Question 1

-Refer to Figure 15-12.The vertical line most likely represents the

Accepted Answer

A)  money demand curve 
B)  short-run aggregate demand curve 
C)  long-run aggregate demand curve 
D)  short-run aggregate supply curve 
E)  long-run aggregate supply curve 
A)  money demand curve 
B)  short-run aggregate demand curve 
C)  long-run aggregate demand curve 
D)  short-run aggregate supply curve 
E)  long-run aggregate supply curve

Question 2

If the Fed sells bonds in an open market operation,which of the following is most likely to occur?

Accepted Answer

A)  The equilibrium level of GDP decreases 
B)  The money supply increases 
C)  The interest rate falls 
D)  The aggregate expenditure line shifts upward 
E)  The open market operation is said to be expansionary. 
A)  The equilibrium level of GDP decreases 
B)  The money supply increases 
C)  The interest rate falls 
D)  The aggregate expenditure line shifts upward 
E)  The open market operation is said to be expansionary.

Question 3

-Refer to Figure 15-11.Suppose the economy is currently at point D where it is producing its full-employment level of real GDP ($6.8 trillion).We would expect that,in the long run,

Accepted Answer

A)  the economy will return to point D unless a demand or supply shock occurred 
B)  wages will fall and aggregate demand will decrease 
C)  wages will rise and aggregate demand will increase 
D)  wages will fall and aggregate supply will increase as the economy moves to point C 
E)  the full-employment level of real GDP would fall to the equilibrium level of real GDP 
A)  the economy will return to point D unless a demand or supply shock occurred 
B)  wages will fall and aggregate demand will decrease 
C)  wages will rise and aggregate demand will increase 
D)  wages will fall and aggregate supply will increase as the economy moves to point C 
E)  the full-employment level of real GDP would fall to the equilibrium level of real GDP

Question 4

A demand shock that increases real GDP above its full-employment level will,in the long run,

Accepted Answer

A)  lead to a higher wage rate and an upward shift of the aggregate supply curve 
B)  lead to a lower wage rate and a downward shift of the aggregate supply curve 
C)  lead to a higher wage rate and a rightward shift of the aggregate demand curve 
D)  lead to a lower wage rate and a leftward shift of the aggregate demand curve 
E)  cause no further shifts in the aggregate supply or aggregate demand curve 
A)  lead to a higher wage rate and an upward shift of the aggregate supply curve 
B)  lead to a lower wage rate and a downward shift of the aggregate supply curve 
C)  lead to a higher wage rate and a rightward shift of the aggregate demand curve 
D)  lead to a lower wage rate and a leftward shift of the aggregate demand curve 
E)  cause no further shifts in the aggregate supply or aggregate demand curve

Question 5

The average percentage markup in the economy is

Accepted Answer

A)  relatively stable,but the price level may not be 
B)  relatively stable,causing the price level to also be relatively stable 
C)  relatively unstable,despite which the price level remains relatively stable 
D)  relatively unstable,causing the price level to also be relatively unstable 
E)  determined by the unit costs of production 
A)  relatively stable,but the price level may not be 
B)  relatively stable,causing the price level to also be relatively stable 
C)  relatively unstable,despite which the price level remains relatively stable 
D)  relatively unstable,causing the price level to also be relatively unstable 
E)  determined by the unit costs of production

Question 6

An increase in the price level will lead to which of the following sequences?

Accepted Answer

A)  The money demand curve shifts leftward,the interest rate drops,the aggregate expenditure line shifts upward,and there is movement downward along the aggregate demand curve. 
B)  The money demand curve shifts rightward,the interest rate increases,the aggregate expenditure line shifts downward,and there is movement upward along the aggregate demand curve. 
C)  The money demand curve shifts leftward,the interest rate drops,the aggregate expenditure line shifts downward,and there is movement upward along the aggregate demand curve. 
D)  The money demand curve shifts rightward,the interest rate increases,the aggregate expenditure line shifts upward,and there is movement downward along the aggregate demand curve. 
E)  the money demand curve shifts leftward,the interest rate drops,the aggregate expenditure line shifts upward,and there is movement upward along the aggregate demand curve. 
A)  The money demand curve shifts leftward,the interest rate drops,the aggregate expenditure line shifts upward,and there is movement downward along the aggregate demand curve. 
B)  The money demand curve shifts rightward,the interest rate increases,the aggregate expenditure line shifts downward,and there is movement upward along the aggregate demand curve. 
C)  The money demand curve shifts leftward,the interest rate drops,the aggregate expenditure line shifts downward,and there is movement upward along the aggregate demand curve. 
D)  The money demand curve shifts rightward,the interest rate increases,the aggregate expenditure line shifts upward,and there is movement downward along the aggregate demand curve. 
E)  the money demand curve shifts leftward,the interest rate drops,the aggregate expenditure line shifts upward,and there is movement upward along the aggregate demand curve.

Question 7

In the short run,an increase in real GDP will

Accepted Answer

A)  increase unit costs and increase the price level 
B)  increase unit costs and decrease the price level 
C)  decrease unit costs and decrease the price level 
D)  decrease unit costs and increase the price level 
E)  have no effect on unit costs or the price level 
A)  increase unit costs and increase the price level 
B)  increase unit costs and decrease the price level 
C)  decrease unit costs and decrease the price level 
D)  decrease unit costs and increase the price level 
E)  have no effect on unit costs or the price level

Question 8

If output increases,which of the following would occur?

Accepted Answer

A)  Prices of non-labor inputs,input requirements per unit of output,and unit costs would all increase,and the economy would move downward along the aggregate supply curve. 
B)  Prices of non-labor inputs,input requirements per unit of output,and unit costs would all decrease,and the economy would move downward along the aggregate supply curve. 
C)  Prices of non-labor inputs,input requirements per unit of output,and unit costs would all decrease,and the economy would move upward along the aggregate supply curve. 
D)  Prices of non-labor inputs,input requirements per unit of output,and unit costs would all increase,and the economy would move upward along the aggregate supply curve. 
E)  Prices of non-labor inputs and input requirements per unit of output would increase,unit costs would decrease,and the economy would move downward along the aggregate supply curve. 
A)  Prices of non-labor inputs,input requirements per unit of output,and unit costs would all increase,and the economy would move downward along the aggregate supply curve. 
B)  Prices of non-labor inputs,input requirements per unit of output,and unit costs would all decrease,and the economy would move downward along the aggregate supply curve. 
C)  Prices of non-labor inputs,input requirements per unit of output,and unit costs would all decrease,and the economy would move upward along the aggregate supply curve. 
D)  Prices of non-labor inputs,input requirements per unit of output,and unit costs would all increase,and the economy would move upward along the aggregate supply curve. 
E)  Prices of non-labor inputs and input requirements per unit of output would increase,unit costs would decrease,and the economy would move downward along the aggregate supply curve.

Question 9

According the AS/AD model,in the long run,expansionary monetary policy will

Accepted Answer

A)  increase both real GDP and the price level. 
B)  decrease both real GDP and the price level. 
C)  decrease the price level and leave real GDP unchanged. 
D)  increase the price level and leave real GDP unchanged. 
E)  increase real GDP and reduce the price level. 
A)  increase both real GDP and the price level. 
B)  decrease both real GDP and the price level. 
C)  decrease the price level and leave real GDP unchanged. 
D)  increase the price level and leave real GDP unchanged. 
E)  increase real GDP and reduce the price level.

Question 10

The equilibrium price level

Accepted Answer

A)  determines by how much the AD curve shifts 
B)  is inversely related to the nominal wage rate 
C)  is influenced by the pricing behavior of all the firms in the economy 
D)  is unaffected by changes in resource costs 
E)  is the same thing as the interest rate 
A)  determines by how much the AD curve shifts 
B)  is inversely related to the nominal wage rate 
C)  is influenced by the pricing behavior of all the firms in the economy 
D)  is unaffected by changes in resource costs 
E)  is the same thing as the interest rate

Question 11

Which of the following is not an example of a demand shock?

Accepted Answer

A)  A reduction in government spending 
B)  An increase in income tax rates 
C)  A change in oil prices. 
D)  A money supply increase. 
E)  An increase in government spending. 
A)  A reduction in government spending 
B)  An increase in income tax rates 
C)  A change in oil prices. 
D)  A money supply increase. 
E)  An increase in government spending.

Question 12

An increase in the price level

Accepted Answer

A)  increases investment spending,thereby shifting the AD curve to the left 
B)  does not shift the AD curve 
C)  causes the government's budget deficit to fall 
D)  increases investment spending,thereby shifting the AD curve to the right 
E)  shifts the AS curve outward 
A)  increases investment spending,thereby shifting the AD curve to the left 
B)  does not shift the AD curve 
C)  causes the government's budget deficit to fall 
D)  increases investment spending,thereby shifting the AD curve to the right 
E)  shifts the AS curve outward

Question 13

A supply shock

Accepted Answer

A)  is usually caused by a change in the money supply 
B)  is any event that causes the aggregate supply curve to shift 
C)  is any event caused by a change in the price level 
D)  is usually good news for the economy 
E)  always leads to an increase in the interest rate 
A)  is usually caused by a change in the money supply 
B)  is any event that causes the aggregate supply curve to shift 
C)  is any event caused by a change in the price level 
D)  is usually good news for the economy 
E)  always leads to an increase in the interest rate

Question 14

The aggregate demand curve identifies the level of aggregate production corresponding to a change in the price level.

Accepted Answer

A) True 
 B)False

Question 15

The AD curve is derived by adding up demand curves for all goods and services.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following can lead to stagflation?

Accepted Answer

A)  A decrease in the money supply 
B)  A decrease in autonomous consumption 
C)  A prolonged increase in oil prices 
D)  An increase in government spending 
E)  A decrease in oil prices 
A)  A decrease in the money supply 
B)  A decrease in autonomous consumption 
C)  A prolonged increase in oil prices 
D)  An increase in government spending 
E)  A decrease in oil prices

Question 17

Which of the following would shift the AS curve downward?

Accepted Answer

A)  A decrease in the price level 
B)  A decrease in world oil prices. 
C)  An increase in world oil prices. 
D)  A natural disaster that raises unit costs for all firms. 
E)  A loss of technological capability. 
A)  A decrease in the price level 
B)  A decrease in world oil prices. 
C)  An increase in world oil prices. 
D)  A natural disaster that raises unit costs for all firms. 
E)  A loss of technological capability.

Question 18

If the price level is increasing and output is falling,which of the following could be the reason?

Accepted Answer

A)  A negative demand shock 
B)  A positive supply shock 
C)  A positive supply shock combined with a positive demand shock 
D)  A negative supply shock 
E)  A positive demand shock 
A)  A negative demand shock 
B)  A positive supply shock 
C)  A positive supply shock combined with a positive demand shock 
D)  A negative supply shock 
E)  A positive demand shock

Question 19

Which of the following would shift the aggregate demand curve to the right?

Accepted Answer

A)  Increases in government purchases,investment spending,autonomous consumption,taxes,or the money supply 
B)  Increases in government purchases,investment spending,autonomous consumption,or the money supply 
C)  Decreases in government purchases,investment spending,autonomous consumption,taxes,or the money supply 
D)  Increases in government purchases,investment spending,autonomous consumption or taxes 
E)  Decreases in government purchases or investment spending,and increases in autonomous consumption,taxes,or the money supply 
A)  Increases in government purchases,investment spending,autonomous consumption,taxes,or the money supply 
B)  Increases in government purchases,investment spending,autonomous consumption,or the money supply 
C)  Decreases in government purchases,investment spending,autonomous consumption,taxes,or the money supply 
D)  Increases in government purchases,investment spending,autonomous consumption or taxes 
E)  Decreases in government purchases or investment spending,and increases in autonomous consumption,taxes,or the money supply

Question 20

The aggregate demand curve

Accepted Answer

A)  represents the relationship between prices and quantities of all goods produced in an economy 
B)  is derived from equilibrium conditions in the labor and money markets 
C)  gives the equilibrium level of real GDP corresponding to a given price level 
D)  is the sum of an economy's individual demand curves 
E)  plots the interest rate as a function of output 
A)  represents the relationship between prices and quantities of all goods produced in an economy 
B)  is derived from equilibrium conditions in the labor and money markets 
C)  gives the equilibrium level of real GDP corresponding to a given price level 
D)  is the sum of an economy's individual demand curves 
E)  plots the interest rate as a function of output

Exam 27: Aggregate Demand and Aggregate Supply

-Refer to Figure 15-12.The vertical line most likely represents the

If the Fed sells bonds in an open market operation,which of the following is most likely to occur?

-Refer to Figure 15-11.Suppose the economy is currently at point D where it is producing its full-employment level of real GDP ($6.8 trillion).We would expect that,in the long run,

A demand shock that increases real GDP above its full-employment level will,in the long run,

The average percentage markup in the economy is

An increase in the price level will lead to which of the following sequences?

In the short run,an increase in real GDP will

If output increases,which of the following would occur?

According the AS/AD model,in the long run,expansionary monetary policy will

The equilibrium price level

Which of the following is not an example of a demand shock?

An increase in the price level

A supply shock

The aggregate demand curve identifies the level of aggregate production corresponding to a change in the price level.

The AD curve is derived by adding up demand curves for all goods and services.

Which of the following can lead to stagflation?

Which of the following would shift the AS curve downward?

If the price level is increasing and output is falling,which of the following could be the reason?

Which of the following would shift the aggregate demand curve to the right?

The aggregate 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

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