Question 1

In the short run,wages are assumed to be:

Accepted Answer

A)  constant. 
B)  sticky. 
C)  inflexible. 
D)  all of the above are true. 
A)  constant. 
B)  sticky. 
C)  inflexible. 
D)  all of the above are true. D

Question 2

In long-run full-employment equilibrium,the CPI equals AD equals SRAS equals LRAS.

Accepted Answer

A) True 
 B)False  True

Question 3

Based on Exhibit 14A-1,when the aggregate demand curve shifts to the position AD₂ and the economy is operating at point E₂,the economy's position of long-run equilibrium corresponds to point:

Accepted Answer

A)  E₁. 
B)  E₂. 
C)  E₃. 
D)  E₁ or E₃. 
A)  E₁. 
B)  E₂. 
C)  E₃. 
D)  E₁ or E₃. C

Question 4

Exhibit 14A-2 Macro AD-AS Model
  
-In Exhibit 14A-2,the long-run aggregate supply curve represents:

Accepted Answer

A)  potential real GDP output for this economy. 
B)  that the economy is experiencing zero inflation. 
C)  that the economy is experiencing a recessionary gap. 
D)  the level of real GDP where the unemployment rate is zero. 
A)  potential real GDP output for this economy. 
B)  that the economy is experiencing zero inflation. 
C)  that the economy is experiencing a recessionary gap. 
D)  the level of real GDP where the unemployment rate is zero.

Question 5

Long-run full-employment equilibrium assumes:

Accepted Answer

A)  a downward-sloping production function. 
B)  a downward-sloping long-run supply curve (LRAS). 
C)  the CPI index price level equals the equilibrium wage rate. 
D)  the CPI equals aggregate demand (A
D)  equals short-run aggregate supply (SRAS) equals long-run aggregate supply (LRAS). 
A)  a downward-sloping production function. 
B)  a downward-sloping long-run supply curve (LRAS). 
C)  the CPI index price level equals the equilibrium wage rate. 
D)  the CPI equals aggregate demand (A
D)  equals short-run aggregate supply (SRAS) equals long-run aggregate supply (LRAS).

Question 6

TYP: SA
Exhibit 14A-3 Macro AD-AS Model
  
-In Exhibit 14A-3,the level of real GDP associated with Y₁:

Accepted Answer

A)  is equal to potential real GDP. 
B)  is an inflationary gap real GDP. 
C)  is a long-run equilibrium. 
D)  is caused by flexible wages and prices. 
A)  is equal to potential real GDP. 
B)  is an inflationary gap real GDP. 
C)  is a long-run equilibrium. 
D)  is caused by flexible wages and prices.

Question 7

Which of the following causes a leftward shift in the short-run aggregate supply curve?

Accepted Answer

A)  An increase of goods prices while nominal incomes are unchanged. 
B)  An increase in nominal incomes. 
C)  An increase of full-employment real GDP. 
D)  An increase of personal consumption expenditures while the price level is unchanged. 
E)  An increase of personal consumption expenditures while full-employment real GDP is unchanged. 
A)  An increase of goods prices while nominal incomes are unchanged. 
B)  An increase in nominal incomes. 
C)  An increase of full-employment real GDP. 
D)  An increase of personal consumption expenditures while the price level is unchanged. 
E)  An increase of personal consumption expenditures while full-employment real GDP is unchanged.

Question 8

The short-run aggregate supply curve (SRAS)is based on the theory that wages are flexible.

Accepted Answer

A) True 
 B)False

Question 9

TYP: SA
Exhibit 14A-3 Macro AD-AS Model
  
-In Exhibit 14A-3,the intersection of AD with SRAS indicates:

Accepted Answer

A)  a short-run equilibrium. 
B)  a long-run equilibrium. 
C)  that the economy needs policies to reduce unemployment. 
D)  that the economy is at full employment. 
A)  a short-run equilibrium. 
B)  a long-run equilibrium. 
C)  that the economy needs policies to reduce unemployment. 
D)  that the economy is at full employment.

Question 10

In the self-correcting AD-AS model,the economy's short-run equilibrium position is indicated by the intersection of which two curves?

Accepted Answer

A)  Short-run aggregate supply and long-run aggregate supply. 
B)  Short-run aggregate supply and aggregate demand. 
C)  Long-run aggregate supply and aggregate demand. 
D)  Long-run aggregate demand and short-run personal consumption expenditures curve. 
E)  Short-run aggregate demand and long-run personal consumption expenditures curve. 
A)  Short-run aggregate supply and long-run aggregate supply. 
B)  Short-run aggregate supply and aggregate demand. 
C)  Long-run aggregate supply and aggregate demand. 
D)  Long-run aggregate demand and short-run personal consumption expenditures curve. 
E)  Short-run aggregate demand and long-run personal consumption expenditures curve.

Question 11

The intersection between the long-run aggregate supply and aggregate demand curves determines the:

Accepted Answer

A) level of full-employment real GDP. 
B) level of prices (CPI). 
C) money supply. 
D) marginal product. 
E) both a and b. 
A) level of full-employment real GDP. 
B) level of prices (CPI). 
C) money supply. 
D) marginal product. 
E) both a and b.

Question 12

Which of the following would cause a decrease (leftward shift)in the short-run aggregate supply curve (SRAS)?

Accepted Answer

A)  An increase in oil prices. 
B)  An advance in technology. 
C)  An increase in the CPI. 
D)  An increase in the long-run aggregate supply curve (LRAS). 
A)  An increase in oil prices. 
B)  An advance in technology. 
C)  An increase in the CPI. 
D)  An increase in the long-run aggregate supply curve (LRAS).

Question 13

The short-run aggregate supply curve (SRAS)is the amount of real GDP:

Accepted Answer

A)  produced at various price levels. 
B)  produced at various savings rate levels. 
C)  purchased at various price levels. 
D)  purchased at various saving rate levels. 
A)  produced at various price levels. 
B)  produced at various savings rate levels. 
C)  purchased at various price levels. 
D)  purchased at various saving rate levels.

Question 14

Beginning from short-run equilibrium at point E₂ in Exhibit 14A-1,the economy's movement to a new position of long-run equilibrium would best be described as:

Accepted Answer

A)  a movement along the AD₂ curve with a shift in the SRAS₁ curve. 
B)  a movement along the SRAS₂ curve with a shift in the AD₂ curve. 
C)  a shift in the LRAS curve to an intersection at E₁. 
D)  no shift of any kind. 
A)  a movement along the AD₂ curve with a shift in the SRAS₁ curve. 
B)  a movement along the SRAS₂ curve with a shift in the AD₂ curve. 
C)  a shift in the LRAS curve to an intersection at E₁. 
D)  no shift of any kind.

Question 15

In the self-correcting AD-AS model,a point where the economy's long-run AS curve,short-run AS curve,and AD curve all intersect at a single point represents a point where:

Accepted Answer

A) real GDP is equal to its full-employment level. 
B) the conditions of short-run equilibrium are fulfilled. 
C) the conditions of long-run equilibrium are fulfilled. 
D) all of the above. 
E) a and c,but not b. 
A) real GDP is equal to its full-employment level. 
B) the conditions of short-run equilibrium are fulfilled. 
C) the conditions of long-run equilibrium are fulfilled. 
D) all of the above. 
E) a and c,but not b.

Question 16

As shown in Exhibit 14A-1,the economy's point of short-run equilibrium,given by the shift of the aggregate demand curve from AD₁ to AD₂ ,is:

Accepted Answer

A)  E₁. 
B)  E₂. 
C)  E₃. 
D)  unable to be determined. 
A)  E₁. 
B)  E₂. 
C)  E₃. 
D)  unable to be determined.

Question 17

If both the price level and nominal incomes change by the same percentage:

Accepted Answer

A) real GDP will remain constant. 
B) the aggregate supply curve will be upward-sloping. 
C) profit margins will change in real terms. 
D) the long-run aggregate supply curve will be horizontal. 
E) both a and d. 
A) real GDP will remain constant. 
B) the aggregate supply curve will be upward-sloping. 
C) profit margins will change in real terms. 
D) the long-run aggregate supply curve will be horizontal. 
E) both a and d.

Question 18

In the long run,wages and prices are considered to be:

Accepted Answer

A)  fixed. 
B)  sticky. 
C)  flexible. 
D)  unstable. 
A)  fixed. 
B)  sticky. 
C)  flexible. 
D)  unstable.

Question 19

One reason for the short-run aggregate supply curve (SRAS)is:

Accepted Answer

A)  a fixed CPI market basket. 
B)  perfect knowledge of workers. 
C)  fixed-wage contracts. 
D)  the upward-sloping production function. 
A)  a fixed CPI market basket. 
B)  perfect knowledge of workers. 
C)  fixed-wage contracts. 
D)  the upward-sloping production function.

Question 20

An aggregate supply curve with a positive slope is associated with an economy in which:

Accepted Answer

A)  input prices and final goods prices always change by the same amount. 
B)  firms expect output prices to be unaffected by changes in input prices. 
C)  nominal wages and salaries do not change much in the short run. 
D)  firms expect consumer demand to be unaffected by changes in prices of final goods. 
A)  input prices and final goods prices always change by the same amount. 
B)  firms expect output prices to be unaffected by changes in input prices. 
C)  nominal wages and salaries do not change much in the short run. 
D)  firms expect consumer demand to be unaffected by changes in prices of final goods.

Exam 14: A: Appendix: The Self-Correcting Aggregate Demand and Supply Model

In the short run,wages are assumed to be:

In long-run full-employment equilibrium,the CPI equals AD equals SRAS equals LRAS.

Based on Exhibit 14A-1,when the aggregate demand curve shifts to the position AD₂ and the economy is operating at point E₂,the economy's position of long-run equilibrium corresponds to point:

Exhibit 14A-2 Macro AD-AS Model -In Exhibit 14A-2,the long-run aggregate supply curve represents:

Long-run full-employment equilibrium assumes:

TYP: SA Exhibit 14A-3 Macro AD-AS Model -In Exhibit 14A-3,the level of real GDP associated with Y₁:

Which of the following causes a leftward shift in the short-run aggregate supply curve?

The short-run aggregate supply curve (SRAS)is based on the theory that wages are flexible.

TYP: SA Exhibit 14A-3 Macro AD-AS Model -In Exhibit 14A-3,the intersection of AD with SRAS indicates:

In the self-correcting AD-AS model,the economy's short-run equilibrium position is indicated by the intersection of which two curves?

The intersection between the long-run aggregate supply and aggregate demand curves determines the:

Which of the following would cause a decrease (leftward shift)in the short-run aggregate supply curve (SRAS)?

The short-run aggregate supply curve (SRAS)is the amount of real GDP:

Beginning from short-run equilibrium at point E₂ in Exhibit 14A-1,the economy's movement to a new position of long-run equilibrium would best be described as:

In the self-correcting AD-AS model,a point where the economy's long-run AS curve,short-run AS curve,and AD curve all intersect at a single point represents a point where:

As shown in Exhibit 14A-1,the economy's point of short-run equilibrium,given by the shift of the aggregate demand curve from AD₁ to AD₂ ,is:

If both the price level and nominal incomes change by the same percentage:

In the long run,wages and prices are considered to be:

One reason for the short-run aggregate supply curve (SRAS)is:

An aggregate supply curve with a positive slope is associated with an economy in which:

Introducing the Economic Way of Thinking

A: Appendix: Applying Graphs to Economics

Production Possibilities,Opportunity Cost,and Economic Growth

Part 1: Market Demand and Supply

Part 2: Market Demand and Supply

Markets in Action

Price Elasticity of Demand

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets and Income Distribution

Gross Domestic Product

Business Cycles and Unemployment

Inflation

Aggregate Demand and Supply

Fiscal Policy

The Public Sector

Federal Deficits,Surpluses,and the National Debt

Money and the Federal Reserve System

Money Creation

Monetary Policy

A: Appendix: Policy Disputes Using the Self-Correcting Aggregate Demand and Supply Model

International Trade and Finance

Economies in Transition

Growth and the Less-Developed Countries

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