Question 1

Exhibit 8-4  
-Refer to Exhibit 8-4.A shift in short-run aggregate supply from SRAS1 to SRAS2 would have been the result of

Accepted Answer

A)  a decrease in the price level. 
B)  an increase in the price level. 
C)  an adverse supply shock. 
D)  a beneficial supply shock. 
A)  a decrease in the price level. 
B)  an increase in the price level. 
C)  an adverse supply shock. 
D)  a beneficial supply shock.

Question 2

Subprime loans generally have a lower loan-to-value ratio than do prime loans.

Accepted Answer

A) True 
 B)False

Question 3

A fall in the price level changes the purchasing power of money.This is relevant to the __________ effect.

Accepted Answer

A)  international trade 
B)  real balance 
C)  aggregate demand 
D)  interest rate 
E)  aggregate supply 
A)  international trade 
B)  real balance 
C)  aggregate demand 
D)  interest rate 
E)  aggregate supply

Question 4

One reason the AD curve is downward sloping is the __________ effect.

Accepted Answer

A)  wage rate 
B)  productivity 
C)  interest rate 
D)  structural 
E)  none of the above 
A)  wage rate 
B)  productivity 
C)  interest rate 
D)  structural 
E)  none of the above

Question 5

Exhibit 8-1  
-Refer to Exhibit 8-1.Assume that the economy is originally in equilibrium at point B.If businesses become pessimistic about future sales,at which point is the economy most likely to end up in the short run?

Accepted Answer

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

Question 6

The economy suffers an adverse supply shock.As a result,in the short run Real GDP will __________ and the price level will __________.

Accepted Answer

A)  rise;rise 
B)  fall;fall 
C)  fall;remain constant 
D)  fall;rise 
E)  rise;fall 
A)  rise;rise 
B)  fall;fall 
C)  fall;remain constant 
D)  fall;rise 
E)  rise;fall

Question 7

Aggregate demand refers to the

Accepted Answer

A)  quantity demanded of all goods and services at various price levels,ceteris paribus. 
B)  quantity demanded of all goods and services at a particular price level,ceteris paribus. 
C)  quantity demanded of Real GDP at various price levels,ceteris paribus. 
D)  various amounts of GDP that are demanded at various price levels,ceteris paribus. 
E)  a and c 
A)  quantity demanded of all goods and services at various price levels,ceteris paribus. 
B)  quantity demanded of all goods and services at a particular price level,ceteris paribus. 
C)  quantity demanded of Real GDP at various price levels,ceteris paribus. 
D)  various amounts of GDP that are demanded at various price levels,ceteris paribus. 
E)  a and c

Question 8

If foreign input prices increase and the United States purchases those inputs,then the U.S.

Accepted Answer

A)  AD curve will shift leftward and U.S.prices will fall. 
B)  AD curve will shift rightward and U.S.prices will rise. 
C)  SRAS curve will shift leftward and U.S.prices will rise. 
D)  SRAS curve will shift rightward and U.S.prices will fall 
A)  AD curve will shift leftward and U.S.prices will fall. 
B)  AD curve will shift rightward and U.S.prices will rise. 
C)  SRAS curve will shift leftward and U.S.prices will rise. 
D)  SRAS curve will shift rightward and U.S.prices will fall

Question 9

In the short run,an increase in investment,ceteris paribus,shifts the

Accepted Answer

A)  AD curve to the right,causing equilibrium price level to rise and equilibrium Real GDP to increase. 
B)  AD curve to the left,causing equilibrium price level to fall and equilibrium Real GDP to decrease. 
C)  SRAS curve to the right,causing equilibrium price level to fall and equilibrium Real GDP to increase. 
D)  SRAS curve to the left,causing equilibrium price level to rise and equilibrium Real GDP to decrease. 
A)  AD curve to the right,causing equilibrium price level to rise and equilibrium Real GDP to increase. 
B)  AD curve to the left,causing equilibrium price level to fall and equilibrium Real GDP to decrease. 
C)  SRAS curve to the right,causing equilibrium price level to fall and equilibrium Real GDP to increase. 
D)  SRAS curve to the left,causing equilibrium price level to rise and equilibrium Real GDP to decrease.

Question 10

Exhibit 8-1  
-Refer to Exhibit 8-1.If we assume that the unemployment rate and Real GDP are inversely related,which of the points on this graph is most likely representative of the lowest unemployment rate?

Accepted Answer

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

Question 11

Which of the following questions is false?

Accepted Answer

A)  Purchasing power and the price level are inversely related. 
B)  The real balance effect refers to the change in the purchasing power of dollar-denominated assets as a result of a change in the price level. 
C)  The aggregate demand curve slopes downward because of the real balance,interest rate,and international trade effects. 
D)  A change in the quantity demanded of Real GDP is directly brought about by a change in interest rates. 
A)  Purchasing power and the price level are inversely related. 
B)  The real balance effect refers to the change in the purchasing power of dollar-denominated assets as a result of a change in the price level. 
C)  The aggregate demand curve slopes downward because of the real balance,interest rate,and international trade effects. 
D)  A change in the quantity demanded of Real GDP is directly brought about by a change in interest rates.

Question 12

A change in the quantity demanded of Real GDP is graphically represented as a

Accepted Answer

A)  shift in the AD curve. 
B)  movement from one point on the AD curve to another point on the same curve. 
C)  movement from a point on the AD curve to a point on the SRAS curve. 
D)  shift in the real balance effect curve. 
E)  shift in the interest rate effect curve. 
A)  shift in the AD curve. 
B)  movement from one point on the AD curve to another point on the same curve. 
C)  movement from a point on the AD curve to a point on the SRAS curve. 
D)  shift in the real balance effect curve. 
E)  shift in the interest rate effect curve.

Question 13

List and describe the three reasons that help to explain why the aggregate demand (AD)curve slopes downward.

Accepted Answer

If the AD curve slopes downward,it means

Question 14

Ceteris paribus,Real GDP and the unemployment rate are

Accepted Answer

A)  directly related. 
B)  inversely related. 
C)  unrelated. 
D)  directly related when GDP is below its natural level and inversely related when GDP is above its natural level. 
A)  directly related. 
B)  inversely related. 
C)  unrelated. 
D)  directly related when GDP is below its natural level and inversely related when GDP is above its natural level.

Question 15

The worker-misperception explanation of the SRAS curve is used to explain why

Accepted Answer

A)  SRAS curves shift to the right 
B)  SRAS curves shift to the left 
C)  the AD curve cannot change the price level if the SRAS curve is operational. 
D)  the SRAS curve slopes downward. 
E)  none of the above 
A)  SRAS curves shift to the right 
B)  SRAS curves shift to the left 
C)  the AD curve cannot change the price level if the SRAS curve is operational. 
D)  the SRAS curve slopes downward. 
E)  none of the above

Question 16

In short-run equilibrium,it is always true that

Accepted Answer

A)  quantity demanded of Real GDP = quantity supplied of Real GDP = Natural Real GDP. 
B)  quantity demanded of Real GDP > quantity supplied of Real GDP. 
C)  quantity demanded of Real GDP = quantity supplied of Real GDP. 
D)  a and b 
E)  There is not enough information to answer the question. 
A)  quantity demanded of Real GDP = quantity supplied of Real GDP = Natural Real GDP. 
B)  quantity demanded of Real GDP > quantity supplied of Real GDP. 
C)  quantity demanded of Real GDP = quantity supplied of Real GDP. 
D)  a and b 
E)  There is not enough information to answer the question.

Question 17

Which of the following is false?

Accepted Answer

A)  Aggregate demand is a specific dollar amount,such as $400 billion. 
B)  At a given price level,anything that changes total expenditures changes aggregate demand. 
C)  Total expenditures rises if consumption rises,ceteris paribus. 
D)  Total expenditures rises if investment spending rises,ceteris paribus. 
A)  Aggregate demand is a specific dollar amount,such as $400 billion. 
B)  At a given price level,anything that changes total expenditures changes aggregate demand. 
C)  Total expenditures rises if consumption rises,ceteris paribus. 
D)  Total expenditures rises if investment spending rises,ceteris paribus.

Question 18

An increase in labor productivity shifts the

Accepted Answer

A)  AD curve rightward. 
B)  AD curve leftward. 
C)  short-run aggregate supply (SRAS)curve leftward. 
D)  SRAS curve rightward. 
E)  none of the above 
A)  AD curve rightward. 
B)  AD curve leftward. 
C)  short-run aggregate supply (SRAS)curve leftward. 
D)  SRAS curve rightward. 
E)  none of the above

Question 19

An increase in the money supply may __________ total expenditures,leading to a __________ shift of the AD curve.

Accepted Answer

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

Question 20

If investment changes because of a change in the price level,then the

Accepted Answer

A)  economy moves from one point on an AD curve to another point on the same curve. 
B)  AD curve shifts. 
C)  economy moves from one point on a SRAS curve to another point on the same curve. 
D)  SRAS curve shifts. 
E)  none of the above 
A)  economy moves from one point on an AD curve to another point on the same curve. 
B)  AD curve shifts. 
C)  economy moves from one point on a SRAS curve to another point on the same curve. 
D)  SRAS curve shifts. 
E)  none of the above

Exam 8: Aggregate Demand and Aggregate Supply

Exhibit 8-4 -Refer to Exhibit 8-4.A shift in short-run aggregate supply from SRAS1 to SRAS2 would have been the result of

Subprime loans generally have a lower loan-to-value ratio than do prime loans.

A fall in the price level changes the purchasing power of money.This is relevant to the __________ effect.

One reason the AD curve is downward sloping is the __________ effect.

Exhibit 8-1 -Refer to Exhibit 8-1.Assume that the economy is originally in equilibrium at point B.If businesses become pessimistic about future sales,at which point is the economy most likely to end up in the short run?

The economy suffers an adverse supply shock.As a result,in the short run Real GDP will __________ and the price level will __________.

Aggregate demand refers to the

If foreign input prices increase and the United States purchases those inputs,then the U.S.

In the short run,an increase in investment,ceteris paribus,shifts the

Exhibit 8-1 -Refer to Exhibit 8-1.If we assume that the unemployment rate and Real GDP are inversely related,which of the points on this graph is most likely representative of the lowest unemployment rate?

Which of the following questions is false?

A change in the quantity demanded of Real GDP is graphically represented as a

List and describe the three reasons that help to explain why the aggregate demand (AD)curve slopes downward.

Ceteris paribus,Real GDP and the unemployment rate are

The worker-misperception explanation of the SRAS curve is used to explain why

In short-run equilibrium,it is always true that

Which of the following is false?

An increase in labor productivity shifts the

An increase in the money supply may __________ total expenditures,leading to a __________ shift of the AD curve.

If investment changes because of a change in the price level,then the

What Economics Is About

Production Possibilities Frontier Framework

Supply and Demand: Theory

Prices: Free, controlled, and Relative

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Classical Macroeconomics and the Self-Regulating Economy

Keynesian Macroeconomics and Economic Instability: a Critique of the Self-Regulating Economy

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Economic Growth: Resources, technology, ideas, and Institutions

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Exhibit 8-4 -Refer to Exhibit 8-4.A shift in short-run aggregate supply from SRAS₁ to SRAS₂ would have been the result of

The economy suffers an adverse supply shock.As a result,in the short run Real GDP will and the price level will .

An increase in the money supply may total expenditures,leading to a shift of the AD curve.