Question 1

When aggregate demand decreased between 1929 and 1933,the GDP deflator decreased.

Accepted Answer

A) True 
 B)False

Question 2

The _____ curve shows the negative relationship between the aggregate price level and the quantity of aggregate output demanded in the economy.

Accepted Answer

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

Question 3

Use the following to answer questions:  
-(Figure: Shifts of the AD-AS Curves)Refer to Figure: Shifts of the AD-AS Curves.A decrease in wages in the short run is illustrated by panel:

Accepted Answer

A)  (a). 
B)  (b). 
C)  (c). 
D)  (d). 
A)  (a). 
B)  (b). 
C)  (c). 
D)  (d).

Question 4

When the price level increases and people want to hold more money,interest rates decrease.

Accepted Answer

A) True 
 B)False

Question 5

A change in _____ has the MOST direct effect on aggregate demand.

Accepted Answer

A)  taxes 
B)  interest rates 
C)  the money supply 
D)  government spending 
A)  taxes 
B)  interest rates 
C)  the money supply 
D)  government spending

Question 6

Examples of fiscal policy do NOT include:

Accepted Answer

A)  government spending on infrastructure to stimulate aggregate demand. 
B)  reducing the interest rate by increasing the money supply. 
C)  an economic stimulus package. 
D)  a $1 500 per family tax rebate. 
A)  government spending on infrastructure to stimulate aggregate demand. 
B)  reducing the interest rate by increasing the money supply. 
C)  an economic stimulus package. 
D)  a $1 500 per family tax rebate.

Question 7

An increase in the minimum wage would likely:

Accepted Answer

A)  cause a movement up the short-run aggregate supply curve from left to right. 
B)  cause a movement down the short-run aggregate supply curve from right to left. 
C)  shift the short-run aggregate supply curve to the right. 
D)  shift the short-run aggregate supply curve to the left. 
A)  cause a movement up the short-run aggregate supply curve from left to right. 
B)  cause a movement down the short-run aggregate supply curve from right to left. 
C)  shift the short-run aggregate supply curve to the right. 
D)  shift the short-run aggregate supply curve to the left.

Question 8

In the long run,changes in the aggregate price level will be accompanied by _____ proportional changes in input prices.

Accepted Answer

A)  less than 
B)  more than 
C)  equal 
D)  opposite 
A)  less than 
B)  more than 
C)  equal 
D)  opposite

Question 9

The wealth effect explains why the:

Accepted Answer

A)  aggregate demand curve slopes downward since changes in aggregate price levels change the purchasing power of people's assets. 
B)  aggregate supply curve slopes upward since an increase in wealth leads to more consumption. 
C)  aggregate supply curve shifts since changes in wealth affect production. 
D)  aggregate demand curve slopes upward since wealth allows consumers to purchase more regardless of the price level. 
A)  aggregate demand curve slopes downward since changes in aggregate price levels change the purchasing power of people's assets. 
B)  aggregate supply curve slopes upward since an increase in wealth leads to more consumption. 
C)  aggregate supply curve shifts since changes in wealth affect production. 
D)  aggregate demand curve slopes upward since wealth allows consumers to purchase more regardless of the price level.

Question 10

As a recessionary gap self-corrects,the equilibrium price level _____ and the equilibrium real output _____.

Accepted Answer

A)  rises;decreases 
B)  rises;increases 
C)  falls;decreases 
D)  falls;increases 
A)  rises;decreases 
B)  rises;increases 
C)  falls;decreases 
D)  falls;increases

Question 11

If Nike sells basketball shoes for $150 per pair and the cost of producing and selling a pair of basketball shoes is $15,Nike's profit per unit on a pair of basketball shoes is:

Accepted Answer

A)  $135. 
B)  $160. 
C)  $165. 
D)  $10. 
A)  $135. 
B)  $160. 
C)  $165. 
D)  $10.

Question 12

An improvement in the business outlook of firms is a type of positive _____ shock and therefore shifts the _____ curve to the _____.

Accepted Answer

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

Question 13

Use the following to answer questions:  
-In response to a negative supply shock,the government decreases taxes.The MOST likely result of the government's tax decrease is a(n)_____ in unemployment and a(n)_____ in the aggregate price level.

Accepted Answer

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

Question 14

Nominal wages are sticky because:

Accepted Answer

A)  wages are slow to rise when there are labour shortages and slow to fall even when the level of unemployment is significant. 
B)  wages remain fixed in the long run,increasing the profitability of the firms. 
C)  wages are slow to fall when there are labour shortages and slow to rise even when the level of unemployment is significant. 
D)  in the long run all wages are adjusted for inflation. 
A)  wages are slow to rise when there are labour shortages and slow to fall even when the level of unemployment is significant. 
B)  wages remain fixed in the long run,increasing the profitability of the firms. 
C)  wages are slow to fall when there are labour shortages and slow to rise even when the level of unemployment is significant. 
D)  in the long run all wages are adjusted for inflation.

Question 15

Short-run aggregate supply increases when producers are willing to supply more at any given price level.

Accepted Answer

A) True 
 B)False

Question 16

If an economy is in short-run equilibrium such that the level of output is greater than the potential output:

Accepted Answer

A)  nominal wages will rise after some time. 
B)  the economy is in long-run equilibrium. 
C)  the short run AS curve will shift right over time. 
D)  unemployment is much higher than its natural rate. 
A)  nominal wages will rise after some time. 
B)  the economy is in long-run equilibrium. 
C)  the short run AS curve will shift right over time. 
D)  unemployment is much higher than its natural rate.

Question 17

An inflationary gap occurs when potential output is above actual aggregate output.

Accepted Answer

A) True 
 B)False

Question 18

According to the long-run aggregate supply curve,when _____,the quantity of aggregate output supplied _____.

Accepted Answer

A)  nominal wages rise;falls 
B)  the aggregate price level rises;does not change 
C)  the aggregate price level rises;falls 
D)  the price of commodities falls;rises 
A)  nominal wages rise;falls 
B)  the aggregate price level rises;does not change 
C)  the aggregate price level rises;falls 
D)  the price of commodities falls;rises

Question 19

Profit per unit equals:

Accepted Answer

A)  price per unit minus cost per unit. 
B)  price per unit divided by cost per unit. 
C)  cost per unit minus price per unit. 
D)  price per unit minus the nominal wage rate. 
A)  price per unit minus cost per unit. 
B)  price per unit divided by cost per unit. 
C)  cost per unit minus price per unit. 
D)  price per unit minus the nominal wage rate.

Question 20

Raising taxes shifts the _____ curve to the _____.

Accepted Answer

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

When aggregate demand decreased between 1929 and 1933,the GDP deflator decreased.

The _____ curve shows the negative relationship between the aggregate price level and the quantity of aggregate output demanded in the economy.

Use the following to answer questions: -(Figure: Shifts of the AD-AS Curves)Refer to Figure: Shifts of the AD-AS Curves.A decrease in wages in the short run is illustrated by panel:

When the price level increases and people want to hold more money,interest rates decrease.

A change in _____ has the MOST direct effect on aggregate demand.

Examples of fiscal policy do NOT include:

An increase in the minimum wage would likely:

In the long run,changes in the aggregate price level will be accompanied by _____ proportional changes in input prices.

The wealth effect explains why the:

As a recessionary gap self-corrects,the equilibrium price level _ and the equilibrium real output _.

If Nike sells basketball shoes for $150 per pair and the cost of producing and selling a pair of basketball shoes is $15,Nike's profit per unit on a pair of basketball shoes is:

An improvement in the business outlook of firms is a type of positive ___ shock and therefore shifts the _ curve to the ___.

Use the following to answer questions: -In response to a negative supply shock,the government decreases taxes.The MOST likely result of the government's tax decrease is a(n)_ in unemployment and a(n)_ in the aggregate price level.

Nominal wages are sticky because:

Short-run aggregate supply increases when producers are willing to supply more at any given price level.

If an economy is in short-run equilibrium such that the level of output is greater than the potential output:

An inflationary gap occurs when potential output is above actual aggregate output.

According to the long-run aggregate supply curve,when _,the quantity of aggregate output supplied _.

Profit per unit equals:

Raising taxes shifts the _ curve to the _.

First Principles

Economic Models: Trade-Offs and Trade

Supply and Demand

Price Controls and Quotas: Meddling With Markets

International Trade

Macroeconomics: the Big Picture

Gdp and the Cpi: Tracking the Macroeconomy

Unemployment and Inflation

Long-Run Economic Growth

Savings, Investment Spending, and the Financial System

Income and Expenditure

Fiscal Policy

Money, Banking, and the Federal Reserve System

Monetary Policy

Inflation, Disinflation, and Deflation

Macroeconomics: Events and Ideas

International Macroeconomics

Graphs in Economics

Filters

Exam 12: Aggregate Demand and Aggregate Supply

When aggregate demand decreased between 1929 and 1933,the GDP deflator decreased.

The _____ curve shows the negative relationship between the aggregate price level and the quantity of aggregate output demanded in the economy.

Use the following to answer questions: -(Figure: Shifts of the AD-AS Curves)Refer to Figure: Shifts of the AD-AS Curves.A decrease in wages in the short run is illustrated by panel:

When the price level increases and people want to hold more money,interest rates decrease.

A change in _____ has the MOST direct effect on aggregate demand.

Examples of fiscal policy do NOT include:

An increase in the minimum wage would likely:

In the long run,changes in the aggregate price level will be accompanied by _____ proportional changes in input prices.

The wealth effect explains why the:

As a recessionary gap self-corrects,the equilibrium price level _____ and the equilibrium real output _____.

If Nike sells basketball shoes for $150 per pair and the cost of producing and selling a pair of basketball shoes is $15,Nike's profit per unit on a pair of basketball shoes is:

An improvement in the business outlook of firms is a type of positive _____ shock and therefore shifts the _____ curve to the _____.

Use the following to answer questions: -In response to a negative supply shock,the government decreases taxes.The MOST likely result of the government's tax decrease is a(n)_____ in unemployment and a(n)_____ in the aggregate price level.

Nominal wages are sticky because:

Short-run aggregate supply increases when producers are willing to supply more at any given price level.

If an economy is in short-run equilibrium such that the level of output is greater than the potential output:

An inflationary gap occurs when potential output is above actual aggregate output.

According to the long-run aggregate supply curve,when _____,the quantity of aggregate output supplied _____.

Profit per unit equals:

Raising taxes shifts the _____ curve to the _____.

First Principles

Economic Models: Trade-Offs and Trade

Supply and Demand

Price Controls and Quotas: Meddling With Markets

International Trade

Macroeconomics: the Big Picture

Gdp and the Cpi: Tracking the Macroeconomy

Unemployment and Inflation

Long-Run Economic Growth

Savings, Investment Spending, and the Financial System

Income and Expenditure

Fiscal Policy

Money, Banking, and the Federal Reserve System

Monetary Policy

Inflation, Disinflation, and Deflation

Macroeconomics: Events and Ideas

International Macroeconomics

Graphs in Economics

Filters

As a recessionary gap self-corrects,the equilibrium price level _ and the equilibrium real output _.

An improvement in the business outlook of firms is a type of positive ___ shock and therefore shifts the _ curve to the ___.

Use the following to answer questions: -In response to a negative supply shock,the government decreases taxes.The MOST likely result of the government's tax decrease is a(n)_ in unemployment and a(n)_ in the aggregate price level.

According to the long-run aggregate supply curve,when _,the quantity of aggregate output supplied _.

Raising taxes shifts the _ curve to the _.