Question 1

Which of the following will shift the aggregate supply curve upward?

Accepted Answer

A)  A decrease in world oil prices 
B)  Bad weather,which increases farmers' costs per unit of output 
C)  Increases in consumer spending 
D)  An increase in the price level 
E)  Technological changes that improve worker productivity 
A)  A decrease in world oil prices 
B)  Bad weather,which increases farmers' costs per unit of output 
C)  Increases in consumer spending 
D)  An increase in the price level 
E)  Technological changes that improve worker productivity

Question 2

In the long run

Accepted Answer

A)  both supply and demand shocks have permanent effects on real GDP. 
B)  real GDP can remain below potential. 
C)  real GDP can remain above potential. 
D)  both supply and demand shocks have no effect on real GDP. 
E)  supply shocks have permanent effects on real GDP but demand shocks have no effect. 
A)  both supply and demand shocks have permanent effects on real GDP. 
B)  real GDP can remain below potential. 
C)  real GDP can remain above potential. 
D)  both supply and demand shocks have no effect on real GDP. 
E)  supply shocks have permanent effects on real GDP but demand shocks have no effect.

Question 3

The aggregate supply curve is

Accepted Answer

A)  vertical in the short run 
B)  horizontal in the short run 
C)  the sum of all of the supply curves of individual firms in the economy 
D)  downward sloping in the short run 
E)  upward sloping in the short run 
A)  vertical in the short run 
B)  horizontal in the short run 
C)  the sum of all of the supply curves of individual firms in the economy 
D)  downward sloping in the short run 
E)  upward sloping in the short run

Question 4

Which of the following is considered in the AS/AD model but was not considered in the short-run macro model?

Accepted Answer

A)  The effect of price changes. 
B)  The effect of interest rate changes. 
C)  Increases in government spending. 
D)  Monetary policy. 
E)  Decreases in government spending. 
A)  The effect of price changes. 
B)  The effect of interest rate changes. 
C)  Increases in government spending. 
D)  Monetary policy. 
E)  Decreases in government spending.

Question 5

-Refer to Figure 15-5.Assuming that the economy starts at point X,a decrease in world oil prices would

Accepted Answer

A)  move the economy to point A 
B)  move the economy to point B 
C)  shift the aggregate supply curve upward to curve E 
D)  shift the aggregate supply curve downward to curve F 
E)  have no impact since the model only shows the relationship between the overall price level and real GDP 
A)  move the economy to point A 
B)  move the economy to point B 
C)  shift the aggregate supply curve upward to curve E 
D)  shift the aggregate supply curve downward to curve F 
E)  have no impact since the model only shows the relationship between the overall price level and real GDP

Question 6

Which of the following sequences results from a decrease in the price level?

Accepted Answer

A)  the money demand curve shifts leftward,the interest rate decreases,investment spending and autonomous consumption increase,the aggregate expenditure line shifts upward,and there is a rightward movement along the aggregate demand curve. 
B)  the money demand curve shifts rightward,the interest rate increases,investment spending and autonomous consumption increase,the aggregate expenditure line shifts downward,and there is a rightward movement along the aggregate demand curve. 
C)  the money demand curve shifts leftward,the interest rate decreases,investment spending and autonomous consumption increase,the aggregate expenditure line shifts upward,and there is a leftward movement along the aggregate demand curve. 
D)  the money demand curve shifts rightward,the interest rate decreases,investment spending and autonomous consumption increase,the aggregate expenditure line shifts upward,and there is a movement upward along the aggregate demand curve. 
E)  the money demand curve shifts leftward,the interest rate increases,investment spending and autonomous consumption increase,the aggregate expenditure line shifts upward,and there is a leftward movement along the aggregate demand curve. 
A)  the money demand curve shifts leftward,the interest rate decreases,investment spending and autonomous consumption increase,the aggregate expenditure line shifts upward,and there is a rightward movement along the aggregate demand curve. 
B)  the money demand curve shifts rightward,the interest rate increases,investment spending and autonomous consumption increase,the aggregate expenditure line shifts downward,and there is a rightward movement along the aggregate demand curve. 
C)  the money demand curve shifts leftward,the interest rate decreases,investment spending and autonomous consumption increase,the aggregate expenditure line shifts upward,and there is a leftward movement along the aggregate demand curve. 
D)  the money demand curve shifts rightward,the interest rate decreases,investment spending and autonomous consumption increase,the aggregate expenditure line shifts upward,and there is a movement upward along the aggregate demand curve. 
E)  the money demand curve shifts leftward,the interest rate increases,investment spending and autonomous consumption increase,the aggregate expenditure line shifts upward,and there is a leftward movement along the aggregate demand curve.

Question 7

A spending shock

Accepted Answer

A)  causes unemployment and inflation to change in the same direction 
B)  results in a movement along the AD curve 
C)  shifts the AS curve 
D)  first affects the economy through the money market 
E)  causes equilibrium GDP to change at each price level 
A)  causes unemployment and inflation to change in the same direction 
B)  results in a movement along the AD curve 
C)  shifts the AS curve 
D)  first affects the economy through the money market 
E)  causes equilibrium GDP to change at each price level

Question 8

If output exceeds its full-employment level,the wage rate will eventually fall,causing a drop in the price level and a drop in real GDP until full employment is restored.

Accepted Answer

A) True 
 B)False

Question 9

-Refer to Figure 15-6.Short-run macroeconomic equilibrium occurs at a price level of

Accepted Answer

A)  120 and real GDP of $5.5 trillion 
B)  140 and real GDP of $5.5 trillion 
C)  120 and real GDP of $6.5 trillion 
D)  120 and real GDP of $7.5 trillion 
E)  140 and real GDP of $7.5 trillion 
A)  120 and real GDP of $5.5 trillion 
B)  140 and real GDP of $5.5 trillion 
C)  120 and real GDP of $6.5 trillion 
D)  120 and real GDP of $7.5 trillion 
E)  140 and real GDP of $7.5 trillion

Question 10

An increase in the price level will increase the interest rate,which will decrease investment spending and shift aggregate demand to the left.

Accepted Answer

A) True 
 B)False

Question 11

-Refer to Figure 15-9.Suppose the economy is in equilibrium with real GDP of $7 trillion.A demand shock shifts the aggregate demand curve to AD2,increasing real GDP to its full-employment level of $7.2 trillion.In the long run,following the shock,we would expect the

Accepted Answer

A)  aggregate demand curve to shift rightward,further increasing real GDP and the price level 
B)  aggregate demand curve to shift leftward,returning real GDP to $7 trillion 
C)  aggregate supply curve to shift downward,returning the price level to 120 
D)  aggregate supply curve to shift upward,returning real GDP to $7 trillion 
E)  economy to remain at the new level of output of $7.2 trillion 
A)  aggregate demand curve to shift rightward,further increasing real GDP and the price level 
B)  aggregate demand curve to shift leftward,returning real GDP to $7 trillion 
C)  aggregate supply curve to shift downward,returning the price level to 120 
D)  aggregate supply curve to shift upward,returning real GDP to $7 trillion 
E)  economy to remain at the new level of output of $7.2 trillion

Question 12

After a negative demand shock,what are the expected long-run adjustments?

Accepted Answer

A)  Wages rise,price level rises,and output falls back to potential 
B)  Wages fall,price level rises,and output falls back to potential 
C)  Wages fall,price level falls,and output increases back to potential 
D)  Wages fall,price level rises,and output increases back to potential 
E)  Wages rise,price level falls,and output increases back to potential 
A)  Wages rise,price level rises,and output falls back to potential 
B)  Wages fall,price level rises,and output falls back to potential 
C)  Wages fall,price level falls,and output increases back to potential 
D)  Wages fall,price level rises,and output increases back to potential 
E)  Wages rise,price level falls,and output increases back to potential

Question 13

The economy's self-correcting mechanism

Accepted Answer

A)  prevents the economy from ever being in disequilibrium 
B)  guides the economy to full employment in the long run 
C)  maintains a steady long-run price level 
D)  is a short-run adjustment process 
E)  is controlled by the Fed 
A)  prevents the economy from ever being in disequilibrium 
B)  guides the economy to full employment in the long run 
C)  maintains a steady long-run price level 
D)  is a short-run adjustment process 
E)  is controlled by the Fed

Question 14

If there is a positive demand shock,which of the following would represent the most likely short and long-run outcomes? (Assume the economy was initially at full employment)

Accepted Answer

A)  In the short run,real GDP and the price level would increase;in the long run,real GDP would return to its original level while the price level would rise even further. 
B)  In the short run,real GDP and the price level would increase;in the long run,real GDP and the price level would return to their original level. 
C)  In the short run,real GDP would increase and the price level would decrease;in the long run,real GDP would return to its original level while the price level would rise even further. 
D)  In the short run,real GDP and the price level would decrease;in the long run,real GDP would return to its original level while the price level would rise even further. 
E)  In the short run,real GDP and the price level would increase;in the long run,real GDP would increase while the price level would return to its original level. 
A)  In the short run,real GDP and the price level would increase;in the long run,real GDP would return to its original level while the price level would rise even further. 
B)  In the short run,real GDP and the price level would increase;in the long run,real GDP and the price level would return to their original level. 
C)  In the short run,real GDP would increase and the price level would decrease;in the long run,real GDP would return to its original level while the price level would rise even further. 
D)  In the short run,real GDP and the price level would decrease;in the long run,real GDP would return to its original level while the price level would rise even further. 
E)  In the short run,real GDP and the price level would increase;in the long run,real GDP would increase while the price level would return to its original level.

Question 15

Due to the multiplier effect,a decrease in investment spending

Accepted Answer

A)  is greater than the resulting decrease in GDP 
B)  has a minimal impact on the economy 
C)  causes the money supply to increase 
D)  leads to an even larger decrease in output 
E)  results in increased autonomous consumption 
A)  is greater than the resulting decrease in GDP 
B)  has a minimal impact on the economy 
C)  causes the money supply to increase 
D)  leads to an even larger decrease in output 
E)  results in increased autonomous consumption

Question 16

The aggregate demand curve

Accepted Answer

A)  is a horizontal line if the economy is perfectly competitive 
B)  depicts the economy's equilibrium output level at each possible price level 
C)  depicts the economy's equilibrium output at each possible interest rate 
D)  shifts whenever the price level changes 
E)  can slope upward if the Fed changes the money supply 
A)  is a horizontal line if the economy is perfectly competitive 
B)  depicts the economy's equilibrium output level at each possible price level 
C)  depicts the economy's equilibrium output at each possible interest rate 
D)  shifts whenever the price level changes 
E)  can slope upward if the Fed changes the money supply

Question 17

If there is a large increase in the price of oil,which of the following would most likely occur in the short run?

Accepted Answer

A)  The aggregate demand curve shifts upward,the price level rises,and output increases. 
B)  The aggregate supply curve shifts downward,the price level falls,and output increases. 
C)  The aggregate demand curve shifts downward,the price level falls,and output falls. 
D)  The aggregate demand curve shifts upward,output remains unchanged,and the price level rises. 
E)  The aggregate supply curve shifts upward,the price level rises,and output falls. 
A)  The aggregate demand curve shifts upward,the price level rises,and output increases. 
B)  The aggregate supply curve shifts downward,the price level falls,and output increases. 
C)  The aggregate demand curve shifts downward,the price level falls,and output falls. 
D)  The aggregate demand curve shifts upward,output remains unchanged,and the price level rises. 
E)  The aggregate supply curve shifts upward,the price level rises,and output falls.

Question 18

If government spending decreases,which of the following would occur?

Accepted Answer

A)  An increase in GDP,an increase in the price level,an increase in money demand,and an increase in the interest rate 
B)  An increase in GDP,a decrease in the price level,an increase in money demand,and a decrease in the interest rate 
C)  A decrease in GDP,a decrease in the price level,a decrease in money demand,and a decrease in the interest rate 
D)  A decrease in GDP,a decrease in the price level,an increase in money demand,and an increase in the interest rate 
E)  An increase in GDP,an increase in the price level,a decrease in money demand,and a decrease in the interest rate. 
A)  An increase in GDP,an increase in the price level,an increase in money demand,and an increase in the interest rate 
B)  An increase in GDP,a decrease in the price level,an increase in money demand,and a decrease in the interest rate 
C)  A decrease in GDP,a decrease in the price level,a decrease in money demand,and a decrease in the interest rate 
D)  A decrease in GDP,a decrease in the price level,an increase in money demand,and an increase in the interest rate 
E)  An increase in GDP,an increase in the price level,a decrease in money demand,and a decrease in the interest rate.

Question 19

]Which of the following would not cause the AD curve to shift?

Accepted Answer

A)  A change in the money supply 
B)  The public's expectations of a fall in the interest rate 
C)  A change in aggregate expenditure caused by a change in the price level 
D)  A change in fiscal policy 
E)  A change in autonomous consumption spending 
A)  A change in the money supply 
B)  The public's expectations of a fall in the interest rate 
C)  A change in aggregate expenditure caused by a change in the price level 
D)  A change in fiscal policy 
E)  A change in autonomous consumption spending

Question 20

What effect did the Iraqi invasion of Kuwait have on the U.S.economy?

Accepted Answer

A)  A rightward shift of the aggregate demand curve 
B)  It had no effect 
C)  A downward shift of the aggregate supply curve 
D)  A leftward shift of the aggregate demand curve 
E)  An upward shift of the aggregate supply curve 
A)  A rightward shift of the aggregate demand curve 
B)  It had no effect 
C)  A downward shift of the aggregate supply curve 
D)  A leftward shift of the aggregate demand curve 
E)  An upward shift of the aggregate supply curve

Exam 27: Aggregate Demand and Aggregate Supply

Which of the following will shift the aggregate supply curve upward?

In the long run

The aggregate supply curve is

Which of the following is considered in the AS/AD model but was not considered in the short-run macro model?

-Refer to Figure 15-5.Assuming that the economy starts at point X,a decrease in world oil prices would

Which of the following sequences results from a decrease in the price level?

A spending shock

If output exceeds its full-employment level,the wage rate will eventually fall,causing a drop in the price level and a drop in real GDP until full employment is restored.

-Refer to Figure 15-6.Short-run macroeconomic equilibrium occurs at a price level of

An increase in the price level will increase the interest rate,which will decrease investment spending and shift aggregate demand to the left.

-Refer to Figure 15-9.Suppose the economy is in equilibrium with real GDP of $7 trillion.A demand shock shifts the aggregate demand curve to AD2,increasing real GDP to its full-employment level of $7.2 trillion.In the long run,following the shock,we would expect the

After a negative demand shock,what are the expected long-run adjustments?

The economy's self-correcting mechanism

If there is a positive demand shock,which of the following would represent the most likely short and long-run outcomes? (Assume the economy was initially at full employment)

Due to the multiplier effect,a decrease in investment spending

The aggregate demand curve

If there is a large increase in the price of oil,which of the following would most likely occur in the short run?

If government spending decreases,which of the following would occur?

]Which of the following would not cause the AD curve to shift?

What effect did the Iraqi invasion of Kuwait have on the U.S.economy?

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 15-9.Suppose the economy is in equilibrium with real GDP of $7 trillion.A demand shock shifts the aggregate demand curve to AD₂,increasing real GDP to its full-employment level of $7.2 trillion.In the long run,following the shock,we would expect the