Question 1

An increase in long-run aggregate supply can be expected to ________ the price level and ________ the natural rate of unemployment.

Accepted Answer

A)  have no effect on; have no effect on 
B)  have no effect on; increase 
C)  decrease; decrease 
D)  decrease; have no effect on 
E)  increase; have no effect on 
A)  have no effect on; have no effect on 
B)  have no effect on; increase 
C)  decrease; decrease 
D)  decrease; have no effect on 
E)  increase; have no effect on

Question 2

Which of the following would cause an increase in employment in the short run?

Accepted Answer

A)  The minimum wage increases. 
B)  Exports decrease. 
C)  There is a negative supply shock. 
D)  There is an increase in the expected price level. 
E)  There is an increase in government spending. 
A)  The minimum wage increases. 
B)  Exports decrease. 
C)  There is a negative supply shock. 
D)  There is an increase in the expected price level. 
E)  There is an increase in government spending.

Question 3

The slope of the short-run aggregate supply curve can be explained by:

Accepted Answer

A)  the fact that all prices are sticky in the short run. 
B)  sticky input prices and flexible output prices. 
C)  flexible input prices and sticky output prices. 
D)  the fact that all prices are flexible in the short run. 
E)  the fact that all prices except wages are flexible in the short run. 
A)  the fact that all prices are sticky in the short run. 
B)  sticky input prices and flexible output prices. 
C)  flexible input prices and sticky output prices. 
D)  the fact that all prices are flexible in the short run. 
E)  the fact that all prices except wages are flexible in the short run.

Question 4

Suppose housing values fall during a recession.In the short run:

Accepted Answer

A)  the price level will fall as we move down the aggregate demand curve. 
B)  the price level will fall as we move down the short-run aggregate supply curve. 
C)  short-run aggregate supply will decrease and the price level will fall. 
D)  short-run aggregate supply will increase because wages will fall. 
E)  aggregate demand will increase because the demand for houses will increase. 
A)  the price level will fall as we move down the aggregate demand curve. 
B)  the price level will fall as we move down the short-run aggregate supply curve. 
C)  short-run aggregate supply will decrease and the price level will fall. 
D)  short-run aggregate supply will increase because wages will fall. 
E)  aggregate demand will increase because the demand for houses will increase.

Question 5

If the price level falls by 5%,then all else being equal,the long-run aggregate supply curve will:

Accepted Answer

A)  remain unchanged. 
B)  shift to the right to reflect an increase in output of 5%. 
C)  shift to the right to reflect an increase in output of more than 5%. 
D)  shift to the left to reflect a decrease in output of 5%. 
E)  shift to the left to reflect a decrease in output of more than 5%. 
A)  remain unchanged. 
B)  shift to the right to reflect an increase in output of 5%. 
C)  shift to the right to reflect an increase in output of more than 5%. 
D)  shift to the left to reflect a decrease in output of 5%. 
E)  shift to the left to reflect a decrease in output of more than 5%.

Question 6

Consider the following figure to answer the questions that follow.
  
-During which period was the economy in an expansion?

Accepted Answer

A)  2005-2009 
B)  2000-2004 
C)  2009-2013 
D)  2004-2008 
E)  2000-2012 
A)  2005-2009 
B)  2000-2004 
C)  2009-2013 
D)  2004-2008 
E)  2000-2012

Question 7

Consider the following figure to answer the questions that follow.
  
-In which year was it most likely the most difficult to find a job?

Accepted Answer

A)  2000 
B)  2001 
C)  2004 
D)  2005 
E)  2008 
A)  2000 
B)  2001 
C)  2004 
D)  2005 
E)  2008

Question 8

Which of the following would cause an upward movement along the aggregate demand curve?

Accepted Answer

A)  There is an increase in expected income. 
B)  There is an increase in the price level that causes an increase in the value of real wealth. 
C)  There is an increase in housing prices that causes an increase in the value of real wealth. 
D)  The value of the dollar increases. 
E)  There is an increase in the expected price level. 
A)  There is an increase in expected income. 
B)  There is an increase in the price level that causes an increase in the value of real wealth. 
C)  There is an increase in housing prices that causes an increase in the value of real wealth. 
D)  The value of the dollar increases. 
E)  There is an increase in the expected price level.

Question 9

The Great Recession was different from other recessions since World War II in that:

Accepted Answer

A)  the rate of unemployment increased and then decreased at a later time. 
B)  the increase in unemployment was much greater and lasted longer. 
C)  real gross domestic product (GDP) initially declined and then recovered sometime later. 
D)  the economy did not return to normal for at least one year. 
E)  the rate of inflation did not change at all. 
A)  the rate of unemployment increased and then decreased at a later time. 
B)  the increase in unemployment was much greater and lasted longer. 
C)  real gross domestic product (GDP) initially declined and then recovered sometime later. 
D)  the economy did not return to normal for at least one year. 
E)  the rate of inflation did not change at all.

Question 10

An increase in aggregate demand is harmful because:

Accepted Answer

A)  workers with sticky wages are paying more for goods and services. 
B)  firms have sticky input prices and earn less profit. 
C)  unemployment rises. 
D)  output has risen above the full employment level. 
E)  wages will have to fall in the long run. 
A)  workers with sticky wages are paying more for goods and services. 
B)  firms have sticky input prices and earn less profit. 
C)  unemployment rises. 
D)  output has risen above the full employment level. 
E)  wages will have to fall in the long run.

Question 11

When prices in the economy have NOT fully adjusted,we say that:

Accepted Answer

A)  we are in the short run. 
B)  we are in the long run. 
C)  it is a period of time less than one year. 
D)  it is a period of time less than five years. 
E)  the market is not in equilibrium. 
A)  we are in the short run. 
B)  we are in the long run. 
C)  it is a period of time less than one year. 
D)  it is a period of time less than five years. 
E)  the market is not in equilibrium.

Question 12

Suppose the government permanently reduces spending in an effort to reduce the budget deficit.In the new long-run equilibrium,output will ________ and the price level will ________.

Accepted Answer

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

Question 13

Consider the following data that identifies real GDP in comparison to the long-run trend of real GDP to answer the questions that follow.
  
-How many quarters did this economy spend in a recession?

Accepted Answer

A)  eight 
B)  four 
C)  two 
D)  six 
E)  seven 
A)  eight 
B)  four 
C)  two 
D)  six 
E)  seven

Question 14

When the unemployment rate is equal to its natural rate-that is,no cyclical unemployment exists-the output level produced in the economy is:

Accepted Answer

A)  always increasing. 
B)  at full employment output. 
C)  below full employment output. 
D)  above full employment output. 
E)  always decreasing. 
A)  always increasing. 
B)  at full employment output. 
C)  below full employment output. 
D)  above full employment output. 
E)  always decreasing.

Question 15

Use the following graph to answer the questions that follow. This graph depicts an economy where aggregate demand has decreased, with no change in either short-run aggregate supply (SRAS) or long-run aggregate supply (LRAS).
  
-As a result of aggregate demand decreasing,we can see that the price level ________ and real gross domestic product (GDP)________.

Accepted Answer

A)  increased; increased 
B)  decreased; decreased 
C)  remained unchanged; increased 
D)  decreased; remained unchanged 
E)  increased; decreased 
A)  increased; increased 
B)  decreased; decreased 
C)  remained unchanged; increased 
D)  decreased; remained unchanged 
E)  increased; decreased

Question 16

The expansion phase of a business cycle is best described as the time:

Accepted Answer

A)  elapsed from a trough to a peak. 
B)  elapsed from a peak to a trough. 
C)  elapsed from a peak to a peak. 
D)  elapsed from a trough to a trough. 
E)  spent producing above the long-run trend of GDP. 
A)  elapsed from a trough to a peak. 
B)  elapsed from a peak to a trough. 
C)  elapsed from a peak to a peak. 
D)  elapsed from a trough to a trough. 
E)  spent producing above the long-run trend of GDP.

Question 17

The aggregate demand curve illustrates the ________ relationship between the ________ and the ________.

Accepted Answer

A)  positive; price level; quantity demanded of real gross domestic product (GDP) 
B)  positive; price level; quantity demanded of nominal GDP 
C)  inverse; price level; quantity demanded of real GDP 
D)  inverse; price level; quantity demanded of nominal GDP 
E)  positive; level of spending; level of real GDP 
A)  positive; price level; quantity demanded of real gross domestic product (GDP) 
B)  positive; price level; quantity demanded of nominal GDP 
C)  inverse; price level; quantity demanded of real GDP 
D)  inverse; price level; quantity demanded of nominal GDP 
E)  positive; level of spending; level of real GDP

Question 18

Suppose an economy has a law that requires all wages to be adjusted quarterly to reflect changes in the general price level.This means wages either increase or decrease depending on the percentage change in the general price level.In this economy:

Accepted Answer

A)  there are recessions but no expansions. 
B)  output is always at the full employment level. 
C)  business cycles are less severe. 
D)  the price level will remain fixed. 
E)  workers are worse off in real terms than if wages were not indexed. 
A)  there are recessions but no expansions. 
B)  output is always at the full employment level. 
C)  business cycles are less severe. 
D)  the price level will remain fixed. 
E)  workers are worse off in real terms than if wages were not indexed.

Question 19

You read a study that predicts that rising oil prices projected for this summer are certain to fuel inflation.Having taken an economics class,due to this expected change in prices,you predict that spending today will ________ and aggregate demand today will ________.

Accepted Answer

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

Question 20

The Great Recession was different from other recessions since World War II in that:

Accepted Answer

A)  the economy did not return to normal for at least one year. 
B)  most consumers were unaffected by the recession. 
C)  the overall economy took far longer to recover than the usual post World War II recession. 
D)  the rate of unemployment increased and then decreased at a later time. 
E)  real gross domestic product (GDP) initially declined and then recovered sometime later. 
A)  the economy did not return to normal for at least one year. 
B)  most consumers were unaffected by the recession. 
C)  the overall economy took far longer to recover than the usual post World War II recession. 
D)  the rate of unemployment increased and then decreased at a later time. 
E)  real gross domestic product (GDP) initially declined and then recovered sometime later.

An increase in long-run aggregate supply can be expected to the price level and the natural rate of unemployment.

Which of the following would cause an increase in employment in the short run?

The slope of the short-run aggregate supply curve can be explained by:

Suppose housing values fall during a recession.In the short run:

If the price level falls by 5%,then all else being equal,the long-run aggregate supply curve will:

Consider the following figure to answer the questions that follow. -During which period was the economy in an expansion?

Consider the following figure to answer the questions that follow. -In which year was it most likely the most difficult to find a job?

Which of the following would cause an upward movement along the aggregate demand curve?

The Great Recession was different from other recessions since World War II in that:

An increase in aggregate demand is harmful because:

When prices in the economy have NOT fully adjusted,we say that:

Suppose the government permanently reduces spending in an effort to reduce the budget deficit.In the new long-run equilibrium,output will and the price level will .

Consider the following data that identifies real GDP in comparison to the long-run trend of real GDP to answer the questions that follow. -How many quarters did this economy spend in a recession?

When the unemployment rate is equal to its natural rate-that is,no cyclical unemployment exists-the output level produced in the economy is:

The expansion phase of a business cycle is best described as the time:

The aggregate demand curve illustrates the relationship between the and the .

Suppose an economy has a law that requires all wages to be adjusted quarterly to reflect changes in the general price level.This means wages either increase or decrease depending on the percentage change in the general price level.In this economy:

You read a study that predicts that rising oil prices projected for this summer are certain to fuel inflation.Having taken an economics class,due to this expected change in prices,you predict that spending today will and aggregate demand today will .

The Great Recession was different from other recessions since World War II in that:

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

An increase in long-run aggregate supply can be expected to ________ the price level and ________ the natural rate of unemployment.

Which of the following would cause an increase in employment in the short run?

The slope of the short-run aggregate supply curve can be explained by:

Suppose housing values fall during a recession.In the short run:

If the price level falls by 5%,then all else being equal,the long-run aggregate supply curve will:

Consider the following figure to answer the questions that follow. -During which period was the economy in an expansion?

Consider the following figure to answer the questions that follow. -In which year was it most likely the most difficult to find a job?

Which of the following would cause an upward movement along the aggregate demand curve?

The Great Recession was different from other recessions since World War II in that:

An increase in aggregate demand is harmful because:

When prices in the economy have NOT fully adjusted,we say that:

Suppose the government permanently reduces spending in an effort to reduce the budget deficit.In the new long-run equilibrium,output will ________ and the price level will ________.

Consider the following data that identifies real GDP in comparison to the long-run trend of real GDP to answer the questions that follow. -How many quarters did this economy spend in a recession?

When the unemployment rate is equal to its natural rate-that is,no cyclical unemployment exists-the output level produced in the economy is:

The expansion phase of a business cycle is best described as the time:

The aggregate demand curve illustrates the ________ relationship between the ________ and the ________.

Suppose an economy has a law that requires all wages to be adjusted quarterly to reflect changes in the general price level.This means wages either increase or decrease depending on the percentage change in the general price level.In this economy:

You read a study that predicts that rising oil prices projected for this summer are certain to fuel inflation.Having taken an economics class,due to this expected change in prices,you predict that spending today will ________ and aggregate demand today will ________.

The Great Recession was different from other recessions since World War II in that:

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

An increase in long-run aggregate supply can be expected to the price level and the natural rate of unemployment.

Suppose the government permanently reduces spending in an effort to reduce the budget deficit.In the new long-run equilibrium,output will and the price level will .

The aggregate demand curve illustrates the relationship between the and the .

You read a study that predicts that rising oil prices projected for this summer are certain to fuel inflation.Having taken an economics class,due to this expected change in prices,you predict that spending today will and aggregate demand today will .