Question 1

Why does the short-run aggregate supply curve shift to the right in the long run, following a decrease in aggregate demand?

Accepted Answer

A)  Workers and firms adjust their expectations of wages and prices downward and they accept lower wages and prices. 
B)  Workers and firms adjust their expectations of wages and prices downward and they push for higher wages and prices. 
C)  Workers and firms adjust their expectations of wages and prices upward and they push for higher wages and prices. 
D)  Workers and firms adjust their expectations of wages and prices upward and they accept lower wages and prices. 
A)  Workers and firms adjust their expectations of wages and prices downward and they accept lower wages and prices. 
B)  Workers and firms adjust their expectations of wages and prices downward and they push for higher wages and prices. 
C)  Workers and firms adjust their expectations of wages and prices upward and they push for higher wages and prices. 
D)  Workers and firms adjust their expectations of wages and prices upward and they accept lower wages and prices.

Question 2

According to the real business cycle model, ________ in aggregate demand ________ GDP.

Accepted Answer

A)  increases; decrease 
B)  increases; increase 
C)  increases; do not affect 
D)  decreases; increase 
A)  increases; decrease 
B)  increases; increase 
C)  increases; do not affect 
D)  decreases; increase

Question 3

Suppose the U.S. GDP growth rate is slower relative to other countries' GDP growth rates. This will

Accepted Answer

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

Question 4

If aggregate demand just decreased, which of the following may have caused the decrease?

Accepted Answer

A)  a decrease in exports 
B)  a decrease in the interest rate 
C)  a decrease in the price level 
D)  a decrease in imports 
A)  a decrease in exports 
B)  a decrease in the interest rate 
C)  a decrease in the price level 
D)  a decrease in imports

Question 5

Which of the following is considered a negative supply shock?

Accepted Answer

A)  increasing immigration in the economy causes the labor supply to rise 
B)  an improvement in technology 
C)  an increase in unemployment 
D)  an unexpected decrease in the refining capacity for oil 
A)  increasing immigration in the economy causes the labor supply to rise 
B)  an improvement in technology 
C)  an increase in unemployment 
D)  an unexpected decrease in the refining capacity for oil

Question 6

The basic aggregate demand and aggregate supply curve model helps explain

Accepted Answer

A)  short-term fluctuations in real GDP and the price level. 
B)  long-term growth. 
C)  price fluctuations in an individual market. 
D)  output fluctuations in an individual market. 
A)  short-term fluctuations in real GDP and the price level. 
B)  long-term growth. 
C)  price fluctuations in an individual market. 
D)  output fluctuations in an individual market.

Question 7

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 an increase in wealth.

Accepted Answer

@#IMG-DLM& Before the increase in demand, the econ

Question 8

Figure 24-2  
-Refer to Figure 24-2. Ceteris paribus, an increase in workers and firms adjusting to having previously overestimated the price level 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 9

Figure 24-2  
-Refer to Figure 24-2. Ceteris paribus, a decrease in the labor force 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 10

Explain how each of the following events would affect the aggregate demand curve.
a. Lower interest rates
b. A decrease in net exports
c. A decrease in the price level
d. Slower income growth in other countries
e. A decrease in imports

Accepted Answer

a. Lower interest rates would increase i

Question 11

If technological change occurs in the economy,

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

At the beginning of the recession of 2007-2009, real GDP in the United States was ________ potential GDP, and in June 2009, real GDP was ________ potential GDP.

Accepted Answer

A)  below; above 
B)  below; below 
C)  above; below 
D)  above; above 
A)  below; above 
B)  below; below 
C)  above; below 
D)  above; above

Question 13

If full-employment GDP is equal to $4.2 trillion, what does the long-run aggregate supply curve look like?

Accepted Answer

A)  It is a horizontal line at $4.2 trillion of GDP. 
B)  It is a vertical line at a level of GDP below $4.2 trillion. 
C)  It is a vertical line at $4.2 trillion of GDP. 
D)  It is a vertical line at a level of GDP above $4.2 trillion. 
A)  It is a horizontal line at $4.2 trillion of GDP. 
B)  It is a vertical line at a level of GDP below $4.2 trillion. 
C)  It is a vertical line at $4.2 trillion of GDP. 
D)  It is a vertical line at a level of GDP above $4.2 trillion.

Question 14

A decrease in disposable income will shift the aggregate demand curve to the left.

Accepted Answer

A) True 
 B)False

Question 15

Long-run macroeconomic equilibrium occurs when aggregate demand ________ short-run aggregate supply and they ________ the long-run supply curve.

Accepted Answer

A)  equals; intersect at a point to the right of 
B)  equals; intersect at a point on 
C)  is greater than; intersect at a point to the left of 
D)  is less than; intersect at a point to the right of 
A)  equals; intersect at a point to the right of 
B)  equals; intersect at a point on 
C)  is greater than; intersect at a point to the left of 
D)  is less than; intersect at a point to the right of

Question 16

Interest rates in the economy have fallen. How will this affect aggregate demand and equilibrium in the short run?

Accepted Answer

A)  Aggregate demand will rise, the equilibrium price level will rise, and the equilibrium level of GDP will rise. 
B)  Aggregate demand will rise, the equilibrium price level will fall, and the equilibrium level of GDP will rise. 
C)  Aggregate demand will fall, the equilibrium price level will fall, and the equilibrium level of GDP will fall. 
D)  Aggregate demand will fall, the equilibrium price level will rise, and the equilibrium level of GDP will fall. 
A)  Aggregate demand will rise, the equilibrium price level will rise, and the equilibrium level of GDP will rise. 
B)  Aggregate demand will rise, the equilibrium price level will fall, and the equilibrium level of GDP will rise. 
C)  Aggregate demand will fall, the equilibrium price level will fall, and the equilibrium level of GDP will fall. 
D)  Aggregate demand will fall, the equilibrium price level will rise, and the equilibrium level of GDP will fall.

Question 17

The long-run adjustment to a negative supply shock results in

Accepted Answer

A)  the short-run aggregate supply curve shifting to the right. 
B)  the price level rising. 
C)  unemployment rising. 
D)  workers being willing to accept higher wages. 
A)  the short-run aggregate supply curve shifting to the right. 
B)  the price level rising. 
C)  unemployment rising. 
D)  workers being willing to accept higher wages.

Question 18

Which of the following is not a reason why the wages of workers and the prices of inputs rise more slowly than the prices of final goods and services?

Accepted Answer

A)  Contracts make prices and wages "sticky." 
B)  Firms are often slow to adjust wages. 
C)  Menu costs make some prices sticky. 
D)  Unions are successful in pushing up wages. 
A)  Contracts make prices and wages "sticky." 
B)  Firms are often slow to adjust wages. 
C)  Menu costs make some prices sticky. 
D)  Unions are successful in pushing up wages.

Question 19

The short-run aggregate supply curve has a

Accepted Answer

A)  negative slope. 
B)  positive slope. 
C)  slope equal to infinity. 
D)  slope equal to zero. 
A)  negative slope. 
B)  positive slope. 
C)  slope equal to infinity. 
D)  slope equal to zero.

Question 20

Figure 24-1  
-Refer to Figure 24-1. Ceteris paribus, an increase in households' expectations of their future income 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.

Exam 24: Aggregate Demand and Aggregate Supply Analysis

Why does the short-run aggregate supply curve shift to the right in the long run, following a decrease in aggregate demand?

According to the real business cycle model, ________ in aggregate demand ________ GDP.

Suppose the U.S. GDP growth rate is slower relative to other countries' GDP growth rates. This will

If aggregate demand just decreased, which of the following may have caused the decrease?

Which of the following is considered a negative supply shock?

The basic aggregate demand and aggregate supply curve model helps explain

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 an increase in wealth.

Figure 24-2 -Refer to Figure 24-2. Ceteris paribus, an increase in workers and firms adjusting to having previously overestimated the price level would be represented by a movement from

Figure 24-2 -Refer to Figure 24-2. Ceteris paribus, a decrease in the labor force would be represented by a movement from

Explain how each of the following events would affect the aggregate demand curve. a. Lower interest rates b. A decrease in net exports c. A decrease in the price level d. Slower income growth in other countries e. A decrease in imports

If technological change occurs in the economy,

At the beginning of the recession of 2007-2009, real GDP in the United States was ________ potential GDP, and in June 2009, real GDP was ________ potential GDP.

If full-employment GDP is equal to $4.2 trillion, what does the long-run aggregate supply curve look like?

A decrease in disposable income will shift the aggregate demand curve to the left.

Long-run macroeconomic equilibrium occurs when aggregate demand ________ short-run aggregate supply and they ________ the long-run supply curve.

Interest rates in the economy have fallen. How will this affect aggregate demand and equilibrium in the short run?

The long-run adjustment to a negative supply shock results in

Which of the following is not a reason why the wages of workers and the prices of inputs rise more slowly than the prices of final goods and services?

The short-run aggregate supply curve has a

Figure 24-1 -Refer to Figure 24-1. Ceteris paribus, an increase in households' expectations of their future income would be represented by a movement from

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

According to the real business cycle model, in aggregate demand GDP.

At the beginning of the recession of 2007-2009, real GDP in the United States was potential GDP, and in June 2009, real GDP was potential GDP.

Long-run macroeconomic equilibrium occurs when aggregate demand short-run aggregate supply and they the long-run supply curve.