Question 1

Explain how "menu costs" affect the slope of the short-run aggregate supply curve.

Accepted Answer

Menu costs make some prices sticky.As th

Question 2

The level of aggregate supply in the long-run is not affected by

Accepted Answer

A) changes in technology. 
B) changes in the capital stock. 
C) changes in the price level. 
D) changes in the number of workers. 
A) changes in technology. 
B) changes in the capital stock. 
C) changes in the price level. 
D) changes in the number of workers.

Question 3

If full-employment GDP is equal to $4.2 trillion,what does the long-run aggregate supply curve look like?

Accepted Answer

A) It is a horizontal line at $4.2 trillion of GDP. 
B) It is a vertical line at a level of GDP below $4.2 trillion. 
C) It is a vertical line at $4.2 trillion of GDP. 
D) It is a vertical line at a level of GDP above $4.2 trillion. 
A) It is a horizontal line at $4.2 trillion of GDP. 
B) It is a vertical line at a level of GDP below $4.2 trillion. 
C) It is a vertical line at $4.2 trillion of GDP. 
D) It is a vertical line at a level of GDP above $4.2 trillion.

Question 4

A decrease in investment causes the price level to ________ in the short run and ________ in the long run.

Accepted Answer

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

Question 5

Explain why the long-run aggregate supply curve is vertical.

Accepted Answer

The long-run aggregate supply curve is v

Question 6

Figure 15-1  
-Refer to Figure 15-1.Ceteris paribus,an increase in interest rates would be represented by a movement from

Accepted Answer

A) AD1 to AD2. 
B) AD2 to AD1. 
C) point A to point B. 
D) point B to point A. 
A) AD1 to AD2. 
B) AD2 to AD1. 
C) point A to point B. 
D) point B to point A.

Question 7

An increase in the price level will

Accepted Answer

A) shift the short-run aggregate supply curve to the left. 
B) shift the short-run aggregate supply curve to the right. 
C) move the economy up along a stationary short-run aggregate supply curve. 
D) move the economy down along a stationary short-run aggregate supply curve. 
A) shift the short-run aggregate supply curve to the left. 
B) shift the short-run aggregate supply curve to the right. 
C) move the economy up along a stationary short-run aggregate supply curve. 
D) move the economy down along a stationary short-run aggregate supply curve.

Question 8

In the dynamic aggregated demand and aggregate supply model,if AD shifts faster than AS

Accepted Answer

A) inflation occurs. 
B) deflation occurs. 
C) stagflation occurs. 
D) disinflation occurs. 
A) inflation occurs. 
B) deflation occurs. 
C) stagflation occurs. 
D) disinflation occurs.

Question 9

The long-run aggregate supply curve will shift to the right if the economy

Accepted Answer

A) experiences technological change. 
B) has a decrease in population. 
C) experiences high levels of inflation. 
D) net exports decrease. 
A) experiences technological change. 
B) has a decrease in population. 
C) experiences high levels of inflation. 
D) net exports decrease.

Question 10

Figure 15-3  
-Refer to Figure 15-3.Suppose the economy is at point A.If investment spending increases in the economy,where will the eventual long-run equilibrium be?

Accepted Answer

A) A 
B) B 
C) C 
D) D 
A) A 
B) B 
C) C 
D) D

Question 11

The invention of the cotton gin ushered in the Industrial Revolution and began a long period of technological innovation.What did this technological change do the short-run supply curve?

Accepted Answer

A) It shifted the short-run aggregate supply curve to the left. 
B) It shifted the short-run aggregate supply curve to the right. 
C) It moved the economy up along a stationary short-run aggregate supply curve. 
D) It moved the economy down along a stationary short-run aggregate supply curve. 
A) It shifted the short-run aggregate supply curve to the left. 
B) It shifted the short-run aggregate supply curve to the right. 
C) It moved the economy up along a stationary short-run aggregate supply curve. 
D) It moved the economy down along a stationary short-run aggregate supply curve.

Question 12

Workers and firms both expect that prices will be 2.5% higher next year than they are this year.As a result,

Accepted Answer

A) workers will be willing to take lower wages next year,but not lower than a 2.5 percent decrease. 
B) the purchasing power of wages will rise if wages increase by 2.5%. 
C) the short-run aggregate supply curve will shift to the left as wages increase. 
D) aggregate demand will increase by 2.5% 
A) workers will be willing to take lower wages next year,but not lower than a 2.5 percent decrease. 
B) the purchasing power of wages will rise if wages increase by 2.5%. 
C) the short-run aggregate supply curve will shift to the left as wages increase. 
D) aggregate demand will increase by 2.5%

Question 13

Changes in the price level

Accepted Answer

A) increase the level of aggregate supply in the long run. 
B) decrease the level of aggregate supply in the long run. 
C) do not affect the level of aggregate supply in the long run. 
D) increase the level of aggregate supply in the long run only at very high levels of output. 
A) increase the level of aggregate supply in the long run. 
B) decrease the level of aggregate supply in the long run. 
C) do not affect the level of aggregate supply in the long run. 
D) increase the level of aggregate supply in the long run only at very high levels of output.

Question 14

Figure 15-1  
-Refer to Figure 15-1.Ceteris paribus,a decrease in the growth rate of domestic GDP relative to the growth rate of foreign GDP would be represented by a movement from

Accepted Answer

A) AD1 to AD2. 
B) AD2 to AD1. 
C) point A to point B. 
D) point B to point A. 
A) AD1 to AD2. 
B) AD2 to AD1. 
C) point A to point B. 
D) point B to point A.

Question 15

Which of the following best describes the "wealth effect"?

Accepted Answer

A) When the price level falls,the real value of household wealth falls. 
B) When the price level falls,the nominal value of household wealth falls. 
C) When the price level falls,the nominal value of household wealth rises. 
D) When the price level falls,the real value of household wealth rises. 
A) When the price level falls,the real value of household wealth falls. 
B) When the price level falls,the nominal value of household wealth falls. 
C) When the price level falls,the nominal value of household wealth rises. 
D) When the price level falls,the real value of household wealth rises.

Question 16

Suppose a developing country receives more machinery and capital equipment as foreign entrepreneurs increase the amount of investment in the economy.As a result,

Accepted Answer

A) the long-run aggregate supply curve will shift to the right. 
B) the long-run aggregate supply curve will shift to the left. 
C) the economy will move up along the long-run aggregate supply curve. 
D) the economy will move down along the long-run aggregate supply curve. 
A) the long-run aggregate supply curve will shift to the right. 
B) the long-run aggregate supply curve will shift to the left. 
C) the economy will move up along the long-run aggregate supply curve. 
D) the economy will move down along the long-run aggregate supply curve.

Question 17

Which of the following is considered a negative supply shock?

Accepted Answer

A) increasing immigration in the economy causes the labor supply to rise 
B) an improvement in technology 
C) an increase in unemployment 
D) an unexpected decrease in the refining capacity for oil 
A) increasing immigration in the economy causes the labor supply to rise 
B) an improvement in technology 
C) an increase in unemployment 
D) an unexpected decrease in the refining capacity for oil

Question 18

In the dynamic aggregate demand and aggregate supply model,what is the result of aggregate demand increasing slower than potential real GDP?

Accepted Answer

Aggregate demand inc

Question 19

One factor which brought on the recession of 2007-2009 was the end of the housing bubble.

Accepted Answer

A) True 
 B)False

Question 20

In the United States,because shipping plays such an important role in the economy,declines in cargo volumes reflect

Accepted Answer

A) increases in short-run aggregate supply. 
B) increases in inflation. 
C) declines in aggregate demand. 
D) decreases in long-run aggregate supply. 
A) increases in short-run aggregate supply. 
B) increases in inflation. 
C) declines in aggregate demand. 
D) decreases in long-run aggregate supply.

Explain how "menu costs" affect the slope of the short-run aggregate supply curve.

The level of aggregate supply in the long-run is not affected by

If full-employment GDP is equal to $4.2 trillion,what does the long-run aggregate supply curve look like?

A decrease in investment causes the price level to in the short run and in the long run.

Explain why the long-run aggregate supply curve is vertical.

Figure 15-1 -Refer to Figure 15-1.Ceteris paribus,an increase in interest rates would be represented by a movement from

An increase in the price level will

In the dynamic aggregated demand and aggregate supply model,if AD shifts faster than AS

The long-run aggregate supply curve will shift to the right if the economy

Figure 15-3 -Refer to Figure 15-3.Suppose the economy is at point A.If investment spending increases in the economy,where will the eventual long-run equilibrium be?

The invention of the cotton gin ushered in the Industrial Revolution and began a long period of technological innovation.What did this technological change do the short-run supply curve?

Workers and firms both expect that prices will be 2.5% higher next year than they are this year.As a result,

Changes in the price level

Figure 15-1 -Refer to Figure 15-1.Ceteris paribus,a decrease in the growth rate of domestic GDP relative to the growth rate of foreign GDP would be represented by a movement from

Which of the following best describes the "wealth effect"?

Suppose a developing country receives more machinery and capital equipment as foreign entrepreneurs increase the amount of investment in the economy.As a result,

Which of the following is considered a negative supply shock?

In the dynamic aggregate demand and aggregate supply model,what is the result of aggregate demand increasing slower than potential real GDP?

One factor which brought on the recession of 2007-2009 was the end of the housing bubble.

In the United States,because shipping plays such an important role in the economy,declines in cargo volumes reflect

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Consumer Choice and Elasticity

Technology,production,and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust Policy

Monopolistic Competition and Oligopoly

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage,international Trade,and Exchange Rates

Filters

Exam 15: Aggregate Demand and Aggregate Supply Analysis

Explain how "menu costs" affect the slope of the short-run aggregate supply curve.

The level of aggregate supply in the long-run is not affected by

If full-employment GDP is equal to $4.2 trillion,what does the long-run aggregate supply curve look like?

A decrease in investment causes the price level to ________ in the short run and ________ in the long run.

Explain why the long-run aggregate supply curve is vertical.

Figure 15-1 -Refer to Figure 15-1.Ceteris paribus,an increase in interest rates would be represented by a movement from

An increase in the price level will

In the dynamic aggregated demand and aggregate supply model,if AD shifts faster than AS

The long-run aggregate supply curve will shift to the right if the economy

Figure 15-3 -Refer to Figure 15-3.Suppose the economy is at point A.If investment spending increases in the economy,where will the eventual long-run equilibrium be?

The invention of the cotton gin ushered in the Industrial Revolution and began a long period of technological innovation.What did this technological change do the short-run supply curve?

Workers and firms both expect that prices will be 2.5% higher next year than they are this year.As a result,

Changes in the price level

Figure 15-1 -Refer to Figure 15-1.Ceteris paribus,a decrease in the growth rate of domestic GDP relative to the growth rate of foreign GDP would be represented by a movement from

Which of the following best describes the "wealth effect"?

Suppose a developing country receives more machinery and capital equipment as foreign entrepreneurs increase the amount of investment in the economy.As a result,

Which of the following is considered a negative supply shock?

In the dynamic aggregate demand and aggregate supply model,what is the result of aggregate demand increasing slower than potential real GDP?

One factor which brought on the recession of 2007-2009 was the end of the housing bubble.

In the United States,because shipping plays such an important role in the economy,declines in cargo volumes reflect

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Consumer Choice and Elasticity

Technology,production,and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust Policy

Monopolistic Competition and Oligopoly

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage,international Trade,and Exchange Rates

Filters

A decrease in investment causes the price level to in the short run and in the long run.