Question 1

Explain why the short-run aggregate supply curve is a relatively flat, horizontal line.

Accepted Answer

In the short run, prices are sticky and output is determined primarily by demand. Firms will adjust production to meet demand. Since firms will supply all the output to meet demand with only small changes in price, the short-run aggregate supply curve is relatively flat.

Question 2

Recall the Application about falling oil prices and their effect on the U.S. economy to answer the following question(s).
-According to this Application, lower oil prices will ________ the prices of gasoline and heating oil which will ________ the amount of money that consumers have to spend.

Accepted Answer

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

Question 3

The relationship between the level of prices and the quantity of real GDP supplied is known as

Accepted Answer

A)  aggregate supply. 
B)  market supply. 
C)  aggregate demand. 
D)  market demand. 
A)  aggregate supply. 
B)  market supply. 
C)  aggregate demand. 
D)  market demand. A

Question 4

Recall the Application about falling oil prices and their effect on the U.S. economy to answer the following question(s).
-According to this Application, lower oil prices may affect

Accepted Answer

A)  aggregate demand. 
B)  aggregate supply. 
C)  both aggregate demand and aggregate supply 
D)  neither aggregate demand and aggregate supply 
A)  aggregate demand. 
B)  aggregate supply. 
C)  both aggregate demand and aggregate supply 
D)  neither aggregate demand and aggregate supply

Question 5

Explain how the wealth effect can affect aggregate demand.

Accepted Answer

As price levels change, the purchasing p

Question 6

An implication of the long-run aggregate supply curve is that continuous increases in the money supply will result in continuous

Accepted Answer

A)  increases in price level. 
B)  decreases in output and price level. 
C)  decreases in output. 
D)  increases in output and price level. 
A)  increases in price level. 
B)  decreases in output and price level. 
C)  decreases in output. 
D)  increases in output and price level.

Question 7

If actual output exceeds potential output, ________ shifts upward over time.

Accepted Answer

A)  the short-run AS curve 
B)  the short-run AD curve 
C)  the long-run AS curve 
D)  the long-run AD curve 
A)  the short-run AS curve 
B)  the short-run AD curve 
C)  the long-run AS curve 
D)  the long-run AD curve

Question 8

Which of the following is an example of a supply shock?

Accepted Answer

A)  a surprise increase of the money supply 
B)  an increase in government spending 
C)  a sharp increase in the price of oil 
D)  an increase in the price level 
A)  a surprise increase of the money supply 
B)  an increase in government spending 
C)  a sharp increase in the price of oil 
D)  an increase in the price level

Question 9

Any change in demand from ________ will also change aggregate demand.

Accepted Answer

A)  households 
B)  firms 
C)  the foreign sector 
D)  all of the above 
A)  households 
B)  firms 
C)  the foreign sector 
D)  all of the above

Question 10

Which one of the following statements is TRUE?

Accepted Answer

A)  In the short run, the level of output is determined by demand. 
B)  In the long run, the level of output is determined by demand. 
C)  In the long run, the aggregate supply curve is horizontal. 
D)  Where aggregate demand and aggregate supply intersect is always the full-employment level of output. 
A)  In the short run, the level of output is determined by demand. 
B)  In the long run, the level of output is determined by demand. 
C)  In the long run, the aggregate supply curve is horizontal. 
D)  Where aggregate demand and aggregate supply intersect is always the full-employment level of output.

Question 11

The relationship between the level of prices and the total demand for all goods and services is known as

Accepted Answer

A)  aggregate supply. 
B)  market supply. 
C)  aggregate demand. 
D)  market demand. 
A)  aggregate supply. 
B)  market supply. 
C)  aggregate demand. 
D)  market demand.

Question 12

Prices for fresh fruit, vegetables and other food products are examples of

Accepted Answer

A)  custom prices. 
B)  auction prices. 
C)  sticky prices. 
D)  temporary prices. 
A)  custom prices. 
B)  auction prices. 
C)  sticky prices. 
D)  temporary prices.

Question 13

Figure 14.1
-Figure 14.1 shows three aggregate demand curves. A movement from curve AD₁ to curve AD₂ could be caused by a(n)

Accepted Answer

A)  increase in the money supply. 
B)  increase in taxes. 
C)  increase in the price level. 
D)  decrease in government spending. 
A)  increase in the money supply. 
B)  increase in taxes. 
C)  increase in the price level. 
D)  decrease in government spending.

Question 14

Output in the long run is determined by which of the two following factors when an economy operates at full employment?

Accepted Answer

A)  capital and supply 
B)  imports and exports 
C)  capital and labor 
D)  the "real" GDP and purchases 
A)  capital and supply 
B)  imports and exports 
C)  capital and labor 
D)  the "real" GDP and purchases

Question 15

Figure 14.2
-Refer to Figure 14.2. A movement from point a to point b could be caused by a(n)

Accepted Answer

A)  increase in government spending. 
B)  decrease in the price of oil. 
C)  decrease in taxes. 
D)  decrease in short-run aggregate supply. 
A)  increase in government spending. 
B)  decrease in the price of oil. 
C)  decrease in taxes. 
D)  decrease in short-run aggregate supply.

Question 16

Which of the following is a problem with the price system that can lead to a breakdown in the coordination of economic activity?

Accepted Answer

A)  The price system works silently in the background. 
B)  Prices can be slow to adjust. 
C)  Prices may be flexible. 
D)  all of the above 
A)  The price system works silently in the background. 
B)  Prices can be slow to adjust. 
C)  Prices may be flexible. 
D)  all of the above

Question 17

Explain why the long-run aggregate supply curve is vertical.

Accepted Answer

In the long run, the economy operates at

Question 18

A decrease in spending on new homes will, other things equal

Accepted Answer

A)  increase aggregate demand. 
B)  decrease aggregate demand. 
C)  increase aggregate supply. 
D)  decrease aggregate supply. 
A)  increase aggregate demand. 
B)  decrease aggregate demand. 
C)  increase aggregate supply. 
D)  decrease aggregate supply.

Question 19

Figure 14.2
-Refer to Figure 14.2. A movement from point d to point c could be caused by a(n)

Accepted Answer

A)  increase in government spending. 
B)  increase in the price of oil. 
C)  increase in taxes. 
D)  increase in short-run aggregate supply. 
A)  increase in government spending. 
B)  increase in the price of oil. 
C)  increase in taxes. 
D)  increase in short-run aggregate supply.

Question 20

When the price level is low and the demand for domestic goods increases, how does it affect international trade?

Accepted Answer

A)  Net exports will decrease. 
B)  Net exports will increase. 
C)  Prices of all international goods will decrease. 
D)  Prices of all international goods will increase. 
A)  Net exports will decrease. 
B)  Net exports will increase. 
C)  Prices of all international goods will decrease. 
D)  Prices of all international goods will increase.

Explain why the short-run aggregate supply curve is a relatively flat, horizontal line.

Recall the Application about falling oil prices and their effect on the U.S. economy to answer the following question(s). -According to this Application, lower oil prices will the prices of gasoline and heating oil which will the amount of money that consumers have to spend.

The relationship between the level of prices and the quantity of real GDP supplied is known as

Recall the Application about falling oil prices and their effect on the U.S. economy to answer the following question(s). -According to this Application, lower oil prices may affect

Explain how the wealth effect can affect aggregate demand.

An implication of the long-run aggregate supply curve is that continuous increases in the money supply will result in continuous

If actual output exceeds potential output, ________ shifts upward over time.

Which of the following is an example of a supply shock?

Any change in demand from ________ will also change aggregate demand.

Which one of the following statements is TRUE?

The relationship between the level of prices and the total demand for all goods and services is known as

Prices for fresh fruit, vegetables and other food products are examples of

Figure 14.1 -Figure 14.1 shows three aggregate demand curves. A movement from curve AD₁ to curve AD₂ could be caused by a(n)

Output in the long run is determined by which of the two following factors when an economy operates at full employment?

Figure 14.2 -Refer to Figure 14.2. A movement from point a to point b could be caused by a(n)

Which of the following is a problem with the price system that can lead to a breakdown in the coordination of economic activity?

Explain why the long-run aggregate supply curve is vertical.

A decrease in spending on new homes will, other things equal

Figure 14.2 -Refer to Figure 14.2. A movement from point d to point c could be caused by a(n)

When the price level is low and the demand for domestic goods increases, how does it affect international trade?

Introduction: What Is Economics

The Key Principles of Economics

Demand, Supply, and Market Equilibrium

Elasticity: A Measure of Responsiveness

Production Technology and Cost

Perfect Competition

Monopoly and Price Discrimination

Market Entry, Monopolistic Competition, and Oligopoly

Imperfect Information, External Benefits, and External Costs

The Labor Market and the Distribution of Income

Measuring a Nations Production and Income

Unemployment and Inflation

Why Do Economies Grow

Fiscal Policy

Money and the Banking System

Monetary Policy and Inflation

International Trade and Finance

Filters

Exam 14: Aggregate Demand and Aggregate Supply

Explain why the short-run aggregate supply curve is a relatively flat, horizontal line.

Recall the Application about falling oil prices and their effect on the U.S. economy to answer the following question(s). -According to this Application, lower oil prices will ________ the prices of gasoline and heating oil which will ________ the amount of money that consumers have to spend.

The relationship between the level of prices and the quantity of real GDP supplied is known as

Recall the Application about falling oil prices and their effect on the U.S. economy to answer the following question(s). -According to this Application, lower oil prices may affect

Explain how the wealth effect can affect aggregate demand.

An implication of the long-run aggregate supply curve is that continuous increases in the money supply will result in continuous

If actual output exceeds potential output, ________ shifts upward over time.

Which of the following is an example of a supply shock?

Any change in demand from ________ will also change aggregate demand.

Which one of the following statements is TRUE?

The relationship between the level of prices and the total demand for all goods and services is known as

Prices for fresh fruit, vegetables and other food products are examples of

Figure 14.1 -Figure 14.1 shows three aggregate demand curves. A movement from curve AD₁ to curve AD₂ could be caused by a(n)

Output in the long run is determined by which of the two following factors when an economy operates at full employment?

Figure 14.2 -Refer to Figure 14.2. A movement from point a to point b could be caused by a(n)

Which of the following is a problem with the price system that can lead to a breakdown in the coordination of economic activity?

Explain why the long-run aggregate supply curve is vertical.

A decrease in spending on new homes will, other things equal

Figure 14.2 -Refer to Figure 14.2. A movement from point d to point c could be caused by a(n)

When the price level is low and the demand for domestic goods increases, how does it affect international trade?

Introduction: What Is Economics

The Key Principles of Economics

Demand, Supply, and Market Equilibrium

Elasticity: A Measure of Responsiveness

Production Technology and Cost

Perfect Competition

Monopoly and Price Discrimination

Market Entry, Monopolistic Competition, and Oligopoly

Imperfect Information, External Benefits, and External Costs

The Labor Market and the Distribution of Income

Measuring a Nations Production and Income

Unemployment and Inflation

Why Do Economies Grow

Fiscal Policy

Money and the Banking System

Monetary Policy and Inflation

International Trade and Finance

Filters

Recall the Application about falling oil prices and their effect on the U.S. economy to answer the following question(s). -According to this Application, lower oil prices will the prices of gasoline and heating oil which will the amount of money that consumers have to spend.