Question 1

One of the influences that the world economy has on U.S. aggregate demand comes from changes in

Accepted Answer

A) world opinion. 
B) foreign income. 
C) foreign governments. 
D) world pollution. 
E) foreign aid. 
A) world opinion. 
B) foreign income. 
C) foreign governments. 
D) world pollution. 
E) foreign aid.

Question 2

Potential GDP

Accepted Answer

A) increases as the price level increases because firms supply more goods and services. 
B) decreases as the price level increases because people demand fewer goods and services. 
C) might either increase or decrease as the price level increases, depending on whether aggregate demand increases or decreases. 
D) is independent of the price level. 
E) never changes. 
A) increases as the price level increases because firms supply more goods and services. 
B) decreases as the price level increases because people demand fewer goods and services. 
C) might either increase or decrease as the price level increases, depending on whether aggregate demand increases or decreases. 
D) is independent of the price level. 
E) never changes.

Question 3

If the AD curve shifts rightward while the AS curve and potential GDP don't change, then

Accepted Answer

A) the economy will move from a peak into recession. 
B) the expansion phase of the business cycle occurs. 
C) there will be no change in real GDP, so the economy is at the peak of the cycle. 
D) there will be no change in real GDP, so the economy is at the trough of the cycle. 
E) real GDP does not change. 
A) the economy will move from a peak into recession. 
B) the expansion phase of the business cycle occurs. 
C) there will be no change in real GDP, so the economy is at the peak of the cycle. 
D) there will be no change in real GDP, so the economy is at the trough of the cycle. 
E) real GDP does not change.

Question 4

Over a business cycle, the quantities of capital, human capital, and entrepreneurial talent

Accepted Answer

A) change gradually and do not fluctuate much. 
B) cycle alongside real GDP. 
C) are completely unpredictable and cannot be forecast. 
D) cycle more than real GDP. 
E) are constant and do not change. 
A) change gradually and do not fluctuate much. 
B) cycle alongside real GDP. 
C) are completely unpredictable and cannot be forecast. 
D) cycle more than real GDP. 
E) are constant and do not change.

Question 5

To prevent demand-pull inflation

Accepted Answer

A) firms must refuse to increase the money wage rate. 
B) firms must refuse to increase the real wage rate. 
C) the Fed must not let the quantity of money persistently rise. 
D) the natural unemployment rate must increase. 
E) real GDP must increase. 
A) firms must refuse to increase the money wage rate. 
B) firms must refuse to increase the real wage rate. 
C) the Fed must not let the quantity of money persistently rise. 
D) the natural unemployment rate must increase. 
E) real GDP must increase.

Question 6

An increase in ________ increases potential GDP and ________ aggregate supply.

Accepted Answer

A) technology; increases 
B) technology; decreases 
C) the money wage rate; increases 
D) the money price of oil; decreases 
E) the money wage rate; decreases 
A) technology; increases 
B) technology; decreases 
C) the money wage rate; increases 
D) the money price of oil; decreases 
E) the money wage rate; decreases

Question 7

Moving along the aggregate supply curve, when the price level rises, the

Accepted Answer

A) quantity supplied does not change because the aggregate supply curve is a vertical line. 
B) the quantity supplied increases. 
C) the quantity supplied decreases. 
D) the aggregate demand curve shifts rightward. 
E) the aggregate demand curve shifts leftward. 
A) quantity supplied does not change because the aggregate supply curve is a vertical line. 
B) the quantity supplied increases. 
C) the quantity supplied decreases. 
D) the aggregate demand curve shifts rightward. 
E) the aggregate demand curve shifts leftward.

Question 8

Which of the following does NOT affect potential GDP?

Accepted Answer

A) the quantity of money 
B) the quantity of labor employed 
C) the quantity of capital and human capital 
D) the amount of entrepreneurial talent available 
E) the quantity of land and natural resources 
A) the quantity of money 
B) the quantity of labor employed 
C) the quantity of capital and human capital 
D) the amount of entrepreneurial talent available 
E) the quantity of land and natural resources

Question 9

An increase in the price level leads to

Accepted Answer

A) a rightward shift of the aggregate demand curve. 
B) a leftward shift of the aggregate demand curve. 
C) a movement upward along the aggregate demand curve. 
D) a movement downward along the aggregate demand curve. 
E) neither a shift in the aggregate demand curve nor a movement along it. 
A) a rightward shift of the aggregate demand curve. 
B) a leftward shift of the aggregate demand curve. 
C) a movement upward along the aggregate demand curve. 
D) a movement downward along the aggregate demand curve. 
E) neither a shift in the aggregate demand curve nor a movement along it.

Question 10

A change in the price level brings a ________ the aggregate supply curve, NOT a ________ the aggregate supply curve.

Accepted Answer

A) shift in; movement along 
B) vertical displacement of; change in the slope of 
C) movement along; shift in 
D) change in the slope of; horizontal displacement of 
E) shift in; change in the slope of 
A) shift in; movement along 
B) vertical displacement of; change in the slope of 
C) movement along; shift in 
D) change in the slope of; horizontal displacement of 
E) shift in; change in the slope of

Question 11

When the aggregate supply curve intersects the aggregate demand curve at a level of real GDP that exceeds potential GDP, is there an inflationary gap or a deflationary gap?
 What adjustments will take place?

Accepted Answer

There is an inflationary gap because rea

Question 12

Demand pull inflation can be started by

Accepted Answer

A) a decrease in the quantity of money. 
B) an increase in government expenditure. 
C) a decrease in net exports. 
D) an increase in the price of oil. 
E) a decrease in the money price of resources. 
A) a decrease in the quantity of money. 
B) an increase in government expenditure. 
C) a decrease in net exports. 
D) an increase in the price of oil. 
E) a decrease in the money price of resources.

Question 13

A decrease in investment leads to ________ in aggregate demand and ________ in real GDP.

Accepted Answer

A) an increase; an increase 
B) an increase; a decrease 
C) a decrease; an increase 
D) a decrease; a decrease 
E) no change; a decrease 
A) an increase; an increase 
B) an increase; a decrease 
C) a decrease; an increase 
D) a decrease; a decrease 
E) no change; a decrease

Question 14

If the price level increases, there is ________ the AD curve and the quantity of real GDP demanded ________.

Accepted Answer

A) a movement upward along; increases 
B) a movement downward along; increases 
C) a movement upward along; decreases 
D) a leftward shift in; decreases 
E) no change in; does not change 
A) a movement upward along; increases 
B) a movement downward along; increases 
C) a movement upward along; decreases 
D) a leftward shift in; decreases 
E) no change in; does not change

Question 15

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 16

If the quantity of real GDP demanded is less than the quantity of real GDP supplied, then

Accepted Answer

A) the economy must be producing at potential GDP. 
B) the price level falls and firms decrease production. 
C) the price level falls and firms increase production. 
D) the price level rises to restore the macroeconomic equilibrium 
E) aggregate demand changes to restore the equilibrium. 
A) the economy must be producing at potential GDP. 
B) the price level falls and firms decrease production. 
C) the price level falls and firms increase production. 
D) the price level rises to restore the macroeconomic equilibrium 
E) aggregate demand changes to restore the equilibrium.

Question 17

A change in any of the following factors EXCEPT ________ shifts the aggregate demand curve.

Accepted Answer

A) expectations about the future 
B) the money wage rate 
C) monetary and fiscal policy 
D) foreign income 
E) the foreign exchange rate 
A) expectations about the future 
B) the money wage rate 
C) monetary and fiscal policy 
D) foreign income 
E) the foreign exchange rate

Question 18

A technological advance ________ aggregate supply, shifting the aggregate supply curve ________ and potentially bringing the ________ phase of the business cycle.

Accepted Answer

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

Question 19

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 20

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

One of the influences that the world economy has on U.S. aggregate demand comes from changes in

Potential GDP

If the AD curve shifts rightward while the AS curve and potential GDP don't change, then

Over a business cycle, the quantities of capital, human capital, and entrepreneurial talent

To prevent demand-pull inflation

An increase in increases potential GDP and aggregate supply.

Moving along the aggregate supply curve, when the price level rises, the

Which of the following does NOT affect potential GDP?

An increase in the price level leads to

A change in the price level brings a the aggregate supply curve, NOT a the aggregate supply curve.

When the aggregate supply curve intersects the aggregate demand curve at a level of real GDP that exceeds potential GDP, is there an inflationary gap or a deflationary gap? What adjustments will take place?

Demand pull inflation can be started by

A decrease in investment leads to in aggregate demand and in real GDP.

If the price level increases, there is the AD curve and the quantity of real GDP demanded .

The line showing potential GDP is a vertical straight line because

If the quantity of real GDP demanded is less than the quantity of real GDP supplied, then

A change in any of the following factors EXCEPT ________ shifts the aggregate demand curve.

A technological advance aggregate supply, shifting the aggregate supply curve and potentially bringing the phase of the business cycle.

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

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

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

One of the influences that the world economy has on U.S. aggregate demand comes from changes in

Potential GDP

If the AD curve shifts rightward while the AS curve and potential GDP don't change, then

Over a business cycle, the quantities of capital, human capital, and entrepreneurial talent

To prevent demand-pull inflation

An increase in ________ increases potential GDP and ________ aggregate supply.

Moving along the aggregate supply curve, when the price level rises, the

Which of the following does NOT affect potential GDP?

An increase in the price level leads to

A change in the price level brings a ________ the aggregate supply curve, NOT a ________ the aggregate supply curve.

When the aggregate supply curve intersects the aggregate demand curve at a level of real GDP that exceeds potential GDP, is there an inflationary gap or a deflationary gap? What adjustments will take place?

Demand pull inflation can be started by

A decrease in investment leads to ________ in aggregate demand and ________ in real GDP.

If the price level increases, there is ________ the AD curve and the quantity of real GDP demanded ________.

The line showing potential GDP is a vertical straight line because

If the quantity of real GDP demanded is less than the quantity of real GDP supplied, then

A change in any of the following factors EXCEPT ________ shifts the aggregate demand curve.

A technological advance ________ aggregate supply, shifting the aggregate supply curve ________ and potentially bringing the ________ phase of the business cycle.

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

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

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

An increase in increases potential GDP and aggregate supply.

A change in the price level brings a the aggregate supply curve, NOT a the aggregate supply curve.

A decrease in investment leads to in aggregate demand and in real GDP.

If the price level increases, there is the AD curve and the quantity of real GDP demanded .

A technological advance aggregate supply, shifting the aggregate supply curve and potentially bringing the phase of the business cycle.

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