Deck 12: Aggregate Demand and Aggregate Supply

Question 1

How many recessions have there been in the United States since 1982?

A) none
B) one
C) two
D) three
E) four

Answer 1

three

Question 2

The term "________ cycle" is a popular way to describe the recession-expansion pattern followed by the economy.

A) business
B) output
C) inflation
D) unemployment
E) long-run

Answer 2

business

Question 3

Unemployment rises and real gross domestic product (GDP)growth slows during the:

A) expansion phase of a business cycle.
B) recession phase of a business cycle.
C) entire business cycle.
D) recovery phase of a business cycle.
E) short-run phase of a business cycle.

Answer 3

recession phase of a business cycle.

Question 4

The short-run fluctuations in economic activity that can cause output to be above or below the long-run trend are called:

A) business cycles.
B) economic contractions.
C) economic expansions.
D) economic peaks.
E) economic troughs.

Question 5

Consider the following data that identifies real GDP in comparison to the long-run trend of real GDP to answer the questions that follow.

Between quarter 10 and quarter 11,real GDP grew by what percentage?

A) 6%
B) 3%
C) 4%
D) 5%
E) -5%

Question 6

Dispersion of a business cycle refers to:

A) the length of time from one business cycle peak to the next.
B) how low a trough or how high a peak of a business cycle is.
C) which segments of the economy are affected by a recession in a business cycle.
D) whether the bottom of the cycle is a depression.
E) how large a cross section of businesses exit their industry.

Question 7

Depth of a business cycle refers to:

A) the length of time from one business cycle peak to the next.
B) how low a trough or how high a peak of a business cycle is.
C) which segments of the economy are affected by a recession in a business cycle.
D) whether the bottom of the cycle is a depression.
E) what percentage of businesses exit their industry.

Question 8

The business cycle measures:

A) fluctuations in the long-run trend growth rate of GDP.
B) fluctuations in the profit of businesses.
C) fluctuations in consumption.
D) short-run fluctuations in economic activity.
E) fluctuations in the average tax rate paid by businesses.

Question 9

Referring to how low a trough or how high a peak of a business cycle is,the term used to describe this phenomenon is:

A) altitude.
B) dispersion.
C) duration.
D) depth.
E) amplitude.

Question 10

Duration of a business cycle refers to:

A) the length of time from one business cycle peak to the next.
B) how low a trough or how high a peak of a business cycle is.
C) which segments of the economy are affected by a recession in a business cycle.
D) whether the bottom of the cycle is a depression.
E) how long it takes for the average business to exit its industry.

Question 11

The phase of the business cycle where the economy is growing slower than usual is called:

A) an economic trough.
B) the long-run trend of GDP.
C) an economic expansion.
D) an economic contraction.
E) an economic peak.

Question 12

Consider the following data that identifies real GDP in comparison to the long-run trend of real GDP to answer the questions that follow.

Between quarter 7 and quarter 8,real GDP grew by what percentage?

A) -2%
B) 3%
C) 1%
D) 6%
E) 2%

Question 13

Referring to the length of time from one business cycle peak to the next,the term used to describe this phenomenon is:

A) altitude.
B) dispersion.
C) duration.
D) depth.
E) amplitude.

Question 14

The business cycle measures:

A) fluctuations in the long-run trend growth rate of GDP.
B) fluctuations in the profit of businesses.
C) fluctuations in consumption.
D) short-run fluctuations in economic activity.
E) fluctuations in the average tax rate paid by businesses.

Question 15

Which of the following is true about recessions in the United States?

A) They are more common today than in the past.
B) They are rarer today than in the past.
C) They occur predictably about every two years.
D) They occur predictably about every eight years.
E) They are often caused by changes in government policy.

Question 16

Referring to which segments of the economy are affected by a recession in a business cycle,the term used to describe this phenomenon is:

A) altitude.
B) dispersion.
C) duration.
D) depth.
E) amplitude.

Question 17

Consider the following data that identifies real GDP in comparison to the long-run trend of real GDP to answer the questions that follow.

On average,what percentage does real GDP grow over the long run?

A) 1%
B) 2%
C) 3%
D) 4%
E) 5%

Question 18

Consider the following data that identifies real GDP in comparison to the long-run trend of real GDP to answer the questions that follow.

Between quarter 2 and quarter 3,real GDP grew by what percentage?

A) 4%
B) 3%
C) 1%
D) 2%
E) -2%

Question 19

The long-run average growth rate of real GDP in the U.S.economy is about:

A) 2%.
B) 3%.
C) 5%.
D) 10%.
E) 1%.

Question 20

The phase of the business cycle where the economy is growing faster than usual is called:

A) an economic trough.
B) the long-run trend of GDP.
C) an economic expansion.
D) an economic contraction.
E) an economic peak.

Question 21

The Great Recession lasted from ________ to ________.

A) August 1929; March 1933
B) May 1937; June 1938
C) March 2001; November 2001
D) December 2007; June 2009
E) July 1991; June 1992

Question 22

For the questions that follow, suppose a country has the following quarterly growth data for the last three years:

The country's long-run average growth rate is 3%.How many quarters were spent in recession?

A) six
B) five
C) four
D) three
E) two

Question 23

During the Great Recession,________ caused long-run aggregate supply to decrease.

A) an increase in international trade
B) an advance in technology
C) financial market turmoil
D) an increase in the U.S.labor force
E) an increase in the money supply

Question 24

Consider the following figure to answer the questions that follow.

During which period was the economy in a contraction?

A) 2001-2005
B) 2008-2009
C) 2004-2008
D) 2005-2008
E) 2000-2004

Question 25

Consider the following figure to answer the questions that follow.

During which year was average income climbing the most rapidly?

A) 2000
B) 2001
C) 2004
D) 2005
E) 2008

Question 26

The Great Recession was similar to other recessions since World War II in that:

A) the rate of unemployment increased and then decreased at a later time.
B) the rate of inflation was extremely high.
C) real gross domestic product (GDP) rapidly increased and then leveled off.
D) the rate of economic growth was unchanged.
E) the rate of unemployment decreased and then increased at a later time.

Question 27

The Great Recession was similar to other recessions since World War II in that:

A) there was extremely high inflation.
B) real gross domestic product (GDP) initially declined and then recovered sometime later.
C) real GDP increased rapidly and then leveled off.
D) the rate of unemployment was unchanged.
E) the trade deficit fell to zero.

Question 28

Consider the following figure to answer the questions that follow.

In which year was the economy growing at the long-run average growth rate?

A) 2001
B) 2004
C) 2005
D) 2009
E) 2013

Question 29

Consider the following data that identifies real GDP in comparison to the long-run trend of real GDP to answer the questions that follow.

How many quarters did this economy spend in a recession?

A) eight
B) four
C) two
D) six
E) seven

Question 30

The contraction phase of a business cycle is best described as the time:

A) elapsed from a trough to a peak.
B) elapsed from a peak to a trough.
C) elapsed from a peak to a peak.
D) elapsed from a trough to a trough.
E) spent producing below the long-run trend of GDP.

Question 31

The Great Recession began in:

A) December 2009.
B) June 2009.
C) August 1929.
D) December 2007.
E) January 1930.

Question 32

Consider the following figure to answer the questions that follow.

During which period was the economy in an expansion?

A) 2005-2009
B) 2000-2004
C) 2009-2013
D) 2004-2008
E) 2000-2012

Question 33

Consider the following figure to answer the questions that follow.

In which year was it most likely the most difficult to find a job?

A) 2000
B) 2001
C) 2004
D) 2005
E) 2008

Question 34

The Great Recession began in ________ and lasted for ________ months.

A) June 2011; 12
B) August 1929; 44
C) December 2007; 18
D) May 1937; 14
E) March 2001; 8

Question 35

During the Great Recession,a major financial crisis followed the collapse of housing prices,which led to:

A) a decrease in the money supply by the Federal Reserve.
B) the decline in the health of many large financial firms and banks.
C) skyrocketing oil prices.
D) an increase in income tax rates to shrink the federal budget deficit.
E) an increase in expected income.

Question 36

For the questions that follow, suppose a country has the following quarterly growth data for the last three years:

The country's long-run average growth rate is 3%.In how many of these quarters did GDP contract?

A) two
B) six
C) five
D) four
E) three

Question 37

The Great Recession ended in:

A) June 2009.
B) January 2009.
C) March 1933.
D) June 1938.
E) June 2012.

Question 38

Consider the following data that identifies real GDP in comparison to the long-run trend of real GDP to answer the questions that follow.

In what quarter did this economy enter a recession?

A) quarter 5
B) quarter 6
C) quarter 7
D) quarter 8
E) quarter 9

Question 39

During the Great Recession,the unemployment rate climbed as high as ________ and remained around 7-9% ________ months after the recession began.

A) 15%; 75
B) 25%; 8
C) 10%; 60
D) 20%; 12
E) 35%; 80

Question 40

The expansion phase of a business cycle is best described as the time:

A) elapsed from a trough to a peak.
B) elapsed from a peak to a trough.
C) elapsed from a peak to a peak.
D) elapsed from a trough to a trough.
E) spent producing above the long-run trend of GDP.

Question 41

The four major spending categories of GDP are:

A) consumption, imports, exports, and government purchases.
B) consumption, government purchases, taxes, and investment.
C) consumption, investment, government purchases, and net exports.
D) consumption, investment, government purchases, and stocks.
E) consumption, investment, taxes, and net exports.

Question 42

Recognition lag,implementation lag,and impact lag are all examples of:

A) crowding-out.
B) savings shifts.
C) time lags that accompany policy decisions.
D) automatic stabilizers.
E) fiscal policies.

Question 43

The Great Recession was different from other recessions since World War II in that:

A) the economy did not return to normal for at least one year.
B) most consumers were unaffected by the recession.
C) the overall economy took far longer to recover than the usual post World War II recession.
D) the rate of unemployment increased and then decreased at a later time.
E) real gross domestic product (GDP) initially declined and then recovered sometime later.

Question 44

The Great Recession was most similar to which of the following downturns?

A) the Great Depression
B) the 2001 recession
C) the 1990 recession
D) the 1982 recession
E) the 1930 recession

Question 45

The Great Recession lasted for ________ months.

A) 12
B) 19
C) 32
D) 44
E) 56

Question 46

The three time lags that accompany policy decisions are:

A) recognition lag, implementation lag, and impact lag.
B) crowding-out lag, implementation lag, and impact lag.
C) recognition lag, implementation lag, and countercyclical lag.
D) crowding-out lag, implementation lag, and countercyclical lag.
E) crowding-out lag, stabilizing lag, and countercyclical lag.

Question 47

Aggregate demand is determined by adding up the spending of:

A) domestic consumers who buy goods and services produced in the United States.
B) domestic consumers and firms that buy goods and services produced in the United States.
C) domestic and foreign consumers who buy goods and services produced in the United States.
D) domestic and foreign consumers and firms that buy goods and services produced in the United States.
E) consumers, firms, the government, and foreigners that buy goods and services produced in the United States.

Question 48

The Great Recession was different from other recessions since World War II in that:

A) real gross domestic product (GDP) initially declined and then recovered sometime later.
B) the trade deficit was largely unaffected.
C) the rate of unemployment increased and then decreased at a later time.
D) the decline in real GDP was much larger and lasted longer.
E) the economy did not return to normal for at least one year.

Question 49

It takes time for the complete effects of monetary and fiscal policy to materialize.This is because there is a(n)________ lag between setting fiscal policy and seeing its effects.

A) recognition
B) implementation
C) impact
D) countercyclical
E) automatic

Question 50

The model used to study business cycles is the ________ model.

A) labor
B) savings
C) growth
D) aggregate demand-aggregate supply
E) interest rate

Question 51

The big difference between the Great Recession and the recession of 1982 was:

A) how the economy recovered after the recessions had officially ended.
B) the increase in the unemployment rate that occurred during each recession.
C) the quarterly real gross domestic product (GDP) growth rates at the official start of each recession.
D) the length (duration) of each recession.
E) the total decline in the economy during each recession.

Question 52

Use the following graph to answer the questions that follow. This graph depicts an economy where aggregate demand has decreased, with no change in either short-run aggregate supply (SRAS) or long-run aggregate supply (LRAS).

The graph accurately summarizes what happened during the Great Depression,because during that time,the price level ________ and real gross domestic product (GDP)________.

A) decreased; decreased
B) increased; decreased
C) remained unchanged; remained unchanged
D) decreased; increased
E) remained unchanged; decreased

Question 53

The Great Recession was similar to most other recessions since World War II in that the economy:

A) rapidly bounced back and resumed normal growth quickly.
B) never really declined much at all.
C) did not return to normal for at least one year.
D) increased rapidly following the beginning of the recession.
E) essentially collapsed and never recovered.

Question 54

GDP is best defined as the total market value of all:

A) goods and services produced within a country within a given time.
B) final goods and services produced within a country within a given time.
C) services produced within a country within a given time.
D) goods produced within a country within a given time.
E) final goods produced within a country within a given time.

Question 55

The Great Recession was different from other recessions since World War II in that:

A) the rate of unemployment increased and then decreased at a later time.
B) the increase in unemployment was much greater and lasted longer.
C) real gross domestic product (GDP) initially declined and then recovered sometime later.
D) the economy did not return to normal for at least one year.
E) the rate of inflation did not change at all.

Question 56

In most nations,one or more governing bodies must approve government spending or new tax policies.This causes a(n)________ lag between setting fiscal policy and seeing its effects.

A) recognition
B) implementation
C) impact
D) countercyclical
E) automatic

Question 57

Use the following graph to answer the questions that follow. This graph depicts an economy where aggregate demand has decreased, with no change in either short-run aggregate supply (SRAS) or long-run aggregate supply (LRAS).

As a result of aggregate demand decreasing,we can see that the price level ________ and real gross domestic product (GDP)________.

A) increased; increased
B) decreased; decreased
C) remained unchanged; increased
D) decreased; remained unchanged
E) increased; decreased

Question 58

The aggregate demand curve is best represented by which of the following equations?

A) AD = C + I + G + NX
B) AD = C + I + G - NX
C) AD = C + I + G
D) AD = C + I
E) AD = C + I - G - NX

Question 59

A recognition lag happens because:

A) it takes time to recognize the true long-run growth rate in the economy.
B) it is difficult to determine when the economy is turning up or down.
C) in most nations, one or more governing bodies must approve government spending or new tax policies.
D) it takes time for the complete effects of monetary and fiscal policy to materialize.
E) it is difficult to recognize what the unemployment rate is.

Question 60

The aggregate demand curve illustrates the ________ relationship between the ________ and the ________.

A) positive; price level; quantity demanded of real gross domestic product (GDP)
B) positive; price level; quantity demanded of nominal GDP
C) inverse; price level; quantity demanded of real GDP
D) inverse; price level; quantity demanded of nominal GDP
E) positive; level of spending; level of real GDP

Question 61

If large emerging economies continue to grow rapidly,we can expect U.S.aggregate:

A) demand to increase.
B) demand to decrease.
C) supply to increase.
D) supply to decrease.
E) demand and supply to be unaffected.

Question 62

When foreign income rises,U.S.aggregate:

A) demand will shift to the right.
B) supply will shift to the right.
C) demand will shift to the left.
D) supply will shift to the left.
E) demand and aggregate supply will be unaffected.

Question 63

The aggregate demand curve slopes downward because:

A) a higher price will increase investment.
B) a higher price level will cause an increase in expected income.
C) a higher price level will increase purchasing power.
D) a higher price level that foreigners must pay will increase exports.
E) a higher price level for future purchases reduces wealth.

Question 64

A fall in the price level that causes a change in net exports results in:

A) a downward movement along the aggregate demand curve.
B) an upward movement along the aggregate demand curve.
C) a rightward shift of the demand curve.
D) a leftward shift of the demand curve.
E) no change in the quantity of aggregate demand.

Question 65

An increase in the value of the dollar will:

A) have no effect on aggregate demand or supply.
B) decrease aggregate supply.
C) increase aggregate supply.
D) increase aggregate demand.
E) decrease aggregate demand.

Question 66

Suppose the majority of students who are graduating in May from a large university have found jobs and signed employment contracts by February.Starting in February,these students are likely to ________ spending and shift the aggregate demand curve________.

A) increase; to the left
B) decrease; to the right
C) decrease; to the left
D) increase; to the right
E) not change their rate of; to the right

Question 67

A(n)________ would cause a leftward shift of the aggregate demand curve.

A) increase in real wealth
B) increase in expected income
C) decrease in foreign income
D) increase in the expected price level
E) decrease in the value of the dollar

Question 68

A decline in U.S.wealth would tend to cause:

A) long-run aggregate supply to increase.
B) aggregate demand to decrease.
C) short-run aggregate supply to increase.
D) long-run aggregate supply to decrease.
E) aggregate demand to increase.

Question 69

The Great Depression is characterized by a decrease in aggregate demand.Of the following factors,which would have caused aggregate demand to decrease?

A) an increase in the labor supply
B) an increase in the money supply
C) an advance in technology
D) a decrease in expected future income
E) an increase in government spending

Question 70

Which of the following would shift aggregate demand to the left?

A) A study predicts that the recent drought will increase food prices this winter.
B) There is a rise in the median price of houses.
C) A rise in the price level reduces saving and increases interest rates.
D) The value of the dollar increases.
E) The European Union emerges from recession.

Question 71

A(n)________ would cause a rightward shift of the aggregate demand curve.

A) decrease in the expected price level
B) decrease in foreign income
C) increase in expected income
D) decrease in real wealth
E) increase in the value of the dollar

Question 72

When median home prices of currently owned homes rise,the value of real wealth for these owners ________ and their aggregate demand ________.

A) increases; is unaffected
B) increases; increases
C) increases; decreases
D) decreases; decreases
E) is unaffected; is unaffected

Question 73

You read in the paper that there has been a significant increase in the consumer confidence index.Having taken an economics class,you predict that spending in the economy will ________ and aggregate demand will ________.

A) decrease; increase
B) decrease; decrease
C) increase; be unaffected
D) increase; decrease
E) increase; increase

Question 74

Which of the following would cause an upward movement along the aggregate demand curve?

A) There is an increase in expected income.
B) There is an increase in the price level that causes an increase in the value of real wealth.
C) There is an increase in housing prices that causes an increase in the value of real wealth.
D) The value of the dollar increases.
E) There is an increase in the expected price level.

Question 75

Which of the following would shift aggregate demand to the right?

A) College graduates are having a difficult time finding jobs.
B) There is a decline in consumer confidence.
C) Stock market values increase by 20%.
D) A fall in the price level increases the value of real wealth.
E) The value of the dollar increases.

Question 76

You read a study that predicts that rising oil prices projected for this summer are certain to fuel inflation.Having taken an economics class,due to this expected change in prices,you predict that spending today will ________ and aggregate demand today will ________.

A) be unaffected; be unaffected
B) increase; increase
C) decrease; decrease
D) decrease; increase
E) increase; decrease

Question 77

An increase in the value of the dollar will ________ exports and ________ imports.

A) increase; increase
B) decrease; decrease
C) have no effect on; have no effect on
D) decrease; increase
E) increase; decrease

Question 78

Which of the following would cause a downward movement along the aggregate demand curve?

A) A rise in the price level makes U.S.goods relatively more expensive than foreign goods.
B) The value of real wealth rises.
C) There is a decline in the expected price level.
D) A fall in the price level increases savings and lowers interest rates, increasing stock market value.
E) The value of the dollar decreases.

Question 79

If people expect higher income in the future,then spending today ________ and aggregate demand ________.

A) increases; is unaffected
B) increases; increases
C) increases; decreases
D) decreases; decreases
E) is unaffected; is unaffected

Question 80

If prices fall,then real wealth ________ and the quantity of aggregate demand ________.

A) increases; increases
B) increases; decreases
C) decreases; decreases
D) decreases; increases
E) is unaffected; is unaffected