Question 1

-In the above figure,the shift from AD₁ to AD₂ might have been the result of

Accepted Answer

A)  an increase in government expenditure. 
B)  a decrease in taxes. 
C)  an increase in the quantity of money. 
D)  All of the above answers are correct. 
A)  an increase in government expenditure. 
B)  a decrease in taxes. 
C)  an increase in the quantity of money. 
D)  All of the above answers are correct.

Question 2

Last year in the country of Union,the price level increased and real GDP increased.Such an outcome might have occurred because short-run aggregate supply ________ and aggregate demand ________.

Accepted Answer

A)  decreased; decreased 
B)  increased; did not change 
C)  increased; decreased 
D)  did not change; increased 
A)  decreased; decreased 
B)  increased; did not change 
C)  increased; decreased 
D)  did not change; increased

Question 3

In the short run,firms expand their production when the price level rises because

Accepted Answer

A)  the money wage rate remains constant so the higher prices for their products makes it profitable for firms to expand production. 
B)  each firm must keep its production up to the level of its rivals, and some firms will expand production as the price level increases. 
C)  the higher prices allow the firm to hire more workers by offering higher wages, thereby increasing productivity and profits. 
D)  firms can increase their profits by increasing their maintenance. 
A)  the money wage rate remains constant so the higher prices for their products makes it profitable for firms to expand production. 
B)  each firm must keep its production up to the level of its rivals, and some firms will expand production as the price level increases. 
C)  the higher prices allow the firm to hire more workers by offering higher wages, thereby increasing productivity and profits. 
D)  firms can increase their profits by increasing their maintenance.

Question 4

The aggregate demand curve

Accepted Answer

A)  shifts rightward when the price level increases and leftward when the price level falls. 
B)  shifts rightward when taxes are decreased. 
C)  shifts rightward when foreign incomes decrease and shifts leftward when foreign incomes increase. 
D)  does not shift, unlike market demand curves. 
A)  shifts rightward when the price level increases and leftward when the price level falls. 
B)  shifts rightward when taxes are decreased. 
C)  shifts rightward when foreign incomes decrease and shifts leftward when foreign incomes increase. 
D)  does not shift, unlike market demand curves.

Question 5

$$\begin{array} { | c | c | c | c | } 
\hline \begin{array} { c } 
\text { Price } \
\text { level }
\end{array} & \begin{array} { c } 
\text { Aggregate } \
\text { demand } \
\text { (trillions of } \
\text { 2005 dollars) }
\end{array} & \begin{array} { c } 
\text { Short-run } \
\text { aggregate } \
\text { supply } \
\text { (trillions of } \
\text { 2005 dollars) }
\end{array} & \begin{array} { c } 
\text { Long-run } \
\text { aggregate } \
\text { supply } \
\text { (trillions of } \
\text { 2005 dollars) }
\end{array} \
\hline 140 & 4 & 8 & 7 \
\hline 130 & 5 & 7 & 7 \
\hline 120 & 6 & 6 & 7 \
\hline 110 & 7 & 5 & 7 \
\hline 100 & 8 & 4 & 7 \
\hline
\end{array}$$
-The data in the above table show that when the price level is 120,if aggregate demand does not change then the

Accepted Answer

A)  money wage rate will rise in the future. 
B)  money wage rate will fall in the future. 
C)  short-run aggregate supply curve will shift leftward. 
D)  long-run aggregate supply curve will shift leftward. 
A)  money wage rate will rise in the future. 
B)  money wage rate will fall in the future. 
C)  short-run aggregate supply curve will shift leftward. 
D)  long-run aggregate supply curve will shift leftward.

Question 6

Business cycles are the result of

Accepted Answer

A)  regular shifts of the AD curve only. 
B)  irregular shifts of the SAS curve only. 
C)  regular shifts of both the AD and SAS curves. 
D)  irregular shifts of both the AD and SAS curves. 
A)  regular shifts of the AD curve only. 
B)  irregular shifts of the SAS curve only. 
C)  regular shifts of both the AD and SAS curves. 
D)  irregular shifts of both the AD and SAS curves.

Question 7

$$\begin{array} { | c | c | c | c | } 
\hline \begin{array} { c } 
\text { Price } \
\text { level }
\end{array} & \begin{array} { c } 
\text { Aggregate } \
\text { demand } \
\text { (trillions of } \
\text { 2005 dollars) }
\end{array} & \begin{array} { c } 
\text { Short-run } \
\text { aggregate } \
\text { supply } \
\text { (trillions of } \
\text { 2005 dollars) }
\end{array} & \begin{array} { c } 
\text { Long-run } \
\text { aggregate } \
\text { supply } \
\text { (trillions of } \
\text { 2005 dollars) }
\end{array} \
\hline 140 & 4 & 8 & 7 \
\hline 130 & 5 & 7 & 7 \
\hline 120 & 6 & 6 & 7 \
\hline 110 & 7 & 5 & 7 \
\hline 100 & 8 & 4 & 7 \
\hline
\end{array}$$
-The data in the above table show that when the price level is 120,the economy

Accepted Answer

A)  is in a long-run macroeconomic equilibrium. 
B)  has an inflationary gap. 
C)  has a recessionary gap. 
D)  will have falling money wage rates sometime in the future. 
A)  is in a long-run macroeconomic equilibrium. 
B)  has an inflationary gap. 
C)  has a recessionary gap. 
D)  will have falling money wage rates sometime in the future.

Question 8

The short-run aggregate supply curve is upward sloping because

Accepted Answer

A)  a lower price level creates a wealth effect. 
B)  lower taxes motivate people to work more. 
C)  money wage rates do not immediately change when the price level changes. 
D)  most business firms operate with long-term contracts for output but not labor. 
A)  a lower price level creates a wealth effect. 
B)  lower taxes motivate people to work more. 
C)  money wage rates do not immediately change when the price level changes. 
D)  most business firms operate with long-term contracts for output but not labor.

Question 9

Substitution effects help explain the slope of the aggregate demand curve.One substitution effect refers to the

Accepted Answer

A)  inverse relationship between the interest rate and the price level. 
B)  direct relationship between the interest rate and the real value of wealth. 
C)  effect on investment expenditures that result from a change in interest rates produced by a change in the price level. 
D)  change in wealth that results from a change in the interest rate. 
A)  inverse relationship between the interest rate and the price level. 
B)  direct relationship between the interest rate and the real value of wealth. 
C)  effect on investment expenditures that result from a change in interest rates produced by a change in the price level. 
D)  change in wealth that results from a change in the interest rate.

Question 10

-In the above figure,the economy is at point A when the money wage rate and the price level both fall by 10 percent.Firms will be willing to supply output equal to

Accepted Answer

A)  less than $13.0 trillion 
B)  $13.0 trillion 
C)  more than $13.0 trillion 
D)  Without more information, it is impossible to determine which of the above answers is correct. 
A)  less than $13.0 trillion 
B)  $13.0 trillion 
C)  more than $13.0 trillion 
D)  Without more information, it is impossible to determine which of the above answers is correct.

Question 11

Short-run equilibrium occurs at the intersection of

Accepted Answer

A)  the SAS and AD curves. 
B)  the SAS, LAS, and AD curves. 
C)  the SAS and LAS curves. 
D)  the LAS and AD curves. 
A)  the SAS and AD curves. 
B)  the SAS, LAS, and AD curves. 
C)  the SAS and LAS curves. 
D)  the LAS and AD curves.

Question 12

-In the above figure,which movement illustrates the impact of a falling price level and a constant money wage rate?

Accepted Answer

A)  E to I 
B)  E to F 
C)  E to J 
D)  E to H 
A)  E to I 
B)  E to F 
C)  E to J 
D)  E to H

Question 13

Based on the figure above,short-run equilibrium occurs at the price level of

Accepted Answer

A)  120 and real GDP of $4 trillion. 
B)  130 and real GDP of $8 trillion. 
C)  140 and real GDP of $12 trillion. 
D)  130 and real GDP of $12 trillion. 
A)  120 and real GDP of $4 trillion. 
B)  130 and real GDP of $8 trillion. 
C)  140 and real GDP of $12 trillion. 
D)  130 and real GDP of $12 trillion.

Question 14

People expect that the El Nino effect will cause drought in Australia in coming years.If most Australian firms expect their profits will fall during the next five years,Australia's ________ this year.

Accepted Answer

A)  aggregate demand will increase 
B)  long-run aggregate supply will increase 
C)  aggregate demand will decrease 
D)  short-run aggregate supply will increase 
A)  aggregate demand will increase 
B)  long-run aggregate supply will increase 
C)  aggregate demand will decrease 
D)  short-run aggregate supply will increase

Question 15

The AD curve shows the sum of

Accepted Answer

A)  the price level, employment, and real GDP. 
B)  consumption expenditure, investment, and real GDP. 
C)  consumption expenditure, investment, government expenditures on goods and services, and net exports. 
D)  consumption expenditure, investment, the price level, and real GDP. 
A)  the price level, employment, and real GDP. 
B)  consumption expenditure, investment, and real GDP. 
C)  consumption expenditure, investment, government expenditures on goods and services, and net exports. 
D)  consumption expenditure, investment, the price level, and real GDP.

Question 16

Which of the following shifts both the LAS and SAS curves?

Accepted Answer

A)  a change in the price level 
B)  a change in the money wage rate 
C)  a simultaneous change in both the price level and the money wage rate 
D)  an advance in technology 
A)  a change in the price level 
B)  a change in the money wage rate 
C)  a simultaneous change in both the price level and the money wage rate 
D)  an advance in technology

Question 17

Aggregate demand increases when

Accepted Answer

A)  foreign incomes fall. 
B)  interest rates rise. 
C)  the exchange rate rises. 
D)  None of the above answers is correct. 
A)  foreign incomes fall. 
B)  interest rates rise. 
C)  the exchange rate rises. 
D)  None of the above answers is correct.

Question 18

If you have $5,000 in wealth and the price level decreases 20 percent,then

Accepted Answer

A)  the $5,000 will buy fewer goods and services. 
B)  the $5,000 will buy more goods and services. 
C)  the real value of the $5,000 decreases. 
D)  the real value of the $5,000 remains constant. 
A)  the $5,000 will buy fewer goods and services. 
B)  the $5,000 will buy more goods and services. 
C)  the real value of the $5,000 decreases. 
D)  the real value of the $5,000 remains constant.

Question 19

-In the above figure,which point corresponds to an increase in technology?

Accepted Answer

A)  Figure A 
B)  Figure B 
C)  Figure C 
D)  Figure D 
A)  Figure A 
B)  Figure B 
C)  Figure C 
D)  Figure D

Question 20

-The above figure illustrates

Accepted Answer

A)  a recessionary gap. 
B)  a full-employment equilibrium. 
C)  an inflationary gap. 
D)  an equilibrium at the economy's physical limits. 
A)  a recessionary gap. 
B)  a full-employment equilibrium. 
C)  an inflationary gap. 
D)  an equilibrium at the economy's physical limits.

-In the above figure,the shift from AD₁ to AD₂ might have been the result of

Last year in the country of Union,the price level increased and real GDP increased.Such an outcome might have occurred because short-run aggregate supply and aggregate demand .

In the short run,firms expand their production when the price level rises because

The aggregate demand curve

Business cycles are the result of

Price level Aggregate demand (trillions of 2005 dollars) Short-run aggregate supply (trillions of 2005 dollars) Long-run aggregate supply (trillions of 2005 dollars) 140 4 8 7 130 5 7 7 120 6 6 7 110 7 5 7 100 8 4 7 -The data in the above table show that when the price level is 120,the economy

The short-run aggregate supply curve is upward sloping because

Substitution effects help explain the slope of the aggregate demand curve.One substitution effect refers to the

-In the above figure,the economy is at point A when the money wage rate and the price level both fall by 10 percent.Firms will be willing to supply output equal to

Short-run equilibrium occurs at the intersection of

-In the above figure,which movement illustrates the impact of a falling price level and a constant money wage rate?

Based on the figure above,short-run equilibrium occurs at the price level of

People expect that the El Nino effect will cause drought in Australia in coming years.If most Australian firms expect their profits will fall during the next five years,Australia's ________ this year.

The AD curve shows the sum of

Which of the following shifts both the LAS and SAS curves?

Aggregate demand increases when

If you have $5,000 in wealth and the price level decreases 20 percent,then

-In the above figure,which point corresponds to an increase in technology?

-The above figure illustrates

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 shift from AD₁ to AD₂ might have been the result of

Last year in the country of Union,the price level increased and real GDP increased.Such an outcome might have occurred because short-run aggregate supply ________ and aggregate demand ________.

In the short run,firms expand their production when the price level rises because

The aggregate demand curve

Business cycles are the result of

Price level Aggregate demand (trillions of 2005 dollars) Short-run aggregate supply (trillions of 2005 dollars) Long-run aggregate supply (trillions of 2005 dollars) 140 4 8 7 130 5 7 7 120 6 6 7 110 7 5 7 100 8 4 7 -The data in the above table show that when the price level is 120,the economy

The short-run aggregate supply curve is upward sloping because

Substitution effects help explain the slope of the aggregate demand curve.One substitution effect refers to the

-In the above figure,the economy is at point A when the money wage rate and the price level both fall by 10 percent.Firms will be willing to supply output equal to

Short-run equilibrium occurs at the intersection of

-In the above figure,which movement illustrates the impact of a falling price level and a constant money wage rate?

Based on the figure above,short-run equilibrium occurs at the price level of

People expect that the El Nino effect will cause drought in Australia in coming years.If most Australian firms expect their profits will fall during the next five years,Australia's ________ this year.

The AD curve shows the sum of

Which of the following shifts both the LAS and SAS curves?

Aggregate demand increases when

If you have $5,000 in wealth and the price level decreases 20 percent,then

-In the above figure,which point corresponds to an increase in technology?

-The above figure illustrates

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

Last year in the country of Union,the price level increased and real GDP increased.Such an outcome might have occurred because short-run aggregate supply and aggregate demand .