Question 1

We draw the long-run aggregate supply curve as a vertical line to reflect the fact that

Accepted Answer

A)  the productive capacity of the economy never changes after full adjustment has occurred. 
B)  changes in the price level do not alter the level of long-run real GDP after full adjustment has occurred. 
C)  technology and resource endowments do not affect long-run real GDP after full adjustment has occurred. 
D)  an accurate depiction of the production possibilities curve is vertical after full adjustment has occurred. 
A)  the productive capacity of the economy never changes after full adjustment has occurred. 
B)  changes in the price level do not alter the level of long-run real GDP after full adjustment has occurred. 
C)  technology and resource endowments do not affect long-run real GDP after full adjustment has occurred. 
D)  an accurate depiction of the production possibilities curve is vertical after full adjustment has occurred.

Question 2

If other factors are held constant, an increase in the price level

Accepted Answer

A)  causes desired net export spending to rise. 
B)  causes desired net export spending to fall. 
C)  causes the real value of the money to increase. 
D)  induces people to spend their money faster. 
A)  causes desired net export spending to rise. 
B)  causes desired net export spending to fall. 
C)  causes the real value of the money to increase. 
D)  induces people to spend their money faster.

Question 3

Which of the following will occur when an economy's price level increases?

Accepted Answer

A)  Aggregate demand will increase. 
B)  The purchasing power of money will increase. 
C)  The purchasing power of money will decrease. 
D)  The real value of wealth will increase. 
A)  Aggregate demand will increase. 
B)  The purchasing power of money will increase. 
C)  The purchasing power of money will decrease. 
D)  The real value of wealth will increase.

Question 4

The aggregate demand curve

Accepted Answer

A)  is like individual demand curves in that prices of other goods are held constant. 
B)  is like individual demand curves in that income is constant. 
C)  differs from individual demand curves in that the aggregate demand curve is not downward sloping. 
D)  differs from individual demand curves in that the aggregate demand curve looks at the entire circular flow of income and product while the individual demand curve looks at only one good. 
A)  is like individual demand curves in that prices of other goods are held constant. 
B)  is like individual demand curves in that income is constant. 
C)  differs from individual demand curves in that the aggregate demand curve is not downward sloping. 
D)  differs from individual demand curves in that the aggregate demand curve looks at the entire circular flow of income and product while the individual demand curve looks at only one good.

Question 5

-In the above figure, a movement from point A to point B can be explained by

Accepted Answer

A)  an decrease in the quantity of money in circulation. 
B)  a decrease in the real value of cash balances. 
C)  the decrease in interest rates. 
D)  the increase in exports to the foreign sector. 
A)  an decrease in the quantity of money in circulation. 
B)  a decrease in the real value of cash balances. 
C)  the decrease in interest rates. 
D)  the increase in exports to the foreign sector.

Question 6

The various quantities of all final commodities demanded at various price levels, ceteris paribus, is the

Accepted Answer

A)  LRAS. 
B)  production possibilities curve. 
C)  aggregate demand curve. 
D)  aggregate supply curve. 
A)  LRAS. 
B)  production possibilities curve. 
C)  aggregate demand curve. 
D)  aggregate supply curve.

Question 7

Steadily improving improvements in technology, other things being equal, will result in

Accepted Answer

A)  no change in the price level and steadily increasing output. 
B)  persistent deflation 
C)  steadily rising price level (inflation) and steadily increasing output. 
D)  a steadily falling price level with no change in output. 
A)  no change in the price level and steadily increasing output. 
B)  persistent deflation 
C)  steadily rising price level (inflation) and steadily increasing output. 
D)  a steadily falling price level with no change in output.

Question 8

The natural rate of unemployment will help determine

Accepted Answer

A)  the open economy effect. 
B)  the position of the long-run aggregate supply curve. 
C)  the level of economic growth in the economy. 
D)  low levels of inflation. 
A)  the open economy effect. 
B)  the position of the long-run aggregate supply curve. 
C)  the level of economic growth in the economy. 
D)  low levels of inflation.

Question 9

Which of the following will NOT lead to a rightward shift of the long-run aggregate supply curve?

Accepted Answer

A)  Increase in labor productivity 
B)  Increase in aggregate demand 
C)  Increase in capital 
D)  Increase in labor 
A)  Increase in labor productivity 
B)  Increase in aggregate demand 
C)  Increase in capital 
D)  Increase in labor

Question 10

-In the above figure, the long-run equilibrium price level is

Accepted Answer

A)  150. 
B)  130. 
C)  110. 
D)  not displayed. 
A)  150. 
B)  130. 
C)  110. 
D)  not displayed.

Question 11

How can the long-run equilibrium level of real Gross Domestic Product (GDP) increase without the price level changing?

Accepted Answer

Since the long-run aggregate supply curv

Question 12

Holding nominal money balances constant, a decrease in the price level

Accepted Answer

A)  causes the real value of the money balances to increase, in turn increasing total planned real expenditures. 
B)  causes the real value of the money balances to decrease, in turn decreasing total planned real expenditures. 
C)  causes the real value of the money balances to increase, thereby increasing the interest rate. 
D)  generates a reduction in the value of the money balances, leading to higher interest rates and a decrease in total planned real expenditures. 
A)  causes the real value of the money balances to increase, in turn increasing total planned real expenditures. 
B)  causes the real value of the money balances to decrease, in turn decreasing total planned real expenditures. 
C)  causes the real value of the money balances to increase, thereby increasing the interest rate. 
D)  generates a reduction in the value of the money balances, leading to higher interest rates and a decrease in total planned real expenditures.

Question 13

Other things being equal, a depreciation of the dollar

Accepted Answer

A)  increases aggregate demand in the United States, and may increase aggregate supply by reducing the prices of imported resources. 
B)  increases aggregate demand in the United States, and may decrease aggregate supply by increasing the prices of imported resources. 
C)  decreases aggregate demand in the United States, and may increase aggregate supply by reducing the prices of imported resources. 
D)  decreases aggregate demand in the United States, and may decrease aggregate supply by increasing the prices of imported resources. 
A)  increases aggregate demand in the United States, and may increase aggregate supply by reducing the prices of imported resources. 
B)  increases aggregate demand in the United States, and may decrease aggregate supply by increasing the prices of imported resources. 
C)  decreases aggregate demand in the United States, and may increase aggregate supply by reducing the prices of imported resources. 
D)  decreases aggregate demand in the United States, and may decrease aggregate supply by increasing the prices of imported resources.

Question 14

Suppose that along the aggregate demand curve, real GDP equals $14.2 trillion when the GDP deflator is 90. If the GDP deflator were 95, real GDP along the aggregate demand curve would equal

Accepted Answer

A)  less than $14.2 trillion. 
B)  $14.2 trillion. 
C)  more than $14.2 trillion but less than $14.8 trillion. 
D)  more than $14.8 trillion. 
A)  less than $14.2 trillion. 
B)  $14.2 trillion. 
C)  more than $14.2 trillion but less than $14.8 trillion. 
D)  more than $14.8 trillion.

Question 15

Which of the following is NOT a reason for the slope of the aggregate demand curve?

Accepted Answer

A)  The substitution effect 
B)  The real balance effect 
C)  The interest rate effect 
D)  The open-economy effect 
A)  The substitution effect 
B)  The real balance effect 
C)  The interest rate effect 
D)  The open-economy effect

Question 16

The long-run aggregate supply curve will shift outward to the right when

Accepted Answer

A)  there is economic growth. 
B)  the price level decreases. 
C)  the real-balance effect increases. 
D)  the amount of labor decreases. 
A)  there is economic growth. 
B)  the price level decreases. 
C)  the real-balance effect increases. 
D)  the amount of labor decreases.

Question 17

An aggregate demand curve

Accepted Answer

A)  shifts to the right when a non-price level change increases total planned real expenditures. 
B)  shifts to the right when a non-price level change decreases total planned real expenditures. 
C)  shifts to the right when the price level falls. 
D)  does not shift to the right or to the left. 
A)  shifts to the right when a non-price level change increases total planned real expenditures. 
B)  shifts to the right when a non-price level change decreases total planned real expenditures. 
C)  shifts to the right when the price level falls. 
D)  does not shift to the right or to the left.

Question 18

If the price level increases,

Accepted Answer

A)  the buying power of your checking account falls. 
B)  the buying power of your checking accounts rises with it. 
C)  there is no effect on buying power. 
D)  the economy tends to grow faster. 
A)  the buying power of your checking account falls. 
B)  the buying power of your checking accounts rises with it. 
C)  there is no effect on buying power. 
D)  the economy tends to grow faster.

Question 19

Aggregate demand reflects

Accepted Answer

A)  planned total spending in the economy. 
B)  planned total production in the economy. 
C)  both spending and production in the economy. 
D)  planned demand for consumer goods only. 
A)  planned total spending in the economy. 
B)  planned total production in the economy. 
C)  both spending and production in the economy. 
D)  planned demand for consumer goods only.

Question 20

Which of the following would unambiguously generate inflation?

Accepted Answer

A)  a decrease in aggregate demand accompanied by an increase in aggregate supply 
B)  an increase in aggregate demand accompanied by an increase in aggregate supply 
C)  a decrease in aggregate demand accompanied by a decrease in aggregate supply 
D)  an increase in aggregate demand accompanied by a decrease in aggregate supply 
A)  a decrease in aggregate demand accompanied by an increase in aggregate supply 
B)  an increase in aggregate demand accompanied by an increase in aggregate supply 
C)  a decrease in aggregate demand accompanied by a decrease in aggregate supply 
D)  an increase in aggregate demand accompanied by a decrease in aggregate supply

Exam 10: Real GDP and the Price Level in the Long Run

We draw the long-run aggregate supply curve as a vertical line to reflect the fact that

If other factors are held constant, an increase in the price level

Which of the following will occur when an economy's price level increases?

The aggregate demand curve

-In the above figure, a movement from point A to point B can be explained by

The various quantities of all final commodities demanded at various price levels, ceteris paribus, is the

Steadily improving improvements in technology, other things being equal, will result in

The natural rate of unemployment will help determine

Which of the following will NOT lead to a rightward shift of the long-run aggregate supply curve?

-In the above figure, the long-run equilibrium price level is

How can the long-run equilibrium level of real Gross Domestic Product (GDP) increase without the price level changing?

Holding nominal money balances constant, a decrease in the price level

Other things being equal, a depreciation of the dollar

Suppose that along the aggregate demand curve, real GDP equals $14.2 trillion when the GDP deflator is 90. If the GDP deflator were 95, real GDP along the aggregate demand curve would equal

Which of the following is NOT a reason for the slope of the aggregate demand curve?

The long-run aggregate supply curve will shift outward to the right when

An aggregate demand curve

If the price level increases,

Aggregate demand reflects

Which of the following would unambiguously generate inflation?

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Measuring the Economys Performance

Global Economic Growth and Development

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money, Banking, and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Demand and Supply Elasticity

Consumer Choice

Rents, Profits, and the Financial Environment of Business

The Firm: Cost and Output Determination

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Regulation and Antitrust Policy in a Globalized Economy

The Labor Market: Demand, Supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, Poverty, and Health Care

Environmental Economics

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

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