Question 1

Which of the following would be most likely to cause an increase in current aggregate demand in the United States?

Accepted Answer

A)  increased fear that the U.S. economy was going into a recession 
B)  an increase in the real interest rate 
C)  sharp increase in the value of stocks owned by Americans 
D)  a recession in Canada, Mexico, and Western Europe 
A)  increased fear that the U.S. economy was going into a recession 
B)  an increase in the real interest rate 
C)  sharp increase in the value of stocks owned by Americans 
D)  a recession in Canada, Mexico, and Western Europe

Question 2

Use the figure below to answer the following question(s).
Figure 10-7
  
-At what output level would the actual rate of unemployment equal the economy's natural rate of unemployment in Figure 10-7?

Accepted Answer

A)  Y₁ 
B)  Y₂ 
C)  at any output greater than Y₂ 
D)  at any output less than Y₁ 
A)  Y₁ 
B)  Y₂ 
C)  at any output greater than Y₂ 
D)  at any output less than Y₁

Question 3

Which of the following will most likely increase short-run aggregate supply?

Accepted Answer

A)  unfavorable weather conditions in the nation's agricultural areas 
B)  an increase in income tax rates 
C)  an increase in the expected inflation rate 
D)  a reduction in resource prices 
A)  unfavorable weather conditions in the nation's agricultural areas 
B)  an increase in income tax rates 
C)  an increase in the expected inflation rate 
D)  a reduction in resource prices

Question 4

Suppose there is an unexpected increase in real interest rates. Using the AD/AS model, describe the effects of this policy in the long run and the short run, assuming everything else equal.

Accepted Answer

In the short run, aggregate demand would

Question 5

Which of the following will most likely accompany an unanticipated increase in aggregate demand?

Accepted Answer

A)  a decrease in prices 
B)  a decrease in resource prices 
C)  a decrease in real GDP 
D)  an increase in real GDP 
A)  a decrease in prices 
B)  a decrease in resource prices 
C)  a decrease in real GDP 
D)  an increase in real GDP

Question 6

How does the self-correcting mechanism act to pull the economy out of a recession?

Accepted Answer

During a recession (when actual output i

Question 7

Use the figure below to answer the following question(s).
Figure 10-5
  
-Given the aggregate demand and aggregate supply conditions depicted in Figure 10-5, which of the following is the most likely occurrence?

Accepted Answer

A)  an increase in resource prices that will stimulate aggregate demand and direct the economy to long-run equilibrium 
B)  a decrease in resource prices that will reduce costs and shift SRAS to the right, directing the economy to long-run equilibrium 
C)  a continuation of this price level and output in the long run 
D)  a shift in LRAS to the left as the result of an increase in the expected inflation rate 
A)  an increase in resource prices that will stimulate aggregate demand and direct the economy to long-run equilibrium 
B)  a decrease in resource prices that will reduce costs and shift SRAS to the right, directing the economy to long-run equilibrium 
C)  a continuation of this price level and output in the long run 
D)  a shift in LRAS to the left as the result of an increase in the expected inflation rate

Question 8

In the aggregate demand/aggregate supply model, an economy operating below its long-run potential capacity will experience

Accepted Answer

A)  falling real wages and resource prices that will increase SRAS, moving the economy back toward full employment. 
B)  rising interest rates that will increase SRAS, moving the economy back toward full employment. 
C)  inflation that will stimulate additional spending and thereby restore full employment. 
D)  a prolonged economic depression unless consumer optimism is increased. 
A)  falling real wages and resource prices that will increase SRAS, moving the economy back toward full employment. 
B)  rising interest rates that will increase SRAS, moving the economy back toward full employment. 
C)  inflation that will stimulate additional spending and thereby restore full employment. 
D)  a prolonged economic depression unless consumer optimism is increased.

Question 9

A currency appreciation will be most likely to

Accepted Answer

A)  reduce net exports and therefore increase aggregate demand. 
B)  raise net exports and therefore decrease aggregate demand. 
C)  reduce net exports and therefore decrease aggregate demand. 
D)  raise net exports and therefore increase aggregate demand. 
A)  reduce net exports and therefore increase aggregate demand. 
B)  raise net exports and therefore decrease aggregate demand. 
C)  reduce net exports and therefore decrease aggregate demand. 
D)  raise net exports and therefore increase aggregate demand.

Question 10

When the U.S. dollar appreciates,

Accepted Answer

A)  U.S. exports rise. 
B)  U.S. imports decline. 
C)  aggregate demand shifts leftward. 
D)  aggregate demand shifts rightward. 
A)  U.S. exports rise. 
B)  U.S. imports decline. 
C)  aggregate demand shifts leftward. 
D)  aggregate demand shifts rightward.

Question 11

An increase in the long-run aggregate supply curve shifts

Accepted Answer

A)  both LRAS and AD to the right. 
B)  both LRAS and SRAS to the right. 
C)  both LRAS and AD to the left. 
D)  only LRAS to the right. 
A)  both LRAS and AD to the right. 
B)  both LRAS and SRAS to the right. 
C)  both LRAS and AD to the left. 
D)  only LRAS to the right.

Question 12

Which will cause a larger short-run increase in prices: an anticipated or unanticipated increase in aggregate demand? Will they cause the same increase in prices in the long run?

Accepted Answer

An anticipated increase in aggregate dem

Question 13

An increase in the general level of prices in the goods and services market that is accompanied by a short-run reduction in real GDP is most likely caused by

Accepted Answer

A)  an unanticipated decrease in aggregate demand. 
B)  an unanticipated increase in aggregate demand. 
C)  a favorable supply shock that shifts SRAS to the right. 
D)  an unfavorable supply shock that shifts SRAS to the left. 
A)  an unanticipated decrease in aggregate demand. 
B)  an unanticipated increase in aggregate demand. 
C)  a favorable supply shock that shifts SRAS to the right. 
D)  an unfavorable supply shock that shifts SRAS to the left.

Question 14

Use the figure below to answer the following question(s).
Figure 10-2
  
-At which point in Figure 10-2 is the economy experiencing an economic boom?

Accepted Answer

A)  G 
B)  I 
C)  F 
D)  H 
A)  G 
B)  I 
C)  F 
D)  H

Question 15

Which of the following would be most likely to cause an increase in current aggregate demand in the United States?

Accepted Answer

A)  increased fear that the U.S. economy was going into a recession 
B)  an increase in the real interest rate 
C)  a reduction in the expected rate of inflation 
D)  rapid growth of real income in Canada and Western Europe 
A)  increased fear that the U.S. economy was going into a recession 
B)  an increase in the real interest rate 
C)  a reduction in the expected rate of inflation 
D)  rapid growth of real income in Canada and Western Europe

Question 16

What impact did the change in housing prices during 2002 to 2005 have within the framework of the AD/AS model?

Accepted Answer

A)  Declining housing prices reduced aggregate demand shifting AD leftward. 
B)  Rising housing prices increased aggregate demand shifting AD rightward. 
C)  Rising housing prices led to increased construction shifting LRAS leftward. 
D)  Declining housing prices caused SRAS to shift leftward. 
A)  Declining housing prices reduced aggregate demand shifting AD leftward. 
B)  Rising housing prices increased aggregate demand shifting AD rightward. 
C)  Rising housing prices led to increased construction shifting LRAS leftward. 
D)  Declining housing prices caused SRAS to shift leftward.

Question 17

If the consumer sentiment index turns down sharply over a period of several months, which of the following is most likely to occur in the near future?

Accepted Answer

A)  an increase in aggregate demand and expansion in real output 
B)  a reduction in aggregate demand and a contraction in real output 
C)  a reduction in aggregate demand and expansion in real output 
D)  an increase in aggregate demand and a contraction in real output 
A)  an increase in aggregate demand and expansion in real output 
B)  a reduction in aggregate demand and a contraction in real output 
C)  a reduction in aggregate demand and expansion in real output 
D)  an increase in aggregate demand and a contraction in real output

Question 18

Which of the following will most likely accompany an unanticipated reduction in aggregate demand?

Accepted Answer

A)  an increase in the general price level 
B)  an increase in unemployment 
C)  an increase in real GDP 
D)  an increase in resource prices 
A)  an increase in the general price level 
B)  an increase in unemployment 
C)  an increase in real GDP 
D)  an increase in resource prices

Question 19

A supply shock is a surprise occurrence that

Accepted Answer

A)  shifts the long-run aggregate supply curve to the right. 
B)  either increases or decreases short-run aggregate supply and output. 
C)  temporarily increases aggregate demand. 
D)  temporarily reduces aggregate demand. 
A)  shifts the long-run aggregate supply curve to the right. 
B)  either increases or decreases short-run aggregate supply and output. 
C)  temporarily increases aggregate demand. 
D)  temporarily reduces aggregate demand.

Question 20

If improvements in education and training programs increased the productivity of persons in the labor force,

Accepted Answer

A)  aggregate demand would decrease. 
B)  short-run aggregate supply would increase, but long-run aggregate supply would not change. 
C)  long-run aggregate supply would increase, but short-run aggregate supply would not change. 
D)  both short-run and long-run aggregate supply. 
A)  aggregate demand would decrease. 
B)  short-run aggregate supply would increase, but long-run aggregate supply would not change. 
C)  long-run aggregate supply would increase, but short-run aggregate supply would not change. 
D)  both short-run and long-run aggregate supply.

Exam 10: Dynamic Change, Economic Fluctuations, and the Ad-As Model

Which of the following would be most likely to cause an increase in current aggregate demand in the United States?

Use the figure below to answer the following question(s). Figure 10-7 -At what output level would the actual rate of unemployment equal the economy's natural rate of unemployment in Figure 10-7?

Which of the following will most likely increase short-run aggregate supply?

Suppose there is an unexpected increase in real interest rates. Using the AD/AS model, describe the effects of this policy in the long run and the short run, assuming everything else equal.

Which of the following will most likely accompany an unanticipated increase in aggregate demand?

How does the self-correcting mechanism act to pull the economy out of a recession?

Use the figure below to answer the following question(s). Figure 10-5 -Given the aggregate demand and aggregate supply conditions depicted in Figure 10-5, which of the following is the most likely occurrence?

In the aggregate demand/aggregate supply model, an economy operating below its long-run potential capacity will experience

A currency appreciation will be most likely to

When the U.S. dollar appreciates,

An increase in the long-run aggregate supply curve shifts

Which will cause a larger short-run increase in prices: an anticipated or unanticipated increase in aggregate demand? Will they cause the same increase in prices in the long run?

An increase in the general level of prices in the goods and services market that is accompanied by a short-run reduction in real GDP is most likely caused by

Use the figure below to answer the following question(s). Figure 10-2 -At which point in Figure 10-2 is the economy experiencing an economic boom?

Which of the following would be most likely to cause an increase in current aggregate demand in the United States?

What impact did the change in housing prices during 2002 to 2005 have within the framework of the AD/AS model?

If the consumer sentiment index turns down sharply over a period of several months, which of the following is most likely to occur in the near future?

Which of the following will most likely accompany an unanticipated reduction in aggregate demand?

A supply shock is a surprise occurrence that

If improvements in education and training programs increased the productivity of persons in the labor force,

The Economic Approach

A : Some Tools of the Economist

B : Some Tools of the Economist

A : Supply, Demand, and the Market Process

B : Supply, Demand, and the Market Process

A : Supply and Demand: Applications and Extensions

B : Supply and Demand: Applications and Extensions

Difficult Cases for the Market and the Role of Government

The Economics of Collective Decision-Making

A : Taking the Nations Economic Pulse

B : Taking the Nations Economic Pulse

Economic Fluctuations, Unemployment, and Inflation

A : an Introduction to Basic Macroeconomic Markets

B : an Introduction to Basic Macroeconomic Markets

Fiscal Policy: the Keynesian View and Historical Perspective

Fiscal Policy, Incentives, and Secondary Effects

A : Money and the Banking System

B : Money and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, Output, and Employment

Creating an Environment for Growth and Prosperity

Institutions, Policies, and Cross-Country Differences in Income and Growth

Gaining From International Trade

International Finance and the Foreign Exchange Market

Consumer Choice and Elasticity

A : Costs and the Supply of Goods

B : Costs and the Supply of Goods

A : Price Takers and the Competitive Process

B : Price Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

A : Price-Searcher Markets With High Entry Barriers

B : Price-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, Productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Special Topic 1 : Government Spending and Taxation

Special Topic 2 : The Economics of Social Security

Special Topic 3 : The Stock Market: Its Function, Performance, and Potential as an Investment Opportunity

Special Topic 4 : Great Debates in Economics: Keynes Versus Hayek

Special Topic 5 : The Crisis of 2008: Causes and Lessons for the Future

Special Topic 6 : Lessons from the Great Depression

Special Topic 7 : Lessons from Japan and Canada

Special Topic 8 : The Federal Budget and the National Debt

Special Topic 9 : The Economics of Healthcare

Special Topic 10 : Education: Problems and Performance

Special Topic 11 : Earnings Differences Between Men and Women

Special Topic 12 : Do Labor Unions Increase the Wages of Workers?

Special Topic 13 : The Question of Resource Exhaustion

Special Topic 14 : Difficult Environmental Cases and the Role of Government

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