Question 1

Cost-push inflation starts with

Accepted Answer

A) an increase in aggregate demand. 
B) a decrease in aggregate demand. 
C) an increase inaggregate supply. 
D) a decrease in aggregate supply. 
E) an increase in potential GDP. 
A) an increase in aggregate demand. 
B) a decrease in aggregate demand. 
C) an increase inaggregate supply. 
D) a decrease in aggregate supply. 
E) an increase in potential GDP.

Question 2

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 3

The main sources of cost-push inflation are increases in

Accepted Answer

A) the money wage rate and the price of raw materials. 
B) the real wage rate and the price of raw materials. 
C) the money wage rate and aggregate demand. 
D) the quantity of money and the real wage rate. 
E) government expenditure and the quantity of money. 
A) the money wage rate and the price of raw materials. 
B) the real wage rate and the price of raw materials. 
C) the money wage rate and aggregate demand. 
D) the quantity of money and the real wage rate. 
E) government expenditure and the quantity of money.

Question 4

Suppose the exchange rate in the year 2010 was 4 yuan per dollar and in 2011 the exchange rate fell to 3 yuan per dollar. If the price of a Chinese sweater was 120 yuan in both years, the new dollar price in 2011 would be ________ and imports of Chinese sweaters would ________.

Accepted Answer

A) $40; increase 
B) $30; decrease 
C) $40; decrease 
D) $30; increase 
E) $40; stay the same because the price stayed the same at 120 yuan 
A) $40; increase 
B) $30; decrease 
C) $40; decrease 
D) $30; increase 
E) $40; stay the same because the price stayed the same at 120 yuan

Question 5

Reasons that the recession of 2008-2009 did not become a depression include: i. The Fed bailed out troubled financial institutions.
Ii. The government aggressively balanced its budget.
Iii. The government increased its expenditures, which increased aggregate demand.

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 6

During a demand-pull inflation, if the Fed tries to maintain a level of real GDP above potential GDP, the AD curve will ________ and the AS curve will ________.

Accepted Answer

A) shift rightward once; shift rightward continuously 
B) shift rightward continuously; shift rightward continuously 
C) shift rightward continuously; not shift 
D) not shift; shift rightward continuously 
E) shift rightward continuously; shift leftward continuously 
A) shift rightward once; shift rightward continuously 
B) shift rightward continuously; shift rightward continuously 
C) shift rightward continuously; not shift 
D) not shift; shift rightward continuously 
E) shift rightward continuously; shift leftward continuously

Question 7

An increase in government expenditure on goods and services ________ aggregate demand, shifting the aggregate demand curve ________ and potentially bringing the ________ phase of the business cycle.

Accepted Answer

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

Question 8

A demand-pull inflation consists of ________ shifts in the AD curve and ________ shifts in the AS curve.

Accepted Answer

A) rightward; rightward 
B) rightward; leftward 
C) right; no 
D) leftward; rightward 
E) leftward; leftward 
A) rightward; rightward 
B) rightward; leftward 
C) right; no 
D) leftward; rightward 
E) leftward; leftward

Question 9

When the price level falls,

Accepted Answer

A) the AS curve shifts rightward but the potential GDP line does not shift. 
B) there is a movement upward along the AS curve. 
C) the AS curve shifts leftward but the potential GDP line does not shift. 
D) there is a movement downward along the AS curve. 
E) both the potential GDP line and the AS curve shift leftward. 
A) the AS curve shifts rightward but the potential GDP line does not shift. 
B) there is a movement upward along the AS curve. 
C) the AS curve shifts leftward but the potential GDP line does not shift. 
D) there is a movement downward along the AS curve. 
E) both the potential GDP line and the AS curve shift leftward.

Question 10

List three changes that lead to a shift of the aggregate supply curve. Discuss why each change shifts the aggregate supply curve and in which direction the curve shifts.

Accepted Answer

A change in potential GDP, a change in t

Question 11

-According to the figure above, which point or points correspond to full employment?

Accepted Answer

A) only point a 
B) only point b 
C) only point c 
D) points a and b 
E) points a, b, and c 
A) only point a 
B) only point b 
C) only point c 
D) points a and b 
E) points a, b, and c

Question 12

When the U.S. price level rises relative to other nations' price levels, then

Accepted Answer

A) U.S. firms' profits increase and the aggregate demand curve shifts rightward. 
B) U.S. exports increase and the aggregate demand curve shifts rightward. 
C) U.S. exports decrease, U.S. imports increase, and the aggregate demand curve shifts leftward. 
D) U.S. exports decrease, U.S. imports increase, and there is a movement upward along the aggregate demand curve. 
E) U.S. exports decrease, U.S. imports increase, and the aggregate demand curve shifts rightward. 
A) U.S. firms' profits increase and the aggregate demand curve shifts rightward. 
B) U.S. exports increase and the aggregate demand curve shifts rightward. 
C) U.S. exports decrease, U.S. imports increase, and the aggregate demand curve shifts leftward. 
D) U.S. exports decrease, U.S. imports increase, and there is a movement upward along the aggregate demand curve. 
E) U.S. exports decrease, U.S. imports increase, and the aggregate demand curve shifts rightward.

Question 13

The quantity of real GDP supplied decreases if the price level ________ because it ________ profits.

Accepted Answer

A) rises; increases 
B) rises; decreases 
C) falls; increases 
D) falls; decreases 
E) None of the above answers are correct because the AS curve is vertical so that the quantity of real GDP supplied does not change when the price level changes. 
A) rises; increases 
B) rises; decreases 
C) falls; increases 
D) falls; decreases 
E) None of the above answers are correct because the AS curve is vertical so that the quantity of real GDP supplied does not change when the price level changes.

Question 14

Which of the following statements is correct?

Accepted Answer

A) A increase in people's expected future income shifts the aggregate demand curve leftward. 
B) A tax increase shifts the aggregate demand curve leftward. 
C) An increase in potential GDP shifts the aggregate demand curve rightward. 
D) An increase in exports shifts the aggregate demand curve leftward. 
E) The higher the price level, the larger is the quantity of real GDP demanded. 
A) A increase in people's expected future income shifts the aggregate demand curve leftward. 
B) A tax increase shifts the aggregate demand curve leftward. 
C) An increase in potential GDP shifts the aggregate demand curve rightward. 
D) An increase in exports shifts the aggregate demand curve leftward. 
E) The higher the price level, the larger is the quantity of real GDP demanded.

Question 15

Changes in which of the following do NOT shift the AS curve?
I. the price level
Ii. potential GDP
Iii. the money wage rate

Accepted Answer

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

Question 16

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

Accepted Answer

A) $10 trillion. 
B) $9 trillion. 
C) $8 trillion. 
D) $7 trillion. 
E) $6 trillion. 
A) $10 trillion. 
B) $9 trillion. 
C) $8 trillion. 
D) $7 trillion. 
E) $6 trillion.

Question 17

The figure above shows the aggregate demand curve.
-The aggregate demand curve in the figure above shifts rightward if

Accepted Answer

A) potential GDP increases. 
B) the money wage rate falls. 
C) taxes are raised. 
D) government expenditure increases. 
E) the Federal Reserve raises the interest rate. 
A) potential GDP increases. 
B) the money wage rate falls. 
C) taxes are raised. 
D) government expenditure increases. 
E) the Federal Reserve raises the interest rate.

Question 18

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

Question 19

A rise in the price level produces a ________ the potential GDP line.

Accepted Answer

A) rightward shift of 
B) movement downward along 
C) leftward shift of 
D) movement upward along 
E) neither a shift of the potential GDP line nor a movement along 
A) rightward shift of 
B) movement downward along 
C) leftward shift of 
D) movement upward along 
E) neither a shift of the potential GDP line nor a movement along

Question 20

Stagflation is a combination of ________ real GDP and a ________ price level.

Accepted Answer

A) increasing; rising 
B) increasing; falling 
C) decreasing; rising 
D) decreasing; falling 
E) no change in; rising 
A) increasing; rising 
B) increasing; falling 
C) decreasing; rising 
D) decreasing; falling 
E) no change in; rising

Cost-push inflation starts with

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

The main sources of cost-push inflation are increases in

Suppose the exchange rate in the year 2010 was 4 yuan per dollar and in 2011 the exchange rate fell to 3 yuan per dollar. If the price of a Chinese sweater was 120 yuan in both years, the new dollar price in 2011 would be and imports of Chinese sweaters would .

Reasons that the recession of 2008-2009 did not become a depression include: i. The Fed bailed out troubled financial institutions. Ii. The government aggressively balanced its budget. Iii. The government increased its expenditures, which increased aggregate demand.

During a demand-pull inflation, if the Fed tries to maintain a level of real GDP above potential GDP, the AD curve will and the AS curve will .

An increase in government expenditure on goods and services aggregate demand, shifting the aggregate demand curve and potentially bringing the phase of the business cycle.

A demand-pull inflation consists of shifts in the AD curve and shifts in the AS curve.

When the price level falls,

List three changes that lead to a shift of the aggregate supply curve. Discuss why each change shifts the aggregate supply curve and in which direction the curve shifts.

-According to the figure above, which point or points correspond to full employment?

When the U.S. price level rises relative to other nations' price levels, then

The quantity of real GDP supplied decreases if the price level because it profits.

Which of the following statements is correct?

Changes in which of the following do NOT shift the AS curve? I. the price level Ii. potential GDP Iii. the money wage rate

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. -Equilibrium real GDP is

The figure above shows the aggregate demand curve. -The aggregate demand curve in the figure above shifts rightward if

-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

A rise in the price level produces a ________ the potential GDP line.

Stagflation is a combination of real GDP and a price level.

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

Cost-push inflation starts with

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

The main sources of cost-push inflation are increases in

Suppose the exchange rate in the year 2010 was 4 yuan per dollar and in 2011 the exchange rate fell to 3 yuan per dollar. If the price of a Chinese sweater was 120 yuan in both years, the new dollar price in 2011 would be ________ and imports of Chinese sweaters would ________.

Reasons that the recession of 2008-2009 did not become a depression include: i. The Fed bailed out troubled financial institutions. Ii. The government aggressively balanced its budget. Iii. The government increased its expenditures, which increased aggregate demand.

During a demand-pull inflation, if the Fed tries to maintain a level of real GDP above potential GDP, the AD curve will ________ and the AS curve will ________.

An increase in government expenditure on goods and services ________ aggregate demand, shifting the aggregate demand curve ________ and potentially bringing the ________ phase of the business cycle.

A demand-pull inflation consists of ________ shifts in the AD curve and ________ shifts in the AS curve.

When the price level falls,

List three changes that lead to a shift of the aggregate supply curve. Discuss why each change shifts the aggregate supply curve and in which direction the curve shifts.

-According to the figure above, which point or points correspond to full employment?

When the U.S. price level rises relative to other nations' price levels, then

The quantity of real GDP supplied decreases if the price level ________ because it ________ profits.

Which of the following statements is correct?

Changes in which of the following do NOT shift the AS curve? I. the price level Ii. potential GDP Iii. the money wage rate

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. -Equilibrium real GDP is

The figure above shows the aggregate demand curve. -The aggregate demand curve in the figure above shifts rightward if

-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

A rise in the price level produces a ________ the potential GDP line.

Stagflation is a combination of ________ real GDP and a ________ price level.

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

Suppose the exchange rate in the year 2010 was 4 yuan per dollar and in 2011 the exchange rate fell to 3 yuan per dollar. If the price of a Chinese sweater was 120 yuan in both years, the new dollar price in 2011 would be and imports of Chinese sweaters would .

During a demand-pull inflation, if the Fed tries to maintain a level of real GDP above potential GDP, the AD curve will and the AS curve will .

An increase in government expenditure on goods and services aggregate demand, shifting the aggregate demand curve and potentially bringing the phase of the business cycle.

A demand-pull inflation consists of shifts in the AD curve and shifts in the AS curve.

The quantity of real GDP supplied decreases if the price level because it profits.

Stagflation is a combination of real GDP and a price level.