Question 1

-In the above figure,suppose the economy had been at point A and now is at B.What could have lead to the movement to B?

Accepted Answer

A)  A tax hike. 
B)  Government expenditures on goods and services increased. 
C)  Winter storms cause factories in the north to be shut down for several weeks. 
D)  Money wage rates rose. 
A)  A tax hike. 
B)  Government expenditures on goods and services increased. 
C)  Winter storms cause factories in the north to be shut down for several weeks. 
D)  Money wage rates rose.

Question 2

One reason that the aggregate demand curve has a negative slope is because

Accepted Answer

A)  firms supply more when prices rise. 
B)  people buy more foreign goods when the domestic price level rises. 
C)  the amount of money in the economy increases when the price level rises. 
D)  firms supply less when prices rise. 
A)  firms supply more when prices rise. 
B)  people buy more foreign goods when the domestic price level rises. 
C)  the amount of money in the economy increases when the price level rises. 
D)  firms supply less when prices rise.

Question 3

What could Keynes have meant by his now famous statement,"in the long run we are all dead? "

Accepted Answer

A)  Government intervention is destabilizing, will lead to slower growth in the long run, and will prevent an economy from self-regulating. 
B)  Government intervention in the economy is necessary in times of recession because an economy rarely restores itself to full-employment. 
C)  Government intervention in the economy is useless because it takes too long to take effect. 
D)  Government intervention in the economy is only effective if it is not erratic. 
A)  Government intervention is destabilizing, will lead to slower growth in the long run, and will prevent an economy from self-regulating. 
B)  Government intervention in the economy is necessary in times of recession because an economy rarely restores itself to full-employment. 
C)  Government intervention in the economy is useless because it takes too long to take effect. 
D)  Government intervention in the economy is only effective if it is not erratic.

Question 4

Economic growth

Accepted Answer

A)  occurs when the long-run aggregate supply curve shifts upward. 
B)  is an increase in potential GDP as the long-run aggregate supply curve shifts rightward. 
C)  requires a compensating decrease in aggregate demand to offset the increase in aggregate supply. 
D)  All of the above answers are correct. 
A)  occurs when the long-run aggregate supply curve shifts upward. 
B)  is an increase in potential GDP as the long-run aggregate supply curve shifts rightward. 
C)  requires a compensating decrease in aggregate demand to offset the increase in aggregate supply. 
D)  All of the above answers are correct.

Question 5

In the short run,a rightward shift of the short-run aggregate supply curve ________ real GDP and ________ the price level.

Accepted Answer

A)  decreases; lowers 
B)  increases; raises 
C)  decreases; raises 
D)  increases; lowers 
A)  decreases; lowers 
B)  increases; raises 
C)  decreases; raises 
D)  increases; lowers

Question 6

According to the intertemporal substitution effect,a higher price level

Accepted Answer

A)  decreases the quantity of real GDP demanded. 
B)  lowers the costs of building new plants and equipment. 
C)  increases the quantity of real GDP demanded. 
D)  makes it less costly for people to buy houses and cars. 
A)  decreases the quantity of real GDP demanded. 
B)  lowers the costs of building new plants and equipment. 
C)  increases the quantity of real GDP demanded. 
D)  makes it less costly for people to buy houses and cars.

Question 7

-In the above figure,the economy is initially at point B.Then the price level falls by 10.The wealth effect will help

Accepted Answer

A)  move the economy to point A. 
B)  move the economy to point C. 
C)  move the economy to point D. 
D)  keep the economy to point B. 
A)  move the economy to point A. 
B)  move the economy to point C. 
C)  move the economy to point D. 
D)  keep the economy to point B.

Question 8

The quantity of real GDP supplied depends on the

Accepted Answer

A)  level of aggregate demand. 
B)  quantity of capital, bonds, and stocks. 
C)  quantity of labor, the quantity of capital, and the state of technology. 
D)  price level, the unemployment rate, and the quantity of government expenditures on goods and services. 
A)  level of aggregate demand. 
B)  quantity of capital, bonds, and stocks. 
C)  quantity of labor, the quantity of capital, and the state of technology. 
D)  price level, the unemployment rate, and the quantity of government expenditures on goods and services.

Question 9

The table below shows data for India's economy. Real GDP is measured in millions of rupees. $$\begin{array} { | c | c | c | c | } 
\hline & \text { Price level } & \begin{array} { c } 
\text { Real GDP } \
\text { supplied in the short } \
\text { run }
\end{array} & \text { Real GDP demanded } \
\hline \text { a } & 114 & 23,501 & 35,898 \
\hline \text { b } & 120 & 25,355 & 32,341 \
\hline \text { c } & 125 & 27,670 & 27,670 \
\hline \text { d } & 131 & 30,366 & 18,569 \
\hline \text { e } & 138 & 33,164 & 15,898 \
\hline
\end{array}$$
If potential GDP in India is ________ million rupees,India is experiencing ________.

Accepted Answer

A)  26,500; an inflationary gap 
B)  28,500; an above full-employment gap 
C)  26,500; a recessionary gap 
D)  30,000; a potential GDP gap 
A)  26,500; an inflationary gap 
B)  28,500; an above full-employment gap 
C)  26,500; a recessionary gap 
D)  30,000; a potential GDP gap

Question 10

Consider a BMW automobile plant. If the price of BMWs increase by 10 percent and the money wage rate and other costs ________,there will be ________.

Accepted Answer

A)  increase by 10 percent; an increase in BMWs profits 
B)  do not change; an increase in BMW's production and profit 
C)  increase by 10 percent; an increase in BMWs production 
D)  do not change; no change in production 
A)  increase by 10 percent; an increase in BMWs profits 
B)  do not change; an increase in BMW's production and profit 
C)  increase by 10 percent; an increase in BMWs production 
D)  do not change; no change in production

Question 11

-In the above figure,which part corresponds to an increase in the money wage rate?

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 12

-In the above figure,curve A is the ________ curve,curve B is the ________ curve,and curve C is the ________ curve.

Accepted Answer

A)  long-run aggregate supply; short-run aggregate supply; aggregate demand 
B)  aggregate demand; short-run aggregate supply; long-run aggregate supply 
C)  short-run aggregate supply; long-run aggregate supply; aggregate demand 
D)  long-run aggregate supply; aggregate demand; short-run aggregate supply 
A)  long-run aggregate supply; short-run aggregate supply; aggregate demand 
B)  aggregate demand; short-run aggregate supply; long-run aggregate supply 
C)  short-run aggregate supply; long-run aggregate supply; aggregate demand 
D)  long-run aggregate supply; aggregate demand; short-run aggregate supply

Question 13

Which of the following increases aggregate demand?

Accepted Answer

A)  a decrease in taxes 
B)  a decrease in foreign income 
C)  a decrease in government expenditure 
D)  a rise in the interest rate 
A)  a decrease in taxes 
B)  a decrease in foreign income 
C)  a decrease in government expenditure 
D)  a rise in the interest rate

Question 14

A key issue in the presidential election of 2012 between President Obama and Mr.Romney concerned tax rates. President Obama favored increasing taxes,especially on the rich.As a result of a tax increase,

Accepted Answer

A)  the aggregate demand curve shifts leftward. 
B)  the aggregate demand curve shifts rightward. 
C)  the aggregate supply curve shifts leftward. 
D)  the aggregate supply curve shifts rightward. 
A)  the aggregate demand curve shifts leftward. 
B)  the aggregate demand curve shifts rightward. 
C)  the aggregate supply curve shifts leftward. 
D)  the aggregate supply curve shifts rightward.

Question 15

An increase in the quantity of capital increases ________ and increase in the full employment quantity of labor increases ________.

Accepted Answer

A)  the SAS and the LAS; only the SAS 
B)  the SAS and the LAS; only the LAS 
C)  the SAS and the LAS; the SAS and the LAS 
D)  only the LAS; the SAS and the LAS 
A)  the SAS and the LAS; only the SAS 
B)  the SAS and the LAS; only the LAS 
C)  the SAS and the LAS; the SAS and the LAS 
D)  only the LAS; the SAS and the LAS

Question 16

If you have $1,000 of money in the bank and the price level rises 5 percent,your

Accepted Answer

A)  money is worth more in terms of what it can purchase. 
B)  money is worth less in terms of what it can purchase. 
C)  money is worth the same in terms of what it can purchase. 
D)  purchasing power has risen. 
A)  money is worth more in terms of what it can purchase. 
B)  money is worth less in terms of what it can purchase. 
C)  money is worth the same in terms of what it can purchase. 
D)  purchasing power has risen.

Question 17

$$\begin{array} { | c | c | c | } 
\hline \text { Price level } & \begin{array} { c } 
\text { Real GDP demanded } \
\text { (billions of 2005 } \
\text { dollars) }
\end{array} & \begin{array} { c } 
\text { Real GDP supplied } \
\text { (billions of 2005 } \
\text { dollars) }
\end{array} \
\hline 90 & 450 & 150 \
\hline 100 & 400 & 250 \
\hline 110 & 350 & 350 \
\hline 120 & 300 & 450 \
\hline 130 & 250 & 550 \
\hline
\end{array}$$
-The table above shows Yellowland's economy aggregate demand and supply schedules.Yellowland's potential GDP is $300 billion.
a) Plot the aggregate demand curve,the short-run aggregate supply curve,and the long-run aggregate supply curve.
b) What are the short-run equilibrium real GDP and price level in Yellowland?
c) What is the long-run equilibrium real GDP?
d) Is Yellowland's short-run macroeconomic equilibrium a full-employment equilibrium,below full-employment equilibrium,or above full-employment equilibrium?
What is the recessionary gap (if any)?
What is the inflationary gap (if any)?
e) Suppose aggregate supply decreases by $150 billion.Plot the new aggregate supply curve.How do real GDP and the price level change in the short run?
f) Is Yellowland's new short-run macroeconomic equilibrium a full-employment equilibrium,below full-employment equilibrium,or above full-employment equilibrium?
What is the recessionary gap (if any)?
What is the inflationary gap (if any)?

Accepted Answer

@#IMG-DLM& 
a)See the figure above.The short-run a

Question 18

The business cycle occurs because aggregate demand and aggregate supply change at uneven rates.

Accepted Answer

A) True 
 B)False

Question 19

What are the factors that can shift the short-run aggregate supply curve but not the long-run aggregate supply curve?
Explain your answer.

Accepted Answer

The only factor that shifts the short-ru

Question 20

Full-employment equilibrium occurs when

Accepted Answer

A)  real GDP exceeds potential GDP. 
B)  real GDP equals potential GDP. 
C)  potential GDP exceeds real GDP. 
D)  a result of an increase in long-run aggregate supply. 
A)  real GDP exceeds potential GDP. 
B)  real GDP equals potential GDP. 
C)  potential GDP exceeds real GDP. 
D)  a result of an increase in long-run aggregate supply.

-In the above figure,suppose the economy had been at point A and now is at B.What could have lead to the movement to B?

One reason that the aggregate demand curve has a negative slope is because

What could Keynes have meant by his now famous statement,"in the long run we are all dead? "

Economic growth

In the short run,a rightward shift of the short-run aggregate supply curve real GDP and the price level.

According to the intertemporal substitution effect,a higher price level

-In the above figure,the economy is initially at point B.Then the price level falls by 10.The wealth effect will help

The quantity of real GDP supplied depends on the

Consider a BMW automobile plant. If the price of BMWs increase by 10 percent and the money wage rate and other costs ,there will be .

-In the above figure,which part corresponds to an increase in the money wage rate?

-In the above figure,curve A is the curve,curve B is the curve,and curve C is the curve.

Which of the following increases aggregate demand?

A key issue in the presidential election of 2012 between President Obama and Mr.Romney concerned tax rates. President Obama favored increasing taxes,especially on the rich.As a result of a tax increase,

An increase in the quantity of capital increases and increase in the full employment quantity of labor increases .

If you have $1,000 of money in the bank and the price level rises 5 percent,your

The business cycle occurs because aggregate demand and aggregate supply change at uneven rates.

What are the factors that can shift the short-run aggregate supply curve but not the long-run aggregate supply curve? Explain your answer.

Full-employment equilibrium occurs when

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,suppose the economy had been at point A and now is at B.What could have lead to the movement to B?

One reason that the aggregate demand curve has a negative slope is because

What could Keynes have meant by his now famous statement,"in the long run we are all dead? "

Economic growth

In the short run,a rightward shift of the short-run aggregate supply curve ________ real GDP and ________ the price level.

According to the intertemporal substitution effect,a higher price level

-In the above figure,the economy is initially at point B.Then the price level falls by 10.The wealth effect will help

The quantity of real GDP supplied depends on the

Consider a BMW automobile plant. If the price of BMWs increase by 10 percent and the money wage rate and other costs ________,there will be ________.

-In the above figure,which part corresponds to an increase in the money wage rate?

-In the above figure,curve A is the ________ curve,curve B is the ________ curve,and curve C is the ________ curve.

Which of the following increases aggregate demand?

A key issue in the presidential election of 2012 between President Obama and Mr.Romney concerned tax rates. President Obama favored increasing taxes,especially on the rich.As a result of a tax increase,

An increase in the quantity of capital increases ________ and increase in the full employment quantity of labor increases ________.

If you have $1,000 of money in the bank and the price level rises 5 percent,your

The business cycle occurs because aggregate demand and aggregate supply change at uneven rates.

What are the factors that can shift the short-run aggregate supply curve but not the long-run aggregate supply curve? Explain your answer.

Full-employment equilibrium occurs when

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

In the short run,a rightward shift of the short-run aggregate supply curve real GDP and the price level.

Consider a BMW automobile plant. If the price of BMWs increase by 10 percent and the money wage rate and other costs ,there will be .

-In the above figure,curve A is the curve,curve B is the curve,and curve C is the curve.

An increase in the quantity of capital increases and increase in the full employment quantity of labor increases .