Question 1

Long-run aggregate supply reflects

Accepted Answer

A)  total production in the economy at full employment. 
B)  total spending in the economy at full employment. 
C)  both production and spending in the economy. 
D)  only foreign production from U.S. subsidiaries. 
A)  total production in the economy at full employment. 
B)  total spending in the economy at full employment. 
C)  both production and spending in the economy. 
D)  only foreign production from U.S. subsidiaries.

Question 2

Supply-side inflation is caused by

Accepted Answer

A)  a decrease in aggregate supply and no change in aggregate demand. 
B)  a decrease in aggregate demand and no change in aggregate supply. 
C)  an increase in aggregate supply and no change in aggregate demand. 
D)  an increase in aggregate demand and no change in aggregate supply. 
A)  a decrease in aggregate supply and no change in aggregate demand. 
B)  a decrease in aggregate demand and no change in aggregate supply. 
C)  an increase in aggregate supply and no change in aggregate demand. 
D)  an increase in aggregate demand and no change in aggregate supply.

Question 3

Supply-side inflation could be caused by which of the following?

Accepted Answer

A)  an increase in aggregate demand 
B)  a decrease in aggregate demand 
C)  an increase in long-run aggregate supply 
D)  a decrease in long-run aggregate supply 
A)  an increase in aggregate demand 
B)  a decrease in aggregate demand 
C)  an increase in long-run aggregate supply 
D)  a decrease in long-run aggregate supply

Question 4

An aggregate demand curve

Accepted Answer

A)  shifts to the right when a non-price level change increases total planned real expenditures. 
B)  shifts to the right when a non-price level change decreases total planned real expenditures. 
C)  shifts to the right when the price level falls. 
D)  does not shift to the right or to the left. 
A)  shifts to the right when a non-price level change increases total planned real expenditures. 
B)  shifts to the right when a non-price level change decreases total planned real expenditures. 
C)  shifts to the right when the price level falls. 
D)  does not shift to the right or to the left.

Question 5

Which of these questions does aggregate demand help us answer? I. What determines the total amount of our output that individuals, firms, governments and foreigners want to buy?
II) What is the economy's long-run real Gross Domestic Product (GDP)?
III) What determines the economy's equilibrium price level and the rate of inflation?

Accepted Answer

A)  I only 
B)  I and II 
C)  II and III 
D)  I and III 
A)  I only 
B)  I and II 
C)  II and III 
D)  I and III

Question 6

Which of the following will NOT cause a leftward shift in the long-run aggregate supply curve?

Accepted Answer

A)  a net outflow of human capital 
B)  an increase in the costs of obtaining energy resources 
C)  a reduction in the amount of capital 
D)  a reduction in government spending 
A)  a net outflow of human capital 
B)  an increase in the costs of obtaining energy resources 
C)  a reduction in the amount of capital 
D)  a reduction in government spending

Question 7

Long-run aggregate supply and a country's production possibility curve (PPC)

Accepted Answer

A)  are closely related. 
B)  are inversely related. 
C)  have no relationship. 
D)  are examples of microeconomic models. 
A)  are closely related. 
B)  are inversely related. 
C)  have no relationship. 
D)  are examples of microeconomic models.

Question 8

Long-run aggregate supply curve corresponds to

Accepted Answer

A)  real GDP when the economy is above full employment. 
B)  real GDP when the economy is at full employment. 
C)  the economy outside its production possibilities curve. 
D)  the economy inside its production possibilities curve. 
A)  real GDP when the economy is above full employment. 
B)  real GDP when the economy is at full employment. 
C)  the economy outside its production possibilities curve. 
D)  the economy inside its production possibilities curve.

Question 9

Explain how an economy can experience long-run economic growth and deflation at the same time.

Accepted Answer

If aggregate demand remains relatively c

Question 10

The aggregate demand curve gives

Accepted Answer

A)  the total amount of real domestic output that will be purchased at each price level. 
B)  the total amount of nominal domestic income that will be purchased at each price level. 
C)  the total value of nominal GDP in an economy for a year, holding income and technology constant. 
D)  the total value of output produced by workers in both foreign and domestic markets at each price level. 
A)  the total amount of real domestic output that will be purchased at each price level. 
B)  the total amount of nominal domestic income that will be purchased at each price level. 
C)  the total value of nominal GDP in an economy for a year, holding income and technology constant. 
D)  the total value of output produced by workers in both foreign and domestic markets at each price level.

Question 11

The aggregate demand curve shows the

Accepted Answer

A)  total amount of planned expenditures on goods and services at each possible price level. 
B)  total amount of nominal goods that the participants in the economy want to purchase. 
C)  total amount of real goods that foreigners want to purchase. 
D)  amount of goods producers will produce as production costs fall. 
A)  total amount of planned expenditures on goods and services at each possible price level. 
B)  total amount of nominal goods that the participants in the economy want to purchase. 
C)  total amount of real goods that foreigners want to purchase. 
D)  amount of goods producers will produce as production costs fall.

Question 12

Which of the following is consistent with secular deflation?

Accepted Answer

A)  a persistently decreasing price level caused by several periods of economic growth with stable AD 
B)  a persistently increasing price level caused by several periods of economic growth with decreasing AD 
C)  a persistently decreasing price level caused by increases in government expenditures 
D)  a persistently decreasing price level caused by money being withdrawn from the economy 
A)  a persistently decreasing price level caused by several periods of economic growth with stable AD 
B)  a persistently increasing price level caused by several periods of economic growth with decreasing AD 
C)  a persistently decreasing price level caused by increases in government expenditures 
D)  a persistently decreasing price level caused by money being withdrawn from the economy

Question 13

At each price level, the aggregate demand curve indicates

Accepted Answer

A)  the nominal value of total production of goods and services domestic income that will be produced. 
B)  the total amount of real planned expenditures. 
C)  the nominal Gross Domestic Product (GDP) that will be produced. 
D)  the total amount of real Gross Domestic Product (GDP) that will be produced. 
A)  the nominal value of total production of goods and services domestic income that will be produced. 
B)  the total amount of real planned expenditures. 
C)  the nominal Gross Domestic Product (GDP) that will be produced. 
D)  the total amount of real Gross Domestic Product (GDP) that will be produced.

Question 14

What is measured on the horizontal axis of the aggregate demand/aggregate supply model?

Accepted Answer

A)  prices 
B)  real Gross Domestic Product (GDP) 
C)  planned expenditures 
D)  nominal income 
A)  prices 
B)  real Gross Domestic Product (GDP) 
C)  planned expenditures 
D)  nominal income

Question 15

Which of the following is NOT true about the aggregate demand curve?

Accepted Answer

A)  The production possibilities curve determines the slope of the aggregate demand curve. 
B)  The aggregate demand curve shows total planned real expenditures at different price levels. 
C)  Changes in the economic conditions in other countries will lead to a shift of the aggregate demand curve. 
D)  The aggregate demand curve considers the entire circular flow of income. 
A)  The production possibilities curve determines the slope of the aggregate demand curve. 
B)  The aggregate demand curve shows total planned real expenditures at different price levels. 
C)  Changes in the economic conditions in other countries will lead to a shift of the aggregate demand curve. 
D)  The aggregate demand curve considers the entire circular flow of income.

Question 16

The full-employment and full-adjustment level of real Gross Domestic Product (GDP) in the economy is represented by

Accepted Answer

A)  the LRAS curve. 
B)  the horizontal line at the price level. 
C)  the AD curve. 
D)  the distance between the LRAS curve and the AD curve. 
A)  the LRAS curve. 
B)  the horizontal line at the price level. 
C)  the AD curve. 
D)  the distance between the LRAS curve and the AD curve.

Question 17

The interest rate effect implies that

Accepted Answer

A)  the aggregate demand curve has a positive slope. 
B)  the aggregate demand curve has a negative slope. 
C)  the short-run aggregate supply curve is horizontal. 
D)  the short-run aggregate supply curve is vertical. 
A)  the aggregate demand curve has a positive slope. 
B)  the aggregate demand curve has a negative slope. 
C)  the short-run aggregate supply curve is horizontal. 
D)  the short-run aggregate supply curve is vertical.

Question 18

If you have $4000 and the GDP deflator decreases from 100 to 90

Accepted Answer

A)  the $4000 will buy 10 percent less of the goods and services produced by society. 
B)  the $4000 will buy 10 percent more of the goods and services produced by society. 
C)  the value of the $4000 decreases. 
D)  the value of the $4000 remains constant. 
A)  the $4000 will buy 10 percent less of the goods and services produced by society. 
B)  the $4000 will buy 10 percent more of the goods and services produced by society. 
C)  the value of the $4000 decreases. 
D)  the value of the $4000 remains constant.

Question 19

What is the shape of the long-run aggregate supply curve? Why?

Accepted Answer

The long-run aggregate supply curve is v

Question 20

Which of the following is NOT a reason for the slope of the aggregate demand curve?

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

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

Long-run aggregate supply reflects

Supply-side inflation is caused by

Supply-side inflation could be caused by which of the following?

An aggregate demand curve

Which of the following will NOT cause a leftward shift in the long-run aggregate supply curve?

Long-run aggregate supply and a country's production possibility curve (PPC)

Long-run aggregate supply curve corresponds to

Explain how an economy can experience long-run economic growth and deflation at the same time.

The aggregate demand curve gives

The aggregate demand curve shows the

Which of the following is consistent with secular deflation?

At each price level, the aggregate demand curve indicates

What is measured on the horizontal axis of the aggregate demand/aggregate supply model?

Which of the following is NOT true about the aggregate demand curve?

The full-employment and full-adjustment level of real Gross Domestic Product (GDP) in the economy is represented by

The interest rate effect implies that

If you have $4000 and the GDP deflator decreases from 100 to 90

What is the shape of the long-run aggregate supply curve? Why?

Which of the following is NOT a reason for the slope of the aggregate demand curve?

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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