Question 1

If full-employment GDP is equal to $4.2 trillion,what does the long-run aggregate supply curve look like?

Accepted Answer

A)  It is a horizontal line at $4.2 trillion of GDP. 
B)  It is a vertical line at a level of GDP below $4.2 trillion. 
C)  It is a vertical line at $4.2 trillion of GDP. 
D)  It is a vertical line at a level of GDP above $4.2 trillion. 
A)  It is a horizontal line at $4.2 trillion of GDP. 
B)  It is a vertical line at a level of GDP below $4.2 trillion. 
C)  It is a vertical line at $4.2 trillion of GDP. 
D)  It is a vertical line at a level of GDP above $4.2 trillion.

Question 2

Figure 15-1
  
-Refer to Figure 15-1.Ceteris paribus,a decrease in personal income taxes 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.

Question 3

Figure 15-1
  
-Refer to Figure 15-1.Ceteris paribus,a decrease in interest rates 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.

Question 4

New Keynesian macroeconomic theory emphasizes the role of "sticky" prices in the economy.

Accepted Answer

A) True 
 B)False

Question 5

An increase in exports decreases aggregate demand.

Accepted Answer

A) True 
 B)False

Question 6

Monetarism is a school of thought put forth by ________,who argued that the economy would ordinarily be at potential GDP.

Accepted Answer

A)  Karl Marx 
B)  Milton Friedman 
C)  Finn Kydland and Edward Prescott 
D)  Robert Lucas and Thomas Sargent 
A)  Karl Marx 
B)  Milton Friedman 
C)  Finn Kydland and Edward Prescott 
D)  Robert Lucas and Thomas Sargent

Question 7

When the price level in the United States rises relative to the price level of other countries,________ will rise,________ will fall,and ________ will fall.

Accepted Answer

A)  imports; exports; net exports 
B)  exports; imports; net exports 
C)  net exports; exports; imports 
D)  net exports; imports; exports 
A)  imports; exports; net exports 
B)  exports; imports; net exports 
C)  net exports; exports; imports 
D)  net exports; imports; exports

Question 8

During the recession of 2007-2009 in the United States,________ relative to potential GDP.

Accepted Answer

A)  business fixed investment spending rose and net export spending declined 
B)  consumption spending rose and residential construction spending declined 
C)  federal government purchases rose and changes in business inventories declined 
D)  net export spending rose and consumption spending declined 
A)  business fixed investment spending rose and net export spending declined 
B)  consumption spending rose and residential construction spending declined 
C)  federal government purchases rose and changes in business inventories declined 
D)  net export spending rose and consumption spending declined

Question 9

In the dynamic aggregated demand and aggregate supply model,if AD shifts further than AS

Accepted Answer

A)  inflation occurs. 
B)  deflation occurs. 
C)  stagflation occurs. 
D)  disinflation occurs. 
A)  inflation occurs. 
B)  deflation occurs. 
C)  stagflation occurs. 
D)  disinflation occurs.

Question 10

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

Accepted Answer

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

Question 11

If aggregate demand just decreased,which of the following may have caused the decrease?

Accepted Answer

A)  a decrease in exports 
B)  a decrease in the interest rate 
C)  a decrease in the price level 
D)  a decrease in imports 
A)  a decrease in exports 
B)  a decrease in the interest rate 
C)  a decrease in the price level 
D)  a decrease in imports

Question 12

An increase 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 rise. 
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 rise. 
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 13

Stagflation occurs when short-run aggregate supply decreases.

Accepted Answer

A) True 
 B)False

Question 14

The proponents of rational expectations and monetarism think that the Federal Reserve should adopt

Accepted Answer

A)  an inflation target. 
B)  a monetary aggregate target. 
C)  a constant monetary growth rule. 
D)  an interest rate target. 
A)  an inflation target. 
B)  a monetary aggregate target. 
C)  a constant monetary growth rule. 
D)  an interest rate target.

Question 15

After an unexpected ________ in the price of oil,the long-run adjustment decreases the price level and ________ the unemployment rate as they return to their original levels.

Accepted Answer

A)  increase; increases 
B)  increase; decreases 
C)  decrease; increases 
D)  decrease; decreases 
A)  increase; increases 
B)  increase; decreases 
C)  decrease; increases 
D)  decrease; decreases

Question 16

When potential GDP increases,short-run aggregate supply also increases,but long-run aggregate supply does not change.

Accepted Answer

A) True 
 B)False

Question 17

At the beginning of the recession of 2007-2009,real GDP in the United States was ________ potential GDP,and in June 2009,real GDP was ________ potential GDP.

Accepted Answer

A)  below; above 
B)  below; below 
C)  above; below 
D)  above; above 
A)  below; above 
B)  below; below 
C)  above; below 
D)  above; above

Question 18

Monetarists believe that the quantity of money should be increased at an increasing rate.

Accepted Answer

A) True 
 B)False

Question 19

According to the real business cycle model

Accepted Answer

A)  increases in aggregate demand raise GDP. 
B)  increases in aggregate demand lower GDP. 
C)  increases in aggregate demand do not affect GDP. 
D)  increases in aggregate demand lower the price level. 
A)  increases in aggregate demand raise GDP. 
B)  increases in aggregate demand lower GDP. 
C)  increases in aggregate demand do not affect GDP. 
D)  increases in aggregate demand lower the price level.

Question 20

Figure 15-1
  
-Refer to Figure 15-1.Ceteris paribus,a decrease 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.

If full-employment GDP is equal to $4.2 trillion,what does the long-run aggregate supply curve look like?

Figure 15-1 -Refer to Figure 15-1.Ceteris paribus,a decrease in personal income taxes would be represented by a movement from

Figure 15-1 -Refer to Figure 15-1.Ceteris paribus,a decrease in interest rates would be represented by a movement from

New Keynesian macroeconomic theory emphasizes the role of "sticky" prices in the economy.

An increase in exports decreases aggregate demand.

Monetarism is a school of thought put forth by ________,who argued that the economy would ordinarily be at potential GDP.

When the price level in the United States rises relative to the price level of other countries, will rise, will fall,and will fall.

During the recession of 2007-2009 in the United States,________ relative to potential GDP.

In the dynamic aggregated demand and aggregate supply model,if AD shifts further than AS

of unemployment during make it easier for workers to wages.

If aggregate demand just decreased,which of the following may have caused the decrease?

An increase in aggregate demand in the economy will have what effect on macroeconomic equilibrium in the long run?

Stagflation occurs when short-run aggregate supply decreases.

The proponents of rational expectations and monetarism think that the Federal Reserve should adopt

After an unexpected in the price of oil,the long-run adjustment decreases the price level and the unemployment rate as they return to their original levels.

When potential GDP increases,short-run aggregate supply also increases,but long-run aggregate supply does not change.

At the beginning of the recession of 2007-2009,real GDP in the United States was potential GDP,and in June 2009,real GDP was potential GDP.

Monetarists believe that the quantity of money should be increased at an increasing rate.

According to the real business cycle model

Figure 15-1 -Refer to Figure 15-1.Ceteris paribus,a decrease 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

If full-employment GDP is equal to $4.2 trillion,what does the long-run aggregate supply curve look like?

Figure 15-1 -Refer to Figure 15-1.Ceteris paribus,a decrease in personal income taxes would be represented by a movement from

Figure 15-1 -Refer to Figure 15-1.Ceteris paribus,a decrease in interest rates would be represented by a movement from

New Keynesian macroeconomic theory emphasizes the role of "sticky" prices in the economy.

An increase in exports decreases aggregate demand.

Monetarism is a school of thought put forth by ________,who argued that the economy would ordinarily be at potential GDP.

When the price level in the United States rises relative to the price level of other countries,________ will rise,________ will fall,and ________ will fall.

During the recession of 2007-2009 in the United States,________ relative to potential GDP.

In the dynamic aggregated demand and aggregate supply model,if AD shifts further than AS

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

If aggregate demand just decreased,which of the following may have caused the decrease?

An increase in aggregate demand in the economy will have what effect on macroeconomic equilibrium in the long run?

Stagflation occurs when short-run aggregate supply decreases.

The proponents of rational expectations and monetarism think that the Federal Reserve should adopt

After an unexpected ________ in the price of oil,the long-run adjustment decreases the price level and ________ the unemployment rate as they return to their original levels.

When potential GDP increases,short-run aggregate supply also increases,but long-run aggregate supply does not change.

At the beginning of the recession of 2007-2009,real GDP in the United States was ________ potential GDP,and in June 2009,real GDP was ________ potential GDP.

Monetarists believe that the quantity of money should be increased at an increasing rate.

According to the real business cycle model

Figure 15-1 -Refer to Figure 15-1.Ceteris paribus,a decrease 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

When the price level in the United States rises relative to the price level of other countries, will rise, will fall,and will fall.

of unemployment during make it easier for workers to wages.

After an unexpected in the price of oil,the long-run adjustment decreases the price level and the unemployment rate as they return to their original levels.

At the beginning of the recession of 2007-2009,real GDP in the United States was potential GDP,and in June 2009,real GDP was potential GDP.