Question 1

When the economy is at an above full-employment equilibrium, ________.

Accepted Answer

A)  nominal GDP exceeds real GDP 
B)  an inflationary gap exists 
C)  a recessionary gap exists 
D)  real GDP is less than potential GDP 
A)  nominal GDP exceeds real GDP 
B)  an inflationary gap exists 
C)  a recessionary gap exists 
D)  real GDP is less than potential GDP B

Question 2

-Suppose the economy is at point B. If firms expect profits will be higher in the future, to what point might the economy's move in the short run?

Accepted Answer

A)  It stays at point B. 
B)  It shifts to a point such as A. 
C)  It shifts to a point such as C. 
D)  None of the above answers are correct because it is the SAS curve that shifts, not the AD curve. 
A)  It stays at point B. 
B)  It shifts to a point such as A. 
C)  It shifts to a point such as C. 
D)  None of the above answers are correct because it is the SAS curve that shifts, not the AD curve. C

Question 3

As world economies start to recover from the 2008 financial crisis and firms expect profits to increase

Accepted Answer

A)  the price level in the U.S. will decrease as firms increase investment. 
B)  the U.S. short-run aggregate supply curve immediately will shift rightward. 
C)  investment will increase and there will be a movement up along the aggregate demand curve. 
D)  both investment and aggregate demand will increase. 
A)  the price level in the U.S. will decrease as firms increase investment. 
B)  the U.S. short-run aggregate supply curve immediately will shift rightward. 
C)  investment will increase and there will be a movement up along the aggregate demand curve. 
D)  both investment and aggregate demand will increase. D

Question 4

In the short run, a decrease in government expenditure ________ real GDP and ________ the price level.

Accepted Answer

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

Question 5

The economy is in its short run equilibrium at the point where the

Accepted Answer

A)  price level is stable. 
B)  SAS curve intersects the LAS curve. 
C)  AD curve intersects the LAS curve. 
D)  AD curve intersects the SAS curve. 
A)  price level is stable. 
B)  SAS curve intersects the LAS curve. 
C)  AD curve intersects the LAS curve. 
D)  AD curve intersects the SAS curve.

Question 6

In a change to immigration policy during 2012, "people younger than 30 who came to the United States before the age of 16, pose no criminal or security threat, and were successful students or served in the military can get a two-year deferral from deportation", Homeland Security Secretary Janet Napolitano said, according to CNN, 06/16/2012. If many of these immigrants had previously been afraid to work, now as a result of being able to work legally

Accepted Answer

A)  both the short-run and long-run aggregate supply curves shift rightward. 
B)  only the long-run aggregate supply curve shifts rightward. 
C)  only the short-run aggregate supply curve shifts rightward. 
D)  neither the short-run nor the long-run supply curve shift. 
A)  both the short-run and long-run aggregate supply curves shift rightward. 
B)  only the long-run aggregate supply curve shifts rightward. 
C)  only the short-run aggregate supply curve shifts rightward. 
D)  neither the short-run nor the long-run supply curve shift.

Question 7

The long-run aggregate supply curve is

Accepted Answer

A)  horizontal at the full-employment price level. 
B)  vertical at the full-employment level of real GDP. 
C)  upward sloping because of the effects of price level changes on real GDP. 
D)  the same as the short-run aggregate supply curve. 
A)  horizontal at the full-employment price level. 
B)  vertical at the full-employment level of real GDP. 
C)  upward sloping because of the effects of price level changes on real GDP. 
D)  the same as the short-run aggregate supply curve.

Question 8

What two variables are determined in an aggregate supply-aggregate demand figure? Is the slope of the short-run aggregate supply curve positive or negative? Is the slope of the aggregate demand curve positive or negative?

Accepted Answer

The aggregate supply-aggregate demand fr

Question 9

At long-run macroeconomic equilibrium, ________.

Accepted Answer

A)  an inflationary gap exists 
B)  real GDP equals potential GDP 
C)  a recessionary gap exists 
D)  real GDP is less than potential GDP but is as close as it is possible to be 
A)  an inflationary gap exists 
B)  real GDP equals potential GDP 
C)  a recessionary gap exists 
D)  real GDP is less than potential GDP but is as close as it is possible to be

Question 10

A rise in the price level changes aggregate demand because

Accepted Answer

A)  firms increase their investment when prices are higher. 
B)  the real value of people's wealth varies directly with the price level and so does their spending. 
C)  the real value of people's wealth decreases and so they decrease their consumption. 
D)  the more money people have, the more it is worth and hence the more goods and services they demand. 
A)  firms increase their investment when prices are higher. 
B)  the real value of people's wealth varies directly with the price level and so does their spending. 
C)  the real value of people's wealth decreases and so they decrease their consumption. 
D)  the more money people have, the more it is worth and hence the more goods and services they demand.

Question 11

-In the above figure, which movement illustrates the impact of the price level and money wage rate rising at the same rate?

Accepted Answer

A)  E to H 
B)  E to K 
C)  E to G 
D)  E to J 
A)  E to H 
B)  E to K 
C)  E to G 
D)  E to J

Question 12

If the economy is at long run equilibrium then

Accepted Answer

A)  real GDP equals potential GDP. 
B)  nominal GDP equals potential GDP. 
C)  real GDP cannot be equal to potential GDP. 
D)  real GDP can be greater than, less than, or equal to potential GDP. 
A)  real GDP equals potential GDP. 
B)  nominal GDP equals potential GDP. 
C)  real GDP cannot be equal to potential GDP. 
D)  real GDP can be greater than, less than, or equal to potential GDP.

Question 13

-In the above figure, the aggregate demand curve is AD?, so the long-run equilibrium level of real GDP is

Accepted Answer

A)  $16 trillion. 
B)  $16.5 trillion. 
C)  more than $16 and less than $16.5 trillion. 
D)  None of the above answers is correct. 
A)  $16 trillion. 
B)  $16.5 trillion. 
C)  more than $16 and less than $16.5 trillion. 
D)  None of the above answers is correct.

Question 14

In the short-run macroeconomic equilibrium

Accepted Answer

A)  real GDP equals potential GDP and aggregate demand determines the price level. 
B)  the price level is fixed and short-run aggregate supply determines real GDP. 
C)  real GDP and the price level are determined by short-run aggregate supply and aggregate demand. 
D)  real GDP is always less than potential GDP. 
A)  real GDP equals potential GDP and aggregate demand determines the price level. 
B)  the price level is fixed and short-run aggregate supply determines real GDP. 
C)  real GDP and the price level are determined by short-run aggregate supply and aggregate demand. 
D)  real GDP is always less than potential GDP.

Question 15

-The table above shows Yellowland's economy aggregate demand and supply schedules. Yellowland's potential GDP is $300 billion.
a)Plot the aggregate demand curve, the short-run aggregate supply curve, and the long-run aggregate supply curve.
b)What are the short-run equilibrium real GDP and price level in Yellowland?
c)What is the long-run equilibrium real GDP?
d)Is Yellowland's short-run macroeconomic equilibrium a full-employment equilibrium, below full-employment equilibrium, or above full-employment equilibrium? What is the recessionary gap (if any)? What is the inflationary gap (if any)?
e)Suppose aggregate supply decreases by $150 billion. Plot the new aggregate supply curve. How do real GDP and the price level change in the short run?
f)Is Yellowland's new short-run macroeconomic equilibrium a full-employment equilibrium, below full-employment equilibrium, or above full-employment equilibrium? What is the recessionary gap (if any)? What is the inflationary gap (if any)?

Accepted Answer

@#IMG-DLM& 
a)See the figure above. The short-run

Question 16

An increase in aggregate demand is shown by a

Accepted Answer

A)  rightward shift of the AD curve. 
B)  movement upward along the AD curve. 
C)  movement downward along the AD curve. 
D)  leftward shift of the AD curve. 
A)  rightward shift of the AD curve. 
B)  movement upward along the AD curve. 
C)  movement downward along the AD curve. 
D)  leftward shift of the AD curve.

Question 17

-In the above figure, if the economy is at point a, an increase in ________ will move the economy to ________.

Accepted Answer

A)  real wealth; point d 
B)  real wealth from a fall in the price level; point d 
C)  expected future income; point b 
D)  expected future income; point d 
A)  real wealth; point d 
B)  real wealth from a fall in the price level; point d 
C)  expected future income; point b 
D)  expected future income; point d

Question 18

The AS/AD model studies the relationship between

Accepted Answer

A)  the price level and unemployment. 
B)  the price level and real GDP. 
C)  unemployment and real GDP. 
D)  nominal GDP and inflation. 
A)  the price level and unemployment. 
B)  the price level and real GDP. 
C)  unemployment and real GDP. 
D)  nominal GDP and inflation.

Question 19

If the full-employment quantity of labor increases, then the

Accepted Answer

A)  LAS curve shifts rightward and the SAS curve does not shift. 
B)  SAS curve shifts rightward and the LAS curve does not shift. 
C)  SAS curve shifts rightward and the LAS curve shifts rightward. 
D)  SAS curve shifts rightward and the LAS curve does shifts leftward. 
A)  LAS curve shifts rightward and the SAS curve does not shift. 
B)  SAS curve shifts rightward and the LAS curve does not shift. 
C)  SAS curve shifts rightward and the LAS curve shifts rightward. 
D)  SAS curve shifts rightward and the LAS curve does shifts leftward.

Question 20

Which of the following shifts the aggregate demand curve rightward?

Accepted Answer

A)  an increase in tax rates 
B)  an increase in government expenditure 
C)  an increase in the exchange rate 
D)  an increase in imports 
A)  an increase in tax rates 
B)  an increase in government expenditure 
C)  an increase in the exchange rate 
D)  an increase in imports

When the economy is at an above full-employment equilibrium, ________.

-Suppose the economy is at point B. If firms expect profits will be higher in the future, to what point might the economy's move in the short run?

As world economies start to recover from the 2008 financial crisis and firms expect profits to increase

In the short run, a decrease in government expenditure real GDP and the price level.

The economy is in its short run equilibrium at the point where the

The long-run aggregate supply curve is

What two variables are determined in an aggregate supply-aggregate demand figure? Is the slope of the short-run aggregate supply curve positive or negative? Is the slope of the aggregate demand curve positive or negative?

At long-run macroeconomic equilibrium, ________.

A rise in the price level changes aggregate demand because

-In the above figure, which movement illustrates the impact of the price level and money wage rate rising at the same rate?

If the economy is at long run equilibrium then

-In the above figure, the aggregate demand curve is AD?, so the long-run equilibrium level of real GDP is

In the short-run macroeconomic equilibrium

An increase in aggregate demand is shown by a

-In the above figure, if the economy is at point a, an increase in will move the economy to .

The AS/AD model studies the relationship between

If the full-employment quantity of labor increases, then the

Which of the following shifts the aggregate demand curve rightward?

What Is Economics?

The Economic Problem

Demand and Supply

Measuring GDP and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Expenditure Multipliers

The Business Cycle, Inflation, and Deflation

Fiscal Policy

Monetary Policy

International Trade Policy

Filters

Exam 10: Aggregate Supply and Aggregate Demand

When the economy is at an above full-employment equilibrium, ________.

-Suppose the economy is at point B. If firms expect profits will be higher in the future, to what point might the economy's move in the short run?

As world economies start to recover from the 2008 financial crisis and firms expect profits to increase

In the short run, a decrease in government expenditure ________ real GDP and ________ the price level.

The economy is in its short run equilibrium at the point where the

The long-run aggregate supply curve is

What two variables are determined in an aggregate supply-aggregate demand figure? Is the slope of the short-run aggregate supply curve positive or negative? Is the slope of the aggregate demand curve positive or negative?

At long-run macroeconomic equilibrium, ________.

A rise in the price level changes aggregate demand because

-In the above figure, which movement illustrates the impact of the price level and money wage rate rising at the same rate?

If the economy is at long run equilibrium then

-In the above figure, the aggregate demand curve is AD?, so the long-run equilibrium level of real GDP is

In the short-run macroeconomic equilibrium

An increase in aggregate demand is shown by a

-In the above figure, if the economy is at point a, an increase in ________ will move the economy to ________.

The AS/AD model studies the relationship between

If the full-employment quantity of labor increases, then the

Which of the following shifts the aggregate demand curve rightward?

What Is Economics?

The Economic Problem

Demand and Supply

Measuring GDP and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Expenditure Multipliers

The Business Cycle, Inflation, and Deflation

Fiscal Policy

Monetary Policy

International Trade Policy

Filters

In the short run, a decrease in government expenditure real GDP and the price level.

-In the above figure, if the economy is at point a, an increase in will move the economy to .