Question 1

The short-run aggregate supply curve is:

Accepted Answer

A) typically vertical. 
B) typically downward sloping. 
C) relatively steep at low levels of output. 
D) typically horizontal. 
E) typically upward sloping. 
A) typically vertical. 
B) typically downward sloping. 
C) relatively steep at low levels of output. 
D) typically horizontal. 
E) typically upward sloping.

Question 2

The real wealth effect is one reason for the negative slope of the aggregate demand curve.

Accepted Answer

A) True 
 B)False

Question 3

A recession with the price level falling is generally caused by:

Accepted Answer

A) an increase in aggregate demand. 
B) a decrease in aggregate demand. 
C) an increase in aggregate supply. 
D) a decrease in aggregate supply. 
E) an increase in the government expenditure. 
A) an increase in aggregate demand. 
B) a decrease in aggregate demand. 
C) an increase in aggregate supply. 
D) a decrease in aggregate supply. 
E) an increase in the government expenditure.

Question 4

Explain how changes in the stock of capital affect aggregate supply.

Accepted Answer

Answers will vary. Changes in the stock

Question 5

If the overall price level decreases, then the aggregate demand curve will shift to the right.

Accepted Answer

A) True 
 B)False

Question 6

When the price level rises as a result of a decrease in aggregate supply, it is called cost-push inflation.

Accepted Answer

A) True 
 B)False

Question 7

Describe the difference between a microeconomic demand curve and an aggregate demand curve.

Accepted Answer

Answers will vary. A microeconomic deman

Question 8

The aggregate demand curve portrays the relationship between price level and real GDP. What are the three reasons why this relationship is a negative or inverse relationship? Provide brief illustrations of each.

Accepted Answer

Answers will vary. The three complementa

Question 9

Figure 13-3 shows the relationship between real GDP and the price level in an economy. In the figure, _____ represents long-run aggregate supply?Figure 13-3

Accepted Answer

A) curve A 
B) curve B 
C) curve C 
D) curve D 
E) curve E 
A) curve A 
B) curve B 
C) curve C 
D) curve D 
E) curve E

Question 10

In the long run, the real output level _____.

Accepted Answer

A) varies positively with the price level 
B) varies negatively with the price level. 
C) is equal to the natural level of real output at all price levels 
D) can be either greater than or less than the natural level of real output 
E) is equal to the natural level of real output at all price levels. 
A) varies positively with the price level 
B) varies negatively with the price level. 
C) is equal to the natural level of real output at all price levels 
D) can be either greater than or less than the natural level of real output 
E) is equal to the natural level of real output at all price levels.

Question 11

If there was no profit effect, but there was a misperception effect in the short run, then:

Accepted Answer

A) both the short-run and the long-run aggregate supply curve would be upward sloping. 
B) the short-run aggregate supply curve would be upward sloping and the long-run aggregate supply curve would be vertical. 
C) the short-run aggregate supply curve would be vertical and the long-run aggregate supply curve would be upward sloping. 
D) both the short-run and the long-run aggregate supply curve would be vertical. 
E) the short-run aggregate supply curve would be horizontal and the long-run aggregate supply curve would be vertical. 
A) both the short-run and the long-run aggregate supply curve would be upward sloping. 
B) the short-run aggregate supply curve would be upward sloping and the long-run aggregate supply curve would be vertical. 
C) the short-run aggregate supply curve would be vertical and the long-run aggregate supply curve would be upward sloping. 
D) both the short-run and the long-run aggregate supply curve would be vertical. 
E) the short-run aggregate supply curve would be horizontal and the long-run aggregate supply curve would be vertical.

Question 12

Figure 13-8 shows the short-run macroeconomic equilibrium of an economy. In the figure, starting at Point A, a decrease in aggregate demand would result in:Figure 13-8

Accepted Answer

A) a further increase in the inflationary gap in the short run. 
B) a further increase in the recessionary gap in the short run. 
C) an immediate restoration of long-run equilibrium in the economy. 
D) a decrease in the inflationary gap in the short run. 
E) a decrease in the unemployment rate in the short run. 
A) a further increase in the inflationary gap in the short run. 
B) a further increase in the recessionary gap in the short run. 
C) an immediate restoration of long-run equilibrium in the economy. 
D) a decrease in the inflationary gap in the short run. 
E) a decrease in the unemployment rate in the short run.

Question 13

Figure 13-4 shows the short-run macroeconomic equilibrium of an economy at Point A. In the figure, Point A suggests that:Figure 13-4

Accepted Answer

A) the economy is running a balance of payment deficit. 
B) there is a surplus of money in the economy. 
C) the economy is operating at long-run equilibrium. 
D) prices are falling in the economy. 
E) there is a low level of unemployment in the economy. 
A) the economy is running a balance of payment deficit. 
B) there is a surplus of money in the economy. 
C) the economy is operating at long-run equilibrium. 
D) prices are falling in the economy. 
E) there is a low level of unemployment in the economy.

Question 14

Investment will increase if:

Accepted Answer

A) business taxes and real interest rates increase at the same time. 
B) business taxes increase and real interest rates decrease at the same time. 
C) business taxes decrease and real interest rates increase at the same time. 
D) business taxes and real interest rates decrease at the same time. 
E) business taxes remain the same and real interest rates increase. 
A) business taxes and real interest rates increase at the same time. 
B) business taxes increase and real interest rates decrease at the same time. 
C) business taxes decrease and real interest rates increase at the same time. 
D) business taxes and real interest rates decrease at the same time. 
E) business taxes remain the same and real interest rates increase.

Question 15

Which of the following increases U.S. aggregate demand?

Accepted Answer

A) An increase in the price level, which increases citizens' real wealth 
B) A decrease in the price level, which reduces interest rates 
C) A decrease in the price level, which increase exports and decreasing imports 
D) An increase in Americans' expected future incomes 
E) A decrease in the price level, which increase citizens' real income 
A) An increase in the price level, which increases citizens' real wealth 
B) A decrease in the price level, which reduces interest rates 
C) A decrease in the price level, which increase exports and decreasing imports 
D) An increase in Americans' expected future incomes 
E) A decrease in the price level, which increase citizens' real income

Question 16

The short-run aggregate supply curve is vertical at the natural level of real output.

Accepted Answer

A) True 
 B)False

Question 17

If some non-price level determinant causes total spending to decrease, there will be a(n):

Accepted Answer

A) upward movement along the aggregate demand curve. 
B) downward movement along the aggregate demand curve. 
C) leftward shift of the aggregate demand curve. 
D) rightward shift of the aggregate demand curve. 
E) increase in the slope of the aggregate demand curve. 
A) upward movement along the aggregate demand curve. 
B) downward movement along the aggregate demand curve. 
C) leftward shift of the aggregate demand curve. 
D) rightward shift of the aggregate demand curve. 
E) increase in the slope of the aggregate demand curve.

Question 18

A supply shock is:

Accepted Answer

A) an expected event that can either increase or decrease long-run aggregate supply permanently. 
B) an unexpected temporary event that can either increase or decrease the supply of an individual firm. 
C) an unexpected temporary event that can either increase or decrease the short-run aggregate supply. 
D) a state of confusion that occurs during a period of hyperinflation which can lead to an increase in supply in an industry. 
E) an artificially created scarcity of a particular commodity that aims at increasing the price of the commodity. 
A) an expected event that can either increase or decrease long-run aggregate supply permanently. 
B) an unexpected temporary event that can either increase or decrease the supply of an individual firm. 
C) an unexpected temporary event that can either increase or decrease the short-run aggregate supply. 
D) a state of confusion that occurs during a period of hyperinflation which can lead to an increase in supply in an industry. 
E) an artificially created scarcity of a particular commodity that aims at increasing the price of the commodity.

Question 19

Which of the following would shift the short-run aggregate supply curve of an industry upward but not change its long-run aggregate supply curve?

Accepted Answer

A) A negative supply shock​ 
B) A positive supply shock 
C) A decrease in the price level 
D) An increase in the price level 
E) A fall in the transport cost of a raw material required for production 
A) A negative supply shock​ 
B) A positive supply shock 
C) A decrease in the price level 
D) An increase in the price level 
E) A fall in the transport cost of a raw material required for production

Question 20

Why do increases in input prices impact the long-run aggregate supply only if they reflect permanent reductions in the supply of those inputs?

Accepted Answer

Answers will vary. In the short run, wag

The short-run aggregate supply curve is:

The real wealth effect is one reason for the negative slope of the aggregate demand curve.

A recession with the price level falling is generally caused by:

Explain how changes in the stock of capital affect aggregate supply.

If the overall price level decreases, then the aggregate demand curve will shift to the right.

When the price level rises as a result of a decrease in aggregate supply, it is called cost-push inflation.

Describe the difference between a microeconomic demand curve and an aggregate demand curve.

The aggregate demand curve portrays the relationship between price level and real GDP. What are the three reasons why this relationship is a negative or inverse relationship? Provide brief illustrations of each.

Figure 13-3 shows the relationship between real GDP and the price level in an economy. In the figure, _____ represents long-run aggregate supply?Figure 13-3

In the long run, the real output level _____.

If there was no profit effect, but there was a misperception effect in the short run, then:

Figure 13-8 shows the short-run macroeconomic equilibrium of an economy. In the figure, starting at Point A, a decrease in aggregate demand would result in:Figure 13-8

Figure 13-4 shows the short-run macroeconomic equilibrium of an economy at Point A. In the figure, Point A suggests that:Figure 13-4

Investment will increase if:

Which of the following increases U.S. aggregate demand?

The short-run aggregate supply curve is vertical at the natural level of real output.

If some non-price level determinant causes total spending to decrease, there will be a(n):

A supply shock is:

Which of the following would shift the short-run aggregate supply curve of an industry upward but not change its long-run aggregate supply curve?

Why do increases in input prices impact the long-run aggregate supply only if they reflect permanent reductions in the supply of those inputs?

The Role and Method of Economics

The Economic Way of Thinking

Supply and Demand

Using Supply and Demand

Market Failure and Public Choice

Production and Costs

Firms in Perfectly Competitive Markets

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets, Income Distribution, and Poverty

Introduction to Macroeconomics: Unemployment, Inflation, and Economic Fluctuations

Economic Growth

Fiscal Policy

Monetary Institutions

The Federal Reserve and Monetary Policy

Issues in Macroeconomic Theory and Policy

International Economics

Filters

Exam 13: Aggregate Demand and Aggregate Supply

The short-run aggregate supply curve is:

The real wealth effect is one reason for the negative slope of the aggregate demand curve.

A recession with the price level falling is generally caused by:

Explain how changes in the stock of capital affect aggregate supply.

If the overall price level decreases, then the aggregate demand curve will shift to the right.

When the price level rises as a result of a decrease in aggregate supply, it is called cost-push inflation.

Describe the difference between a microeconomic demand curve and an aggregate demand curve.

The aggregate demand curve portrays the relationship between price level and real GDP. What are the three reasons why this relationship is a negative or inverse relationship? Provide brief illustrations of each.

Figure 13-3 shows the relationship between real GDP and the price level in an economy. In the figure, _____ represents long-run aggregate supply?Figure 13-3

In the long run, the real output level _____.

If there was no profit effect, but there was a misperception effect in the short run, then:

Figure 13-8 shows the short-run macroeconomic equilibrium of an economy. In the figure, starting at Point A, a decrease in aggregate demand would result in:Figure 13-8

Figure 13-4 shows the short-run macroeconomic equilibrium of an economy at Point A. In the figure, Point A suggests that:Figure 13-4

Investment will increase if:

Which of the following increases U.S. aggregate demand?

The short-run aggregate supply curve is vertical at the natural level of real output.

If some non-price level determinant causes total spending to decrease, there will be a(n):

A supply shock is:

Which of the following would shift the short-run aggregate supply curve of an industry upward but not change its long-run aggregate supply curve?

Why do increases in input prices impact the long-run aggregate supply only if they reflect permanent reductions in the supply of those inputs?

The Role and Method of Economics

The Economic Way of Thinking

Supply and Demand

Using Supply and Demand

Market Failure and Public Choice

Production and Costs

Firms in Perfectly Competitive Markets

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets, Income Distribution, and Poverty

Introduction to Macroeconomics: Unemployment, Inflation, and Economic Fluctuations

Economic Growth

Fiscal Policy

Monetary Institutions

The Federal Reserve and Monetary Policy

Issues in Macroeconomic Theory and Policy

International Economics

Filters