Question 1

Figure 15-4  
-Refer to Figure 15-4.Given the economy is at point A in year 1,what will happen to the unemployment rate in year 2?

Accepted Answer

A) It will rise. 
B) It will fall. 
C) It will remain constant. 
D) not enough information to answer the question 
A) It will rise. 
B) It will fall. 
C) It will remain constant. 
D) not enough information to answer the question

Question 2

According to the real business cycle model,________ in aggregate demand ________ GDP.

Accepted Answer

A) increases;decrease 
B) increases;increase 
C) increases;do not affect 
D) decreases;increase 
A) increases;decrease 
B) increases;increase 
C) increases;do not affect 
D) decreases;increase

Question 3

Figure 15-2  
-Refer to Figure 15-2.Ceteris paribus,an increase in the expected price of an important natural resource would be represented by a movement from

Accepted Answer

A) SRAS1 to SRAS2. 
B) SRAS2 to SRAS1. 
C) point A to point B. 
D) point B to point A. 
A) SRAS1 to SRAS2. 
B) SRAS2 to SRAS1. 
C) point A to point B. 
D) point B to point A.

Question 4

Potential GDP refers to the level of

Accepted Answer

A) real GDP in the long run. 
B) nominal GDP in the long run. 
C) real GDP in the short run. 
D) nominal GDP in the short run. 
A) real GDP in the long run. 
B) nominal GDP in the long run. 
C) real GDP in the short run. 
D) nominal GDP in the short run.

Question 5

The recession of 2007-2009 made many consumers pessimistic about their future incomes.How does this increased pessimism affect the aggregate demand curve?

Accepted Answer

A) This will move the economy up along a stationary aggregate demand curve. 
B) This will move the economy down along a stationary aggregate demand curve. 
C) This will shift the aggregate demand curve to the left. 
D) This will shift the aggregate demand curve to the right. 
A) This will move the economy up along a stationary aggregate demand curve. 
B) This will move the economy down along a stationary aggregate demand curve. 
C) This will shift the aggregate demand curve to the left. 
D) This will shift the aggregate demand curve to the right.

Question 6

A negative supply shock in the short run causes

Accepted Answer

A) the aggregate supply curve to shift to the left. 
B) the price level to fall. 
C) unemployment to fall. 
D) equilibrium real GDP to rise. 
A) the aggregate supply curve to shift to the left. 
B) the price level to fall. 
C) unemployment to fall. 
D) equilibrium real GDP to rise.

Question 7

________ of unemployment during ________ make it easier for workers to ________ wages.

Accepted Answer

A) High levels;a recession;negotiate higher 
B) Low levels;an expansion;negotiate higher 
C) Low levels;a recession;accept lower 
D) High levels;an expansion;accept lower 
A) High levels;a recession;negotiate higher 
B) Low levels;an expansion;negotiate higher 
C) Low levels;a recession;accept lower 
D) High levels;an expansion;accept lower

Question 8

Explain how the static aggregate demand and aggregate supply model gives us misleading results about the price level,particularly with respect to decreases in aggregate demand.Describe how the aggregate demand curve is different in the dynamic model as compared to the static model.Describe how potential GDP is different in the dynamic model as compared to the static model.

Accepted Answer

The static model incorrectly predicts th

Question 9

In the long run,

Accepted Answer

A) GDP > potential GDP. 
B) unemployment is at its natural rate. 
C) LRAS and SRAS lie on the same line. 
D) the inflation rate is zero. 
A) GDP > potential GDP. 
B) unemployment is at its natural rate. 
C) LRAS and SRAS lie on the same line. 
D) the inflation rate is zero.

Question 10

Which of the following models advocate that the quantity of money should be increased at a constant rate?

Accepted Answer

A) the monetarist model 
B) the new classical model 
C) the real business cycle model 
D) the new Keynesian model 
A) the monetarist model 
B) the new classical model 
C) the real business cycle model 
D) the new Keynesian model

Question 11

Beginning with long-run equilibrium,use the aggregate demand and aggregate supply model to illustrate what happens in the short run when the economy suffers a negative supply shock.

Accepted Answer

@#IMG-DLM& The economy is at point A with the pric

Question 12

The long-run aggregate supply curve shows the relationship between the ________ and ________.

Accepted Answer

A) inflation rate;quantity of real GDP demanded 
B) real interest rate;quantity of real GDP supplied 
C) nominal interest rate;quantity of real GDP supplied 
D) price level;quantity of real GDP supplied 
A) inflation rate;quantity of real GDP demanded 
B) real interest rate;quantity of real GDP supplied 
C) nominal interest rate;quantity of real GDP supplied 
D) price level;quantity of real GDP supplied

Question 13

Which of the following would cause the short-run aggregate supply curve to shift to the right?

Accepted Answer

A) an increase in the price level 
B) a decrease in inflation expectations 
C) a technological advance 
D) an increase in interest rates 
A) an increase in the price level 
B) a decrease in inflation expectations 
C) a technological advance 
D) an increase in interest rates

Question 14

When potential GDP increases,long-run aggregate supply also increases.

Accepted Answer

A) True 
 B)False

Question 15

Using aggregate demand and aggregate supply,explain what happens in the short run if the Federal Reserve lowers interest rates in the economy? Be sure to detail what happens to aggregate demand,the price level,the level of GDP,and unemployment.Assume that the economy is at full employment before the interest rate decrease.

Accepted Answer

A decrease in the interest rate will cau

Question 16

Last week,six Swedish kronor could purchase one U.S.dollar.This week,it takes eight Swedish kronor to purchase one U.S.dollar.This change in the value of the dollar will ________ exports from the United States to Sweden and ________ U.S.aggregate demand.

Accepted Answer

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

Question 17

What variables cause the short-run aggregate supply curve to shift? For each variable,identify whether an increase in that variable will cause the short-run aggregate supply curve to shift to the right or to the left.

Accepted Answer

The variables that will cause the short-

Question 18

During the recession of 2007-2009 in the United States,________ relative to potential GDP.

Accepted Answer

A) business fixed investment spending rose and net export spending declined 
B) consumption spending rose and residential construction spending declined 
C) federal government purchases rose and changes in business inventories declined 
D) net export spending rose and consumption spending declined 
A) business fixed investment spending rose and net export spending declined 
B) consumption spending rose and residential construction spending declined 
C) federal government purchases rose and changes in business inventories declined 
D) net export spending rose and consumption spending declined

Question 19

Suppose the U.S.GDP growth rate is faster relative to other countries' GDP growth rates.This will

Accepted Answer

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

Question 20

If aggregate demand just increased,which of the following may have caused the increase?

Accepted Answer

A) an increase in government purchases 
B) an increase in the interest rate 
C) an increase in the price level 
D) an increase in imports 
A) an increase in government purchases 
B) an increase in the interest rate 
C) an increase in the price level 
D) an increase in imports

Figure 15-4 -Refer to Figure 15-4.Given the economy is at point A in year 1,what will happen to the unemployment rate in year 2?

According to the real business cycle model, in aggregate demand GDP.

Figure 15-2 -Refer to Figure 15-2.Ceteris paribus,an increase in the expected price of an important natural resource would be represented by a movement from

Potential GDP refers to the level of

The recession of 2007-2009 made many consumers pessimistic about their future incomes.How does this increased pessimism affect the aggregate demand curve?

A negative supply shock in the short run causes

of unemployment during make it easier for workers to wages.

In the long run,

Which of the following models advocate that the quantity of money should be increased at a constant rate?

Beginning with long-run equilibrium,use the aggregate demand and aggregate supply model to illustrate what happens in the short run when the economy suffers a negative supply shock.

The long-run aggregate supply curve shows the relationship between the and .

Which of the following would cause the short-run aggregate supply curve to shift to the right?

When potential GDP increases,long-run aggregate supply also increases.

Last week,six Swedish kronor could purchase one U.S.dollar.This week,it takes eight Swedish kronor to purchase one U.S.dollar.This change in the value of the dollar will exports from the United States to Sweden and U.S.aggregate demand.

What variables cause the short-run aggregate supply curve to shift? For each variable,identify whether an increase in that variable will cause the short-run aggregate supply curve to shift to the right or to the left.

During the recession of 2007-2009 in the United States,________ relative to potential GDP.

Suppose the U.S.GDP growth rate is faster relative to other countries' GDP growth rates.This will

If aggregate demand just increased,which of the following may have caused the increase?

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

Figure 15-4 -Refer to Figure 15-4.Given the economy is at point A in year 1,what will happen to the unemployment rate in year 2?

According to the real business cycle model,________ in aggregate demand ________ GDP.

Figure 15-2 -Refer to Figure 15-2.Ceteris paribus,an increase in the expected price of an important natural resource would be represented by a movement from

Potential GDP refers to the level of

The recession of 2007-2009 made many consumers pessimistic about their future incomes.How does this increased pessimism affect the aggregate demand curve?

A negative supply shock in the short run causes

________ of unemployment during ________ make it easier for workers to ________ wages.

In the long run,

Which of the following models advocate that the quantity of money should be increased at a constant rate?

Beginning with long-run equilibrium,use the aggregate demand and aggregate supply model to illustrate what happens in the short run when the economy suffers a negative supply shock.

The long-run aggregate supply curve shows the relationship between the ________ and ________.

Which of the following would cause the short-run aggregate supply curve to shift to the right?

When potential GDP increases,long-run aggregate supply also increases.

Last week,six Swedish kronor could purchase one U.S.dollar.This week,it takes eight Swedish kronor to purchase one U.S.dollar.This change in the value of the dollar will ________ exports from the United States to Sweden and ________ U.S.aggregate demand.

What variables cause the short-run aggregate supply curve to shift? For each variable,identify whether an increase in that variable will cause the short-run aggregate supply curve to shift to the right or to the left.

During the recession of 2007-2009 in the United States,________ relative to potential GDP.

Suppose the U.S.GDP growth rate is faster relative to other countries' GDP growth rates.This will

If aggregate demand just increased,which of the following may have caused the increase?

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

According to the real business cycle model, in aggregate demand GDP.

of unemployment during make it easier for workers to wages.

The long-run aggregate supply curve shows the relationship between the and .

Last week,six Swedish kronor could purchase one U.S.dollar.This week,it takes eight Swedish kronor to purchase one U.S.dollar.This change in the value of the dollar will exports from the United States to Sweden and U.S.aggregate demand.