Question 1

If potential GDP increases,

Accepted Answer

A) aggregate supply does not change. 
B) the quantity of aggregate supply decreases. 
C) aggregate supply increases. 
D) the price level rises. 
E) the money wage rate must have fallen. 
A) aggregate supply does not change. 
B) the quantity of aggregate supply decreases. 
C) aggregate supply increases. 
D) the price level rises. 
E) the money wage rate must have fallen. C

Question 2

The money wage rate is constant when moving along

Accepted Answer

A) only the aggregate supply curve. 
B) only the aggregate supply curve and the potential GDP line. 
C) only the potential GDP line. 
D) neither the aggregate supply curve nor the potential GDP line. 
E) the aggregate supply curve, the potential GDP line, and the aggregate demand curve. 
A) only the aggregate supply curve. 
B) only the aggregate supply curve and the potential GDP line. 
C) only the potential GDP line. 
D) neither the aggregate supply curve nor the potential GDP line. 
E) the aggregate supply curve, the potential GDP line, and the aggregate demand curve. A

Question 3

-The change in potential real GDP and aggregate supply shown in the graph above can be a result of

Accepted Answer

A) an increase in the real wage rate. 
B) an increase in the quantity of capital. 
C) a decrease in the money wage rate. 
D) a decrease in the money price of oil. 
E) a fall in the price level. 
A) an increase in the real wage rate. 
B) an increase in the quantity of capital. 
C) a decrease in the money wage rate. 
D) a decrease in the money price of oil. 
E) a fall in the price level. B

Question 4

An inflationary gap is created when

Accepted Answer

A) real GDP is greater than potential GDP. 
B) real GDP equal to potential GDP. 
C) the inflation rate is less than potential inflation. 
D) the price level exceeds the equilibrium price level. 
E) potential GDP is greater than real GDP. 
A) real GDP is greater than potential GDP. 
B) real GDP equal to potential GDP. 
C) the inflation rate is less than potential inflation. 
D) the price level exceeds the equilibrium price level. 
E) potential GDP is greater than real GDP.

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

Demand-pull inflation starts with a shift of the

Accepted Answer

A) AS curve rightward. 
B) AD curve rightward. 
C) AS curve leftward. 
D) AD curve leftward. 
E) potential GDP line leftward. 
A) AS curve rightward. 
B) AD curve rightward. 
C) AS curve leftward. 
D) AD curve leftward. 
E) potential GDP line leftward.

Question 7

If taxes are cut, there is

Accepted Answer

A) an increase in aggregate demand and the AD curve shifts rightward. 
B) a decrease in aggregate demand and the AD curve shifts leftward. 
C) an increase in the quantity of real GDP demanded and a movement up along the AD curve. 
D) a decrease in the quantity of real GDP demanded and a movement down along the AD curve. 
E) no change in aggregate demand, only a change in potential GDP. 
A) an increase in aggregate demand and the AD curve shifts rightward. 
B) a decrease in aggregate demand and the AD curve shifts leftward. 
C) an increase in the quantity of real GDP demanded and a movement up along the AD curve. 
D) a decrease in the quantity of real GDP demanded and a movement down along the AD curve. 
E) no change in aggregate demand, only a change in potential GDP.

Question 8

In the short-run, an increase in the price of raw materials will ________ the price level and ________ real GDP.

Accepted Answer

A) raise; increase 
B) raise; decrease 
C) raise; not change 
D) lower; increase 
E) lower; decrease 
A) raise; increase 
B) raise; decrease 
C) raise; not change 
D) lower; increase 
E) lower; decrease

Question 9

If the money wage rate rises,

Accepted Answer

A) the AS curve shifts rightward. 
B) there is a movement up along the AS curve. 
C) the AS curve shifts leftward. 
D) there is a movement down along the AS curve. 
E) there is neither a movement along or a shift in the AS curve. 
A) the AS curve shifts rightward. 
B) there is a movement up along the AS curve. 
C) the AS curve shifts leftward. 
D) there is a movement down along the AS curve. 
E) there is neither a movement along or a shift in the AS curve.

Question 10

When the price level rises, the real interest rate ________ and the quantity of real GDP demanded ________.

Accepted Answer

A) rises; increases 
B) rises; decreases 
C) falls; increases 
D) falls; decreases 
E) does not change; does not change 
A) rises; increases 
B) rises; decreases 
C) falls; increases 
D) falls; decreases 
E) does not change; does not change

Question 11

If the money wage rate is constant and the price level increases, what happens to the real wage rate, firms' profits, and the aggregate quantity supplied?

Accepted Answer

The real wage rate falls. Because the pr

Question 12

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 13

Define "stagflation" and explain how it can be created.

Accepted Answer

Stagflation is a combination of two word

Question 14

The aggregate supply curve illustrates that the

Accepted Answer

A) higher the price level, the greater the quantity of real GDP supplied. 
B) higher the price level, the smaller the quantity of real GDP supplied. 
C) aggregate demand curve is not needed to determine the aggregate price level. 
D) price level does not affect the quantity of real GDP supplied. 
E) amount of potential GDP increases when the price level rises. 
A) higher the price level, the greater the quantity of real GDP supplied. 
B) higher the price level, the smaller the quantity of real GDP supplied. 
C) aggregate demand curve is not needed to determine the aggregate price level. 
D) price level does not affect the quantity of real GDP supplied. 
E) amount of potential GDP increases when the price level rises.

Question 15

A tax increase

Accepted Answer

A) decreases aggregate demand and the AD curve shifts leftward. 
B) increases aggregate demand and the AD curve shifts rightward. 
C) decreases the quantity of real GDP demanded and there is a movement up along the AD curve. 
D) increases the quantity of real GDP demanded and there is a movement down along the AD curve. 
E) does not shift or lead to a movement along the aggregate demand curve. 
A) decreases aggregate demand and the AD curve shifts leftward. 
B) increases aggregate demand and the AD curve shifts rightward. 
C) decreases the quantity of real GDP demanded and there is a movement up along the AD curve. 
D) increases the quantity of real GDP demanded and there is a movement down along the AD curve. 
E) does not shift or lead to a movement along the aggregate demand curve.

Question 16

The quantity of real GDP supplied increases when the price level increases because

Accepted Answer

A) investment increases. 
B) the quantity of money increases. 
C) the real wage rate falls. 
D) the real wage rate rises. 
E) aggregate demand increases. 
A) investment increases. 
B) the quantity of money increases. 
C) the real wage rate falls. 
D) the real wage rate rises. 
E) aggregate demand increases.

Question 17

An economy experiences a recessionary gap. As the economy adjusts to full employment, the money wage rate

Accepted Answer

A) falls, shifting the aggregate supply curve rightward. 
B) rises, shifting the aggregate supply curve leftward. 
C) rises, shifting the aggregate demand curve rightward. 
D) falls, shifting the aggregate demand curve leftward. 
E) falls, increasing potential GDP. 
A) falls, shifting the aggregate supply curve rightward. 
B) rises, shifting the aggregate supply curve leftward. 
C) rises, shifting the aggregate demand curve rightward. 
D) falls, shifting the aggregate demand curve leftward. 
E) falls, increasing potential GDP.

Question 18

$$\begin{array} { c c c c } 
\begin{array} { c } 
\text { Price level } \
\text { (GDP deflator) }
\end{array} & \begin{array} { c } 
\text { Potential GDP } \
\text { (billions of 2005 dollars) }
\end{array} & \begin{array} { c } 
\text { Real GDP supplied } \
\text { (billions of 2005 dollars) }
\end{array} & \begin{array} { c } 
\text { Real GDP demanded } \
\text { (billions of 2005 dollars) }
\end{array} \
\hline 150 & 25 & 34 & 16 \
140 & 25 & 31 & 19 \
130 & 25 & 28 & 22 \
120 & 25 & 25 & 25 \
110 & 25 & 23 & 28
\end{array}$$
-The table above gives data for the nation of Pearl, a small island in the South Pacific. If aggregate demand increases so that the quantity of real GDP demanded is $6 billion more at each price level, the new equilibrium real GDP is

Accepted Answer

A) $34 billion. 
B) $31 billion. 
C) $28 billion. 
D) $25 billion. 
E) $23 billion. 
A) $34 billion. 
B) $31 billion. 
C) $28 billion. 
D) $25 billion. 
E) $23 billion.

Question 19

Because there is a ________ relationship between the price level and the quantity of real GDP supplied, the aggregate supply curve is ________ curve.

Accepted Answer

A) negative; an upward-sloping 
B) positive; a downward-sloping 
C) positive; an upward-sloping 
D) negative; a downward-sloping 
E) positive; a vertical 
A) negative; an upward-sloping 
B) positive; a downward-sloping 
C) positive; an upward-sloping 
D) negative; a downward-sloping 
E) positive; a vertical

Question 20

If the equilibrium price level is 135 but the actual price level is 150, then

Accepted Answer

A) firms increase their production because they are able to sell their output at a higher than expected price. 
B) the quantity of real GDP demanded is less than the quantity of real GDP supplied. 
C) the quantity of real GDP demanded is greater than the quantity of real GDP supplied. 
D) aggregate demand will increase to restore equilibrium. 
E) aggregate demand will decrease to restore equilibrium. 
A) firms increase their production because they are able to sell their output at a higher than expected price. 
B) the quantity of real GDP demanded is less than the quantity of real GDP supplied. 
C) the quantity of real GDP demanded is greater than the quantity of real GDP supplied. 
D) aggregate demand will increase to restore equilibrium. 
E) aggregate demand will decrease to restore equilibrium.

If potential GDP increases,

The money wage rate is constant when moving along

-The change in potential real GDP and aggregate supply shown in the graph above can be a result of

An inflationary gap is created when

-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?

Demand-pull inflation starts with a shift of the

If taxes are cut, there is

In the short-run, an increase in the price of raw materials will the price level and real GDP.

If the money wage rate rises,

When the price level rises, the real interest rate and the quantity of real GDP demanded .

If the money wage rate is constant and the price level increases, what happens to the real wage rate, firms' profits, and the aggregate quantity supplied?

The aggregate supply curve shows the relationship between

Define "stagflation" and explain how it can be created.

The aggregate supply curve illustrates that the

A tax increase

The quantity of real GDP supplied increases when the price level increases because

An economy experiences a recessionary gap. As the economy adjusts to full employment, the money wage rate

Because there is a relationship between the price level and the quantity of real GDP supplied, the aggregate supply curve is curve.

If the equilibrium price level is 135 but the actual price level is 150, then

Getting Started

The Us and Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Global Markets in Action

Externalities: Pollution, Education, and Health Care

Production and Cost

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Gdp: a Measure of Total Production and Income

Jobs and Unemployment

The Cpi and the Cost of Living

Potential Gdp and Economic Growth

Money and the Monetary System

Fiscal Policy and Monetary Policy

Filters

Exam 19: Aggregate Supply and Aggregate Demand

If potential GDP increases,

The money wage rate is constant when moving along

-The change in potential real GDP and aggregate supply shown in the graph above can be a result of

An inflationary gap is created when

-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?

Demand-pull inflation starts with a shift of the

If taxes are cut, there is

In the short-run, an increase in the price of raw materials will ________ the price level and ________ real GDP.

If the money wage rate rises,

When the price level rises, the real interest rate ________ and the quantity of real GDP demanded ________.

If the money wage rate is constant and the price level increases, what happens to the real wage rate, firms' profits, and the aggregate quantity supplied?

The aggregate supply curve shows the relationship between

Define "stagflation" and explain how it can be created.

The aggregate supply curve illustrates that the

A tax increase

The quantity of real GDP supplied increases when the price level increases because

An economy experiences a recessionary gap. As the economy adjusts to full employment, the money wage rate

Because there is a ________ relationship between the price level and the quantity of real GDP supplied, the aggregate supply curve is ________ curve.

If the equilibrium price level is 135 but the actual price level is 150, then

Getting Started

The Us and Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Global Markets in Action

Externalities: Pollution, Education, and Health Care

Production and Cost

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Gdp: a Measure of Total Production and Income

Jobs and Unemployment

The Cpi and the Cost of Living

Potential Gdp and Economic Growth

Money and the Monetary System

Fiscal Policy and Monetary Policy

Filters

In the short-run, an increase in the price of raw materials will the price level and real GDP.

When the price level rises, the real interest rate and the quantity of real GDP demanded .

Because there is a relationship between the price level and the quantity of real GDP supplied, the aggregate supply curve is curve.