Question 1

The negative relationship between the aggregate price level and aggregate output demanded gives the aggregate demand curve a _____ slope.

Accepted Answer

A)  positive 
B)  vertical 
C)  horizontal 
D)  negative 
A)  positive 
B)  vertical 
C)  horizontal 
D)  negative

Question 2

Sticky wages and prices occur:

Accepted Answer

A)  in the long run. 
B)  in the short run. 
C)  in both the short and long run. 
D)  only when the economy is operating above its potential real GDP. 
A)  in the long run. 
B)  in the short run. 
C)  in both the short and long run. 
D)  only when the economy is operating above its potential real GDP.

Question 3

The nominal wage is the dollar amount of the wage paid.

Accepted Answer

A) True 
 B)False

Question 4

The long-run aggregate supply curve is:

Accepted Answer

A)  upward sloping. 
B)  downward sloping. 
C)  horizontal. 
D)  vertical. 
A)  upward sloping. 
B)  downward sloping. 
C)  horizontal. 
D)  vertical.

Question 5

Use the following to answer questions:  
-(Figure: Policy Alternatives)Refer to Figure: Policy Alternatives.The economy in panel (b)is initially in short-run equilibrium at real GDP level Y1 and price level P2.At real GDP level Y1 there is:

Accepted Answer

A)  an inflationary gap. 
B)  a recessionary gap. 
C)  no gap. 
D)  long-run equilibrium. 
A)  an inflationary gap. 
B)  a recessionary gap. 
C)  no gap. 
D)  long-run equilibrium.

Question 6

According to the interest rate effect,a decrease in the price level causes people to _____ their money holdings,which _____ interest rates and _____ investment spending.

Accepted Answer

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

Question 7

When short-run aggregate supply increases,it means that the short-run aggregate supply curve shifts to the right,showing that producers are willing to produce more at each price level.

Accepted Answer

A) True 
 B)False

Question 8

A negative supply shock raises production costs and increases the quantity producers are willing to supply at any given price level.

Accepted Answer

A) True 
 B)False

Question 9

When the price level increases,people want to hold more money.

Accepted Answer

A) True 
 B)False

Question 10

Use the following to answer questions:  
-(Figure: An Increase in Aggregate Demand)Refer to Figure: An Increase in Aggregate Demand.At the Y2 level of real GDP:

Accepted Answer

A)  an inflationary gap equal to the sum of Y2 and YP occurs. 
B)  an inflationary gap equal to the difference between Y2 and YP occurs. 
C)  the solution at Y2 is a long-run equilibrium. 
D)  a recessionary gap equal to the difference between Y2 and YP occurs. 
A)  an inflationary gap equal to the sum of Y2 and YP occurs. 
B)  an inflationary gap equal to the difference between Y2 and YP occurs. 
C)  the solution at Y2 is a long-run equilibrium. 
D)  a recessionary gap equal to the difference between Y2 and YP occurs.

Question 11

Stagflation is a combination of _____ unemployment and _____ inflation.

Accepted Answer

A)  increasing;increasing 
B)  decreasing;decreasing 
C)  increasing;decreasing 
D)  decreasing;increasing 
A)  increasing;increasing 
B)  decreasing;decreasing 
C)  increasing;decreasing 
D)  decreasing;increasing

Question 12

Which factor will increase short-run aggregate supply?

Accepted Answer

A)  a law that requires health insurance for all employees 
B)  an increase in the aggregate price level 
C)  a large decrease in the price of oil 
D)  an increase in the minimum wage 
A)  a law that requires health insurance for all employees 
B)  an increase in the aggregate price level 
C)  a large decrease in the price of oil 
D)  an increase in the minimum wage

Question 13

A movement along the aggregate demand curve is caused by a(n):

Accepted Answer

A)  change in the aggregate price level. 
B)  increase in consumer spending. 
C)  reduction in taxes. 
D)  reduction in government spending. 
A)  change in the aggregate price level. 
B)  increase in consumer spending. 
C)  reduction in taxes. 
D)  reduction in government spending.

Question 14

In long-run macroeconomic equilibrium,actual aggregate output equals potential output.

Accepted Answer

A) True 
 B)False

Question 15

When the price level increases,firms in perfectly competitive markets will:

Accepted Answer

A)  decrease output and increase the price. 
B)  decrease output. 
C)  increase output and decrease the price. 
D)  increase output. 
A)  decrease output and increase the price. 
B)  decrease output. 
C)  increase output and decrease the price. 
D)  increase output.

Question 16

Use the following to answer questions:  
-(Figure: The Multiplier)Refer to Figure: The Multiplier.If this economy is at Y1 and investment spending increases:

Accepted Answer

A)  AD1 will shift to the left,reflecting a multiplied decrease in real GDP at every price level. 
B)  AD1 will shift to the right,reflecting a multiplied increase in real GDP at every price level. 
C)  an upward movement along the AD1 will take place,reflecting an increase in the price level. 
D)  a downward movement along the AD1 will take place,reflecting a decrease in the price level. 
A)  AD1 will shift to the left,reflecting a multiplied decrease in real GDP at every price level. 
B)  AD1 will shift to the right,reflecting a multiplied increase in real GDP at every price level. 
C)  an upward movement along the AD1 will take place,reflecting an increase in the price level. 
D)  a downward movement along the AD1 will take place,reflecting a decrease in the price level.

Question 17

If the price level decreases by 20%,the purchasing power of $1 000 will increase to $1 200.

Accepted Answer

A) True 
 B)False

Question 18

If nominal wages fall,then the short-run aggregate _____ curve shifts to the _____.

Accepted Answer

A)  supply;right 
B)  supply;left 
C)  demand;right 
D)  demand;left 
A)  supply;right 
B)  supply;left 
C)  demand;right 
D)  demand;left

Question 19

When short-run aggregate supply decreases,it means that the short-run aggregate supply curve shifts to the _____ and the quantity of aggregate output that producers are willing to supply _____.

Accepted Answer

A)  right;decreases 
B)  right;increases 
C)  left;decreases 
D)  left;increases 
A)  right;decreases 
B)  right;increases 
C)  left;decreases 
D)  left;increases

Question 20

In the income-expenditure model,if the price level increases,the wealth and interest rate effects will decrease planned expenditures.

Accepted Answer

A) True 
 B)False

The negative relationship between the aggregate price level and aggregate output demanded gives the aggregate demand curve a _____ slope.

Sticky wages and prices occur:

The nominal wage is the dollar amount of the wage paid.

The long-run aggregate supply curve is:

Use the following to answer questions: -(Figure: Policy Alternatives)Refer to Figure: Policy Alternatives.The economy in panel (b)is initially in short-run equilibrium at real GDP level Y₁ and price level P₂.At real GDP level Y₁ there is:

According to the interest rate effect,a decrease in the price level causes people to ___ their money holdings,which _ interest rates and ___ investment spending.

When short-run aggregate supply increases,it means that the short-run aggregate supply curve shifts to the right,showing that producers are willing to produce more at each price level.

A negative supply shock raises production costs and increases the quantity producers are willing to supply at any given price level.

When the price level increases,people want to hold more money.

Use the following to answer questions: -(Figure: An Increase in Aggregate Demand)Refer to Figure: An Increase in Aggregate Demand.At the Y₂ level of real GDP:

Stagflation is a combination of _ unemployment and _ inflation.

Which factor will increase short-run aggregate supply?

A movement along the aggregate demand curve is caused by a(n):

In long-run macroeconomic equilibrium,actual aggregate output equals potential output.

When the price level increases,firms in perfectly competitive markets will:

Use the following to answer questions: -(Figure: The Multiplier)Refer to Figure: The Multiplier.If this economy is at Y₁ and investment spending increases:

If the price level decreases by 20%,the purchasing power of $1 000 will increase to $1 200.

If nominal wages fall,then the short-run aggregate _ curve shifts to the _.

When short-run aggregate supply decreases,it means that the short-run aggregate supply curve shifts to the _ and the quantity of aggregate output that producers are willing to supply _.

In the income-expenditure model,if the price level increases,the wealth and interest rate effects will decrease planned expenditures.

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

The negative relationship between the aggregate price level and aggregate output demanded gives the aggregate demand curve a _____ slope.

Sticky wages and prices occur:

The nominal wage is the dollar amount of the wage paid.

The long-run aggregate supply curve is:

Use the following to answer questions: -(Figure: Policy Alternatives)Refer to Figure: Policy Alternatives.The economy in panel (b)is initially in short-run equilibrium at real GDP level Y1 and price level P2.At real GDP level Y1 there is:

According to the interest rate effect,a decrease in the price level causes people to _____ their money holdings,which _____ interest rates and _____ investment spending.

When short-run aggregate supply increases,it means that the short-run aggregate supply curve shifts to the right,showing that producers are willing to produce more at each price level.

A negative supply shock raises production costs and increases the quantity producers are willing to supply at any given price level.

When the price level increases,people want to hold more money.

Use the following to answer questions: -(Figure: An Increase in Aggregate Demand)Refer to Figure: An Increase in Aggregate Demand.At the Y2 level of real GDP:

Stagflation is a combination of _____ unemployment and _____ inflation.

Which factor will increase short-run aggregate supply?

A movement along the aggregate demand curve is caused by a(n):

In long-run macroeconomic equilibrium,actual aggregate output equals potential output.

When the price level increases,firms in perfectly competitive markets will:

Use the following to answer questions: -(Figure: The Multiplier)Refer to Figure: The Multiplier.If this economy is at Y1 and investment spending increases:

If the price level decreases by 20%,the purchasing power of $1 000 will increase to $1 200.

If nominal wages fall,then the short-run aggregate _____ curve shifts to the _____.

When short-run aggregate supply decreases,it means that the short-run aggregate supply curve shifts to the _____ and the quantity of aggregate output that producers are willing to supply _____.

In the income-expenditure model,if the price level increases,the wealth and interest rate effects will decrease planned expenditures.

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

Use the following to answer questions: -(Figure: Policy Alternatives)Refer to Figure: Policy Alternatives.The economy in panel (b)is initially in short-run equilibrium at real GDP level Y₁ and price level P₂.At real GDP level Y₁ there is:

According to the interest rate effect,a decrease in the price level causes people to ___ their money holdings,which _ interest rates and ___ investment spending.

Use the following to answer questions: -(Figure: An Increase in Aggregate Demand)Refer to Figure: An Increase in Aggregate Demand.At the Y₂ level of real GDP:

Stagflation is a combination of _ unemployment and _ inflation.

Use the following to answer questions: -(Figure: The Multiplier)Refer to Figure: The Multiplier.If this economy is at Y₁ and investment spending increases:

If nominal wages fall,then the short-run aggregate _ curve shifts to the _.

When short-run aggregate supply decreases,it means that the short-run aggregate supply curve shifts to the _ and the quantity of aggregate output that producers are willing to supply _.