Question 1

Real GDP will increase over the long run if

Accepted Answer

A)  prices continually go up. 
B)  the long-run aggregate supply curve shifts continually to the right. 
C)  the long-run aggregate supply curve shifts continually to the left. 
D)  the long-run aggregate demand curve shifts continually to the left. 
A)  prices continually go up. 
B)  the long-run aggregate supply curve shifts continually to the right. 
C)  the long-run aggregate supply curve shifts continually to the left. 
D)  the long-run aggregate demand curve shifts continually to the left.

Question 2

Which of the following cause the aggregate demand curve to slope downward and to the right?

Accepted Answer

A)  the prices of key goods 
B)  the interest rate effect 
C)  military expenditures of the government 
D)  the demand-shock effect 
A)  the prices of key goods 
B)  the interest rate effect 
C)  military expenditures of the government 
D)  the demand-shock effect

Question 3

What is measured on the horizontal axis when we draw a graph of the long-run aggregate supply curve?

Accepted Answer

A)  production of capital goods 
B)  production of consumer goods 
C)  the price level 
D)  real GDP 
A)  production of capital goods 
B)  production of consumer goods 
C)  the price level 
D)  real GDP

Question 4

What is the shape of the long-run aggregate supply curve? Why?

Accepted Answer

The long-run aggregate supply curve is v

Question 5

Which of the following can cause supply-side inflation?

Accepted Answer

A)  an increase in human capital 
B)  increases in the money supply 
C)  tax cuts 
D)  none of the above 
A)  an increase in human capital 
B)  increases in the money supply 
C)  tax cuts 
D)  none of the above

Question 6

The long-run aggregate supply curve is

Accepted Answer

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

Question 7

If there is persistent inflation,

Accepted Answer

A)  long-run aggregate supply is growing at a faster rate than aggregate demand. 
B)  long-run aggregate supply is growing at a slower rate than aggregate demand. 
C)  there is an excess of total planned expenditures. 
D)  long-run aggregate supply is constant. 
A)  long-run aggregate supply is growing at a faster rate than aggregate demand. 
B)  long-run aggregate supply is growing at a slower rate than aggregate demand. 
C)  there is an excess of total planned expenditures. 
D)  long-run aggregate supply is constant.

Question 8

Over the past several decades, what has been true about inflation in the United States?

Accepted Answer

A)  Inflation rates have been consistently negative. 
B)  The nation has experienced persistent deflation. 
C)  Inflation has been very stable. 
D)  Inflation rates have been consistently positive. 
A)  Inflation rates have been consistently negative. 
B)  The nation has experienced persistent deflation. 
C)  Inflation has been very stable. 
D)  Inflation rates have been consistently positive.

Question 9

The total level of all planned expenditures in the economy best describes

Accepted Answer

A)  aggregate supply. 
B)  aggregate demand. 
C)  aggregate expenditures. 
D)  both B and C are correct. 
A)  aggregate supply. 
B)  aggregate demand. 
C)  aggregate expenditures. 
D)  both B and C are correct.

Question 10

Which of the following is consistent with secular deflation?

Accepted Answer

A)  a persistently decreasing price level caused by several periods of economic growth with stable AD 
B)  a persistently increasing price level caused by several periods of economic growth with decreasing AD 
C)  a persistently decreasing price level caused by increases in government expenditures 
D)  a persistently decreasing price level caused by money being withdrawn from the economy 
A)  a persistently decreasing price level caused by several periods of economic growth with stable AD 
B)  a persistently increasing price level caused by several periods of economic growth with decreasing AD 
C)  a persistently decreasing price level caused by increases in government expenditures 
D)  a persistently decreasing price level caused by money being withdrawn from the economy

Question 11

The aggregate demand curve gives

Accepted Answer

A)  the total amount of real domestic output that will be purchased at each price level. 
B)  the total amount of nominal domestic income that will be purchased at each price level. 
C)  the total value of nominal GDP in an economy for a year, holding income and technology constant. 
D)  the total value of output produced by workers in both foreign and domestic markets at each price level. 
A)  the total amount of real domestic output that will be purchased at each price level. 
B)  the total amount of nominal domestic income that will be purchased at each price level. 
C)  the total value of nominal GDP in an economy for a year, holding income and technology constant. 
D)  the total value of output produced by workers in both foreign and domestic markets at each price level.

Question 12

If the dollar appreciates and foreign goods become less expensive, the total planned expenditures on domestic goods and services will

Accepted Answer

A)  fall due to the open economy effect. 
B)  fall due to the interest rate effect. 
C)  increase due to the open economy effect. 
D)  increase due to the interest rate effect. 
A)  fall due to the open economy effect. 
B)  fall due to the interest rate effect. 
C)  increase due to the open economy effect. 
D)  increase due to the interest rate effect.

Question 13

The interest rate effect shows that if the price level increases,

Accepted Answer

A)  consumers and businesses will increase their spending to buy the same amount of goods as before to make up for the higher interest rates. 
B)  consumers and businesses will decrease their spending as the interest rate increases, thereby pushing up the cost of acquiring funds. 
C)  U.S. exports and imports will both decrease. 
D)  the real value of financial assets will increase. 
A)  consumers and businesses will increase their spending to buy the same amount of goods as before to make up for the higher interest rates. 
B)  consumers and businesses will decrease their spending as the interest rate increases, thereby pushing up the cost of acquiring funds. 
C)  U.S. exports and imports will both decrease. 
D)  the real value of financial assets will increase.

Question 14

What information is provided by the aggregate demand curve?

Accepted Answer

The aggregate demand curve relates total

Question 15

The aggregate demand curve is usually

Accepted Answer

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

Question 16

Secular deflation occurs when

Accepted Answer

A)  there is no economic growth and aggregate demand falls. 
B)  aggregate demand increases at the same time there is no economic growth. 
C)  aggregate demand remains unchanged while economic growth increases long-run aggregate supply. 
D)  both aggregate demand and aggregate supply are shifting left. 
A)  there is no economic growth and aggregate demand falls. 
B)  aggregate demand increases at the same time there is no economic growth. 
C)  aggregate demand remains unchanged while economic growth increases long-run aggregate supply. 
D)  both aggregate demand and aggregate supply are shifting left.

Question 17

When the price level falls,

Accepted Answer

A)  imports increase, and exports decrease, which causes a movement up along the aggregate demand curve. 
B)  there is no impact on imports or exports, so there is no associated movement along the aggregate demand curve. 
C)  imports decrease and exports increase, which cause a movement down along the aggregate demand curve. 
D)  imports decrease and exports increase, which cause a movement up along the aggregate demand curve. 
A)  imports increase, and exports decrease, which causes a movement up along the aggregate demand curve. 
B)  there is no impact on imports or exports, so there is no associated movement along the aggregate demand curve. 
C)  imports decrease and exports increase, which cause a movement down along the aggregate demand curve. 
D)  imports decrease and exports increase, which cause a movement up along the aggregate demand curve.

Question 18

The long-run aggregate supply curve is

Accepted Answer

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

Question 19

Aggregate supply is

Accepted Answer

A)  the summation of all product supply curves. 
B)  the horizontal summation of all supply curves for services. 
C)  the stock of all goods in the economy. 
D)  the sum of all planned production in the economy. 
A)  the summation of all product supply curves. 
B)  the horizontal summation of all supply curves for services. 
C)  the stock of all goods in the economy. 
D)  the sum of all planned production in the economy.

Question 20

In the long run, persistent inflation in the United States is caused by

Accepted Answer

A)  leftward shifts in both the long-run aggregate supply curve and in the aggregate demand curve. 
B)  rightward shifts in the long-run aggregate supply curve and the leftward shift of the aggregate demand curve. 
C)  a faster rightward shift of the aggregate demand curve than the rightward shift of the long-run aggregate supply curve. 
D)  leftward shifts in the aggregate demand curve while the position of the long-run supply curve is unchanged. 
A)  leftward shifts in both the long-run aggregate supply curve and in the aggregate demand curve. 
B)  rightward shifts in the long-run aggregate supply curve and the leftward shift of the aggregate demand curve. 
C)  a faster rightward shift of the aggregate demand curve than the rightward shift of the long-run aggregate supply curve. 
D)  leftward shifts in the aggregate demand curve while the position of the long-run supply curve is unchanged.

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

Real GDP will increase over the long run if

Which of the following cause the aggregate demand curve to slope downward and to the right?

What is measured on the horizontal axis when we draw a graph of the long-run aggregate supply curve?

What is the shape of the long-run aggregate supply curve? Why?

Which of the following can cause supply-side inflation?

The long-run aggregate supply curve is

If there is persistent inflation,

Over the past several decades, what has been true about inflation in the United States?

The total level of all planned expenditures in the economy best describes

Which of the following is consistent with secular deflation?

The aggregate demand curve gives

If the dollar appreciates and foreign goods become less expensive, the total planned expenditures on domestic goods and services will

The interest rate effect shows that if the price level increases,

What information is provided by the aggregate demand curve?

The aggregate demand curve is usually

Secular deflation occurs when

When the price level falls,

The long-run aggregate supply curve is

Aggregate supply is

In the long run, persistent inflation in the United States is caused by

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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