Question 1

A negative demand shock decreases the price level in the short run.

Accepted Answer

A) True 
 B)False

Question 2

The economy's self-correcting mechanism is such that demand shocks are offset in the long run by shifts of aggregate supply and supply shocks are offset by shifts of aggregate demand.

Accepted Answer

A) True 
 B)False

Question 3

Wages often respond slowly to changes in output.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following is an accurate description of the aggregate demand curve?

Accepted Answer

A)  It is the sum of all individual demand curves for all products 
B)  It shows all price levels at which firms' unit costs equal their percent markups. 
C)  It is the curve decided upon by the voters. 
D)  It shows the relationship between firms' unit costs and their percentage markups. 
E)  It shows the equilibrium level of GDP associated with price level. 
A)  It is the sum of all individual demand curves for all products 
B)  It shows all price levels at which firms' unit costs equal their percent markups. 
C)  It is the curve decided upon by the voters. 
D)  It shows the relationship between firms' unit costs and their percentage markups. 
E)  It shows the equilibrium level of GDP associated with price level.

Question 5

-In Figure 15-17 above,which of the following most likely represents the long-run aggregate supply curve?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
E)  None of the above. 
A)  A 
B)  B 
C)  C 
D)  D 
E)  None of the above.

Question 6

Stagflation is the combination of

Accepted Answer

A)  falling output and a falling price level 
B)  falling output and rising unemployment 
C)  falling output and a rising price level 
D)  falling output and falling unemployment 
E)  rising unemployment and a falling price level 
A)  falling output and a falling price level 
B)  falling output and rising unemployment 
C)  falling output and a rising price level 
D)  falling output and falling unemployment 
E)  rising unemployment and a falling price level

Question 7

A positive demand shock will

Accepted Answer

A)  shift the AD curve to the left. 
B)  increase real GDP and the price level in the short run. 
C)  decrease real GDP and the price level in the short run. 
D)  increase real GDP and decrease the price level in the short run. 
E)  decrease real GDP and increase the price level in the short run. 
A)  shift the AD curve to the left. 
B)  increase real GDP and the price level in the short run. 
C)  decrease real GDP and the price level in the short run. 
D)  increase real GDP and decrease the price level in the short run. 
E)  decrease real GDP and increase the price level in the short run.

Question 8

A demand shock

Accepted Answer

A)  is any event that causes the aggregate demand curve to shift 
B)  is usually caused by a change in the price level 
C)  is usually caused by a change in real GDP 
D)  can be traced back to a shift in the economy's production possibilities frontier 
E)  is generally a good thing for the economy 
A)  is any event that causes the aggregate demand curve to shift 
B)  is usually caused by a change in the price level 
C)  is usually caused by a change in real GDP 
D)  can be traced back to a shift in the economy's production possibilities frontier 
E)  is generally a good thing for the economy

Question 9

As output increases,a typical firm's unit costs

Accepted Answer

A)  decrease because the firm buys its inputs in large quantities 
B)  increase because the supply of inputs increases 
C)  remain constant 
D)  increase due to the increasing scarcity of resources 
E)  decrease as firms take advantage of diseconomies of scale 
A)  decrease because the firm buys its inputs in large quantities 
B)  increase because the supply of inputs increases 
C)  remain constant 
D)  increase due to the increasing scarcity of resources 
E)  decrease as firms take advantage of diseconomies of scale

Question 10

As there is a movement upward and leftward along the AD curve,

Accepted Answer

A)  aggregate expenditure decreases 
B)  the price level remains constant 
C)  equilibrium GDP increases 
D)  aggregate expenditure increases 
E)  the interest rate falls 
A)  aggregate expenditure decreases 
B)  the price level remains constant 
C)  equilibrium GDP increases 
D)  aggregate expenditure increases 
E)  the interest rate falls

Question 11

A decrease in the price level

Accepted Answer

A)  decreases investment spending,thereby shifting the AD curve. 
B)  increases investment spending,thereby shifting the AD curve. 
C)  does not shift the AD curve. 
D)  increases autonomous consumption spending,thereby shifting the AD curve. 
E)  changes the slope of the AD curve. 
A)  decreases investment spending,thereby shifting the AD curve. 
B)  increases investment spending,thereby shifting the AD curve. 
C)  does not shift the AD curve. 
D)  increases autonomous consumption spending,thereby shifting the AD curve. 
E)  changes the slope of the AD curve.

Question 12

If a change in real GDP causes the price level to change,there will be a movement along the aggregate supply curve.

Accepted Answer

A) True 
 B)False

Question 13

-Refer to Figure 15-13.Starting from point A,suppose a supply shock shifts the aggregate supply curve to AS2.In the short run,this will

Accepted Answer

A)  decrease real GDP,increase the price level,lower wages,and return the aggregate supply curve to AS1 
B)  increase real GDP,decrease the price level,increase wages,and return the aggregate supply curve to AS1 
C)  decrease real GDP and increase the price level 
D)  increase real GDP and decrease the price level 
E)  lower the full employment level of real GDP to Y2 
A)  decrease real GDP,increase the price level,lower wages,and return the aggregate supply curve to AS1 
B)  increase real GDP,decrease the price level,increase wages,and return the aggregate supply curve to AS1 
C)  decrease real GDP and increase the price level 
D)  increase real GDP and decrease the price level 
E)  lower the full employment level of real GDP to Y2

Question 14

A negative demand shock

Accepted Answer

A)  shifts the AD curve to the right 
B)  decreases real GDP and increases the price level in the short run 
C)  is the result of an increase in money demand 
D)  results in a movement down and to the right along the AD curve 
E)  decreases both real GDP and the price level in the short run 
A)  shifts the AD curve to the right 
B)  decreases real GDP and increases the price level in the short run 
C)  is the result of an increase in money demand 
D)  results in a movement down and to the right along the AD curve 
E)  decreases both real GDP and the price level in the short run

Question 15

Why does a change in GDP affect unit costs and the price level?

Accepted Answer

A)  as GDP increases,productivity increases. 
B)  as GDP increases the price of non-labor inputs increases and the nominal wage tends to increase. 
C)  as GDP decreases,there are efficient gains 
D)  as GDP increases,economies of scale allow for lower unit costs. 
E)  as GDP increases the price of non-labor inputs decreases and the nominal wage tends to increase. 
A)  as GDP increases,productivity increases. 
B)  as GDP increases the price of non-labor inputs increases and the nominal wage tends to increase. 
C)  as GDP decreases,there are efficient gains 
D)  as GDP increases,economies of scale allow for lower unit costs. 
E)  as GDP increases the price of non-labor inputs decreases and the nominal wage tends to increase.

Question 16

If the cost per unit of output for a particular product is $50 and the product sells for $55,what is the percentage markup over cost per unit?

Accepted Answer

A)  200 percent 
B)  10 percent 
C)  100 percent 
D)  20 percent 
E)  50 percent 
A)  200 percent 
B)  10 percent 
C)  100 percent 
D)  20 percent 
E)  50 percent

Question 17

The only requirement for short-run equilibrium is that the economy must be on the aggregate supply curve.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following describes what would happen after an increase in oil prices?

Accepted Answer

A)  A downward shift of the aggregate supply curve as unit costs decrease,followed by a gradual increase in the wage as employment increases,leading to a leftward shift of the aggregate supply curve 
B)  An upward shift of the aggregate supply curve as unit costs increase,followed by a gradual decrease in the wage as employment decreases,leading to a leftward shift of the aggregate supply curve 
C)  An upward shift of the aggregate supply curve as unit costs increase,followed by a gradual decrease in the wage as employment decreases,leading to a rightward shift of the aggregate supply curve 
D)  A downward shift of the aggregate supply curve as unit costs decrease,followed by a gradual decrease in the wage as employment decreases,leading to a rightward shift of the aggregate supply curve 
E)  An upward shift of the aggregate supply curve as unit costs increase,followed by a gradual decrease in the wage as employment increases,leading to a rightward shift of the aggregate supply curve 
A)  A downward shift of the aggregate supply curve as unit costs decrease,followed by a gradual increase in the wage as employment increases,leading to a leftward shift of the aggregate supply curve 
B)  An upward shift of the aggregate supply curve as unit costs increase,followed by a gradual decrease in the wage as employment decreases,leading to a leftward shift of the aggregate supply curve 
C)  An upward shift of the aggregate supply curve as unit costs increase,followed by a gradual decrease in the wage as employment decreases,leading to a rightward shift of the aggregate supply curve 
D)  A downward shift of the aggregate supply curve as unit costs decrease,followed by a gradual decrease in the wage as employment decreases,leading to a rightward shift of the aggregate supply curve 
E)  An upward shift of the aggregate supply curve as unit costs increase,followed by a gradual decrease in the wage as employment increases,leading to a rightward shift of the aggregate supply curve

Question 19

Which of the following most accurately describes the aggregate supply curve?

Accepted Answer

A)  It shows the price level associated with firms' unit costs and markups for any level of GDP. 
B)  It is the sum of all individual firms' supply curves. 
C)  It is determined by the federal government. 
D)  It shows firms' unit costs for each level of GDP. 
E)  It shows the equilibrium level of GDP corresponding to each price level. 
A)  It shows the price level associated with firms' unit costs and markups for any level of GDP. 
B)  It is the sum of all individual firms' supply curves. 
C)  It is determined by the federal government. 
D)  It shows firms' unit costs for each level of GDP. 
E)  It shows the equilibrium level of GDP corresponding to each price level.

Question 20

Which of the following would lead to a rightward shift of the money demand curve?

Accepted Answer

A)  A decrease in the price level 
B)  A decrease in output 
C)  An open market sale of bonds by the Fed 
D)  An increase in the price level 
E)  An open market purchase of bonds by the Fed 
A)  A decrease in the price level 
B)  A decrease in output 
C)  An open market sale of bonds by the Fed 
D)  An increase in the price level 
E)  An open market purchase of bonds by the Fed

Exam 27: Aggregate Demand and Aggregate Supply

A negative demand shock decreases the price level in the short run.

The economy's self-correcting mechanism is such that demand shocks are offset in the long run by shifts of aggregate supply and supply shocks are offset by shifts of aggregate demand.

Wages often respond slowly to changes in output.

Which of the following is an accurate description of the aggregate demand curve?

-In Figure 15-17 above,which of the following most likely represents the long-run aggregate supply curve?

Stagflation is the combination of

A positive demand shock will

A demand shock

As output increases,a typical firm's unit costs

As there is a movement upward and leftward along the AD curve,

A decrease in the price level

If a change in real GDP causes the price level to change,there will be a movement along the aggregate supply curve.

-Refer to Figure 15-13.Starting from point A,suppose a supply shock shifts the aggregate supply curve to AS2.In the short run,this will

A negative demand shock

Why does a change in GDP affect unit costs and the price level?

If the cost per unit of output for a particular product is $50 and the product sells for $55,what is the percentage markup over cost per unit?

The only requirement for short-run equilibrium is that the economy must be on the aggregate supply curve.

Which of the following describes what would happen after an increase in oil prices?

Which of the following most accurately describes the aggregate supply curve?

Which of the following would lead to a rightward shift of the money demand curve?

What Is Economics

Scarcity,choice,and Economic Systems

Scarcity, choice, and Economic Systems: Part A

Working With Supply and Demand

Elasticity

Consumer Choice

Production and Cost

How Firms Make Decisions: Profit Maximization

Perfect Competition

Perfect Competition: Part A

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets

labor Markets: Part A

Capital and Financial Markets

Economic Efficiency and the Competitive Ideal

Governments Role in Economic Efficiency

Comparative Advantage and the Gains From International Trade

What Macroeconomics Tries to Explain

Production, income, and Employment

The Price Level and Inflation

The Classical Long-Run Model

Part A: The Classical Model in an Open Economy

Economic Growth and Rising Living Standards

Economic Fluctuations

The Short-Run Macro Model

Fiscal Policy

Money,banks,and the Federal Reserve

The Money Market and Monetary Policy

Feedback Effects From GDP to the Money Market

Inflation and Monetary Policy

Exchange Rates and Macroeconomic Policy

Appendix-finding Equilibrium GDP Algebraically

Appendix: Capital and Leverage

Filters

-Refer to Figure 15-13.Starting from point A,suppose a supply shock shifts the aggregate supply curve to AS₂.In the short run,this will