Question 1

Aggregate demand is determined by adding up the spending of:

Accepted Answer

A)  domestic consumers who buy goods and services produced in the United States. 
B)  domestic consumers and firms that buy goods and services produced in the United States. 
C)  domestic and foreign consumers who buy goods and services produced in the United States. 
D)  domestic and foreign consumers and firms that buy goods and services produced in the United States. 
E)  consumers, firms, the government, and foreigners that buy goods and services produced in the United States. 
A)  domestic consumers who buy goods and services produced in the United States. 
B)  domestic consumers and firms that buy goods and services produced in the United States. 
C)  domestic and foreign consumers who buy goods and services produced in the United States. 
D)  domestic and foreign consumers and firms that buy goods and services produced in the United States. 
E)  consumers, firms, the government, and foreigners that buy goods and services produced in the United States. E

Question 2

The long-run aggregate supply curve is:

Accepted Answer

A)  vertical because full employment output is independent of the price level. 
B)  upward-sloping because the economy grows over time. 
C)  horizontal because full employment output is independent of the price level. 
D)  upward-sloping because as the price level rises, firms will increase output. 
E)  downward-sloping because rising prices reduce real wealth and spending. 
A)  vertical because full employment output is independent of the price level. 
B)  upward-sloping because the economy grows over time. 
C)  horizontal because full employment output is independent of the price level. 
D)  upward-sloping because as the price level rises, firms will increase output. 
E)  downward-sloping because rising prices reduce real wealth and spending. A

Question 3

Suppose new drilling techniques increase the world oil supply.In the long run,output will ________ and the price level will ________.

Accepted Answer

A)  remain unchanged; decrease 
B)  remain unchanged; remain unchanged 
C)  increase; decrease 
D)  increase; remain unchanged 
E)  increase; increase 
A)  remain unchanged; decrease 
B)  remain unchanged; remain unchanged 
C)  increase; decrease 
D)  increase; remain unchanged 
E)  increase; increase C

Question 4

The relationship between sticky input prices and flexible output prices explains:

Accepted Answer

A)  the positive slope of the short-run aggregate supply curve. 
B)  the vertical slope of the long-run aggregate supply curve. 
C)  the negative slope of the short-run aggregate supply curve. 
D)  the negative slope of the aggregate demand curve. 
E)  the positive slope of both the short-run and long-run aggregate supply curves. 
A)  the positive slope of the short-run aggregate supply curve. 
B)  the vertical slope of the long-run aggregate supply curve. 
C)  the negative slope of the short-run aggregate supply curve. 
D)  the negative slope of the aggregate demand curve. 
E)  the positive slope of both the short-run and long-run aggregate supply curves.

Question 5

If the economy is in a recession caused by lower aggregate demand,then in the absence of policy action,the price level will ________,output will ________,and employment will ________ in the long run.

Accepted Answer

A)  increase; remain unchanged; increase 
B)  remain unchanged; increase; increase 
C)  decrease; increase; increase 
D)  decrease; decrease; increase 
E)  increase; increase; increase 
A)  increase; remain unchanged; increase 
B)  remain unchanged; increase; increase 
C)  decrease; increase; increase 
D)  decrease; decrease; increase 
E)  increase; increase; increase

Question 6

In most nations,one or more governing bodies must approve government spending or new tax policies.This causes a(n)________ lag between setting fiscal policy and seeing its effects.

Accepted Answer

A)  recognition 
B)  implementation 
C)  impact 
D)  countercyclical 
E)  automatic 
A)  recognition 
B)  implementation 
C)  impact 
D)  countercyclical 
E)  automatic

Question 7

Refer to the following figure to answer the questions that follow.
  
-Based on the figure,if the economy is currently at point B,then in the long run,we can expect we will move to:

Accepted Answer

A)  point C. 
B)  point A. 
C)  point D. 
D)  point C and then point D. 
E)  point A and then point C. 
A)  point C. 
B)  point A. 
C)  point D. 
D)  point C and then point D. 
E)  point A and then point C.

Question 8

Refer to the following figure to answer the questions that follow.
  
-Based on the figure,which of the following would cause the short-run aggregate supply curve to shift from SRAS₁ to SRAS₂?

Accepted Answer

A)  Congress votes to increase the minimum wage. 
B)  There is an increase in spending and firms respond by producing more output. 
C)  Wages and input prices fall as the economy recovers from a recession. 
D)  A severe drought reduces farm production. 
E)  A temporary rise in the price of oil results in higher gasoline prices. 
A)  Congress votes to increase the minimum wage. 
B)  There is an increase in spending and firms respond by producing more output. 
C)  Wages and input prices fall as the economy recovers from a recession. 
D)  A severe drought reduces farm production. 
E)  A temporary rise in the price of oil results in higher gasoline prices.

Question 9

The long-run output of an economy depends on:

Accepted Answer

A)  the level of spending. 
B)  the level of unemployment. 
C)  the level of inflation. 
D)  the level of aggregate demand. 
E)  resources, technology, and institutions. 
A)  the level of spending. 
B)  the level of unemployment. 
C)  the level of inflation. 
D)  the level of aggregate demand. 
E)  resources, technology, and institutions.

Question 10

The three time lags that accompany policy decisions are:

Accepted Answer

A)  recognition lag, implementation lag, and impact lag. 
B)  crowding-out lag, implementation lag, and impact lag. 
C)  recognition lag, implementation lag, and countercyclical lag. 
D)  crowding-out lag, implementation lag, and countercyclical lag. 
E)  crowding-out lag, stabilizing lag, and countercyclical lag. 
A)  recognition lag, implementation lag, and impact lag. 
B)  crowding-out lag, implementation lag, and impact lag. 
C)  recognition lag, implementation lag, and countercyclical lag. 
D)  crowding-out lag, implementation lag, and countercyclical lag. 
E)  crowding-out lag, stabilizing lag, and countercyclical lag.

Question 11

If prices fall,then real wealth ________ and the quantity of aggregate demand ________.

Accepted Answer

A)  increases; increases 
B)  increases; decreases 
C)  decreases; decreases 
D)  decreases; increases 
E)  is unaffected; is unaffected 
A)  increases; increases 
B)  increases; decreases 
C)  decreases; decreases 
D)  decreases; increases 
E)  is unaffected; is unaffected

Question 12

The term "________ cycle" is a popular way to describe the recession-expansion pattern followed by the economy.

Accepted Answer

A)  business 
B)  output 
C)  inflation 
D)  unemployment 
E)  long-run 
A)  business 
B)  output 
C)  inflation 
D)  unemployment 
E)  long-run

Question 13

Draw a graph to illustrate the phases of the business cycle.Be sure to identify the length of a contraction and an expansion.Identify a peak and a trough.

Accepted Answer

The accompanying figure shows a typical

Question 14

If workers actively demand pay increases when the price level is rising and are willing to accept pay cuts when the price level is falling,then the short-run aggregate supply curve would be:

Accepted Answer

A)  negatively sloped. 
B)  nearly vertical. 
C)  nearly horizontal. 
D)  positively sloped as usual. 
E)  always shifting to the right or the left. 
A)  negatively sloped. 
B)  nearly vertical. 
C)  nearly horizontal. 
D)  positively sloped as usual. 
E)  always shifting to the right or the left.

Question 15

A supply shock causes a shift in:

Accepted Answer

A)  short-run aggregate supply. 
B)  aggregate demand. 
C)  aggregate demand and short-run aggregate supply. 
D)  long-run aggregate supply. 
E)  short-run and long-run aggregate supply. 
A)  short-run aggregate supply. 
B)  aggregate demand. 
C)  aggregate demand and short-run aggregate supply. 
D)  long-run aggregate supply. 
E)  short-run and long-run aggregate supply.

Question 16

The aggregate demand curve is best represented by which of the following equations?

Accepted Answer

A)  AD = C + I + G + NX 
B)  AD = C + I + G - NX 
C)  AD = C + I + G 
D)  AD = C + I 
E)  AD = C + I - G - NX 
A)  AD = C + I + G + NX 
B)  AD = C + I + G - NX 
C)  AD = C + I + G 
D)  AD = C + I 
E)  AD = C + I - G - NX

Question 17

Consider the following data that identifies real GDP in comparison to the long-run trend of real GDP to answer the questions that follow.
  
-Between quarter 2 and quarter 3,real GDP grew by what percentage?

Accepted Answer

A)  4% 
B)  3% 
C)  1% 
D)  2% 
E)  -2% 
A)  4% 
B)  3% 
C)  1% 
D)  2% 
E)  -2%

Question 18

The economy is in short-run equilibrium when:

Accepted Answer

A)  aggregate demand intersects short-run aggregate supply. 
B)  short-run aggregate supply intersects long-run aggregate supply. 
C)  aggregate demand intersects long-run aggregate supply. 
D)  aggregate demand intersects both long-run and short-run aggregate supply. 
E)  the economy is at full employment output. 
A)  aggregate demand intersects short-run aggregate supply. 
B)  short-run aggregate supply intersects long-run aggregate supply. 
C)  aggregate demand intersects long-run aggregate supply. 
D)  aggregate demand intersects both long-run and short-run aggregate supply. 
E)  the economy is at full employment output.

Question 19

The Great Recession was similar to other recessions since World War II in that:

Accepted Answer

A)  there was extremely high inflation. 
B)  real gross domestic product (GDP) initially declined and then recovered sometime later. 
C)  real GDP increased rapidly and then leveled off. 
D)  the rate of unemployment was unchanged. 
E)  the trade deficit fell to zero. 
A)  there was extremely high inflation. 
B)  real gross domestic product (GDP) initially declined and then recovered sometime later. 
C)  real GDP increased rapidly and then leveled off. 
D)  the rate of unemployment was unchanged. 
E)  the trade deficit fell to zero.

Question 20

Suppose that many countries in Europe sink into recession.In the short run,output in the United States will ________ and the price level will ________.

Accepted Answer

A)  increase; increase 
B)  decrease; decrease 
C)  remain unaffected; remain unaffected 
D)  decrease; remain unaffected 
E)  increase; remain unaffected 
A)  increase; increase 
B)  decrease; decrease 
C)  remain unaffected; remain unaffected 
D)  decrease; remain unaffected 
E)  increase; remain unaffected

Aggregate demand is determined by adding up the spending of:

The long-run aggregate supply curve is:

Suppose new drilling techniques increase the world oil supply.In the long run,output will and the price level will .

The relationship between sticky input prices and flexible output prices explains:

If the economy is in a recession caused by lower aggregate demand,then in the absence of policy action,the price level will ,output will ,and employment will in the long run.

In most nations,one or more governing bodies must approve government spending or new tax policies.This causes a(n)________ lag between setting fiscal policy and seeing its effects.

Refer to the following figure to answer the questions that follow. -Based on the figure,if the economy is currently at point B,then in the long run,we can expect we will move to:

Refer to the following figure to answer the questions that follow. -Based on the figure,which of the following would cause the short-run aggregate supply curve to shift from SRAS₁ to SRAS₂?

The long-run output of an economy depends on:

The three time lags that accompany policy decisions are:

If prices fall,then real wealth and the quantity of aggregate demand .

The term "________ cycle" is a popular way to describe the recession-expansion pattern followed by the economy.

Draw a graph to illustrate the phases of the business cycle.Be sure to identify the length of a contraction and an expansion.Identify a peak and a trough.

If workers actively demand pay increases when the price level is rising and are willing to accept pay cuts when the price level is falling,then the short-run aggregate supply curve would be:

A supply shock causes a shift in:

The aggregate demand curve is best represented by which of the following equations?

Consider the following data that identifies real GDP in comparison to the long-run trend of real GDP to answer the questions that follow. -Between quarter 2 and quarter 3,real GDP grew by what percentage?

The economy is in short-run equilibrium when:

The Great Recession was similar to other recessions since World War II in that:

Suppose that many countries in Europe sink into recession.In the short run,output in the United States will and the price level will .

Thinking Like an Economist

Economic Models and Gains From Trade

The Market at Work: Supply and Demand

Market Efficiency

Costs and Production: How Do Businesses Work?

Market Structures

Behavioral Economics and Game Theory

Labor Markets and Earnings

Government in the Economy

What Is Macroeconomics?

Measuring the Macroeconomy, Inflation, and Unemployment

Economic Growth and the Wealth of Nations

Savings, Investment, and the Market for Loanable Funds

Money and the Federal Reserve

Monetary Policy

Fiscal Policy and Budget Deficits

International Economics

Personal Finance

Filters

Exam 12: Aggregate Demand and Aggregate Supply

Aggregate demand is determined by adding up the spending of:

The long-run aggregate supply curve is:

Suppose new drilling techniques increase the world oil supply.In the long run,output will ________ and the price level will ________.

The relationship between sticky input prices and flexible output prices explains:

If the economy is in a recession caused by lower aggregate demand,then in the absence of policy action,the price level will ________,output will ________,and employment will ________ in the long run.

In most nations,one or more governing bodies must approve government spending or new tax policies.This causes a(n)________ lag between setting fiscal policy and seeing its effects.

Refer to the following figure to answer the questions that follow. -Based on the figure,if the economy is currently at point B,then in the long run,we can expect we will move to:

Refer to the following figure to answer the questions that follow. -Based on the figure,which of the following would cause the short-run aggregate supply curve to shift from SRAS₁ to SRAS₂?

The long-run output of an economy depends on:

The three time lags that accompany policy decisions are:

If prices fall,then real wealth ________ and the quantity of aggregate demand ________.

The term "________ cycle" is a popular way to describe the recession-expansion pattern followed by the economy.

Draw a graph to illustrate the phases of the business cycle.Be sure to identify the length of a contraction and an expansion.Identify a peak and a trough.

If workers actively demand pay increases when the price level is rising and are willing to accept pay cuts when the price level is falling,then the short-run aggregate supply curve would be:

A supply shock causes a shift in:

The aggregate demand curve is best represented by which of the following equations?

Consider the following data that identifies real GDP in comparison to the long-run trend of real GDP to answer the questions that follow. -Between quarter 2 and quarter 3,real GDP grew by what percentage?

The economy is in short-run equilibrium when:

The Great Recession was similar to other recessions since World War II in that:

Suppose that many countries in Europe sink into recession.In the short run,output in the United States will ________ and the price level will ________.

Thinking Like an Economist

Economic Models and Gains From Trade

The Market at Work: Supply and Demand

Market Efficiency

Costs and Production: How Do Businesses Work?

Market Structures

Behavioral Economics and Game Theory

Labor Markets and Earnings

Government in the Economy

What Is Macroeconomics?

Measuring the Macroeconomy, Inflation, and Unemployment

Economic Growth and the Wealth of Nations

Savings, Investment, and the Market for Loanable Funds

Money and the Federal Reserve

Monetary Policy

Fiscal Policy and Budget Deficits

International Economics

Personal Finance

Filters

Suppose new drilling techniques increase the world oil supply.In the long run,output will and the price level will .

If the economy is in a recession caused by lower aggregate demand,then in the absence of policy action,the price level will ,output will ,and employment will in the long run.

If prices fall,then real wealth and the quantity of aggregate demand .

Suppose that many countries in Europe sink into recession.In the short run,output in the United States will and the price level will .