Question 1

When inflation pushes up prices in the economy,input prices are _________ and revenues _________ in the short run.

Accepted Answer

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

Question 2

Input prices are _________ in the short run and _________ in the long run.

Accepted Answer

A)  sticky; sticky 
B)  flexible; flexible 
C)  increasing; increasing 
D)  flexible; sticky 
E)  sticky; flexible 
A)  sticky; sticky 
B)  flexible; flexible 
C)  increasing; increasing 
D)  flexible; sticky 
E)  sticky; flexible

Question 3

Refer to the following figure to answer the next three questions.
  
-Based on the figure,if the economy is initially at point B and new technology leads to an increase in labor productivity,then in the long run we will end up at point __________.

Accepted Answer

A)  A. 
B)  B. 
C)  C. 
D)  D. 
E)  E. 
A)  A. 
B)  B. 
C)  C. 
D)  D. 
E)  E.

Question 4

All else being equal,an increase in _________ would shift the long-run aggregate supply curve to the left.

Accepted Answer

A)  the unemployment rate 
B)  the inflation rate 
C)  economic growth 
D)  government spending 
E)  the rate at which capital depreciates 
A)  the unemployment rate 
B)  the inflation rate 
C)  economic growth 
D)  government spending 
E)  the rate at which capital depreciates

Question 5

The aggregate demand curve slopes downward because:

Accepted Answer

A)  as price rises, consumers substitute cheaper goods for more expensive goods. 
B)  all demand curves slope downward. 
C)  a higher price level will increase purchasing power. 
D)  a higher price level will increase exports. 
E)  a higher price level reduces wealth. 
A)  as price rises, consumers substitute cheaper goods for more expensive goods. 
B)  all demand curves slope downward. 
C)  a higher price level will increase purchasing power. 
D)  a higher price level will increase exports. 
E)  a higher price level reduces wealth.

Question 6

Suppose there is a surge in stock market values.In the short run,we would expect the price level to __________ and the unemployment rate to __________.

Accepted Answer

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

Question 7

Shifts in the aggregate demand curve are caused by:

Accepted Answer

A)  the wealth effect. 
B)  the interest rate effect. 
C)  money illusion. 
D)  changes in labor productivity. 
E)  changes in spending. 
A)  the wealth effect. 
B)  the interest rate effect. 
C)  money illusion. 
D)  changes in labor productivity. 
E)  changes in spending.

Question 8

Which of the following would cause a downward movement along the aggregate demand curve?

Accepted Answer

A)  A rise in the price level makes U.S.goods relatively more expensive than foreign goods. 
B)  The value of real wealth rises. 
C)  There is a decline in the expected price level. 
D)  A fall in the price level increases savings and lowers interest rates. 
E)  The value of the dollar decreases. 
A)  A rise in the price level makes U.S.goods relatively more expensive than foreign goods. 
B)  The value of real wealth rises. 
C)  There is a decline in the expected price level. 
D)  A fall in the price level increases savings and lowers interest rates. 
E)  The value of the dollar decreases.

Question 9

If consumers decide to save a larger percentage of their income,it will be:

Accepted Answer

A)  harmful in the long run because the price level will rise. 
B)  beneficial in the short run because saving will rise. 
C)  beneficial in the long run because interest rates will fall. 
D)  harmful in the long run because aggregate supply will fall. 
E)  harmful in the long run because unemployment will increase. 
A)  harmful in the long run because the price level will rise. 
B)  beneficial in the short run because saving will rise. 
C)  beneficial in the long run because interest rates will fall. 
D)  harmful in the long run because aggregate supply will fall. 
E)  harmful in the long run because unemployment will increase.

Question 10

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 11

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.

Question 12

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 percent 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 13

When a change in the price level leads to a change in the interest rate and thus a change in the quantity of aggregate demand,it is called the:

Accepted Answer

A)  interest rate effect. 
B)  wealth effect. 
C)  savings effect. 
D)  output effect. 
E)  price effect. 
A)  interest rate effect. 
B)  wealth effect. 
C)  savings effect. 
D)  output effect. 
E)  price effect.

Question 14

Refer to the following figure to answer the next two questions.
  
-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 15

Which of the following is true about recessions in the United States?

Accepted Answer

A)  They are more common today than in the past. 
B)  They are rarer today than in the past. 
C)  They occur predictably about every two years. 
D)  They occur predictably about every eight years. 
E)  They are often caused by changes in government policy. 
A)  They are more common today than in the past. 
B)  They are rarer today than in the past. 
C)  They occur predictably about every two years. 
D)  They occur predictably about every eight years. 
E)  They are often caused by changes in government policy.

Question 16

Which of the following would shift aggregate demand to the left?

Accepted Answer

A)  A study predicts that the recent drought will increase food prices this winter. 
B)  There is a rise in the median price of houses. 
C)  A rise in the price level reduces saving and increases interest rates. 
D)  The value of the dollar increases. 
E)  The European Union emerges from recession. 
A)  A study predicts that the recent drought will increase food prices this winter. 
B)  There is a rise in the median price of houses. 
C)  A rise in the price level reduces saving and increases interest rates. 
D)  The value of the dollar increases. 
E)  The European Union emerges from recession.

Question 17

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 18

When firms invest less because people are saving less,it is called the:

Accepted Answer

A)  wealth effect. 
B)  international trade effect. 
C)  interest rate effect. 
D)  savings effect. 
E)  investment effect. 
A)  wealth effect. 
B)  international trade effect. 
C)  interest rate effect. 
D)  savings effect. 
E)  investment effect.

Question 19

Suppose people are worried about losing their jobs.In the short run,this will:

Accepted Answer

A)  decrease short-run aggregate supply and output. 
B)  decrease aggregate demand and output. 
C)  decrease aggregate demand and short-run aggregate supply. 
D)  decrease output and increase the price level. 
E)  increase saving and increase aggregate demand. 
A)  decrease short-run aggregate supply and output. 
B)  decrease aggregate demand and output. 
C)  decrease aggregate demand and short-run aggregate supply. 
D)  decrease output and increase the price level. 
E)  increase saving and increase aggregate demand.

Question 20

When the general price level rises and firms decide not to change their prices in the short run,this can be attributed to:

Accepted Answer

A)  menu costs. 
B)  legally binding contracts. 
C)  inflexible input prices. 
D)  money illusion. 
E)  a decline in revenues. 
A)  menu costs. 
B)  legally binding contracts. 
C)  inflexible input prices. 
D)  money illusion. 
E)  a decline in revenues.

When inflation pushes up prices in the economy,input prices are _ and revenues _ in the short run.

Input prices are _ in the short run and _ in the long run.

Refer to the following figure to answer the next three questions. -Based on the figure,if the economy is initially at point B and new technology leads to an increase in labor productivity,then in the long run we will end up at point __________.

All else being equal,an increase in _________ would shift the long-run aggregate supply curve to the left.

The aggregate demand curve slopes downward because:

Suppose there is a surge in stock market values.In the short run,we would expect the price level to and the unemployment rate to .

Shifts in the aggregate demand curve are caused by:

Which of the following would cause a downward movement along the aggregate demand curve?

If consumers decide to save a larger percentage of their income,it will be:

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

Aggregate demand is determined by adding up the spending of:

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 percent change in the general price level.In this economy:

When a change in the price level leads to a change in the interest rate and thus a change in the quantity of aggregate demand,it is called the:

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

Which of the following is true about recessions in the United States?

Which of the following would shift aggregate demand to the left?

The long-run output of an economy depends on:

When firms invest less because people are saving less,it is called the:

Suppose people are worried about losing their jobs.In the short run,this will:

When the general price level rises and firms decide not to change their prices in the short run,this can be attributed to:

The Five Foundations of Economics

Model Building and Gains From Trade

The Market at Work: Supply and Demand

Price Controls

The Efficiency of Markets and the Costs of Taxation

Introduction to Macroeconomics and Gross Domestic Product

Unemployment

The Price Level and Inflation

Savings, interest Rates, and the Market for Loanable Funds

Financial Markets and Securities

Economic Growth and the Wealth of Nations

Growth Theory

The Great Recession, the Great Depression, and Great Macroeconomic Debates

Federal Budgets: the Tools of Fiscal Policy

Fiscal Policy

Money and the Federal Reserve

Monetary Policy

International Trade

International Finance

Filters

Exam 13: The Aggregate Demandaggregate Supply Model

When inflation pushes up prices in the economy,input prices are _________ and revenues _________ in the short run.

Input prices are _________ in the short run and _________ in the long run.

Refer to the following figure to answer the next three questions. -Based on the figure,if the economy is initially at point B and new technology leads to an increase in labor productivity,then in the long run we will end up at point __________.

All else being equal,an increase in _________ would shift the long-run aggregate supply curve to the left.

The aggregate demand curve slopes downward because:

Suppose there is a surge in stock market values.In the short run,we would expect the price level to __________ and the unemployment rate to __________.

Shifts in the aggregate demand curve are caused by:

Which of the following would cause a downward movement along the aggregate demand curve?

If consumers decide to save a larger percentage of their income,it will be:

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

Aggregate demand is determined by adding up the spending of:

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 percent change in the general price level.In this economy:

When a change in the price level leads to a change in the interest rate and thus a change in the quantity of aggregate demand,it is called the:

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

Which of the following is true about recessions in the United States?

Which of the following would shift aggregate demand to the left?

The long-run output of an economy depends on:

When firms invest less because people are saving less,it is called the:

Suppose people are worried about losing their jobs.In the short run,this will:

When the general price level rises and firms decide not to change their prices in the short run,this can be attributed to:

The Five Foundations of Economics

Model Building and Gains From Trade

The Market at Work: Supply and Demand

Price Controls

The Efficiency of Markets and the Costs of Taxation

Introduction to Macroeconomics and Gross Domestic Product

Unemployment

The Price Level and Inflation

Savings, interest Rates, and the Market for Loanable Funds

Financial Markets and Securities

Economic Growth and the Wealth of Nations

Growth Theory

The Great Recession, the Great Depression, and Great Macroeconomic Debates

Federal Budgets: the Tools of Fiscal Policy

Fiscal Policy

Money and the Federal Reserve

Monetary Policy

International Trade

International Finance

Filters

When inflation pushes up prices in the economy,input prices are _ and revenues _ in the short run.

Input prices are _ in the short run and _ in the long run.

Suppose there is a surge in stock market values.In the short run,we would expect the price level to and the unemployment rate to .

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