Question 1

Which of the following is consistent with the sticky-wage explanation of the upward-sloping SRAS curve?

Accepted Answer

A) The price level rises,the real wage falls,and the quantity demanded of labor declines. 
B) The price level falls,the real wage rises,and the quantity demanded of labor falls. 
C) The price level rises,the real wage rises,and the quantity demanded of labor falls. 
D) The nominal wage rises,the real wage rises,and the quantity demanded and supplied of labor rise. 
E) a and b 
A) The price level rises,the real wage falls,and the quantity demanded of labor declines. 
B) The price level falls,the real wage rises,and the quantity demanded of labor falls. 
C) The price level rises,the real wage rises,and the quantity demanded of labor falls. 
D) The nominal wage rises,the real wage rises,and the quantity demanded and supplied of labor rise. 
E) a and b

Question 2

If investment changes because of a change in the price level,then the

Accepted Answer

A) economy moves from one point on an AD curve to another point on the same curve. 
B) AD curve shifts. 
C) economy moves from one point on a SRAS curve to another point on the same curve. 
D) SRAS curve shifts. 
E) none of the above 
A) economy moves from one point on an AD curve to another point on the same curve. 
B) AD curve shifts. 
C) economy moves from one point on a SRAS curve to another point on the same curve. 
D) SRAS curve shifts. 
E) none of the above

Question 3

Explain why the short-run aggregate supply curve (SRAS)is upward sloping,while the long-run aggregate supply (LRAS)curve is a vertical line.

Accepted Answer

The SRAS curve slopes upward because of

Question 4

A falling interest rate affects the demand for consumer __________ and shifts the AD curve to the __________.

Accepted Answer

A) nondurables;right 
B) nondurables;left 
C) durables;right 
D) durables;left 
A) nondurables;right 
B) nondurables;left 
C) durables;right 
D) durables;left

Question 5

A decrease in business taxes,causes the expected profitability of investment projects to __________,which then shifts the AD curve to the __________.

Accepted Answer

A) rise;right 
B) rise;left 
C) decline;right 
D) decline;left 
A) rise;right 
B) rise;left 
C) decline;right 
D) decline;left

Question 6

Which of the following best describes how the international trade effect works?

Accepted Answer

A) The price level in the U.S.falls relative to foreign price levels,U.S.goods become relatively less expensive than foreign goods,and both Americans and foreigners buy more U.S.goods. 
B) The price level in the U.S.falls relative to foreign price levels,U.S.goods become relatively more expensive than foreign goods,and both Americans and foreigners buy more U.S.goods. 
C) The price level in the U.S.rises relative to foreign price levels,U.S.goods become relatively more expensive than foreign goods,and both Americans and foreigners buy fewer U.S.goods. 
D) The price level in the U.S.rises relative to foreign price levels,U.S.goods become relatively more expensive than foreign goods,and both Americans and foreigners buy more U.S.goods. 
E) a and c 
A) The price level in the U.S.falls relative to foreign price levels,U.S.goods become relatively less expensive than foreign goods,and both Americans and foreigners buy more U.S.goods. 
B) The price level in the U.S.falls relative to foreign price levels,U.S.goods become relatively more expensive than foreign goods,and both Americans and foreigners buy more U.S.goods. 
C) The price level in the U.S.rises relative to foreign price levels,U.S.goods become relatively more expensive than foreign goods,and both Americans and foreigners buy fewer U.S.goods. 
D) The price level in the U.S.rises relative to foreign price levels,U.S.goods become relatively more expensive than foreign goods,and both Americans and foreigners buy more U.S.goods. 
E) a and c

Question 7

Which of the following would cause a rightward shift in the AD curve?

Accepted Answer

A) an increase in the price level 
B) a decrease in the price level 
C) an increase in imports 
D) a decrease in the quantity of money available in the economy 
E) an increase in government purchases of goods and services 
A) an increase in the price level 
B) a decrease in the price level 
C) an increase in imports 
D) a decrease in the quantity of money available in the economy 
E) an increase in government purchases of goods and services

Question 8

Assume that the economy is currently in short-run equilibrium,then the dollar appreciates in the foreign exchange market.Describe the correct sequence of events that happen as the economy adjusts to a new short-run equilibrium (be sure to state what the impact would be on the price level and Real GDP).

Accepted Answer

As the dollar appreciates,foreign goods

Question 9

The aggregate demand (AD)curve shifts to the right.This is a result of

Accepted Answer

A) total expenditures increasing at a given price level. 
B) total expenditures decreasing at a given price level. 
C) the real balance effect. 
D) the interest rate effect 
E) b and c 
A) total expenditures increasing at a given price level. 
B) total expenditures decreasing at a given price level. 
C) the real balance effect. 
D) the interest rate effect 
E) b and c

Question 10

Suppose consumption increases at each price level.As a result,aggregate demand __________,and the AD curve shifts __________.

Accepted Answer

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

Question 11

Which set of changes is definitely predicted to raise the price level in the short run?

Accepted Answer

A) The money supply falls and wage rates rise. 
B) The money supply falls and wage rates fall. 
C) The money supply rises and wage rates fall. 
D) Labor productivity rises and there is a beneficial supply shock. 
E) The prices of nonlabor inputs rise and individuals expect higher (future)incomes. 
A) The money supply falls and wage rates rise. 
B) The money supply falls and wage rates fall. 
C) The money supply rises and wage rates fall. 
D) Labor productivity rises and there is a beneficial supply shock. 
E) The prices of nonlabor inputs rise and individuals expect higher (future)incomes.

Question 12

Exhibit 8-1  
-Refer to Exhibit 8-2.Based on the given change,what word (rises or falls)should go in blank (3)and blank (4),respectively,to summarize the resulting impact on short run equilibrium?

Accepted Answer

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

Question 13

Which of the following is an example of an adverse supply shock?

Accepted Answer

A) a nationwide drought lasting for many months 
B) an outbreak of war among several of the Middle Eastern oil-producing countries 
C) an influenza virus that affects 50 percent of the labor force over a two month period 
D) a,b,and c 
E) a and c 
A) a nationwide drought lasting for many months 
B) an outbreak of war among several of the Middle Eastern oil-producing countries 
C) an influenza virus that affects 50 percent of the labor force over a two month period 
D) a,b,and c 
E) a and c

Question 14

Exhibit 8-4  
-Refer to Exhibit 8-4.A movement from point A to point B on SRAS1 could have been the result of

Accepted Answer

A) a decrease in the price level. 
B) an increase in the price level. 
C) an adverse supply shock. 
D) a beneficial supply shock. 
A) a decrease in the price level. 
B) an increase in the price level. 
C) an adverse supply shock. 
D) a beneficial supply shock.

Question 15

Exhibit 8-1  
-Refer to Exhibit 8-1.Assume the economy is originally in equilibrium at point A If the price of oil rises,at which point is the economy most likely to end up in the short run?

Accepted Answer

A) A 
B) B 
C) C 
D) D 
A) A 
B) B 
C) C 
D) D

Question 16

If aggregate quantity demanded is greater than aggregate quantity supplied at a particular price level,then

Accepted Answer

A) consumers will bid prices upward,and a greater quantity of output will be supplied. 
B) the shortage will likely be eliminated. 
C) a and b 
D) none of the above 
A) consumers will bid prices upward,and a greater quantity of output will be supplied. 
B) the shortage will likely be eliminated. 
C) a and b 
D) none of the above

Question 17

In short-run equilibrium,it is always true that

Accepted Answer

A) quantity demanded of Real GDP = quantity supplied of Real GDP = Natural Real GDP. 
B) quantity demanded of Real GDP > quantity supplied of Real GDP. 
C) quantity demanded of Real GDP = quantity supplied of Real GDP. 
D) a and b 
E) There is not enough information to answer the question. 
A) quantity demanded of Real GDP = quantity supplied of Real GDP = Natural Real GDP. 
B) quantity demanded of Real GDP > quantity supplied of Real GDP. 
C) quantity demanded of Real GDP = quantity supplied of Real GDP. 
D) a and b 
E) There is not enough information to answer the question.

Question 18

Exhibit 8-3  
-Refer to Exhibit 8-3.A movement from point A to point B on AD1 would have been the result of

Accepted Answer

A) a decrease in the price level. 
B) an increase in the price level. 
C) an increase in income taxes. 
D) a decrease in income taxes. 
A) a decrease in the price level. 
B) an increase in the price level. 
C) an increase in income taxes. 
D) a decrease in income taxes.

Question 19

One reason the AD curve is downward sloping is the __________ effect.

Accepted Answer

A) wage rate 
B) productivity 
C) interest rate 
D) structural 
E) none of the above 
A) wage rate 
B) productivity 
C) interest rate 
D) structural 
E) none of the above

Question 20

Aggregate demand curves are

Accepted Answer

A) downward sloping. 
B) upward sloping. 
C) horizontal. 
D) vertical. 
A) downward sloping. 
B) upward sloping. 
C) horizontal. 
D) vertical.

Exam 8: Aggregate Demand and Aggregate Supply

Which of the following is consistent with the sticky-wage explanation of the upward-sloping SRAS curve?

If investment changes because of a change in the price level,then the

Explain why the short-run aggregate supply curve (SRAS)is upward sloping,while the long-run aggregate supply (LRAS)curve is a vertical line.

A falling interest rate affects the demand for consumer __________ and shifts the AD curve to the __________.

A decrease in business taxes,causes the expected profitability of investment projects to __________,which then shifts the AD curve to the __________.

Which of the following best describes how the international trade effect works?

Which of the following would cause a rightward shift in the AD curve?

The aggregate demand (AD)curve shifts to the right.This is a result of

Suppose consumption increases at each price level.As a result,aggregate demand __________,and the AD curve shifts __________.

Which set of changes is definitely predicted to raise the price level in the short run?

Exhibit 8-1 -Refer to Exhibit 8-2.Based on the given change,what word (rises or falls)should go in blank (3)and blank (4),respectively,to summarize the resulting impact on short run equilibrium?

Which of the following is an example of an adverse supply shock?

Exhibit 8-4 -Refer to Exhibit 8-4.A movement from point A to point B on SRAS1 could have been the result of

Exhibit 8-1 -Refer to Exhibit 8-1.Assume the economy is originally in equilibrium at point A If the price of oil rises,at which point is the economy most likely to end up in the short run?

If aggregate quantity demanded is greater than aggregate quantity supplied at a particular price level,then

In short-run equilibrium,it is always true that

Exhibit 8-3 -Refer to Exhibit 8-3.A movement from point A to point B on AD1 would have been the result of

One reason the AD curve is downward sloping is the __________ effect.

Aggregate demand curves are

What Economics Is About

Production Possibilities Frontier Framework

Supply and Demand: Theory

Prices: Free, controlled, and Relative

Supply,demand,and Price: Applications

Macroeconomic Measurements, part I: Prices and Unemployment

Macroeconomic Measurements, part II: GDP and Real GDP

Classical Macroeconomics and the Self-Regulating Economy

Keynesian Macroeconomics and Economic Instability: a Critique of the Self-Regulating Economy

Fiscal Policy and the Federal Budget

Money,banking,and the Financial System

The Federal Reserve System

Money and the Economy

Monetary Policy

Expectations Theory and the Economy

Economic Growth: Resources, technology, ideas, and Institutions

The Financial Crisis of 2007-2009

Debates in Macroeconomics Over the Role and Effects of Government

Public Choice and Special-Interest-Group Politics

Building Theories to Explain Everyday Life: From Observations to Questions to Theories to Predictions

International Trade

International Finance

Globalization and International Impacts on the Economy

The Economic Case for and Against Government: Five Topics Considered

Stocks, bonds, futures, and Options

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A falling interest rate affects the demand for consumer and shifts the AD curve to the .

A decrease in business taxes,causes the expected profitability of investment projects to ,which then shifts the AD curve to the .

Suppose consumption increases at each price level.As a result,aggregate demand ,and the AD curve shifts .

Exhibit 8-4 -Refer to Exhibit 8-4.A movement from point A to point B on SRAS₁ could have been the result of

Exhibit 8-3 -Refer to Exhibit 8-3.A movement from point A to point B on AD₁ would have been the result of