Question 1

The business cycle ________ on KB Homes since the company's inception over 60 years ago.

Accepted Answer

A) has had virtually no effect 
B) has always had a negative effect 
C) has had a large effect 
D) has always had a positive effect 
A) has had virtually no effect 
B) has always had a negative effect 
C) has had a large effect 
D) has always had a positive effect

Question 2

Which of the following best describes the "interest rate effect"?

Accepted Answer

A) An increase in the price level raises the interest rate and chokes off government spending. 
B) An increase in the price level lowers the interest rate and chokes off government spending. 
C) An increase in the price level raises the interest rate and chokes off investment and consumption spending. 
D) An increase in the price level lowers the interest rate and chokes off investment and consumption spending. 
A) An increase in the price level raises the interest rate and chokes off government spending. 
B) An increase in the price level lowers the interest rate and chokes off government spending. 
C) An increase in the price level raises the interest rate and chokes off investment and consumption spending. 
D) An increase in the price level lowers the interest rate and chokes off investment and consumption spending.

Question 3

Figure 13-3  
-Refer to Figure 13-3.Suppose the economy is at point A.If government spending increases in the economy,where will the eventual long-run equilibrium be?

Accepted Answer

A) A 
B) B 
C) C 
D) D 
A) A 
B) B 
C) C 
D) D

Question 4

The automatic mechanism ________ the price level in the case of ________ and ________ the price level in the case of ________.

Accepted Answer

A) raises; recession; lowers; expansion 
B) raises; expansion raises; recession 
C) lowers; expansion; lowers; recession 
D) lowers; recession; raises; expansion 
A) raises; recession; lowers; expansion 
B) raises; expansion raises; recession 
C) lowers; expansion; lowers; recession 
D) lowers; recession; raises; expansion

Question 5

Why does the short-run aggregate supply curve slope upward?

Accepted Answer

The short-run aggregate supply curve slo

Question 6

The international trade effect states that a(n)________ in the price level will ________ net exports.

Accepted Answer

A) increase; increase 
B) increase; decrease 
C) decrease; decrease 
D) decrease; not affect 
A) increase; increase 
B) increase; decrease 
C) decrease; decrease 
D) decrease; not affect

Question 7

The monetary growth rule is a plan for increasing the quantity of money

Accepted Answer

A) at a fixed rate that does not respond to changes in the economic condition. 
B) at a rate which increases as the economy grows. 
C) at a rate which decreases as the economy declines. 
D) at a rate which increases during recessions and decreases during expansions. 
A) at a fixed rate that does not respond to changes in the economic condition. 
B) at a rate which increases as the economy grows. 
C) at a rate which decreases as the economy declines. 
D) at a rate which increases during recessions and decreases during expansions.

Question 8

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 9

In 2005,Hurricane Katrina destroyed oil and natural gas refining capacity in the Gulf of Mexico.This subsequently drove up natural gas,gasoline,and heating oil prices.As a result,this should

Accepted Answer

A) shift the short-run aggregate supply curve to the left. 
B) shift the short-run aggregate supply curve to the right. 
C) move the economy up along a stationary short-run aggregate supply curve. 
D) move the economy down along a stationary short-run aggregate supply curve. 
A) shift the short-run aggregate supply curve to the left. 
B) shift the short-run aggregate supply curve to the right. 
C) move the economy up along a stationary short-run aggregate supply curve. 
D) move the economy down along a stationary short-run aggregate supply curve.

Question 10

Figure 13-3  
-Refer to Figure 13-3.Suppose the economy is at point A.If investment spending increases in the economy,where will the eventual long-run equilibrium be?

Accepted Answer

A) A 
B) B 
C) C 
D) D 
A) A 
B) B 
C) C 
D) D

Question 11

Lower personal income taxes

Accepted Answer

A) increase aggregate demand. 
B) decrease disposable income. 
C) decrease aggregate demand. 
D) increase transfer payments. 
A) increase aggregate demand. 
B) decrease disposable income. 
C) decrease aggregate demand. 
D) increase transfer payments.

Question 12

How do changes in income tax policies affect aggregate demand?

Accepted Answer

A) Higher taxes increase disposable income,consumption,and aggregate demand. 
B) Higher taxes reduce disposable income,consumption,and aggregate demand. 
C) Higher taxes increase corporate investment and aggregate demand. 
D) Higher taxes increase aggregate supply and thus increase aggregate demand as well. 
A) Higher taxes increase disposable income,consumption,and aggregate demand. 
B) Higher taxes reduce disposable income,consumption,and aggregate demand. 
C) Higher taxes increase corporate investment and aggregate demand. 
D) Higher taxes increase aggregate supply and thus increase aggregate demand as well.

Question 13

Ceteris paribus,in the long run,a negative supply shock causes

Accepted Answer

A) the long-run aggregate supply curve to shift to the left. 
B) the price level to rise initially,and then return to its lower level. 
C) unemployment to fall below its short-run level. 
D) equilibrium real GDP to fall. 
A) the long-run aggregate supply curve to shift to the left. 
B) the price level to rise initially,and then return to its lower level. 
C) unemployment to fall below its short-run level. 
D) equilibrium real GDP to fall.

Question 14

Figure 13-2  
-Refer to Figure 13-2.Ceteris paribus,a decrease in the expected price of an important natural resource 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 15

Workers and firms both expect that prices will be 3% higher next year than they are this year.As a result

Accepted Answer

A) workers will be willing to take lower wages next year. 
B) the purchasing power of wages will rise if wages increase by 3%. 
C) the short-run aggregate supply curve will shift to the left as wages increase. 
D) aggregate demand will increase by 3%. 
A) workers will be willing to take lower wages next year. 
B) the purchasing power of wages will rise if wages increase by 3%. 
C) the short-run aggregate supply curve will shift to the left as wages increase. 
D) aggregate demand will increase by 3%.

Question 16

Figure 13-3  
-Refer to Figure 13-3.Which of the points in the above graph are possible long-run equilibria?

Accepted Answer

A) A and B 
B) A and C 
C) A and D 
D) B and D 
A) A and B 
B) A and C 
C) A and D 
D) B and D

Question 17

Figure 13-1  
-Refer to Figure 13-1.Ceteris paribus,a decrease in households' expectations of their future income 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 18

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 19

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

Accepted Answer

A) True 
 B)False

Question 20

Briefly describe monetarism and the monetary growth rule.

Accepted Answer

Monetarism refers to the macroeconomic t

The business cycle ________ on KB Homes since the company's inception over 60 years ago.

Which of the following best describes the "interest rate effect"?

Figure 13-3 -Refer to Figure 13-3.Suppose the economy is at point A.If government spending increases in the economy,where will the eventual long-run equilibrium be?

The automatic mechanism the price level in the case of and the price level in the case of .

Why does the short-run aggregate supply curve slope upward?

The international trade effect states that a(n) in the price level will net exports.

The monetary growth rule is a plan for increasing the quantity of money

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.

In 2005,Hurricane Katrina destroyed oil and natural gas refining capacity in the Gulf of Mexico.This subsequently drove up natural gas,gasoline,and heating oil prices.As a result,this should

Figure 13-3 -Refer to Figure 13-3.Suppose the economy is at point A.If investment spending increases in the economy,where will the eventual long-run equilibrium be?

Lower personal income taxes

How do changes in income tax policies affect aggregate demand?

Ceteris paribus,in the long run,a negative supply shock causes

Figure 13-2 -Refer to Figure 13-2.Ceteris paribus,a decrease in the expected price of an important natural resource would be represented by a movement from

Workers and firms both expect that prices will be 3% higher next year than they are this year.As a result

Figure 13-3 -Refer to Figure 13-3.Which of the points in the above graph are possible long-run equilibria?

Figure 13-1 -Refer to Figure 13-1.Ceteris paribus,a decrease in households' expectations of their future income would be represented by a movement from

According to the real business cycle model

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

Briefly describe monetarism and the monetary growth rule.

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: The Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Money,Banks,and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, Unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

Exam 13: Aggregate Demand and Aggregate Supply Analysis

The business cycle ________ on KB Homes since the company's inception over 60 years ago.

Which of the following best describes the "interest rate effect"?

Figure 13-3 -Refer to Figure 13-3.Suppose the economy is at point A.If government spending increases in the economy,where will the eventual long-run equilibrium be?

The automatic mechanism ________ the price level in the case of ________ and ________ the price level in the case of ________.

Why does the short-run aggregate supply curve slope upward?

The international trade effect states that a(n)________ in the price level will ________ net exports.

The monetary growth rule is a plan for increasing the quantity of money

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.

In 2005,Hurricane Katrina destroyed oil and natural gas refining capacity in the Gulf of Mexico.This subsequently drove up natural gas,gasoline,and heating oil prices.As a result,this should

Figure 13-3 -Refer to Figure 13-3.Suppose the economy is at point A.If investment spending increases in the economy,where will the eventual long-run equilibrium be?

Lower personal income taxes

How do changes in income tax policies affect aggregate demand?

Ceteris paribus,in the long run,a negative supply shock causes

Figure 13-2 -Refer to Figure 13-2.Ceteris paribus,a decrease in the expected price of an important natural resource would be represented by a movement from

Workers and firms both expect that prices will be 3% higher next year than they are this year.As a result

Figure 13-3 -Refer to Figure 13-3.Which of the points in the above graph are possible long-run equilibria?

Figure 13-1 -Refer to Figure 13-1.Ceteris paribus,a decrease in households' expectations of their future income would be represented by a movement from

According to the real business cycle model

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

Briefly describe monetarism and the monetary growth rule.

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: The Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Money,Banks,and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, Unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

The automatic mechanism the price level in the case of and the price level in the case of .

The international trade effect states that a(n) in the price level will net exports.

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.