Question 1

Which aggregate supply curve has a positive slope?

Accepted Answer

A)  long-run only 
B)  short-run only 
C)  both long-run and short-run 
D)  neither long-run nor short-run 
A)  long-run only 
B)  short-run only 
C)  both long-run and short-run 
D)  neither long-run nor short-run

Question 2

The international trade effect states that a(n) ________ in the price level will ________ net exports.

Accepted Answer

A)  increase; increase 
B)  increase; decrease 
C)  decrease; decrease 
D)  decrease; not affect 
A)  increase; increase 
B)  increase; decrease 
C)  decrease; decrease 
D)  decrease; not affect

Question 3

An increase in the price level shifts the aggregate demand curve to the left.

Accepted Answer

A) True 
 B)False

Question 4

Figure 24-1  
-Refer to Figure 24-1. Ceteris paribus, an increase in the price level 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 5

Hurricane Katrina resulted in a decline in oil production infrastructure along the gulf coast. As a result there was an unexpected decline in oil and natural gas supplies in 2005. Suppose that this caused an increase in the price level and a decline in real GDP in 2006. Also assume that potential real GDP continued to grow due to other factors. You can assume the aggregate demand curve did not change. Show the macroeconomic equilibrium for 2005 and 2006 using the dynamic aggregate supply and aggregate demand model.

Accepted Answer

@#IMG-DLM& The economy began at the point (Y1, P1)

Question 6

Monetarists believe that the quantity of money should be increased at an increasing rate.

Accepted Answer

A) True 
 B)False

Question 7

In the dynamic aggregate demand and aggregate supply model, what is the result of aggregate demand increasing slower than potential real GDP?

Accepted Answer

Aggregate demand inc

Question 8

What is the relationship among the AD, SRAS and LRAS curves when the economy is in macroeconomic equilibrium?

Accepted Answer

When the economy is in long-ru

Question 9

Starting from long-run equilibrium, use the basic aggregate demand and aggregate supply diagram to show what happens in both the long run and the short run when there is a decline in wealth.

Accepted Answer

@#IMG-DLM& Before the decline in demand, the econo

Question 10

Figure 24-2  
-Refer to Figure 24-2. 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

If the economy receives an influx of new workers from immigration,

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)  we will move up along the long-run aggregate supply curve. 
D)  we 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)  we will move up along the long-run aggregate supply curve. 
D)  we will move down along the long-run aggregate supply curve.

Question 12

The impact of Hurricane Katrina on consumers in the economy was to make them very pessimistic about their future incomes. How does this increased pessimism affect the aggregate demand curve?

Accepted Answer

A)  This will move the economy up along a stationary aggregate demand curve. 
B)  This will move the economy down along a stationary aggregate demand curve. 
C)  This will shift the aggregate demand curve to the left. 
D)  This will shift the aggregate demand curve to the right. 
A)  This will move the economy up along a stationary aggregate demand curve. 
B)  This will move the economy down along a stationary aggregate demand curve. 
C)  This will shift the aggregate demand curve to the left. 
D)  This will shift the aggregate demand curve to the right.

Question 13

Suppose the economy is at full employment and firms become more optimistic about the future profitability of new investment. Which of the following will happen in the short run?

Accepted Answer

A)  Output will decline. 
B)  Prices will decline. 
C)  Unemployment will decline. 
D)  The aggregate demand curve will shift to the left. 
A)  Output will decline. 
B)  Prices will decline. 
C)  Unemployment will decline. 
D)  The aggregate demand curve will shift to the left.

Question 14

Suppose a developing country receives more machinery and capital equipment as foreign entrepreneurs increase 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 15

Inflation is generally the result of total spending growing faster than total production.

Accepted Answer

A) True 
 B)False

Question 16

If workers leave a country to seek out better opportunities in another country, then this will

Accepted Answer

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

Question 17

The ________ curve is vertical.

Accepted Answer

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

Question 18

The long-run aggregate supply curve shows the relationship between

Accepted Answer

A)  short-run aggregate supply and short-run aggregate demand. 
B)  the price level and quantity of real GDP supplied. 
C)  the real interest rate and the nominal interest rate. 
D)  the quantity of real GDP supplied and the quantity of nominal GDP supplied. 
A)  short-run aggregate supply and short-run aggregate demand. 
B)  the price level and quantity of real GDP supplied. 
C)  the real interest rate and the nominal interest rate. 
D)  the quantity of real GDP supplied and the quantity of nominal GDP supplied.

Question 19

Figure 24-3  
-Refer to Figure 24-3. Suppose the economy is at point A. If investment spending increases in the economy, where will the eventual long-run equilibrium be?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
A)  A 
B)  B 
C)  C 
D)  D

Question 20

A decrease in investment causes the price level to ________ in the short run and ________ in the long run.

Accepted Answer

A)  increase; increase further 
B)  increase; decrease 
C)  decrease; decrease further 
D)  decrease; increase 
A)  increase; increase further 
B)  increase; decrease 
C)  decrease; decrease further 
D)  decrease; increase

Exam 24: Aggregate Demand and Aggregate Supply Analysis

Which aggregate supply curve has a positive slope?

The international trade effect states that a(n) ________ in the price level will ________ net exports.

An increase in the price level shifts the aggregate demand curve to the left.

Figure 24-1 -Refer to Figure 24-1. Ceteris paribus, an increase in the price level would be represented by a movement from

Monetarists believe that the quantity of money should be increased at an increasing rate.

In the dynamic aggregate demand and aggregate supply model, what is the result of aggregate demand increasing slower than potential real GDP?

What is the relationship among the AD, SRAS and LRAS curves when the economy is in macroeconomic equilibrium?

Starting from long-run equilibrium, use the basic aggregate demand and aggregate supply diagram to show what happens in both the long run and the short run when there is a decline in wealth.

Figure 24-2 -Refer to Figure 24-2. Ceteris paribus, an increase in the expected price of an important natural resource would be represented by a movement from

If the economy receives an influx of new workers from immigration,

The impact of Hurricane Katrina on consumers in the economy was to make them very pessimistic about their future incomes. How does this increased pessimism affect the aggregate demand curve?

Suppose the economy is at full employment and firms become more optimistic about the future profitability of new investment. Which of the following will happen in the short run?

Suppose a developing country receives more machinery and capital equipment as foreign entrepreneurs increase the amount of investment in the economy. As a result,

Inflation is generally the result of total spending growing faster than total production.

If workers leave a country to seek out better opportunities in another country, then this will

The ________ curve is vertical.

The long-run aggregate supply curve shows the relationship between

Figure 24-3 -Refer to Figure 24-3. Suppose the economy is at point A. If investment spending increases in the economy, where will the eventual long-run equilibrium be?

A decrease in investment causes the price level to ________ in the short run and ________ in the long run.

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

Externalities, Environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

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 international trade effect states that a(n) in the price level will net exports.

A decrease in investment causes the price level to in the short run and in the long run.