Question 1

One reason that the aggregate demand curve has a negative slope is because

Accepted Answer

A)  firms supply more when prices rise. 
B)  people buy more foreign goods when the domestic price level rises. 
C)  the amount of money in the economy increases when the price level rises. 
D)  firms supply less when prices rise. 
A)  firms supply more when prices rise. 
B)  people buy more foreign goods when the domestic price level rises. 
C)  the amount of money in the economy increases when the price level rises. 
D)  firms supply less when prices rise.

Question 2

An economy is at full employment. Which of the following events can create a recessionary gap?

Accepted Answer

A)  an increase in foreign income 
B)  an increase in taxes 
C)  a decrease in the quantity of capital 
D)  a decrease in money wages 
A)  an increase in foreign income 
B)  an increase in taxes 
C)  a decrease in the quantity of capital 
D)  a decrease in money wages

Question 3

According to the intertemporal substitution effect, a fall in the price level will

Accepted Answer

A)  decrease the real value of wealth, which increases the quantity of real GDP demanded. 
B)  cause the interest rate to fall so that investment increases and the quantity of real GDP demanded increases. 
C)  increase net exports, which causes the quantity of real GDP demanded to increase. 
D)  increase the real value of wealth, which raises the interest rate so that the quantity of real GDP demanded decreases. 
A)  decrease the real value of wealth, which increases the quantity of real GDP demanded. 
B)  cause the interest rate to fall so that investment increases and the quantity of real GDP demanded increases. 
C)  increase net exports, which causes the quantity of real GDP demanded to increase. 
D)  increase the real value of wealth, which raises the interest rate so that the quantity of real GDP demanded decreases.

Question 4

Suppose the economy is experiencing a recessionary gap. In the long run, if aggregate demand does not change, the following events happen: the money wage rate ________, unemployment ________, and the price level ________.

Accepted Answer

A)  falls; rises; falls 
B)  falls; falls; falls 
C)  rises; rises; rises 
D)  rises; falls; rises 
A)  falls; rises; falls 
B)  falls; falls; falls 
C)  rises; rises; rises 
D)  rises; falls; rises

Question 5

In the figure above, the economy is at point A when the price level falls to 100. Money wage rates and all other resource prices remain constant. Firms are willing to supply output equal to

Accepted Answer

A)  $15.5 trillion. 
B)  $16.0 trillion. 
C)  $16.5 trillion. 
D)  None of the above answers is correct. 
A)  $15.5 trillion. 
B)  $16.0 trillion. 
C)  $16.5 trillion. 
D)  None of the above answers is correct.

Question 6

When an increase in aggregate demand exceeds the increase in aggregate supply

Accepted Answer

A)  real GDP decreases while nominal GDP increases. 
B)  the price level falls while real GDP increases. 
C)  nominal GDP decreases and real GDP decreases. 
D)  the economy will experience inflation as the price level rises. 
A)  real GDP decreases while nominal GDP increases. 
B)  the price level falls while real GDP increases. 
C)  nominal GDP decreases and real GDP decreases. 
D)  the economy will experience inflation as the price level rises.

Question 7

________ economists believe that the economy is self-regulating and always at full employment.

Accepted Answer

A)  Keynesian 
B)  Monetarist 
C)  Classical 
D)  All 
A)  Keynesian 
B)  Monetarist 
C)  Classical 
D)  All

Question 8

-In the above figure, the short-run aggregate supply curve is SAS1. If technology advances, there is

Accepted Answer

A)  an upward movement along SAS1. 
B)  a downward movement along SAS1. 
C)  a shift to SAS0. 
D)  a shift to SAS2. 
A)  an upward movement along SAS1. 
B)  a downward movement along SAS1. 
C)  a shift to SAS0. 
D)  a shift to SAS2.

Question 9

-In the above figure, the economy initially is at point C. Then the domestic price level rises by 10. A

Accepted Answer

A)  substitution effect would help move the economy to point D. 
B)  substitution effect would help move the economy to point B. 
C)  substitution effect would keep the economy at point C. 
D)  wealth effect would help move the economy to point B. 
A)  substitution effect would help move the economy to point D. 
B)  substitution effect would help move the economy to point B. 
C)  substitution effect would keep the economy at point C. 
D)  wealth effect would help move the economy to point B.

Question 10

What are fiscal and monetary policies? Do they have an immediate effect on the AD curve or the SAS curve?

Accepted Answer

Fiscal policy is defined as changes in g

Question 11

-In the above figure, the economy is at point A when changes occur. If the new equilibrium has a price level of 100 and real GDP of $17.0 trillion, then it must be the case that

Accepted Answer

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

Question 12

-In the above figure, the economy will be at full employment if the price level

Accepted Answer

A)  is 110. 
B)  is above 110. 
C)  is below 100. 
D)  All of the above are possible because the economy will be at full employment at any price level at, above, or below 110. 
A)  is 110. 
B)  is above 110. 
C)  is below 100. 
D)  All of the above are possible because the economy will be at full employment at any price level at, above, or below 110.

Question 13

-In the above figure, real GDP at full employment 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

Short-run equilibrium occurs at the intersection of

Accepted Answer

A)  the SAS and AD curves. 
B)  the SAS, LAS, and AD curves. 
C)  the SAS and LAS curves. 
D)  the LAS and AD curves. 
A)  the SAS and AD curves. 
B)  the SAS, LAS, and AD curves. 
C)  the SAS and LAS curves. 
D)  the LAS and AD curves.

Question 15

If the expected future inflation rate decreases, then

Accepted Answer

A)  aggregate demand increases. 
B)  short-run aggregate supply increases. 
C)  aggregate demand decreases. 
D)  long-run aggregate supply decreases. 
A)  aggregate demand increases. 
B)  short-run aggregate supply increases. 
C)  aggregate demand decreases. 
D)  long-run aggregate supply decreases.

Question 16

-Using the data in the above table, in the short-run macroeconomic equilibrium, there is

Accepted Answer

A)  an inflationary gap of $1 trillion. 
B)  an inflationary gap of $2 trillion. 
C)  a recessionary gap of $1 trillion. 
D)  a recessionary gap of $2 trillion. 
A)  an inflationary gap of $1 trillion. 
B)  an inflationary gap of $2 trillion. 
C)  a recessionary gap of $1 trillion. 
D)  a recessionary gap of $2 trillion.

Question 17

An increase in the quantity of capital shifts both the long-run and short-run aggregate supply curves.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following shifts the short-run aggregate supply curve?
I.changes in the size of the labor force
II.changes in the money wage rate

Accepted Answer

A)  I only 
B)  II only 
C)  both I and II 
D)  neither I nor II 
A)  I only 
B)  II only 
C)  both I and II 
D)  neither I nor II

Question 19

In 2008, the dollar appreciated relative to the euro. This appreciation caused ________ and a ________.

Accepted Answer

A)  a movement up along the U.S. aggregate demand curve; decrease in U.S. exports to Europe 
B)  a decrease in U.S. exports to Europe; leftward shift in the U.S. aggregate demand curve 
C)  an increase in U.S. exports to Europe; movement up along the U.S. aggregate demand curve 
D)  a decrease in U.S. exports to Europe; a movement up along the U.S. aggregate demand curve 
A)  a movement up along the U.S. aggregate demand curve; decrease in U.S. exports to Europe 
B)  a decrease in U.S. exports to Europe; leftward shift in the U.S. aggregate demand curve 
C)  an increase in U.S. exports to Europe; movement up along the U.S. aggregate demand curve 
D)  a decrease in U.S. exports to Europe; a movement up along the U.S. aggregate demand curve

Question 20

In the short-run, real GDP can be greater than or less than potential GDP because in the short run the money wage rate is fixed.

Accepted Answer

A) True 
 B)False

One reason that the aggregate demand curve has a negative slope is because

An economy is at full employment. Which of the following events can create a recessionary gap?

According to the intertemporal substitution effect, a fall in the price level will

Suppose the economy is experiencing a recessionary gap. In the long run, if aggregate demand does not change, the following events happen: the money wage rate , unemployment , and the price level .

In the figure above, the economy is at point A when the price level falls to 100. Money wage rates and all other resource prices remain constant. Firms are willing to supply output equal to

When an increase in aggregate demand exceeds the increase in aggregate supply

________ economists believe that the economy is self-regulating and always at full employment.

-In the above figure, the short-run aggregate supply curve is SAS1. If technology advances, there is

-In the above figure, the economy initially is at point C. Then the domestic price level rises by 10. A

What are fiscal and monetary policies? Do they have an immediate effect on the AD curve or the SAS curve?

-In the above figure, the economy is at point A when changes occur. If the new equilibrium has a price level of 100 and real GDP of $17.0 trillion, then it must be the case that

-In the above figure, the economy will be at full employment if the price level

-In the above figure, real GDP at full employment is

Short-run equilibrium occurs at the intersection of

If the expected future inflation rate decreases, then

-Using the data in the above table, in the short-run macroeconomic equilibrium, there is

An increase in the quantity of capital shifts both the long-run and short-run aggregate supply curves.

Which of the following shifts the short-run aggregate supply curve? I.changes in the size of the labor force II.changes in the money wage rate

In 2008, the dollar appreciated relative to the euro. This appreciation caused and a .

In the short-run, real GDP can be greater than or less than potential GDP because in the short run the money wage rate is fixed.

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

One reason that the aggregate demand curve has a negative slope is because

An economy is at full employment. Which of the following events can create a recessionary gap?

According to the intertemporal substitution effect, a fall in the price level will

Suppose the economy is experiencing a recessionary gap. In the long run, if aggregate demand does not change, the following events happen: the money wage rate ________, unemployment ________, and the price level ________.

In the figure above, the economy is at point A when the price level falls to 100. Money wage rates and all other resource prices remain constant. Firms are willing to supply output equal to

When an increase in aggregate demand exceeds the increase in aggregate supply

________ economists believe that the economy is self-regulating and always at full employment.

-In the above figure, the short-run aggregate supply curve is SAS1. If technology advances, there is

-In the above figure, the economy initially is at point C. Then the domestic price level rises by 10. A

What are fiscal and monetary policies? Do they have an immediate effect on the AD curve or the SAS curve?

-In the above figure, the economy is at point A when changes occur. If the new equilibrium has a price level of 100 and real GDP of $17.0 trillion, then it must be the case that

-In the above figure, the economy will be at full employment if the price level

-In the above figure, real GDP at full employment is

Short-run equilibrium occurs at the intersection of

If the expected future inflation rate decreases, then

-Using the data in the above table, in the short-run macroeconomic equilibrium, there is

An increase in the quantity of capital shifts both the long-run and short-run aggregate supply curves.

Which of the following shifts the short-run aggregate supply curve? I.changes in the size of the labor force II.changes in the money wage rate

In 2008, the dollar appreciated relative to the euro. This appreciation caused ________ and a ________.

In the short-run, real GDP can be greater than or less than potential GDP because in the short run the money wage rate is fixed.

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

Suppose the economy is experiencing a recessionary gap. In the long run, if aggregate demand does not change, the following events happen: the money wage rate , unemployment , and the price level .

In 2008, the dollar appreciated relative to the euro. This appreciation caused and a .