less expensive than Canadian sofas. 
A)  more expensive, so Sherri will likely purchase a U.S.manufactured sofa. 
B)  more expensive, so Sherri will likely purchase a Canadian manufactured sofa. 
C)  less expensive, so Sherri will likely purchase a U.S.manufactured sofa. 
D)  less expensive, so Sherri will likely purchase a Canadian manufactured sofa. 
E)  Both answers B and D could be correct depending on whether U.S.manufactured sofas were initially more expensive or less expensive than Canadian sofas.

A change in the price level produces a ________ the aggregate demand curve. i. shift in Ii) change in the slope of Iii) movement along

Which of the following is true?

________ decreases aggregate supply.

13.4 Chapter Figures The figure above shows the aggregate supply curve and potential GDP. -If potential GDP increases, then in the figure above the potential GDP line and the aggregate supply curve .

-Based on the table above, a. What is the equilibrium price level and real GDP? b. If potential GDP is $11.0 trillion, what does that imply about the economy's level of employment? c. If potential GDP is $9.0 trillion, what does that imply about the economy's level of employment?

The line showing potential GDP is a vertical straight line because

Price level (GDP deflator) Real GDP demanded (trillions of 2005 dollars) Real GDP supplied (trillions of 2005 dollars) 80 10 2 90 9 4 100 8 6 110 7 7 120 6 8 130 4 9 The table gives the aggregate demand and aggregate supply schedules for a nation. -The equilibrium price level is

All of the following actions shift the aggregate demand curve to the right EXCEPT

The the is the quantity of real GDP supplied.

When the macroeconomic equilibrium is such that real GDP is less than potential real GDP, the economy is suffering from and the government policy to eliminate this gap will real GDP and to the price level.

What factor changes the quantity of real GDP supplied and results in a movement along the AS curve?

According to the AS-AD model

How does a cut in interest rates that increases investment affect the quantity of real GDP demanded, the aggregate demand curve, real GDP, and the price level?

An increase in the price of oil aggregate supply, shifting the aggregate supply curve and potentially bringing the phase of the business cycle.

The aggregate supply curve shows the relationship between

-In the figure above, the economy is at an equilibrium with real GDP of $13 trillion and a price level of 110.At this point there is

The aggregate supply curve slopes because a in the price level brings a in the real wage rate.

-In the figure above, the shift in the aggregate demand curve from AD₁ to AD₃ could be the result of

What is the effect on aggregate supply and potential GDP of an increase in the money wage rate?

Sherri lives in Canada and is considering buying a new sofa.If the price level in Canada falls and the price level in the United States does not change, Canadian manufactured sofas are relatively

Getting Started

The Usand Global Economies

The Economic Problem

Demand and Supply

Gdp: a Measure of Total Production and Income

Jobs and Unemployment

The Cpi and the Cost of Living

Potential Gdp and the Natural Unemployment Rate

Economic Growth

Finance, Saving, and Investment

The Monetary System

Money, Interest, and Inflation

Aggregate Expenditure Multiplier

The Short-Run Policy Tradeoff

Fiscal Policy

Monetary Policy

International Trade Policy

International Finance

Filters

Exam 13: Aggregate Supply and Aggregate Demand

A change in the price level produces a ________ the aggregate demand curve. i. shift in Ii) change in the slope of Iii) movement along

Which of the following is true?

________ decreases aggregate supply.

13.4 Chapter Figures The figure above shows the aggregate supply curve and potential GDP. -If potential GDP increases, then in the figure above the potential GDP line ________ and the aggregate supply curve ________.

-Based on the table above, a. What is the equilibrium price level and real GDP? b. If potential GDP is $11.0 trillion, what does that imply about the economy's level of employment? c. If potential GDP is $9.0 trillion, what does that imply about the economy's level of employment?

The line showing potential GDP is a vertical straight line because

Price level (GDP deflator) Real GDP demanded (trillions of 2005 dollars) Real GDP supplied (trillions of 2005 dollars) 80 10 2 90 9 4 100 8 6 110 7 7 120 6 8 130 4 9 The table gives the aggregate demand and aggregate supply schedules for a nation. -The equilibrium price level is

All of the following actions shift the aggregate demand curve to the right EXCEPT

The ________ the ________ is the quantity of real GDP supplied.

When the macroeconomic equilibrium is such that real GDP is less than potential real GDP, the economy is suffering from ________ and the government policy to eliminate this gap will ________ real GDP and to ________ the price level.

What factor changes the quantity of real GDP supplied and results in a movement along the AS curve?

According to the AS-AD model

How does a cut in interest rates that increases investment affect the quantity of real GDP demanded, the aggregate demand curve, real GDP, and the price level?

An increase in the price of oil ________ aggregate supply, shifting the aggregate supply curve ________ and potentially bringing the ________ phase of the business cycle.

The aggregate supply curve shows the relationship between

-In the figure above, the economy is at an equilibrium with real GDP of $13 trillion and a price level of 110.At this point there is

The aggregate supply curve slopes ________ because a ________ in the price level brings a ________ in the real wage rate.

-In the figure above, the shift in the aggregate demand curve from AD₁ to AD₃ could be the result of

What is the effect on aggregate supply and potential GDP of an increase in the money wage rate?

Sherri lives in Canada and is considering buying a new sofa.If the price level in Canada falls and the price level in the United States does not change, Canadian manufactured sofas are relatively

Getting Started

The Usand Global Economies

The Economic Problem

Demand and Supply

Gdp: a Measure of Total Production and Income

Jobs and Unemployment

The Cpi and the Cost of Living

Potential Gdp and the Natural Unemployment Rate

Economic Growth

Finance, Saving, and Investment

The Monetary System

Money, Interest, and Inflation

Aggregate Expenditure Multiplier

The Short-Run Policy Tradeoff

Fiscal Policy

Monetary Policy

International Trade Policy

International Finance

Filters

13.4 Chapter Figures The figure above shows the aggregate supply curve and potential GDP. -If potential GDP increases, then in the figure above the potential GDP line and the aggregate supply curve .

The the is the quantity of real GDP supplied.

When the macroeconomic equilibrium is such that real GDP is less than potential real GDP, the economy is suffering from and the government policy to eliminate this gap will real GDP and to the price level.

An increase in the price of oil aggregate supply, shifting the aggregate supply curve and potentially bringing the phase of the business cycle.

The aggregate supply curve slopes because a in the price level brings a in the real wage rate.