Question 1

Fluctuations in aggregate demand and aggregate supply explain why real GDP fluctuates.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following events will increase short-run aggregate supply?

Accepted Answer

A)  an advance in technology 
B)  an increase in resource prices 
C)  an increase in the natural unemployment rate 
D)  an increase in foreign income 
A)  an advance in technology 
B)  an increase in resource prices 
C)  an increase in the natural unemployment rate 
D)  an increase in foreign income

Question 3

Give examples of factors that decrease short-run aggregate supply. Which way does the SAS curve shift?

Accepted Answer

Aggregate supply decreases if potential

Question 4

An increase in the money wage rate shifts the short-run aggregate supply curve ________; an increase in technology shifts the long-run aggregate supply curve ________.

Accepted Answer

A)  rightward; rightward 
B)  rightward; leftward 
C)  leftward; rightward 
D)  leftward; leftward 
A)  rightward; rightward 
B)  rightward; leftward 
C)  leftward; rightward 
D)  leftward; leftward

Question 5

The aggregate demand curve shows the ________ relationship between the price level and ________.

Accepted Answer

A)  positive; the quantity of real GDP demanded 
B)  negative; aggregate labor demanded 
C)  positive; aggregate labor demand 
D)  negative; the quantity of real GDP demanded 
A)  positive; the quantity of real GDP demanded 
B)  negative; aggregate labor demanded 
C)  positive; aggregate labor demand 
D)  negative; the quantity of real GDP demanded

Question 6

Long-run macroeconomic equilibrium is achieved when the money wage rate has adjusted so that employment is such that real GDP equals potential GDP.

Accepted Answer

A) True 
 B)False

Question 7

An above-full-employment equilibrium occurs when

Accepted Answer

A)  aggregate demand decreases while neither the short-run nor long-run aggregate supply changes. 
B)  short-run aggregate supply decreases while neither aggregate demand nor long-run aggregate supply changes. 
C)  the equilibrium level of real GDP is greater than potential GDP. 
D)  the equilibrium level of real GDP is less than potential GDP. 
A)  aggregate demand decreases while neither the short-run nor long-run aggregate supply changes. 
B)  short-run aggregate supply decreases while neither aggregate demand nor long-run aggregate supply changes. 
C)  the equilibrium level of real GDP is greater than potential GDP. 
D)  the equilibrium level of real GDP is less than potential GDP.

Question 8

-In the above figure, the inflationary gap when AD? is the aggregate demand curve equals

Accepted Answer

A)  the difference between 110 and 100. 
B)  the difference between $16.5 trillion and $16.0 trillion. 
C)  LAS minus SAS at a price level of 100. 
D)  AD?. 
A)  the difference between 110 and 100. 
B)  the difference between $16.5 trillion and $16.0 trillion. 
C)  LAS minus SAS at a price level of 100. 
D)  AD?.

Question 9

-In the above figure, the economy is at point A when changes occur. If the new equilibrium has a price level of 120 and real GDP of $15.0 trillion, then it must be the case that

Accepted Answer

A)  aggregate demand has increased. 
B)  aggregate demand has decreased. 
C)  aggregate supply has decreased. 
D)  aggregate supply has increased. 
A)  aggregate demand has increased. 
B)  aggregate demand has decreased. 
C)  aggregate supply has decreased. 
D)  aggregate supply has increased.

Question 10

How does the aggregate demand curve reflect an increase in aggregate demand?

Accepted Answer

A rightward shift of

Question 11

In November, 2012, U.S. lawmakers were faced with a "fiscal cliff:" if they did not agree on how to reduce the federal deficit, automatic tax increases and drastic cuts in government spending would take effect. What would be the result if the fiscal cliff occurred?

Accepted Answer

A)  a recessionary gap 
B)  an inflationary gap 
C)  stagflation 
D)  nothing 
A)  a recessionary gap 
B)  an inflationary gap 
C)  stagflation 
D)  nothing

Question 12

Moving upward along the short-run aggregate supply curve results in a ________ in the price level and ________ in real GDP.

Accepted Answer

A)  rise; an increase 
B)  rise; a decrease 
C)  fall; an increase 
D)  fall; a decrease 
A)  rise; an increase 
B)  rise; a decrease 
C)  fall; an increase 
D)  fall; a decrease

Question 13

In the short run, firms expand their production when the price level rises because

Accepted Answer

A)  the money wage rate remains constant so the higher prices for their products makes it profitable for firms to expand production. 
B)  each firm must keep its production up to the level of its rivals, and some firms will expand production as the price level increases. 
C)  the higher prices allow the firm to hire more workers by offering higher wages, thereby increasing productivity and profits. 
D)  firms can increase their profits by increasing their maintenance. 
A)  the money wage rate remains constant so the higher prices for their products makes it profitable for firms to expand production. 
B)  each firm must keep its production up to the level of its rivals, and some firms will expand production as the price level increases. 
C)  the higher prices allow the firm to hire more workers by offering higher wages, thereby increasing productivity and profits. 
D)  firms can increase their profits by increasing their maintenance.

Question 14

Suppose that during 2009, the actual real GDP of Chile was 3.5 billion pesos at the same time the potential GDP was 3.4 billion pesos. What sort of equilibrium existed in Chile?

Accepted Answer

Chile's actual real GDP exceed

Question 15

We distinguish between the long-run aggregate supply curve and the short-run aggregate supply curve. In the long run

Accepted Answer

A)  technology is fixed but it is not in the short run. 
B)  the price level is constant but in the short run it fluctuates. 
C)  the aggregate supply curve is horizontal while in the short run it is upward sloping. 
D)  real GDP equals potential GDP. 
A)  technology is fixed but it is not in the short run. 
B)  the price level is constant but in the short run it fluctuates. 
C)  the aggregate supply curve is horizontal while in the short run it is upward sloping. 
D)  real GDP equals potential GDP.

Question 16

If you have $1,000 in wealth and the price level increases by 20 percent, then

Accepted Answer

A)  the $1,000 will buy fewer goods and services. 
B)  the $1,000 dollars will buy 20 percent more goods and services. 
C)  the real value of the $1,000 increases. 
D)  you will be able to buy fewer goods, but the real value of those goods will increase. 
A)  the $1,000 will buy fewer goods and services. 
B)  the $1,000 dollars will buy 20 percent more goods and services. 
C)  the real value of the $1,000 increases. 
D)  you will be able to buy fewer goods, but the real value of those goods will increase.

Question 17

Which of the following does NOT shift the aggregate demand curve?

Accepted Answer

A)  a decrease in the quantity of money 
B)  an increase in people's expected future incomes 
C)  an increase in the price level 
D)  an increase in current foreign income 
A)  a decrease in the quantity of money 
B)  an increase in people's expected future incomes 
C)  an increase in the price level 
D)  an increase in current foreign income

Question 18

The short-run aggregate supply curve shifts because of changes in all of the following EXCEPT

Accepted Answer

A)  the capital stock. 
B)  technological progress. 
C)  money wage rates. 
D)  the price level. 
A)  the capital stock. 
B)  technological progress. 
C)  money wage rates. 
D)  the price level.

Question 19

If the economy is in short 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 20

-The data in the above table indicate that when the price level is 120

Accepted Answer

A)  firms have unexpectedly low inventories, so prices will rise. 
B)  inventories are at levels planned by firms. 
C)  firms will plan to increase the level of output. 
D)  firms have unexpectedly high inventories, so prices fall. 
A)  firms have unexpectedly low inventories, so prices will rise. 
B)  inventories are at levels planned by firms. 
C)  firms will plan to increase the level of output. 
D)  firms have unexpectedly high inventories, so prices fall.

Fluctuations in aggregate demand and aggregate supply explain why real GDP fluctuates.

Which of the following events will increase short-run aggregate supply?

Give examples of factors that decrease short-run aggregate supply. Which way does the SAS curve shift?

An increase in the money wage rate shifts the short-run aggregate supply curve ; an increase in technology shifts the long-run aggregate supply curve .

The aggregate demand curve shows the relationship between the price level and .

Long-run macroeconomic equilibrium is achieved when the money wage rate has adjusted so that employment is such that real GDP equals potential GDP.

An above-full-employment equilibrium occurs when

-In the above figure, the inflationary gap when AD? is the aggregate demand curve equals

-In the above figure, the economy is at point A when changes occur. If the new equilibrium has a price level of 120 and real GDP of $15.0 trillion, then it must be the case that

How does the aggregate demand curve reflect an increase in aggregate demand?

In November, 2012, U.S. lawmakers were faced with a "fiscal cliff:" if they did not agree on how to reduce the federal deficit, automatic tax increases and drastic cuts in government spending would take effect. What would be the result if the fiscal cliff occurred?

Moving upward along the short-run aggregate supply curve results in a in the price level and in real GDP.

In the short run, firms expand their production when the price level rises because

Suppose that during 2009, the actual real GDP of Chile was 3.5 billion pesos at the same time the potential GDP was 3.4 billion pesos. What sort of equilibrium existed in Chile?

We distinguish between the long-run aggregate supply curve and the short-run aggregate supply curve. In the long run

If you have $1,000 in wealth and the price level increases by 20 percent, then

Which of the following does NOT shift the aggregate demand curve?

The short-run aggregate supply curve shifts because of changes in all of the following EXCEPT

If the economy is in short run equilibrium then

-The data in the above table indicate that when the price level is 120

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

Fluctuations in aggregate demand and aggregate supply explain why real GDP fluctuates.

Which of the following events will increase short-run aggregate supply?

Give examples of factors that decrease short-run aggregate supply. Which way does the SAS curve shift?

An increase in the money wage rate shifts the short-run aggregate supply curve ________; an increase in technology shifts the long-run aggregate supply curve ________.

The aggregate demand curve shows the ________ relationship between the price level and ________.

Long-run macroeconomic equilibrium is achieved when the money wage rate has adjusted so that employment is such that real GDP equals potential GDP.

An above-full-employment equilibrium occurs when

-In the above figure, the inflationary gap when AD? is the aggregate demand curve equals

-In the above figure, the economy is at point A when changes occur. If the new equilibrium has a price level of 120 and real GDP of $15.0 trillion, then it must be the case that

How does the aggregate demand curve reflect an increase in aggregate demand?

In November, 2012, U.S. lawmakers were faced with a "fiscal cliff:" if they did not agree on how to reduce the federal deficit, automatic tax increases and drastic cuts in government spending would take effect. What would be the result if the fiscal cliff occurred?

Moving upward along the short-run aggregate supply curve results in a ________ in the price level and ________ in real GDP.

In the short run, firms expand their production when the price level rises because

Suppose that during 2009, the actual real GDP of Chile was 3.5 billion pesos at the same time the potential GDP was 3.4 billion pesos. What sort of equilibrium existed in Chile?

We distinguish between the long-run aggregate supply curve and the short-run aggregate supply curve. In the long run

If you have $1,000 in wealth and the price level increases by 20 percent, then

Which of the following does NOT shift the aggregate demand curve?

The short-run aggregate supply curve shifts because of changes in all of the following EXCEPT

If the economy is in short run equilibrium then

-The data in the above table indicate that when the price level is 120

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

An increase in the money wage rate shifts the short-run aggregate supply curve ; an increase in technology shifts the long-run aggregate supply curve .

The aggregate demand curve shows the relationship between the price level and .

Moving upward along the short-run aggregate supply curve results in a in the price level and in real GDP.