Question 1

The aggregate demand curve shows the relationship between planned spending and the ______.

Accepted Answer

A)  nominal interest rate 
B)  real interest rate 
C)  unemployment rate 
D)  inflation rate 
A)  nominal interest rate 
B)  real interest rate 
C)  unemployment rate 
D)  inflation rate

Question 2

Starting from potential output, if consumer confidence increases and consumers decide to spend more, then this will shift the ______ curve to the right and generate ______.

Accepted Answer

A)  aggregate demand; a recessionary output gap 
B)  aggregate supply; a recessionary output gap 
C)  aggregate demand; an expansionary output gap 
D)  aggregate supply; an expansionary output gap 
A)  aggregate demand; a recessionary output gap 
B)  aggregate supply; a recessionary output gap 
C)  aggregate demand; an expansionary output gap 
D)  aggregate supply; an expansionary output gap

Question 3

The economy is in long-run equilibrium:

Accepted Answer

A)  when the AD and AS curves intersect at potential output Y*. 
B)  when the AD and AS curves intersect, regardless of the level of output. 
C)  when the AD and AS curves become vertical. 
D)  only when the business cycle is eliminated. 
A)  when the AD and AS curves intersect at potential output Y*. 
B)  when the AD and AS curves intersect, regardless of the level of output. 
C)  when the AD and AS curves become vertical. 
D)  only when the business cycle is eliminated.

Question 4

Shifts in ______ can return the economy to long-run equilibrium.

Accepted Answer

A)  the AD curve only 
B)  the AS curve only 
C)  either the AD curve or the AS curve 
D)  the PAE line only 
A)  the AD curve only 
B)  the AS curve only 
C)  either the AD curve or the AS curve 
D)  the PAE line only

Question 5

The AS curve slopes upward because:

Accepted Answer

A)  all firms will increase their prices in response to an increase in aggregate demand, but some will increase their output and other will decrease their output. 
B)  all firms will increase their prices, but not their output in response to an increase in aggregate demand. 
C)  some firms will increase their prices and their output in response to an increase in aggregate demand. 
D)  all firms will increase their prices and their output in response to an increase in aggregate demand. 
A)  all firms will increase their prices in response to an increase in aggregate demand, but some will increase their output and other will decrease their output. 
B)  all firms will increase their prices, but not their output in response to an increase in aggregate demand. 
C)  some firms will increase their prices and their output in response to an increase in aggregate demand. 
D)  all firms will increase their prices and their output in response to an increase in aggregate demand.

Question 6

As the available technology improves, ______ shifts to the _____.

Accepted Answer

A)  aggregate demand; left 
B)  aggregate demand; right 
C)  aggregate supply; left 
D)  aggregate supply; right 
A)  aggregate demand; left 
B)  aggregate demand; right 
C)  aggregate supply; left 
D)  aggregate supply; right

Question 7

For a given inflation rate if a resolution of international disputes leads to a cutback in government military spending, then the ______ shifts _____.

Accepted Answer

A)  aggregate demand curve; right 
B)  aggregate demand curve; left 
C)  aggregate supply curve; upward 
D)  aggregate supply curve; downward 
A)  aggregate demand curve; right 
B)  aggregate demand curve; left 
C)  aggregate supply curve; upward 
D)  aggregate supply curve; downward

Question 8

The aggregate supply curve will shift downward in response to:

Accepted Answer

A)  an increase in the expected rate of inflation. 
B)  a decrease in the expected rate of inflation. 
C)  an increase in potential GDP. 
D)  a decrease in potential GDP. 
A)  an increase in the expected rate of inflation. 
B)  a decrease in the expected rate of inflation. 
C)  an increase in potential GDP. 
D)  a decrease in potential GDP.

Question 9

Suppose the economy is currently operating at potential output; an expansionary gap may be caused by each of the following EXCEPT:

Accepted Answer

A)  a positive demand shock. 
B)  a negative inflation shock. 
C)  a decrease in taxes. 
D)  an increase in the money supply. 
A)  a positive demand shock. 
B)  a negative inflation shock. 
C)  a decrease in taxes. 
D)  an increase in the money supply.

Question 10

An inflation shock is:

Accepted Answer

A)  the level of inflation consistent with output in a recessionary gap. 
B)  the level of inflation consistent with output in an expansionary gap. 
C)  a sudden change in the normal behavior of inflation, unrelated to the nation's output gap. 
D)  a change in the inflation rate generated by excessive aggregate spending. 
A)  the level of inflation consistent with output in a recessionary gap. 
B)  the level of inflation consistent with output in an expansionary gap. 
C)  a sudden change in the normal behavior of inflation, unrelated to the nation's output gap. 
D)  a change in the inflation rate generated by excessive aggregate spending.

The aggregate demand curve shows the relationship between planned spending and the ______.

Starting from potential output, if consumer confidence increases and consumers decide to spend more, then this will shift the curve to the right and generate .

The economy is in long-run equilibrium:

Shifts in ______ can return the economy to long-run equilibrium.

The AS curve slopes upward because:

As the available technology improves, __ shifts to the _.

For a given inflation rate if a resolution of international disputes leads to a cutback in government military spending, then the __ shifts _.

The aggregate supply curve will shift downward in response to:

Suppose the economy is currently operating at potential output; an expansionary gap may be caused by each of the following EXCEPT:

An inflation shock is:

Thinking Like an Economist

Comparative Advantage

Supply and Demand

Macroeconomics: the Birds-Eye View of the Economy

Measuring Economic Activity: Gdp and Unemployment

Measuring the Price Level and Inflation

Economic Growth, Productivity, and Living Standards

Workers, Wages, and Unemployment

Saving and Capital Formation

Money, Prices, and the Federal Reserve

Financial Markets and International Capital Flows

Short-Term Economics Fluctuations: An Introduction

Stabilizing the Economy: the Role of the Fed

Aggregate Demand, Aggregate Supply, and Inflation

Filters

Exam 13: Spending and Output in the Short Run

The aggregate demand curve shows the relationship between planned spending and the ______.

Starting from potential output, if consumer confidence increases and consumers decide to spend more, then this will shift the ______ curve to the right and generate ______.

The economy is in long-run equilibrium:

Shifts in ______ can return the economy to long-run equilibrium.

The AS curve slopes upward because:

As the available technology improves, ______ shifts to the _____.

For a given inflation rate if a resolution of international disputes leads to a cutback in government military spending, then the ______ shifts _____.

The aggregate supply curve will shift downward in response to:

Suppose the economy is currently operating at potential output; an expansionary gap may be caused by each of the following EXCEPT:

An inflation shock is:

Thinking Like an Economist

Comparative Advantage

Supply and Demand

Macroeconomics: the Birds-Eye View of the Economy

Measuring Economic Activity: Gdp and Unemployment

Measuring the Price Level and Inflation

Economic Growth, Productivity, and Living Standards

Workers, Wages, and Unemployment

Saving and Capital Formation

Money, Prices, and the Federal Reserve

Financial Markets and International Capital Flows

Short-Term Economics Fluctuations: An Introduction

Stabilizing the Economy: the Role of the Fed

Aggregate Demand, Aggregate Supply, and Inflation

Filters

Starting from potential output, if consumer confidence increases and consumers decide to spend more, then this will shift the curve to the right and generate .

As the available technology improves, __ shifts to the _.

For a given inflation rate if a resolution of international disputes leads to a cutback in government military spending, then the __ shifts _.