Question 1

Which of the following will cause a movement along the aggregate demand curve?

Accepted Answer

A)  A decrease in the price level 
B)  An increase in government purchases 
C)  A decrease in taxes 
D)  An increase in investment spending 
E)  An increase in the interest rate 
A)  A decrease in the price level 
B)  An increase in government purchases 
C)  A decrease in taxes 
D)  An increase in investment spending 
E)  An increase in the interest rate

Question 2

-Refer to Figure 15-10.Suppose that output in the economy is currently below full employment.If real GDP is $6.8 trillion and a demand shock lowers real GDP to $6.5 trillion,what would we expect to occur in the long run?

Accepted Answer

A)  The aggregate supply curve will shift upward as wages fall. 
B)  The aggregate supply curve will shift downward as wages fall. 
C)  The aggregate demand curve will shift rightward as wages fall. 
D)  The aggregate demand curve will shift leftward as wages fall. 
E)  No further changes in aggregate supply or aggregate demand without government intervention. 
A)  The aggregate supply curve will shift upward as wages fall. 
B)  The aggregate supply curve will shift downward as wages fall. 
C)  The aggregate demand curve will shift rightward as wages fall. 
D)  The aggregate demand curve will shift leftward as wages fall. 
E)  No further changes in aggregate supply or aggregate demand without government intervention.

Question 3

-Refer to Figure 15-13.Beginning at point A,suppose a supply shock shifts the aggregate supply curve to AS2.In the long run,we would expect

Accepted Answer

A)  an increase in the price level and a decrease in real GDP 
B)  an increase in the price level and a return of real GDP to its full-employment level 
C)  a decrease in the price level to below its level at point A,and a return of real GDP to its full-employment level 
D)  the price level and real GDP to return to their original levels at point A 
E)  aggregate demand to increase until full employment is restored. 
A)  an increase in the price level and a decrease in real GDP 
B)  an increase in the price level and a return of real GDP to its full-employment level 
C)  a decrease in the price level to below its level at point A,and a return of real GDP to its full-employment level 
D)  the price level and real GDP to return to their original levels at point A 
E)  aggregate demand to increase until full employment is restored.

Question 4

]Which of the following describes what would happen after a positive supply shock such as a decrease in world oil prices?

Accepted Answer

A)  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 downward shift of the aggregate supply curve. 
B)  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 an upward 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 an upward 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 downward shift of the aggregate supply curve. 
E)  An upward shift of the aggregate demand curve. 
A)  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 downward shift of the aggregate supply curve. 
B)  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 an upward 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 an upward 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 downward shift of the aggregate supply curve. 
E)  An upward shift of the aggregate demand curve.

Question 5

Which of the following is a supply shock?

Accepted Answer

A)  A decrease in money demand 
B)  An increase in the money supply 
C)  An increase in investment spending 
D)  A change in oil prices 
E)  A change in taxes 
A)  A decrease in money demand 
B)  An increase in the money supply 
C)  An increase in investment spending 
D)  A change in oil prices 
E)  A change in taxes

Question 6

The long-run aggregate supply curve

Accepted Answer

A)  is vertical 
B)  is upward sloping 
C)  is downward sloping 
D)  is horizontal 
E)  can have a variety of shapes depending on fiscal policy 
A)  is vertical 
B)  is upward sloping 
C)  is downward sloping 
D)  is horizontal 
E)  can have a variety of shapes depending on fiscal policy

Question 7

Which of the following would happen as the wage rate gradually adjusts following a shock?

Accepted Answer

A)  Nothing will change 
B)  A shift of the production possibilities frontier 
C)  A shift in the short-run aggregate supply curve 
D)  A shift in the aggregate demand curve 
E)  A shift in the long-run aggregate supply curve 
A)  Nothing will change 
B)  A shift of the production possibilities frontier 
C)  A shift in the short-run aggregate supply curve 
D)  A shift in the aggregate demand curve 
E)  A shift in the long-run aggregate supply curve

Question 8

If a war interrupted oil production,which of the following would most likely happen in the short run?

Accepted Answer

A)  Unit costs would decrease and there would be an upward movement along the aggregate supply curve. 
B)  Unit costs would increase and the aggregate supply curve would shift upward. 
C)  Unit costs would increase and the aggregate supply curve would shift downward. 
D)  Unit costs would decrease and the aggregate supply curve would shift upward. 
E)  Unit costs would increase and there would be movement along the aggregate supply curve. 
A)  Unit costs would decrease and there would be an upward movement along the aggregate supply curve. 
B)  Unit costs would increase and the aggregate supply curve would shift upward. 
C)  Unit costs would increase and the aggregate supply curve would shift downward. 
D)  Unit costs would decrease and the aggregate supply curve would shift upward. 
E)  Unit costs would increase and there would be movement along the aggregate supply curve.

Question 9

If investment spending increases due to increased optimism in the business sector,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 10

The vertical aggregate supply curve is consistent with

Accepted Answer

A)  the classical model 
B)  the short run macro model 
C)  a typical firm's supply curve 
D)  a positive demand shock 
E)  a negative demand shock 
A)  the classical model 
B)  the short run macro model 
C)  a typical firm's supply curve 
D)  a positive demand shock 
E)  a negative demand shock

Question 11

If autonomous consumption decreases,which of the following would occur in the short run?

Accepted Answer

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

Question 12

The aggregate supply curve

Accepted Answer

A)  indicates the markup at which firms are willing to supply a given level of output 
B)  is derived from equilibrium conditions in the money market 
C)  has a positive slope because an increase in real GDP causes an increase in the cost of resources 
D)  is found by summing up the supply curves of all the firms in an economy 
E)  illustrates how a change in the price level affects total output 
A)  indicates the markup at which firms are willing to supply a given level of output 
B)  is derived from equilibrium conditions in the money market 
C)  has a positive slope because an increase in real GDP causes an increase in the cost of resources 
D)  is found by summing up the supply curves of all the firms in an economy 
E)  illustrates how a change in the price level affects total output

Question 13

Which of the following would lead to an upward movement along the aggregate demand curve?

Accepted Answer

A)  An increase in government purchases 
B)  An increase in the money supply 
C)  An increase in the price level 
D)  A decrease in the money supply 
E)  An increase in taxes 
A)  An increase in government purchases 
B)  An increase in the money supply 
C)  An increase in the price level 
D)  A decrease in the money supply 
E)  An increase in taxes

Question 14

In the long run,changes in equilibrium GDP are most likely to be caused by

Accepted Answer

A)  changes in full-employment output 
B)  open market operations by the Fed 
C)  changes in nominal wages 
D)  contractionary or expansionary fiscal policy 
E)  none of these;long-run equilibrium GDP is a constant 
A)  changes in full-employment output 
B)  open market operations by the Fed 
C)  changes in nominal wages 
D)  contractionary or expansionary fiscal policy 
E)  none of these;long-run equilibrium GDP is a constant

Question 15

In the short run,a negative supply shock

Accepted Answer

A)  causes firms' unit costs to decrease 
B)  shifts the AS curve to the right 
C)  causes output to decrease and the price level to increase 
D)  shifts the AD curve to the left 
E)  causes both output and the price level to decrease 
A)  causes firms' unit costs to decrease 
B)  shifts the AS curve to the right 
C)  causes output to decrease and the price level to increase 
D)  shifts the AD curve to the left 
E)  causes both output and the price level to decrease

Question 16

If it costs $8 to produce a certain product and the product sells for $9,then

Accepted Answer

A)  the markup is approximately 11.1 percent 
B)  the market for this product must be monopolistic 
C)  the markup is $1 
D)  firms in this industry should shut down to minimize their losses 
E)  the revenue gained from the last unit produced is $1 
A)  the markup is approximately 11.1 percent 
B)  the market for this product must be monopolistic 
C)  the markup is $1 
D)  firms in this industry should shut down to minimize their losses 
E)  the revenue gained from the last unit produced is $1

Question 17

Which of the following would lead to a positive supply shock?

Accepted Answer

A)  An increase in the money supply. 
B)  A decrease in taxes. 
C)  The discovery of a more efficient production method. 
D)  An increase in consumer confidence. 
E)  An increase in energy prices. 
A)  An increase in the money supply. 
B)  A decrease in taxes. 
C)  The discovery of a more efficient production method. 
D)  An increase in consumer confidence. 
E)  An increase in energy prices.

Question 18

The AD curve shifts rightward if taxes decrease.

Accepted Answer

A) True 
 B)False

Question 19

All of the following are examples of demand shocks,except one.Which is the exception?

Accepted Answer

A)  A spontaneous decrease in money demand 
B)  A tax increase 
C)  A contraction of the money supply by the Fed 
D)  An increase in the price level 
E)  A reduction in government spending 
A)  A spontaneous decrease in money demand 
B)  A tax increase 
C)  A contraction of the money supply by the Fed 
D)  An increase in the price level 
E)  A reduction in government spending

Question 20

A decrease in oil prices is considered a demand shock because it would lead to a shift of the aggregate demand curve.

Accepted Answer

A) True 
 B)False

Exam 27: Aggregate Demand and Aggregate Supply

Which of the following will cause a movement along the aggregate demand curve?

-Refer to Figure 15-10.Suppose that output in the economy is currently below full employment.If real GDP is $6.8 trillion and a demand shock lowers real GDP to $6.5 trillion,what would we expect to occur in the long run?

-Refer to Figure 15-13.Beginning at point A,suppose a supply shock shifts the aggregate supply curve to AS2.In the long run,we would expect

]Which of the following describes what would happen after a positive supply shock such as a decrease in world oil prices?

Which of the following is a supply shock?

The long-run aggregate supply curve

Which of the following would happen as the wage rate gradually adjusts following a shock?

If a war interrupted oil production,which of the following would most likely happen in the short run?

If investment spending increases due to increased optimism in the business sector,which of the following would occur?

The vertical aggregate supply curve is consistent with

If autonomous consumption decreases,which of the following would occur in the short run?

The aggregate supply curve

Which of the following would lead to an upward movement along the aggregate demand curve?

In the long run,changes in equilibrium GDP are most likely to be caused by

In the short run,a negative supply shock

If it costs $8 to produce a certain product and the product sells for $9,then

Which of the following would lead to a positive supply shock?

The AD curve shifts rightward if taxes decrease.

All of the following are examples of demand shocks,except one.Which is the exception?

A decrease in oil prices is considered a demand shock because it would lead to a shift of 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

Filters

-Refer to Figure 15-13.Beginning at point A,suppose a supply shock shifts the aggregate supply curve to AS₂.In the long run,we would expect