Question 1

-In the above figure,the short-run aggregate supply curve is SAS₁.If the prices of resources fall,there is

Accepted Answer

A)  an upward movement along SAS₁. 
B)  a downward movement along SAS₁. 
C)  a shift to SAS₀. 
D)  a shift to SAS₂. 
A)  an upward movement along SAS₁. 
B)  a downward movement along SAS₁. 
C)  a shift to SAS₀. 
D)  a shift to SAS₂.

Question 2

$$\begin{array} { | c | c | c | c | } 
\hline \text { Price level } & \begin{array} { c } 
\text { Aggregate demand } \
\text { (trillions of 2005 } \
\text { dollars) }
\end{array} & \begin{array} { c } 
\text { Short-run aggregate } \
\text { supply (trillions of } \
2005 \text { dollars) }
\end{array} & \begin{array} { c } 
\text { Long-run aggregate } \
\text { supply (trillions of } \
\text { 2005 dollars) }
\end{array} \
\hline 100 & 11 & 7 & 10 \
\hline 110 & 10 & 8 & 10 \
\hline 120 & 9 & 9 & 10 \
\hline 130 & 8 & 10 & 10 \
\hline 140 & 7 & 11 & 10 \
\hline
\end{array}$$
-Based on the data in the table above,the economy will be in short-run equilibrium at a price level of

Accepted Answer

A)  90. 
B)  110. 
C)  100. 
D)  120. 
A)  90. 
B)  110. 
C)  100. 
D)  120.

Question 3

A recessionary gap means that short-run macroeconomic equilibrium GDP

Accepted Answer

A)  is less than full-employment GDP. 
B)  equals full-employment GDP. 
C)  is more than full-employment GDP. 
D)  may be less than, more than, or the same as full-employment GDP depending on the level of potential GDP. 
A)  is less than full-employment GDP. 
B)  equals full-employment GDP. 
C)  is more than full-employment GDP. 
D)  may be less than, more than, or the same as full-employment GDP depending on the level of potential GDP.

Question 4

A technological advance ________ the long-run aggregate supply curve and ________ the short-run aggregate supply curve.

Accepted Answer

A)  shifts; shifts 
B)  shifts; does not shift 
C)  does not shift; shifts 
D)  does not shift; does not shift 
A)  shifts; shifts 
B)  shifts; does not shift 
C)  does not shift; shifts 
D)  does not shift; does not shift

Question 5

-In the above figure,point B represents

Accepted Answer

A)  a recessionary gap. 
B)  a full-employment equilibrium. 
C)  an inflationary gap. 
D)  a decrease in aggregate demand. 
A)  a recessionary gap. 
B)  a full-employment equilibrium. 
C)  an inflationary gap. 
D)  a decrease in aggregate demand.

Question 6

The wealth effect points out that consumption decreases when people's real wealth decreases.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following events will increase long-run aggregate supply?

Accepted Answer

A)  an increase in the interest rate 
B)  an increase in resource prices 
C)  a decrease in expected profit 
D)  an advance in technology 
A)  an increase in the interest rate 
B)  an increase in resource prices 
C)  a decrease in expected profit 
D)  an advance in technology

Question 8

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

Accepted Answer

A)  an inflationary gap of $1 trillion. 
B)  an inflationary gap of $2 trillion. 
C)  a recessionary gap of $1 trillion. 
D)  a recessionary gap of $2 trillion. 
A)  an inflationary gap of $1 trillion. 
B)  an inflationary gap of $2 trillion. 
C)  a recessionary gap of $1 trillion. 
D)  a recessionary gap of $2 trillion.

Question 9

If the economy is at long run equilibrium then

Accepted Answer

A)  real GDP equals potential GDP. 
B)  nominal GDP equals potential GDP. 
C)  real GDP cannot be equal to potential GDP. 
D)  real GDP can be greater than, less than, or equal to potential GDP. 
A)  real GDP equals potential GDP. 
B)  nominal GDP equals potential GDP. 
C)  real GDP cannot be equal to potential GDP. 
D)  real GDP can be greater than, less than, or equal to potential GDP.

Question 10

A fall in the money wage rate shifts

Accepted Answer

A)  both the SAS and LAS curves rightward. 
B)  both the SAS and LAS curves leftward. 
C)  the SAS curve rightward but leaves the LAS curve unchanged. 
D)  the LAS curve rightward but leaves the SAS curve unchanged. 
A)  both the SAS and LAS curves rightward. 
B)  both the SAS and LAS curves leftward. 
C)  the SAS curve rightward but leaves the LAS curve unchanged. 
D)  the LAS curve rightward but leaves the SAS curve unchanged.

Question 11

The long-run aggregate supply curve is vertical at $12 trillion but the short-run aggregate supply curve intersects the aggregate demand curve at $13 trillion.We know that

Accepted Answer

A)  the economy is producing below full employment in the short run, and will adjust by hiring more workers, thus decreasing unemployment. 
B)  the price level is too high. The long-run equilibrium will occur with a lower price level. 
C)  adjustments will occur so that the long-run aggregate supply equals $13 trillion. 
D)  adjustments will occur so that the short-run aggregate supply eventually intersects the aggregate demand curve at $12 trillion. 
A)  the economy is producing below full employment in the short run, and will adjust by hiring more workers, thus decreasing unemployment. 
B)  the price level is too high. The long-run equilibrium will occur with a lower price level. 
C)  adjustments will occur so that the long-run aggregate supply equals $13 trillion. 
D)  adjustments will occur so that the short-run aggregate supply eventually intersects the aggregate demand curve at $12 trillion.

Question 12

Which of the following changes does NOT shift the short-run aggregate supply curve?

Accepted Answer

A)  an increase in the price level 
B)  an increase in technology 
C)  an increase in the quantity of capital 
D)  an increase in the money wage rate 
A)  an increase in the price level 
B)  an increase in technology 
C)  an increase in the quantity of capital 
D)  an increase in the money wage rate

Question 13

The intertemporal substitution effect of the price level on aggregate demand

Accepted Answer

A)  is the same as the real wealth effect. 
B)  is one reason that the aggregate demand curve has a negative slope. 
C)  explains why aggregate demand increases when the amount of money increases. 
D)  is one reason that the aggregate demand curve has a positive slope. 
A)  is the same as the real wealth effect. 
B)  is one reason that the aggregate demand curve has a negative slope. 
C)  explains why aggregate demand increases when the amount of money increases. 
D)  is one reason that the aggregate demand curve has a positive slope.

Question 14

Compare the policy prescriptions of Keynesian,Classical,and Monetarist economists.

Accepted Answer

Keynesians believe that without assistan

Question 15

Real GDP supplied
 $$\begin{array} { | c | c | c | c | } 
\hline \text { Price level } & \begin{array} { c } 
\text { Real GDP } \
\text { demanded } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Short run } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Long run } \
\text { (dollars) }
\end{array} \
\hline 90 & 700 & 300 & 600 \
\hline 100 & 600 & 400 & 600 \
\hline 110 & 500 & 500 & 600 \
\hline 120 & 400 & 600 & 600 \
\hline
\end{array}$$
-The table above gives the aggregate demand and aggregate supply schedules in Lotus Land.In short-run equilibrium,there is ________.

Accepted Answer

A)  an inflationary gap of $100 
B)  a recessionary gap of $100 
C)  a recessionary gap of $200 
D)  an inflationary gap of $200 
A)  an inflationary gap of $100 
B)  a recessionary gap of $100 
C)  a recessionary gap of $200 
D)  an inflationary gap of $200

Question 16

In the long-run equilibrium,an increase in the quantity of capital leads to

Accepted Answer

A)  an increase in the equilibrium price level and an increase in equilibrium real GDP. 
B)  a decrease in the equilibrium price level and an increase in equilibrium real GDP. 
C)  a decrease in the equilibrium price level, but no change in equilibrium real GDP. 
D)  no change in the equilibrium price level, but an increase in equilibrium real GDP. 
A)  an increase in the equilibrium price level and an increase in equilibrium real GDP. 
B)  a decrease in the equilibrium price level and an increase in equilibrium real GDP. 
C)  a decrease in the equilibrium price level, but no change in equilibrium real GDP. 
D)  no change in the equilibrium price level, but an increase in equilibrium real GDP.

Question 17

In the short-run

Accepted Answer

A)  the aggregate supply curve is upward sloping. 
B)  real GDP is always equal to potential GDP. 
C)  the money wage rate can change. 
D)  the price level does not change. 
A)  the aggregate supply curve is upward sloping. 
B)  real GDP is always equal to potential GDP. 
C)  the money wage rate can change. 
D)  the price level does not change.

Question 18

The Keynesian theory of business cycle views volatile expectations of future sales and profits as the main source of economic fluctuations.

Accepted Answer

A) True 
 B)False

Question 19

Real GDP supplied
 $$\begin{array} { | c | c | c | c | } 
\hline \text { Price level } & \begin{array} { c } 
\text { Real GDP } \
\text { demanded } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Short run } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Long run } \
\text { (dollars) }
\end{array} \
\hline 90 & 700 & 300 & 600 \
\hline 100 & 600 & 400 & 600 \
\hline 110 & 500 & 500 & 600 \
\hline 120 & 400 & 600 & 600 \
\hline
\end{array}$$
-The table above gives the aggregate demand and aggregate supply schedules in Lotus Land.Lotus Land is in short-run macroeconomic equilibrium.In the long run,if aggregate demand does not change then Lotus Land will return to full-employment as ________.

Accepted Answer

A)  the money wage rate rises 
B)  the money wage rate falls 
C)  businesses cut their imports 
D)  the government cuts taxes 
A)  the money wage rate rises 
B)  the money wage rate falls 
C)  businesses cut their imports 
D)  the government cuts taxes

Question 20

When the quantity of capital increases,then the

Accepted Answer

A)  LAS curve shifts rightward and the SAS curve does not shift. 
B)  SAS curve shifts rightward and the LAS curve does not shift. 
C)  SAS curve shifts rightward and the LAS curve shifts rightward. 
D)  SAS curve shifts rightward and the LAS curve does shifts leftward. 
A)  LAS curve shifts rightward and the SAS curve does not shift. 
B)  SAS curve shifts rightward and the LAS curve does not shift. 
C)  SAS curve shifts rightward and the LAS curve shifts rightward. 
D)  SAS curve shifts rightward and the LAS curve does shifts leftward.

-In the above figure,the short-run aggregate supply curve is SAS₁.If the prices of resources fall,there is

A recessionary gap means that short-run macroeconomic equilibrium GDP

A technological advance the long-run aggregate supply curve and the short-run aggregate supply curve.

-In the above figure,point B represents

The wealth effect points out that consumption decreases when people's real wealth decreases.

Which of the following events will increase long-run aggregate supply?

If the economy is at long run equilibrium then

A fall in the money wage rate shifts

The long-run aggregate supply curve is vertical at $12 trillion but the short-run aggregate supply curve intersects the aggregate demand curve at $13 trillion.We know that

Which of the following changes does NOT shift the short-run aggregate supply curve?

The intertemporal substitution effect of the price level on aggregate demand

Compare the policy prescriptions of Keynesian,Classical,and Monetarist economists.

Real GDP supplied Price level Real GDP demanded (dollars) Short run (dollars) Long run (dollars) 90 700 300 600 100 600 400 600 110 500 500 600 120 400 600 600 -The table above gives the aggregate demand and aggregate supply schedules in Lotus Land.In short-run equilibrium,there is ________.

In the long-run equilibrium,an increase in the quantity of capital leads to

In the short-run

The Keynesian theory of business cycle views volatile expectations of future sales and profits as the main source of economic fluctuations.

When the quantity of capital increases,then the

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

-In the above figure,the short-run aggregate supply curve is SAS₁.If the prices of resources fall,there is

A recessionary gap means that short-run macroeconomic equilibrium GDP

A technological advance ________ the long-run aggregate supply curve and ________ the short-run aggregate supply curve.

-In the above figure,point B represents

The wealth effect points out that consumption decreases when people's real wealth decreases.

Which of the following events will increase long-run aggregate supply?

If the economy is at long run equilibrium then

A fall in the money wage rate shifts

The long-run aggregate supply curve is vertical at $12 trillion but the short-run aggregate supply curve intersects the aggregate demand curve at $13 trillion.We know that

Which of the following changes does NOT shift the short-run aggregate supply curve?

The intertemporal substitution effect of the price level on aggregate demand

Compare the policy prescriptions of Keynesian,Classical,and Monetarist economists.

Real GDP supplied Price level Real GDP demanded (dollars) Short run (dollars) Long run (dollars) 90 700 300 600 100 600 400 600 110 500 500 600 120 400 600 600 -The table above gives the aggregate demand and aggregate supply schedules in Lotus Land.In short-run equilibrium,there is ________.

In the long-run equilibrium,an increase in the quantity of capital leads to

In the short-run

The Keynesian theory of business cycle views volatile expectations of future sales and profits as the main source of economic fluctuations.

When the quantity of capital increases,then the

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

A technological advance the long-run aggregate supply curve and the short-run aggregate supply curve.