Question 1

Explain why the long-run aggregate supply curve is vertical.

Accepted Answer

The long-run aggregate supply curve is v

Question 2

Figure 13-4  
-Refer to Figure 13-4.Given the economy is at point A in year 1,what will happen to the price level in year 2?

Accepted Answer

A) It will rise. 
B) It will fall. 
C) It will remain constant. 
D) not enough information to answer the question 
A) It will rise. 
B) It will fall. 
C) It will remain constant. 
D) not enough information to answer the question

Question 3

Figure 13-1  
-Refer to Figure 13-1.Ceteris paribus,an increase in interest rates would be represented by a movement from

Accepted Answer

A) AD1 to AD2. 
B) AD2 to AD1. 
C) point A to point B. 
D) point B to point A. 
A) AD1 to AD2. 
B) AD2 to AD1. 
C) point A to point B. 
D) point B to point A.

Question 4

As the recession persisted into 2009,the unemployment rate in the United States rose to ________,the highest rate since the recession of 2001-2002 and the second highest since the Great Depression.

Accepted Answer

A) 5.5 percent 
B) 9.3 percent 
C) 17.6 percent 
D) 25.1 percent 
A) 5.5 percent 
B) 9.3 percent 
C) 17.6 percent 
D) 25.1 percent

Question 5

At a long-run macroeconomic equilibrium,real GDP is always equal to potential GDP.

Accepted Answer

A) True 
 B)False

Question 6

The monetary growth rule is a plan for increasing the quantity of money

Accepted Answer

A) at a fixed rate that does not respond to changes in the economic condition. 
B) at a rate which increases as the economy grows. 
C) at a rate which decreases as the economy declines. 
D) at a rate which increases during recessions and decreases during expansions. 
A) at a fixed rate that does not respond to changes in the economic condition. 
B) at a rate which increases as the economy grows. 
C) at a rate which decreases as the economy declines. 
D) at a rate which increases during recessions and decreases during expansions.

Question 7

The real business cycle model focuses on how

Accepted Answer

A) wage and price stickiness explains fluctuations in real GDP. 
B) the labor theory of value is the best measure of value of a good or service. 
C) the Federal Reserve should adopt a monetary growth rule. 
D) productivity shocks explain fluctuations in real GDP. 
A) wage and price stickiness explains fluctuations in real GDP. 
B) the labor theory of value is the best measure of value of a good or service. 
C) the Federal Reserve should adopt a monetary growth rule. 
D) productivity shocks explain fluctuations in real GDP.

Question 8

The automatic mechanism ________ the price level in the case of ________ and ________ the price level in the case of ________.

Accepted Answer

A) raises; recession; lowers; expansion 
B) lowers; expansion; lowers; recession 
C) raises; expansion; raises; recession 
D) lowers; recession; raises; expansion 
A) raises; recession; lowers; expansion 
B) lowers; expansion; lowers; recession 
C) raises; expansion; raises; recession 
D) lowers; recession; raises; expansion

Question 9

The new Keynesians emphasize the importance of

Accepted Answer

A) rational expectations. 
B) the monetary growth rule. 
C) real causes of the business cycle. 
D) sticky wages and prices. 
A) rational expectations. 
B) the monetary growth rule. 
C) real causes of the business cycle. 
D) sticky wages and prices.

Question 10

Figure 13-2  
-Refer to Figure 13-2.Ceteris paribus,an increase in the expected price of an important natural resource would be represented by a movement from

Accepted Answer

A) SRAS1 to SRAS2. 
B) SRAS2 to SRAS1. 
C) point A to point B. 
D) point B to point A. 
A) SRAS1 to SRAS2. 
B) SRAS2 to SRAS1. 
C) point A to point B. 
D) point B to point A.

Question 11

Which of the following models focuses on how productivity shocks explain fluctuations in real GDP?

Accepted Answer

A) the monetarist model 
B) the new classical model 
C) the real business cycle model 
D) the new Keynesian model 
A) the monetarist model 
B) the new classical model 
C) the real business cycle model 
D) the new Keynesian model

Question 12

A decrease in the price level results in a(n)________ in the quantity of real GDP demanded because a lower price level ________ consumption,investment,and net exports.

Accepted Answer

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

Question 13

Stagflation occurs when short-run aggregate supply decreases.

Accepted Answer

A) True 
 B)False

Question 14

A decrease in government spending will result in a decrease in the price level and a decrease in real GDP in the long run.

Accepted Answer

A) True 
 B)False

Question 15

Stagflation occurs when aggregate supply and aggregate demand both increase.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following models advocate that the quantity of money should be increased at a constant rate?

Accepted Answer

A) the monetarist model 
B) the new classical model 
C) the real business cycle model 
D) the new Keynesian model 
A) the monetarist model 
B) the new classical model 
C) the real business cycle model 
D) the new Keynesian model

Question 17

Explain how the economy moves back to full employment from recession.Be sure to detail what happens to short-run aggregate supply,unemployment,equilibrium GDP and the price level.

Accepted Answer

When an economy enters a recession,sales

Question 18

Suppose a developing country experiences a reduction in machinery and capital equipment as foreign entrepreneurs decrease the amount of investment in the economy.As a result,

Accepted Answer

A) the long-run aggregate supply curve will shift to the right. 
B) the long-run aggregate supply curve will shift to the left. 
C) the economy will move up along the long-run aggregate supply curve. 
D) the economy will move down along the long-run aggregate supply curve. 
A) the long-run aggregate supply curve will shift to the right. 
B) the long-run aggregate supply curve will shift to the left. 
C) the economy will move up along the long-run aggregate supply curve. 
D) the economy will move down along the long-run aggregate supply curve.

Question 19

According to the real business cycle model,________ in aggregate demand ________ GDP.

Accepted Answer

A) increases; decrease 
B) increases; increase 
C) increases; do not affect 
D) decreases; increase 
A) increases; decrease 
B) increases; increase 
C) increases; do not affect 
D) decreases; increase

Question 20

An increase in the price level will

Accepted Answer

A) shift the short-run aggregate supply curve to the left. 
B) shift the short-run aggregate supply curve to the right. 
C) move the economy up along a stationary short-run aggregate supply curve. 
D) move the economy down along a stationary short-run aggregate supply curve. 
A) shift the short-run aggregate supply curve to the left. 
B) shift the short-run aggregate supply curve to the right. 
C) move the economy up along a stationary short-run aggregate supply curve. 
D) move the economy down along a stationary short-run aggregate supply curve.

Explain why the long-run aggregate supply curve is vertical.

Figure 13-4 -Refer to Figure 13-4.Given the economy is at point A in year 1,what will happen to the price level in year 2?

Figure 13-1 -Refer to Figure 13-1.Ceteris paribus,an increase in interest rates would be represented by a movement from

As the recession persisted into 2009,the unemployment rate in the United States rose to ________,the highest rate since the recession of 2001-2002 and the second highest since the Great Depression.

At a long-run macroeconomic equilibrium,real GDP is always equal to potential GDP.

The monetary growth rule is a plan for increasing the quantity of money

The real business cycle model focuses on how

The automatic mechanism the price level in the case of and the price level in the case of .

The new Keynesians emphasize the importance of

Figure 13-2 -Refer to Figure 13-2.Ceteris paribus,an increase in the expected price of an important natural resource would be represented by a movement from

Which of the following models focuses on how productivity shocks explain fluctuations in real GDP?

A decrease in the price level results in a(n) in the quantity of real GDP demanded because a lower price level consumption,investment,and net exports.

Stagflation occurs when short-run aggregate supply decreases.

A decrease in government spending will result in a decrease in the price level and a decrease in real GDP in the long run.

Stagflation occurs when aggregate supply and aggregate demand both increase.

Which of the following models advocate that the quantity of money should be increased at a constant rate?

Explain how the economy moves back to full employment from recession.Be sure to detail what happens to short-run aggregate supply,unemployment,equilibrium GDP and the price level.

Suppose a developing country experiences a reduction in machinery and capital equipment as foreign entrepreneurs decrease the amount of investment in the economy.As a result,

According to the real business cycle model, in aggregate demand GDP.

An increase in the price level will

Economics: Foundations and Models

Trade-Offs,comparative Advantage,and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, government Price Setting, and Taxes

The Economics of Health Care

Firms,the Stock Market,and Corporate Governance

Comparative Advantage and the Gains From International Trade

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

Exam 13: Aggregate Demand and Aggregate Supply Analysis

Explain why the long-run aggregate supply curve is vertical.

Figure 13-4 -Refer to Figure 13-4.Given the economy is at point A in year 1,what will happen to the price level in year 2?

Figure 13-1 -Refer to Figure 13-1.Ceteris paribus,an increase in interest rates would be represented by a movement from

As the recession persisted into 2009,the unemployment rate in the United States rose to ________,the highest rate since the recession of 2001-2002 and the second highest since the Great Depression.

At a long-run macroeconomic equilibrium,real GDP is always equal to potential GDP.

The monetary growth rule is a plan for increasing the quantity of money

The real business cycle model focuses on how

The automatic mechanism ________ the price level in the case of ________ and ________ the price level in the case of ________.

The new Keynesians emphasize the importance of

Figure 13-2 -Refer to Figure 13-2.Ceteris paribus,an increase in the expected price of an important natural resource would be represented by a movement from

Which of the following models focuses on how productivity shocks explain fluctuations in real GDP?

A decrease in the price level results in a(n)________ in the quantity of real GDP demanded because a lower price level ________ consumption,investment,and net exports.

Stagflation occurs when short-run aggregate supply decreases.

A decrease in government spending will result in a decrease in the price level and a decrease in real GDP in the long run.

Stagflation occurs when aggregate supply and aggregate demand both increase.

Which of the following models advocate that the quantity of money should be increased at a constant rate?

Explain how the economy moves back to full employment from recession.Be sure to detail what happens to short-run aggregate supply,unemployment,equilibrium GDP and the price level.

Suppose a developing country experiences a reduction in machinery and capital equipment as foreign entrepreneurs decrease the amount of investment in the economy.As a result,

According to the real business cycle model,________ in aggregate demand ________ GDP.

An increase in the price level will

Economics: Foundations and Models

Trade-Offs,comparative Advantage,and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, government Price Setting, and Taxes

The Economics of Health Care

Firms,the Stock Market,and Corporate Governance

Comparative Advantage and the Gains From International Trade

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

The automatic mechanism the price level in the case of and the price level in the case of .

A decrease in the price level results in a(n) in the quantity of real GDP demanded because a lower price level consumption,investment,and net exports.

According to the real business cycle model, in aggregate demand GDP.