Question 1

If potential GDP is equal to $600 billion,what does the long-run aggregate supply curve look like?

Accepted Answer

A) It is a horizontal line at $600 billion of GDP. 
B) It is a vertical line at a level of GDP below $600 billion. 
C) It is a vertical line at $600 billion of GDP. 
D) It is a vertical line at a level of GDP above $600 billion. 
A) It is a horizontal line at $600 billion of GDP. 
B) It is a vertical line at a level of GDP below $600 billion. 
C) It is a vertical line at $600 billion of GDP. 
D) It is a vertical line at a level of GDP above $600 billion.

Question 2

Why does the short-run aggregate supply curve shift to the right in the long run,following a decrease in aggregate demand?

Accepted Answer

A) Workers and firms adjust their expectations of wages and prices downward and they accept lower wages and prices. 
B) Workers and firms adjust their expectations of wages and prices downward and they push for higher wages and prices. 
C) Workers and firms adjust their expectations of wages and prices upward and they push for higher wages and prices. 
D) Workers and firms adjust their expectations of wages and prices upward and they accept lower wages and prices. 
A) Workers and firms adjust their expectations of wages and prices downward and they accept lower wages and prices. 
B) Workers and firms adjust their expectations of wages and prices downward and they push for higher wages and prices. 
C) Workers and firms adjust their expectations of wages and prices upward and they push for higher wages and prices. 
D) Workers and firms adjust their expectations of wages and prices upward and they accept lower wages and prices.

Question 3

A decrease in aggregate demand results in a(n)________ in the ________.

Accepted Answer

A) recession; long run 
B) expansion; long run 
C) expansion; short run 
D) recession; short run 
A) recession; long run 
B) expansion; long run 
C) expansion; short run 
D) recession; short run

Question 4

Suppose the economy is at full employment and firms become more optimistic about the future profitability of new investment.Which of the following will happen in the short run?

Accepted Answer

A) Output will decline. 
B) Prices will decline. 
C) Unemployment will decline. 
D) The aggregate demand curve will shift to the left. 
A) Output will decline. 
B) Prices will decline. 
C) Unemployment will decline. 
D) The aggregate demand curve will shift to the left.

Question 5

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

Accepted Answer

A) the economy experiences technological change. 
B) there is a decrease in population. 
C) the economy experiences high levels of inflation. 
D) net exports decrease. 
A) the economy experiences technological change. 
B) there is a decrease in population. 
C) the economy experiences high levels of inflation. 
D) net exports decrease.

Question 6

Suppose a developing country experiences a reduction in machinery and capital equipment as foreign entrepreneurs decrease the amount of investment in the economy.As a result

Accepted Answer

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

Question 7

Which of the following could explain why there is an increase in potential GDP but the equilibrium level of GDP falls?

Accepted Answer

A) SRAS shifted to the right by more than LRAS. 
B) AD shifted to the right by more than SRAS. 
C) AD shifted to the right by less than SRAS. 
D) AD did not shift and SRAS shifted to the left. 
A) SRAS shifted to the right by more than LRAS. 
B) AD shifted to the right by more than SRAS. 
C) AD shifted to the right by less than SRAS. 
D) AD did not shift and SRAS shifted to the left.

Question 8

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 9

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 10

Following the bursting of the housing bubble in 2005,KB Homes sold ________ new homes and its stock price ________ dramatically.The result was total losses of $2.4 billion between 2007 and 2010.

Accepted Answer

A) fewer; rose 
B) fewer; fell 
C) more; rose 
D) more; fell 
A) fewer; rose 
B) fewer; fell 
C) more; rose 
D) more; fell

Question 11

A decrease in the price level results in a(n)________ in the quantity of real GDP demanded because a lower price level ________ consumption,investment,and net exports.

Accepted Answer

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

Question 12

A decrease in investment causes the price level to ________ in the short run and ________ in the long run.

Accepted Answer

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

Question 13

Changes in the price level

Accepted Answer

A) increase the level of aggregate supply in the long run. 
B) decrease the level of aggregate supply in the long run. 
C) do not affect the level of aggregate supply in the long run. 
D) increase the level of aggregate supply in the long run only at very high levels of output. 
A) increase the level of aggregate supply in the long run. 
B) decrease the level of aggregate supply in the long run. 
C) do not affect the level of aggregate supply in the long run. 
D) increase the level of aggregate supply in the long run only at very high levels of output.

Question 14

The basic aggregate demand and aggregate supply curve model helps explain

Accepted Answer

A) short-term fluctuations in real GDP and the price level. 
B) long-term growth. 
C) price fluctuations in an individual market. 
D) output fluctuations in an individual market. 
A) short-term fluctuations in real GDP and the price level. 
B) long-term growth. 
C) price fluctuations in an individual market. 
D) output fluctuations in an individual market.

Question 15

Figure 13-1  
-Refer to Figure 13-1.Ceteris paribus,an increase in the value of the domestic currency relative to foreign currencies 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 16

Which of the following will shift the aggregate demand curve to the left,ceteris paribus?

Accepted Answer

A) an increase in interest rates 
B) an increase in disposable income 
C) an increase in expected profits for firms 
D) an increase in net exports 
A) an increase in interest rates 
B) an increase in disposable income 
C) an increase in expected profits for firms 
D) an increase in net exports

Question 17

Figure 13-1  
-Refer to Figure 13-1.Ceteris paribus,an increase 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.

Question 18

On average,in the recessions since 1950,it has taken ________ for real GDP to return to its cyclical peak.

Accepted Answer

A) about 6 months 
B) about 1 year 
C) about 18 months 
D) almost 2.5 years 
A) about 6 months 
B) about 1 year 
C) about 18 months 
D) almost 2.5 years

Question 19

Which of the following is considered a negative supply shock?

Accepted Answer

A) increasing immigration in the economy causes the labor supply to rise 
B) an improvement in technology 
C) an increase in unemployment 
D) an unexpected decrease in the refining capacity for oil 
A) increasing immigration in the economy causes the labor supply to rise 
B) an improvement in technology 
C) an increase in unemployment 
D) an unexpected decrease in the refining capacity for oil

Question 20

Stagflation occurs when short-run aggregate supply decreases.

Accepted Answer

A) True 
 B)False

If potential GDP is equal to $600 billion,what does the long-run aggregate supply curve look like?

Why does the short-run aggregate supply curve shift to the right in the long run,following a decrease in aggregate demand?

A decrease in aggregate demand results in a(n) in the .

Suppose the economy is at full employment and firms become more optimistic about the future profitability of new investment.Which of the following will happen in the short run?

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

Suppose a developing country experiences a reduction in machinery and capital equipment as foreign entrepreneurs decrease the amount of investment in the economy.As a result

Which of the following could explain why there is an increase in potential GDP but the equilibrium level of GDP falls?

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

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

Following the bursting of the housing bubble in 2005,KB Homes sold new homes and its stock price dramatically.The result was total losses of $2.4 billion between 2007 and 2010.

A decrease in the price level results in a(n) in the quantity of real GDP demanded because a lower price level consumption,investment,and net exports.

A decrease in investment causes the price level to in the short run and in the long run.

Changes in the price level

The basic aggregate demand and aggregate supply curve model helps explain

Figure 13-1 -Refer to Figure 13-1.Ceteris paribus,an increase in the value of the domestic currency relative to foreign currencies would be represented by a movement from

Which of the following will shift the aggregate demand curve to the left,ceteris paribus?

Figure 13-1 -Refer to Figure 13-1.Ceteris paribus,an increase in the price level would be represented by a movement from

On average,in the recessions since 1950,it has taken ________ for real GDP to return to its cyclical peak.

Which of the following is considered a negative supply shock?

Stagflation occurs when short-run aggregate supply decreases.

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

If potential GDP is equal to $600 billion,what does the long-run aggregate supply curve look like?

Why does the short-run aggregate supply curve shift to the right in the long run,following a decrease in aggregate demand?

A decrease in aggregate demand results in a(n)________ in the ________.

Suppose the economy is at full employment and firms become more optimistic about the future profitability of new investment.Which of the following will happen in the short run?

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

Suppose a developing country experiences a reduction in machinery and capital equipment as foreign entrepreneurs decrease the amount of investment in the economy.As a result

Which of the following could explain why there is an increase in potential GDP but the equilibrium level of GDP falls?

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

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

Following the bursting of the housing bubble in 2005,KB Homes sold ________ new homes and its stock price ________ dramatically.The result was total losses of $2.4 billion between 2007 and 2010.

A decrease in the price level results in a(n)________ in the quantity of real GDP demanded because a lower price level ________ consumption,investment,and net exports.

A decrease in investment causes the price level to ________ in the short run and ________ in the long run.

Changes in the price level

The basic aggregate demand and aggregate supply curve model helps explain

Figure 13-1 -Refer to Figure 13-1.Ceteris paribus,an increase in the value of the domestic currency relative to foreign currencies would be represented by a movement from

Which of the following will shift the aggregate demand curve to the left,ceteris paribus?

Figure 13-1 -Refer to Figure 13-1.Ceteris paribus,an increase in the price level would be represented by a movement from

On average,in the recessions since 1950,it has taken ________ for real GDP to return to its cyclical peak.

Which of the following is considered a negative supply shock?

Stagflation occurs when short-run aggregate supply decreases.

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

A decrease in aggregate demand results in a(n) in the .

Following the bursting of the housing bubble in 2005,KB Homes sold new homes and its stock price dramatically.The result was total losses of $2.4 billion between 2007 and 2010.

A decrease in the price level results in a(n) in the quantity of real GDP demanded because a lower price level consumption,investment,and net exports.

A decrease in investment causes the price level to in the short run and in the long run.