Question 1

The long-run aggregate supply curve is vertical.

Accepted Answer

A) True 
 B)False  True

Question 2

Which of the following would cause the short-run aggregate supply curve to shift to the left?

Accepted Answer

A)  an increase in the price level 
B)  an increase in inflation expectations 
C)  a technological advance 
D)  a decrease in interest rates 
A)  an increase in the price level 
B)  an increase in inflation expectations 
C)  a technological advance 
D)  a decrease in interest rates B

Question 3

Suppose a recession occurs as a result of a negative supply shock,and instead of the economy naturally working its way back to equilibrium,the government uses policy to shift the aggregate demand curve to fight the recession.Using policy this way would

Accepted Answer

A)  bring real GDP back to potential GDP more quickly but would result in a permanently higher price level. 
B)  bring real GDP back to potential GDP more slowly but would bring the price level back to the original price level more quickly. 
C)  quickly result in a new, higher level of real GDP and a permanently lower price level. 
D)  bring the price level back to its original level more quickly but would result in a permanently lower level of potential GDP. 
A)  bring real GDP back to potential GDP more quickly but would result in a permanently higher price level. 
B)  bring real GDP back to potential GDP more slowly but would bring the price level back to the original price level more quickly. 
C)  quickly result in a new, higher level of real GDP and a permanently lower price level. 
D)  bring the price level back to its original level more quickly but would result in a permanently lower level of potential GDP. A

Question 4

The proponents of ________ and ________ think that the Federal Reserve should adopt a constant monetary growth rule.

Accepted Answer

A)  new Keynesianism; the new classical model 
B)  the real business cycle model; Marxism 
C)  rational expectations; monetarism 
D)  the monetarist model; the Keynesian model 
A)  new Keynesianism; the new classical model 
B)  the real business cycle model; Marxism 
C)  rational expectations; monetarism 
D)  the monetarist model; the Keynesian model

Question 5

Explain how each of the following events would affect the aggregate demand curve.
a.Lower interest rates
b.A decrease in net exports
c.A decrease in the price level
d.Slower income growth in other countries
e.A decrease in imports

Accepted Answer

a∙Lower interest rates would increase in

Question 6

What variables cause the short-run aggregate supply curve to shift? For each variable,identify whether an increase in that variable will cause the short-run aggregate supply curve to shift to the right or to the left.

Accepted Answer

The variables that will cause the short-

Question 7

On average,in the recessions since 1950,it has taken ________ for employment to return to its cyclical peak.

Accepted Answer

A)  about 6 months 
B)  about 1 year 
C)  about 18 months 
D)  almost 2.5 years 
A)  about 6 months 
B)  about 1 year 
C)  about 18 months 
D)  almost 2.5 years

Question 8

Which of the following will shift the aggregate demand curve to the left,ceteris paribus?

Accepted Answer

A)  an increase in interest rates 
B)  an increase in disposable income 
C)  an increase in expected profits for firms 
D)  an increase in net exports 
A)  an increase in interest rates 
B)  an increase in disposable income 
C)  an increase in expected profits for firms 
D)  an increase in net exports

Question 9

According to ________,entrepreneurship does not contribute anything of value to production.

Accepted Answer

A)  Robert Lucas and Thomas Sargent 
B)  Milton Friedman 
C)  John Maynard Keynes 
D)  Karl Marx 
A)  Robert Lucas and Thomas Sargent 
B)  Milton Friedman 
C)  John Maynard Keynes 
D)  Karl Marx

Question 10

Stagflation usually results from

Accepted Answer

A)  a supply shock. 
B)  a decrease in aggregate demand. 
C)  an increase in aggregate supply. 
D)  an increase in aggregate demand. 
A)  a supply shock. 
B)  a decrease in aggregate demand. 
C)  an increase in aggregate supply. 
D)  an increase in aggregate demand.

Question 11

A decrease in aggregate demand in the economy will have what effect on macroeconomic equilibrium in the long run?

Accepted Answer

A)  The price level will fall, and the level of GDP will be unaffected. 
B)  The price level will fall, and the level of GDP will fall. 
C)  The price level will rise, and the level of GDP will fall. 
D)  The price level will rise, and the level of GDP will be unaffected. 
A)  The price level will fall, and the level of GDP will be unaffected. 
B)  The price level will fall, and the level of GDP will fall. 
C)  The price level will rise, and the level of GDP will fall. 
D)  The price level will rise, and the level of GDP will be unaffected.

Question 12

Short-run macroeconomic equilibrium occurs when

Accepted Answer

A)  aggregate demand and short-run aggregate supply intersect. 
B)  the equilibrium lies on the long-run aggregate supply curve. 
C)  structural and frictional unemployment equal zero. 
D)  A and B 
A)  aggregate demand and short-run aggregate supply intersect. 
B)  the equilibrium lies on the long-run aggregate supply curve. 
C)  structural and frictional unemployment equal zero. 
D)  A and B

Question 13

Figure 15-2
  
-Refer to Figure 15-2.Ceteris paribus,an increase in the number of workers and firms adjusting to having previously underestimated the price level would be represented by a movement from

Accepted Answer

A)  SRAS₁ to SRAS₂. 
B)  SRAS₂ to SRAS₁. 
C)  point A to point B. 
D)  point B to point A. 
A)  SRAS₁ to SRAS₂. 
B)  SRAS₂ to SRAS₁. 
C)  point A to point B. 
D)  point B to point A.

Question 14

An increase in the price level shifts the aggregate demand curve to the left.

Accepted Answer

A) True 
 B)False

Question 15

________ of unemployment during ________ make it easier for workers to ________ wages.

Accepted Answer

A)  High levels; a recession; negotiate higher 
B)  Low levels; an expansion; negotiate higher 
C)  Low levels; a recession; accept lower 
D)  High levels; an expansion; accept lower 
A)  High levels; a recession; negotiate higher 
B)  Low levels; an expansion; negotiate higher 
C)  Low levels; a recession; accept lower 
D)  High levels; an expansion; accept lower

Question 16

The main belief of the monetarist model is that

Accepted Answer

A)  workers and firms have rational expectations. 
B)  the quantity of money should be increased at a constant rate. 
C)  productivity shocks explain fluctuations in real GDP. 
D)  the economy is slow to adjust to sticky wages and prices. 
A)  workers and firms have rational expectations. 
B)  the quantity of money should be increased at a constant rate. 
C)  productivity shocks explain fluctuations in real GDP. 
D)  the economy is slow to adjust to sticky wages and prices.

Question 17

If the U.S.dollar decreases in value relative to other currencies,how does this affect the aggregate demand curve?

Accepted Answer

A)  This will move the economy up along a stationary aggregate demand curve. 
B)  This will move the economy down along a stationary aggregate demand curve. 
C)  This will shift the aggregate demand curve to the left. 
D)  This will shift the aggregate demand curve to the right. 
A)  This will move the economy up along a stationary aggregate demand curve. 
B)  This will move the economy down along a stationary aggregate demand curve. 
C)  This will shift the aggregate demand curve to the left. 
D)  This will shift the aggregate demand curve to the right.

Question 18

Explain whether KB Homes' sales are likely to fluctuate more or less than the sales of each of the following firms as the economy moves from recession to expansion and back to recession.
Whirlpool Corporation (appliance manufacturer)
Taco Bell
The Boeing Company (aircraft manufacturer)
GameStop (video game sales and rentals)

Accepted Answer

KB Homes' sales are likely to fluctuate

Question 19

According to the real business cycle model,________ in aggregate demand ________ GDP.

Accepted Answer

A)  increases; decrease 
B)  increases; increase 
C)  increases; do not affect 
D)  decreases; increase 
A)  increases; decrease 
B)  increases; increase 
C)  increases; do not affect 
D)  decreases; increase

Question 20

Figure 15-1
  
-Refer to Figure 15-1.Ceteris paribus,an increase in the price level would be represented by a movement from

Accepted Answer

A)  AD₁ to AD₂. 
B)  AD₂ to AD₁. 
C)  point A to point B. 
D)  point B to point A. 
A)  AD₁ to AD₂. 
B)  AD₂ to AD₁. 
C)  point A to point B. 
D)  point B to point A.

The long-run aggregate supply curve is vertical.

Which of the following would cause the short-run aggregate supply curve to shift to the left?

Suppose a recession occurs as a result of a negative supply shock,and instead of the economy naturally working its way back to equilibrium,the government uses policy to shift the aggregate demand curve to fight the recession.Using policy this way would

The proponents of and think that the Federal Reserve should adopt a constant monetary growth rule.

Explain how each of the following events would affect the aggregate demand curve. a.Lower interest rates b.A decrease in net exports c.A decrease in the price level d.Slower income growth in other countries e.A decrease in imports

What variables cause the short-run aggregate supply curve to shift? For each variable,identify whether an increase in that variable will cause the short-run aggregate supply curve to shift to the right or to the left.

On average,in the recessions since 1950,it has taken ________ for employment to return to its cyclical peak.

Which of the following will shift the aggregate demand curve to the left,ceteris paribus?

According to ________,entrepreneurship does not contribute anything of value to production.

Stagflation usually results from

A decrease in aggregate demand in the economy will have what effect on macroeconomic equilibrium in the long run?

Short-run macroeconomic equilibrium occurs when

Figure 15-2 -Refer to Figure 15-2.Ceteris paribus,an increase in the number of workers and firms adjusting to having previously underestimated the price level would be represented by a movement from

An increase in the price level shifts the aggregate demand curve to the left.

of unemployment during make it easier for workers to wages.

The main belief of the monetarist model is that

If the U.S.dollar decreases in value relative to other currencies,how does this affect the aggregate demand curve?

According to the real business cycle model, in aggregate demand GDP.

Figure 15-1 -Refer to Figure 15-1.Ceteris paribus,an increase in the price level would be represented by a movement from

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: The Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Health Care

Firms, The Stock Market, and Corporate Governance

Consumer Choice and Elasticity

Technology,Production,and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust Policy

Monopolistic Competition and Oligopoly

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, The Financial System, and Business Cycles

Money,Banks,and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, International Trade, and Exchange Rates

Filters

Exam 15: Aggregate Demand and Aggregate Supply Analysis

The long-run aggregate supply curve is vertical.

Which of the following would cause the short-run aggregate supply curve to shift to the left?

Suppose a recession occurs as a result of a negative supply shock,and instead of the economy naturally working its way back to equilibrium,the government uses policy to shift the aggregate demand curve to fight the recession.Using policy this way would

The proponents of ________ and ________ think that the Federal Reserve should adopt a constant monetary growth rule.

Explain how each of the following events would affect the aggregate demand curve. a.Lower interest rates b.A decrease in net exports c.A decrease in the price level d.Slower income growth in other countries e.A decrease in imports

What variables cause the short-run aggregate supply curve to shift? For each variable,identify whether an increase in that variable will cause the short-run aggregate supply curve to shift to the right or to the left.

On average,in the recessions since 1950,it has taken ________ for employment to return to its cyclical peak.

Which of the following will shift the aggregate demand curve to the left,ceteris paribus?

According to ________,entrepreneurship does not contribute anything of value to production.

Stagflation usually results from

A decrease in aggregate demand in the economy will have what effect on macroeconomic equilibrium in the long run?

Short-run macroeconomic equilibrium occurs when

Figure 15-2 -Refer to Figure 15-2.Ceteris paribus,an increase in the number of workers and firms adjusting to having previously underestimated the price level would be represented by a movement from

An increase in the price level shifts the aggregate demand curve to the left.

________ of unemployment during ________ make it easier for workers to ________ wages.

The main belief of the monetarist model is that

If the U.S.dollar decreases in value relative to other currencies,how does this affect the aggregate demand curve?

According to the real business cycle model,________ in aggregate demand ________ GDP.

Figure 15-1 -Refer to Figure 15-1.Ceteris paribus,an increase in the price level would be represented by a movement from

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: The Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Health Care

Firms, The Stock Market, and Corporate Governance

Consumer Choice and Elasticity

Technology,Production,and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust Policy

Monopolistic Competition and Oligopoly

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, The Financial System, and Business Cycles

Money,Banks,and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, International Trade, and Exchange Rates

Filters

The proponents of and think that the Federal Reserve should adopt a constant monetary growth rule.

of unemployment during make it easier for workers to wages.

According to the real business cycle model, in aggregate demand GDP.