Question 1

In the short run,an increase in the price level causes which of the following:

Accepted Answer

A)  A rightward shift in the aggregate demand curve. 
B)  A leftward shift in the short-run aggregate supply curve. 
C)  A rightward shift in the short-run aggregate supply curve. 
D)  A movement upward along the short-run aggregate supply curve. 
A)  A rightward shift in the aggregate demand curve. 
B)  A leftward shift in the short-run aggregate supply curve. 
C)  A rightward shift in the short-run aggregate supply curve. 
D)  A movement upward along the short-run aggregate supply curve.

Question 2

Exhibit 14A-5 Macro AD-AS Model
  
-Economic growth is represented in Exhibit 14A-5 by a:

Accepted Answer

A)  leftward shift in the long-run aggregate supply curve (LRAS). 
B)  inward shift of the production possibilities curve. 
C)  rightward shift in the long-run aggregate supply curve (LRAS). 
D)  movement along the long-run aggregate supply curve (LRAS). 
A)  leftward shift in the long-run aggregate supply curve (LRAS). 
B)  inward shift of the production possibilities curve. 
C)  rightward shift in the long-run aggregate supply curve (LRAS). 
D)  movement along the long-run aggregate supply curve (LRAS).

Question 3

The position of the long-run aggregate supply curve corresponds to the economy's:

Accepted Answer

A)  full-employment real GDP. 
B)  maximum possible level of employment. 
C)  natural level of personal consumption expenditure. 
D)  maximum possible level of personal consumption expenditures. 
E)  maximum possible price level. 
A)  full-employment real GDP. 
B)  maximum possible level of employment. 
C)  natural level of personal consumption expenditure. 
D)  maximum possible level of personal consumption expenditures. 
E)  maximum possible price level.

Question 4

The short-run aggregate supply curve is upward-sloping because:

Accepted Answer

A)  the quantity of real output supplied is inversely related to aggregate supply. 
B)  nominal incomes are fixed. 
C)  of the conjunction between the incremental capital-output ratio and the interbank offer rate. 
D)  an increase in price will increase the supply of money. 
A)  the quantity of real output supplied is inversely related to aggregate supply. 
B)  nominal incomes are fixed. 
C)  of the conjunction between the incremental capital-output ratio and the interbank offer rate. 
D)  an increase in price will increase the supply of money.

Question 5

Beginning in Exhibit 14A-1 from long-run equilibrium at point E₁,the aggregate demand curve shifts to AD₂ .The economy's path to a new long-run equilibrium is represented by a movement from:

Accepted Answer

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

Question 6

Exhibit 14A-5 Macro AD-AS Model
  
-Beginning in Exhibit 14A-5 from long-run equilibrium at point E₁,the aggregate demand curve shifts to AD₂.The economy's path to a new long-run equilibrium is represented by a movement from:

Accepted Answer

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

Question 7

Which of the following explains why higher prices in the goods and services market measured by the CPI leads to an upward-sloping aggregate supply curve?

Accepted Answer

A)  The higher prices will temporarily improve profit margins because the cost of wages and salaries are fixed in the short run. 
B)  The higher prices will reduce the purchasing power of the fixed quantity of money and, thereby, stimulate additional output. 
C)  The higher prices will expand the economy's resource base and, thereby, stimulate additional output. 
D)  The higher prices will improve technology and, thereby, stimulate additional output. 
A)  The higher prices will temporarily improve profit margins because the cost of wages and salaries are fixed in the short run. 
B)  The higher prices will reduce the purchasing power of the fixed quantity of money and, thereby, stimulate additional output. 
C)  The higher prices will expand the economy's resource base and, thereby, stimulate additional output. 
D)  The higher prices will improve technology and, thereby, stimulate additional output.

Question 8

In the long run,an increase in aggregate demand causes the price level to ____ and the long-run aggregate supply curve to ____.

Accepted Answer

A)  decrease; decrease 
B)  increase; increase 
C)  decrease; remain unchanged 
D)  increase; remain unchanged 
A)  decrease; decrease 
B)  increase; increase 
C)  decrease; remain unchanged 
D)  increase; remain unchanged

Question 9

Exhibit 14A-6 Aggregate demand and supply model
  
-As shown in Exhibit 14A-6,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 10

Beginning from a position of long-run equilibrium at the full-employment level of real GDP,the economy's short-run response to a decrease in the aggregate demand curve would be a:

Accepted Answer

A)  movement upward along the short-run aggregate supply curve. 
B)  movement upward along the long-run aggregate supply curve. 
C)  downward shift in the short-run aggregate supply curve. 
D)  movement downward along the short-run aggregate supply curve. 
A)  movement upward along the short-run aggregate supply curve. 
B)  movement upward along the long-run aggregate supply curve. 
C)  downward shift in the short-run aggregate supply curve. 
D)  movement downward along the short-run aggregate supply curve.

Question 11

In the short run,a price increase in the goods and services market measured by the CPI will:

Accepted Answer

A)  increase the purchasing power of money. 
B)  improve producer profits and, thereby, induce suppliers to expand output. 
C)  increase resource prices, lower profits, and lead to a decline in output. 
D)  reduce the natural rate of unemployment. 
A)  increase the purchasing power of money. 
B)  improve producer profits and, thereby, induce suppliers to expand output. 
C)  increase resource prices, lower profits, and lead to a decline in output. 
D)  reduce the natural rate of unemployment.

Question 12

The long-run aggregate supply curve is:

Accepted Answer

A)  upward sloping. 
B)  downward sloping. 
C)  vertical at full-employment real GDP. 
D)  horizontal at full-employment real GDP. 
A)  upward sloping. 
B)  downward sloping. 
C)  vertical at full-employment real GDP. 
D)  horizontal at full-employment real GDP.

Question 13

Nominal wages are assumed fixed in the short run because:

Accepted Answer

A)  workers have wages stated in their contracts. 
B)  of minimum wage laws. 
C)  workers are unaware of short-run changes in their real wages. 
D)  all of the above are true. 
E)  none of the above are true. 
A)  workers have wages stated in their contracts. 
B)  of minimum wage laws. 
C)  workers are unaware of short-run changes in their real wages. 
D)  all of the above are true. 
E)  none of the above are true.

Question 14

The long-run aggregate supply curve (LRAS)is represented by a(n)____ curve with respect to the CPI.

Accepted Answer

A)  horizontal 
B)  upward-sloping 
C)  downward-sloping 
D)  vertical 
A)  horizontal 
B)  upward-sloping 
C)  downward-sloping 
D)  vertical

Question 15

Suppose that the economy is in a position of short-run equilibrium at a point where real GDP is below the full-employment level.Assuming no further change in aggregate demand and self-correction,the movement to a new long-run equilibrium includes a decrease in which of the following?

Accepted Answer

A)  The unemployment rate. 
B)  The price level (CPI). 
C)  The level of nominal wages and salaries. 
D)  All of the above. 
A)  The unemployment rate. 
B)  The price level (CPI). 
C)  The level of nominal wages and salaries. 
D)  All of the above.

Question 16

The full-employment level of real GDP is the level which can be produced with:

Accepted Answer

A) given technology and productive resources. 
B) frictional and structural unemployment equal to zero. 
C) cyclical unemployment equal to zero. 
D) both a and b. 
E) both a and c. 
A) given technology and productive resources. 
B) frictional and structural unemployment equal to zero. 
C) cyclical unemployment equal to zero. 
D) both a and b. 
E) both a and c.

Question 17

Exhibit 14A-2 Macro AD-AS Model
  
-In Exhibit 14A-2,the short-run equilibrium depicts an economy:

Accepted Answer

A)  with an inflationary gap. 
B)  with a recessionary gap. 
C)  producing at full employment. 
D)  None of the above answers are correct. 
A)  with an inflationary gap. 
B)  with a recessionary gap. 
C)  producing at full employment. 
D)  None of the above answers are correct.

Question 18

Exhibit 14A-6 Aggregate demand and supply model
  
-Based on Exhibit 14A-6,when the aggregate demand curve is in the position AD₁,the economy's position of long-run equilibrium corresponds to point:

Accepted Answer

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

Question 19

The long-run aggregate supply curve is:

Accepted Answer

A)  upward-sloping. 
B)  downward-sloping. 
C)  horizontal. 
D)  vertical. 
E)  none of the above. 
A)  upward-sloping. 
B)  downward-sloping. 
C)  horizontal. 
D)  vertical. 
E)  none of the above.

Question 20

A decrease in nominal incomes causes a leftward shift in the short-run aggregate supply curve (SRAS).

Accepted Answer

A) True 
 B)False

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

In the short run,an increase in the price level causes which of the following:

Exhibit 14A-5 Macro AD-AS Model -Economic growth is represented in Exhibit 14A-5 by a:

The position of the long-run aggregate supply curve corresponds to the economy's:

The short-run aggregate supply curve is upward-sloping because:

Beginning in Exhibit 14A-1 from long-run equilibrium at point E₁,the aggregate demand curve shifts to AD₂ .The economy's path to a new long-run equilibrium is represented by a movement from:

Exhibit 14A-5 Macro AD-AS Model -Beginning in Exhibit 14A-5 from long-run equilibrium at point E₁,the aggregate demand curve shifts to AD₂.The economy's path to a new long-run equilibrium is represented by a movement from:

Which of the following explains why higher prices in the goods and services market measured by the CPI leads to an upward-sloping aggregate supply curve?

In the long run,an increase in aggregate demand causes the price level to ____ and the long-run aggregate supply curve to ____.

Exhibit 14A-6 Aggregate demand and supply model -As shown in Exhibit 14A-6,the economy's point of short-run equilibrium,given by the shift of the aggregate demand curve from AD₁ to AD₂,is:

Beginning from a position of long-run equilibrium at the full-employment level of real GDP,the economy's short-run response to a decrease in the aggregate demand curve would be a:

In the short run,a price increase in the goods and services market measured by the CPI will:

The long-run aggregate supply curve is:

Nominal wages are assumed fixed in the short run because:

The long-run aggregate supply curve (LRAS)is represented by a(n)____ curve with respect to the CPI.

Suppose that the economy is in a position of short-run equilibrium at a point where real GDP is below the full-employment level.Assuming no further change in aggregate demand and self-correction,the movement to a new long-run equilibrium includes a decrease in which of the following?

The full-employment level of real GDP is the level which can be produced with:

Exhibit 14A-2 Macro AD-AS Model -In Exhibit 14A-2,the short-run equilibrium depicts an economy:

Exhibit 14A-6 Aggregate demand and supply model -Based on Exhibit 14A-6,when the aggregate demand curve is in the position AD₁,the economy's position of long-run equilibrium corresponds to point:

The long-run aggregate supply curve is:

A decrease in nominal incomes causes a leftward shift in the short-run aggregate supply curve (SRAS).

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

Filters

In the long run,an increase in aggregate demand causes the price level to and the long-run aggregate supply curve to .