Question 1

A classical economist believes that

Accepted Answer

A)  if the economy was left alone, it would rarely operate at full employment. 
B)  the economy is self-regulating and always at full employment. 
C)  the economy is self-regulating and will normally, though not always, operate at full employment if monetary policy is not erratic. 
D)  the economy is self-regulating and will normally, though not always, operate at full employment if fiscal policy is not erratic. 
A)  if the economy was left alone, it would rarely operate at full employment. 
B)  the economy is self-regulating and always at full employment. 
C)  the economy is self-regulating and will normally, though not always, operate at full employment if monetary policy is not erratic. 
D)  the economy is self-regulating and will normally, though not always, operate at full employment if fiscal policy is not erratic.

Question 2

-In the figure above,potential GDP equals

Accepted Answer

A)  $12.5 trillion. 
B)  $13.0 trillion. 
C)  $13.5 trillion. 
D)  None of the above answers is correct. 
A)  $12.5 trillion. 
B)  $13.0 trillion. 
C)  $13.5 trillion. 
D)  None of the above answers is correct.

Question 3

-In the above figure,if aggregate demand does not change the short-run equilibrium will

Accepted Answer

A)  eventually adjust to a long-run equilibrium with a higher price level. 
B)  will not adjust on its own. 
C)  eventually adjust to a long-run equilibrium with a lower price level. 
D)  None of the above answers are correct. 
A)  eventually adjust to a long-run equilibrium with a higher price level. 
B)  will not adjust on its own. 
C)  eventually adjust to a long-run equilibrium with a lower price level. 
D)  None of the above answers are correct.

Question 4

During an above full-employment equilibrium,actual GDP is greater than potential GDP.

Accepted Answer

A) True 
 B)False

Question 5

-In the above figure,point B depicts

Accepted Answer

A)  an inflationary gap with real GDP in excess of potential GDP. 
B)  an inflationary gap with real GDP less than potential GDP. 
C)  a recessionary gap with real GDP in excess of potential GDP. 
D)  a recessionary gap with real GDP less than potential GDP. 
A)  an inflationary gap with real GDP in excess of potential GDP. 
B)  an inflationary gap with real GDP less than potential GDP. 
C)  a recessionary gap with real GDP in excess of potential GDP. 
D)  a recessionary gap with real GDP less than potential GDP.

Question 6

$$\begin{array} { | c | c | c | c | } 
\hline \begin{array} { c } 
\text { Price } \
\text { level }
\end{array} & \begin{array} { c } 
\text { Aggregate } \
\text { demand } \
\text { (trillions of } \
\text { 2005 dollars) }
\end{array} & \begin{array} { c } 
\text { Short-run } \
\text { aggregate } \
\text { supply } \
\text { (trillions of } \
\text { 2005 dollars) }
\end{array} & \begin{array} { c } 
\text { Long-run } \
\text { aggregate } \
\text { supply } \
\text { (trillions of } \
\text { 2005 dollars) }
\end{array} \
\hline 100 & 13 & 9 & 10 \
\hline 105 & 12 & 10 & 10 \
\hline 110 & 11 & 11 & 10 \
\hline 115 & 10 & 13 & 10 \
\hline
\end{array}$$
-Using the data in the above table,in the long-run macroeconomic equilibrium,the price level is ________ and the level of real GDP is ________.

Accepted Answer

A)  115; $10 trillion 
B)  110; $10 trillion 
C)  105; $11 trillion 
D)  115; $11 trillion 
A)  115; $10 trillion 
B)  110; $10 trillion 
C)  105; $11 trillion 
D)  115; $11 trillion

Question 7

Suppose that the money wage in the economy increases by 8 percent.As a result the

Accepted Answer

A)  long-run aggregate supply will decrease. 
B)  long-run and the short-run aggregate supply both decrease. 
C)  short-run aggregate supply will decrease. 
D)  long-run aggregate supply will increase and the short-run aggregate supply will decrease. 
A)  long-run aggregate supply will decrease. 
B)  long-run and the short-run aggregate supply both decrease. 
C)  short-run aggregate supply will decrease. 
D)  long-run aggregate supply will increase and the short-run aggregate supply will decrease.

Question 8

Wealth and substitution effects explain why the aggregate demand curve has a positive slope.

Accepted Answer

A) True 
 B)False

Question 9

-In the above figure,real GDP at full employment is

Accepted Answer

A)  $13 trillion. 
B)  $13.5 trillion. 
C)  more than $13 and less than $13.5 trillion. 
D)  None of the above answers is correct. 
A)  $13 trillion. 
B)  $13.5 trillion. 
C)  more than $13 and less than $13.5 trillion. 
D)  None of the above answers is correct.

Question 10

If the world economy expands so that foreign demand for U.S.-made goods increases,in the short run what will happen to aggregate demand,the price level,and real GDP in the U.S.?

Accepted Answer

Net exports increase so U.S.ag

Question 11

Which of the following increases aggregate demand?

Accepted Answer

A)  an increase in taxes 
B)  an increase in the quantity of money 
C)  an increase in the exchange rate 
D)  a decrease in government expenditures 
A)  an increase in taxes 
B)  an increase in the quantity of money 
C)  an increase in the exchange rate 
D)  a decrease in government expenditures

Question 12

In a short-run macroeconomic equilibrium,potential GDP exceeds real GDP.If aggregate demand does not change,then the

Accepted Answer

A)  short-run aggregate supply curve will shift rightward as the money wage rate falls. 
B)  short-run aggregate supply curve will shift leftward as the money wage rate rises. 
C)  long-run aggregate supply curve will shift leftward as the money wage rate rises. 
D)  long-run aggregate supply curve will shift leftward as the money wage rate falls. 
A)  short-run aggregate supply curve will shift rightward as the money wage rate falls. 
B)  short-run aggregate supply curve will shift leftward as the money wage rate rises. 
C)  long-run aggregate supply curve will shift leftward as the money wage rate rises. 
D)  long-run aggregate supply curve will shift leftward as the money wage rate falls.

Question 13

-In the above figure,the economy initially is at point C.Then the domestic price level rises by 10.A

Accepted Answer

A)  substitution effect would help move the economy to point D. 
B)  substitution effect would help move the economy to point B. 
C)  substitution effect would keep the economy at point C. 
D)  wealth effect would help move the economy to point B. 
A)  substitution effect would help move the economy to point D. 
B)  substitution effect would help move the economy to point B. 
C)  substitution effect would keep the economy at point C. 
D)  wealth effect would help move the economy to point B.

Question 14

An increase in the money wage rate

Accepted Answer

A)  increases the long-run aggregate supply. 
B)  decreases the long-run aggregate supply. 
C)  increases the short-run aggregate supply. 
D)  decreases the short-run aggregate supply. 
A)  increases the long-run aggregate supply. 
B)  decreases the long-run aggregate supply. 
C)  increases the short-run aggregate supply. 
D)  decreases the short-run aggregate supply.

Question 15

In November,2012,U.S.lawmakers were faced with a "fiscal cliff:" if they did not agree on how to reduce the federal deficit,automatic tax increases and drastic cuts in government spending would take effect. What would happen if the fiscal cliff occurred?

Accepted Answer

A)  The aggregate demand curve shifts leftward, the price level falls and real GDP decreases. 
B)  The aggregate demand curve shifts rightward, the price level rises and real GDP increases. 
C)  The short run aggregate supply curve shift leftward, the price level rises and real GDP decreases. 
D)  The short run aggregate supply curve shifts rightward, the price level falls and real GDP increases. 
A)  The aggregate demand curve shifts leftward, the price level falls and real GDP decreases. 
B)  The aggregate demand curve shifts rightward, the price level rises and real GDP increases. 
C)  The short run aggregate supply curve shift leftward, the price level rises and real GDP decreases. 
D)  The short run aggregate supply curve shifts rightward, the price level falls and real GDP increases.

Question 16

In long-run macroeconomic equilibrium,

Accepted Answer

A)  real GDP equals potential GDP. 
B)  the price level is fixed and aggregate demand determines real GDP. 
C)  real GDP and the price level are determined by short-run aggregate supply and aggregate demand and long-run aggregate supply is irrelevant. 
D)  real GDP is less than potential GDP. 
A)  real GDP equals potential GDP. 
B)  the price level is fixed and aggregate demand determines real GDP. 
C)  real GDP and the price level are determined by short-run aggregate supply and aggregate demand and long-run aggregate supply is irrelevant. 
D)  real GDP is less than potential GDP.

Question 17

Technological progress will

Accepted Answer

A)  shift the LAS curve rightward but will not shift the SAS curve. 
B)  not shift either the LAS or the SAS curve. 
C)  shift both the LAS and SAS curves rightward. 
D)  shift the SAS curve rightward but will not shift the LAS curve. 
A)  shift the LAS curve rightward but will not shift the SAS curve. 
B)  not shift either the LAS or the SAS curve. 
C)  shift both the LAS and SAS curves rightward. 
D)  shift the SAS curve rightward but will not shift the LAS curve.

Question 18

7 Numeric and Graphing Questions
 $$\begin{array} { | c | c | c | } 
\begin{array} { c } 
\text { Price level } \
\text { (GDP deflator } \
2005 = 100 \text { ) }
\end{array} & \begin{array} { c } 
\text { Quantity of real } \
\text { GDP demanded } \
\text { (trillions of 2005 } \
\text { dollars) }
\end{array} & \begin{array} { c } 
\text { Quantity of real } \
\text { GDP supplied } \
\text { (trillions of 2005 } \
\text { dollars) }
\end{array} \
\hline 115 & 8.8 & 12.0 \
\hline 110 & 9.4 & 11.0 \
\hline 105 & 10.0 & 10.0 \
\hline 100 & 10.6 & 9.0 \
\hline 95 & 11.2 & 8.0 \
\hline 90 & 11.8 & 7.0 \
\hline
\end{array}$$
-Based on the table above,
a) What is the equilibrium price level and real GDP?
b) If potential GDP is $11.0 trillion,what does that imply about the economy's level of employment?
c) If potential GDP is $9.0 trillion,what does that imply about the economy's level of employment?

Accepted Answer

a)The equilibrium price level is 105; th

Question 19

Which of the following statements regarding aggregate supply are correct?

Accepted Answer

A)  Moving along the long-run aggregate supply curve, both the price level and the money wage rate change by the same percentage. 
B)  Moving along the short-run aggregate supply curve, both the price level and the money wage rate change by the same percentage. 
C)  Moving along the long-run aggregate supply curve, the money wage rate changes but the price level is constant. 
D)  Moving along the short-run aggregate supply curve, the money wage rate changes but the price level is constant. 
A)  Moving along the long-run aggregate supply curve, both the price level and the money wage rate change by the same percentage. 
B)  Moving along the short-run aggregate supply curve, both the price level and the money wage rate change by the same percentage. 
C)  Moving along the long-run aggregate supply curve, the money wage rate changes but the price level is constant. 
D)  Moving along the short-run aggregate supply curve, the money wage rate changes but the price level is constant.

Question 20

In 2008,Germany passed a stimulus package of $29 billion as its economy slowed. This policy action follows the ________ to restore full employment.

Accepted Answer

A)  Keynesian viewpoint that supports increases in federal government expenditure 
B)  Keynesian viewpoint that supports increases in the money supply 
C)  monetarist viewpoint that supports increases in expenditure by the federal government 
D)  new classical viewpoint that discourages the use of expenditure by the federal government 
A)  Keynesian viewpoint that supports increases in federal government expenditure 
B)  Keynesian viewpoint that supports increases in the money supply 
C)  monetarist viewpoint that supports increases in expenditure by the federal government 
D)  new classical viewpoint that discourages the use of expenditure by the federal government

A classical economist believes that

-In the figure above,potential GDP equals

-In the above figure,if aggregate demand does not change the short-run equilibrium will

During an above full-employment equilibrium,actual GDP is greater than potential GDP.

-In the above figure,point B depicts

Suppose that the money wage in the economy increases by 8 percent.As a result the

Wealth and substitution effects explain why the aggregate demand curve has a positive slope.

-In the above figure,real GDP at full employment is

If the world economy expands so that foreign demand for U.S.-made goods increases,in the short run what will happen to aggregate demand,the price level,and real GDP in the U.S.?

Which of the following increases aggregate demand?

In a short-run macroeconomic equilibrium,potential GDP exceeds real GDP.If aggregate demand does not change,then the

-In the above figure,the economy initially is at point C.Then the domestic price level rises by 10.A

An increase in the money wage rate

In November,2012,U.S.lawmakers were faced with a "fiscal cliff:" if they did not agree on how to reduce the federal deficit,automatic tax increases and drastic cuts in government spending would take effect. What would happen if the fiscal cliff occurred?

In long-run macroeconomic equilibrium,

Technological progress will

Which of the following statements regarding aggregate supply are correct?

In 2008,Germany passed a stimulus package of $29 billion as its economy slowed. This policy action follows the ________ to restore full employment.

What Is Economics

The Economic Problem

Demand and Supply

Measuring GDP and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, The Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Expenditure Multipliers

Inflation, Jobs, and the Business Cycle

Fiscal Policy

Monetary Policy

International Trade Policy

Introduction

Monitoring Macroeconomic Performance

Macroeconomic Trends

Macroeconomic Fluctuations

Macroeconomic Policy

Filters

Exam 10: Aggregate Supply and Aggregate Demand

A classical economist believes that

-In the figure above,potential GDP equals

-In the above figure,if aggregate demand does not change the short-run equilibrium will

During an above full-employment equilibrium,actual GDP is greater than potential GDP.

-In the above figure,point B depicts

Suppose that the money wage in the economy increases by 8 percent.As a result the

Wealth and substitution effects explain why the aggregate demand curve has a positive slope.

-In the above figure,real GDP at full employment is

If the world economy expands so that foreign demand for U.S.-made goods increases,in the short run what will happen to aggregate demand,the price level,and real GDP in the U.S.?

Which of the following increases aggregate demand?

In a short-run macroeconomic equilibrium,potential GDP exceeds real GDP.If aggregate demand does not change,then the

-In the above figure,the economy initially is at point C.Then the domestic price level rises by 10.A

An increase in the money wage rate

In November,2012,U.S.lawmakers were faced with a "fiscal cliff:" if they did not agree on how to reduce the federal deficit,automatic tax increases and drastic cuts in government spending would take effect. What would happen if the fiscal cliff occurred?

In long-run macroeconomic equilibrium,

Technological progress will

Which of the following statements regarding aggregate supply are correct?

In 2008,Germany passed a stimulus package of $29 billion as its economy slowed. This policy action follows the ________ to restore full employment.

What Is Economics

The Economic Problem

Demand and Supply

Measuring GDP and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, The Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Expenditure Multipliers

Inflation, Jobs, and the Business Cycle

Fiscal Policy

Monetary Policy

International Trade Policy

Introduction

Monitoring Macroeconomic Performance

Macroeconomic Trends

Macroeconomic Fluctuations

Macroeconomic Policy

Filters