Question 1

When the production possibilities curve shifts outward,

Accepted Answer

A)  the long-run aggregate supply curve shifts to the left. 
B)  the long-run aggregate supply curve is unchanged. 
C)  the price level rises in the long run. 
D)  the long-run aggregate supply curve shifts to the right. 
A)  the long-run aggregate supply curve shifts to the left. 
B)  the long-run aggregate supply curve is unchanged. 
C)  the price level rises in the long run. 
D)  the long-run aggregate supply curve shifts to the right.

Question 2

Economic growth is demonstrated by the LRAS as it

Accepted Answer

A)  shifts to the right. 
B)  shifts to the left. 
C)  becomes more horizontal. 
D)  becomes more vertical. 
A)  shifts to the right. 
B)  shifts to the left. 
C)  becomes more horizontal. 
D)  becomes more vertical.

Question 3

Other things being equal, the lower planned real expenditures along an aggregate demand curve are, the

Accepted Answer

A)  more the production possibilities cure shifts to the left. 
B)  lower the price level. 
C)  higher the price level. 
D)  lower the level of endowments. 
A)  more the production possibilities cure shifts to the left. 
B)  lower the price level. 
C)  higher the price level. 
D)  lower the level of endowments.

Question 4

Demand-side inflation occurs when

Accepted Answer

A)  increases in aggregate demand are not matched by increases in aggregate supply. 
B)  increases in aggregate supply outstrip increases in aggregate demand. 
C)  aggregate demand falls more rapidly than aggregate supply. 
D)  long-run aggregate demand rises faster than short-run aggregate supply. 
A)  increases in aggregate demand are not matched by increases in aggregate supply. 
B)  increases in aggregate supply outstrip increases in aggregate demand. 
C)  aggregate demand falls more rapidly than aggregate supply. 
D)  long-run aggregate demand rises faster than short-run aggregate supply.

Question 5

A long-run aggregate supply curve may graphically be represented as a

Accepted Answer

A)  vertical line. 
B)  horizontal line. 
C)  an upward sloping line. 
D)  a downward sloping line. 
A)  vertical line. 
B)  horizontal line. 
C)  an upward sloping line. 
D)  a downward sloping line.

Question 6

What are three causes of supply-side inflation?

Accepted Answer

Shifting the LRAS to the left can be cau

Question 7

When prices increase, the real interest rate

Accepted Answer

A)  will increase and total planned spending on goods and services will increase. 
B)  will increase and total planned spending on goods and services will decrease. 
C)  will decrease and total planned spending on goods and services will decrease. 
D)  will not be affected. 
A)  will increase and total planned spending on goods and services will increase. 
B)  will increase and total planned spending on goods and services will decrease. 
C)  will decrease and total planned spending on goods and services will decrease. 
D)  will not be affected.

Question 8

The slope of the long-run aggregate supply curve is

Accepted Answer

A)  positive. 
B)  negative. 
C)  zero. 
D)  undefined. 
A)  positive. 
B)  negative. 
C)  zero. 
D)  undefined.

Question 9

When the price level increases, total planned real expenditures on goods and services falls. All of the following are responsible EXCEPT

Accepted Answer

A)  the substitution effect. 
B)  the real-balance effect. 
C)  the interest rate effect. 
D)  the open economy effect. 
A)  the substitution effect. 
B)  the real-balance effect. 
C)  the interest rate effect. 
D)  the open economy effect.

Question 10

In an economy in which aggregate demand is stable and a period of sustained and significant productivity growth occurs, there will be

Accepted Answer

A)  secular deflation. 
B)  secular inflation. 
C)  a constant price level. 
D)  a shift of aggregate supply to the left. 
A)  secular deflation. 
B)  secular inflation. 
C)  a constant price level. 
D)  a shift of aggregate supply to the left.

Question 11

The real-balance effect refers to

Accepted Answer

A)  the economy's response to interest rate changes. 
B)  the change in the value of cash balances due to price level changes. 
C)  the change in net exports. 
D)  the economy's ability to balance recession and expansion. 
A)  the economy's response to interest rate changes. 
B)  the change in the value of cash balances due to price level changes. 
C)  the change in net exports. 
D)  the economy's ability to balance recession and expansion.

Question 12

The intersection of aggregate demand and long-run aggregate supply identify the price level at which total planned

Accepted Answer

A)  real expenditures equal actual nominal GDP. 
B)  real expenditures equal total planned production. 
C)  export spending equals total planned import spending. 
D)  government spending equals total planned tax revenues. 
A)  real expenditures equal actual nominal GDP. 
B)  real expenditures equal total planned production. 
C)  export spending equals total planned import spending. 
D)  government spending equals total planned tax revenues.

Question 13

Higher interest rates

Accepted Answer

A)  reduce total planned real expenditures because they increase the cost of borrowing funds. 
B)  reduce total planned real expenditures because they reduce the income of bankers and other creditors. 
C)  increase total planned real expenditures because they increase the incomes of all people in the economy. 
D)  increase total planned real expenditures because they lower the costs of building new plants and equipment. 
A)  reduce total planned real expenditures because they increase the cost of borrowing funds. 
B)  reduce total planned real expenditures because they reduce the income of bankers and other creditors. 
C)  increase total planned real expenditures because they increase the incomes of all people in the economy. 
D)  increase total planned real expenditures because they lower the costs of building new plants and equipment.

Question 14

Economic growth can be shown by

Accepted Answer

A)  a leftward shift in the aggregate supply curve. 
B)  no change in the aggregate supply curve. 
C)  a rightward shift in the aggregate supply curve. 
D)  a leftward shift in the production possibilities curve. 
A)  a leftward shift in the aggregate supply curve. 
B)  no change in the aggregate supply curve. 
C)  a rightward shift in the aggregate supply curve. 
D)  a leftward shift in the production possibilities curve.

Question 15

Supply side inflation can be caused by

Accepted Answer

A)  a persistent increase in aggregate supply while aggregate demand remains unchanged. 
B)  a persistent decrease in aggregate supply while aggregate demand remains unchanged. 
C)  a persistent decrease in aggregate supply while aggregate demand has significant decreases. 
D)  a persistent increase in aggregate demand while aggregate supply remains unchanged. 
A)  a persistent increase in aggregate supply while aggregate demand remains unchanged. 
B)  a persistent decrease in aggregate supply while aggregate demand remains unchanged. 
C)  a persistent decrease in aggregate supply while aggregate demand has significant decreases. 
D)  a persistent increase in aggregate demand while aggregate supply remains unchanged.

Question 16

The total of all planned expenditures in the entire economy is

Accepted Answer

A)  the open economy effect. 
B)  LRAS. 
C)  aggregate supply. 
D)  aggregate demand. 
A)  the open economy effect. 
B)  LRAS. 
C)  aggregate supply. 
D)  aggregate demand.

Question 17

A country's long-run aggregate supply curve will shift to the left when there is (are)

Accepted Answer

A)  fewer regulatory impediments to business. 
B)  a discovery of new oil reserves in that country. 
C)  a reduction in the labor force. 
D)  a reduction in the money supply. 
A)  fewer regulatory impediments to business. 
B)  a discovery of new oil reserves in that country. 
C)  a reduction in the labor force. 
D)  a reduction in the money supply.

Question 18

The level of real GDP identified by the long-run aggregate supply curve is

Accepted Answer

A)  the full-employment level of real GDP. 
B)  the level of GDP at which each business firm is experiencing growth in sales. 
C)  the level of GDP at which each industry is experiencing growth in sales. 
D)  the level of GDP at which no one is below the poverty line. 
A)  the full-employment level of real GDP. 
B)  the level of GDP at which each business firm is experiencing growth in sales. 
C)  the level of GDP at which each industry is experiencing growth in sales. 
D)  the level of GDP at which no one is below the poverty line.

Question 19

What could cause a decrease in the price level and simultaneously an increase in GDP similar to the 1920s in the United States?

Accepted Answer

A)  an increase in interest rates 
B)  a decrease in consumer confidence 
C)  an increase in productivity 
D)  a decrease in interest rates 
A)  an increase in interest rates 
B)  a decrease in consumer confidence 
C)  an increase in productivity 
D)  a decrease in interest rates

Question 20

An indirect effect of an increase in the price level works through

Accepted Answer

A)  people substituting out of domestic goods and into foreign goods as exchange rates rise. 
B)  changes in trade balances as domestic goods become more expensive, causing interest rates to move in the opposite direction from the change in the exchange rate. 
C)  interest rates as people save more as the higher prices make their money balances less attractive. 
D)  interest rates as people borrow to maintain their money balances, bidding up interest rates and reducing total planned real expenditures. 
A)  people substituting out of domestic goods and into foreign goods as exchange rates rise. 
B)  changes in trade balances as domestic goods become more expensive, causing interest rates to move in the opposite direction from the change in the exchange rate. 
C)  interest rates as people save more as the higher prices make their money balances less attractive. 
D)  interest rates as people borrow to maintain their money balances, bidding up interest rates and reducing total planned real expenditures.

Exam 10: Real GDP and the Price Level in the Long Run

When the production possibilities curve shifts outward,

Economic growth is demonstrated by the LRAS as it

Other things being equal, the lower planned real expenditures along an aggregate demand curve are, the

Demand-side inflation occurs when

A long-run aggregate supply curve may graphically be represented as a

What are three causes of supply-side inflation?

When prices increase, the real interest rate

The slope of the long-run aggregate supply curve is

When the price level increases, total planned real expenditures on goods and services falls. All of the following are responsible EXCEPT

In an economy in which aggregate demand is stable and a period of sustained and significant productivity growth occurs, there will be

The real-balance effect refers to

The intersection of aggregate demand and long-run aggregate supply identify the price level at which total planned

Higher interest rates

Economic growth can be shown by

Supply side inflation can be caused by

The total of all planned expenditures in the entire economy is

A country's long-run aggregate supply curve will shift to the left when there is (are)

The level of real GDP identified by the long-run aggregate supply curve is

What could cause a decrease in the price level and simultaneously an increase in GDP similar to the 1920s in the United States?

An indirect effect of an increase in the price level works through

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Measuring the Economys Performance

Global Economic Growth and Development

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money, Banking, and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Demand and Supply Elasticity

Consumer Choice

Rents, Profits, and the Financial Environment of Business

The Firm: Cost and Output Determination

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Regulation and Antitrust Policy in a Globalized Economy

The Labor Market: Demand, Supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, Poverty, and Health Care

Environmental Economics

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

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