Question 1

New drilling technologies lead to a 50 percent increase in oil reserves.How will this impact equilibrium output and the price level?

Accepted Answer

The answer of New drilling technologies lead to a 50...

Question 2

An increase in ________ can be expected to shift the aggregate demand curve to the right.

Accepted Answer

A)  taxes 
B)  the price of oil 
C)  expected future income 
D)  interest rates 
E)  the exchange rate value of the dollar

Question 3

In the long run,the output of an economy

Accepted Answer

A)  does not grow. 
B)  grows at a positive rate. 
C)  depends on aggregate demand. 
D)  is equal to full-employment output. 
E)  depends on the price level.

Question 4

Explain and illustrate how the short-run and long-run equilibrium levels of output and the price level are affected by legislation that increases the employer's cost of providing health care to workers.

Accepted Answer

The answer of Explain and illustrate how the short-run and...

Question 5

When an economy has a more stable and well-developed financial system,it is reasonable to expect

Accepted Answer

A)  an upward movement along the long-run aggregate supply curve. 
B)  a downward movement along the long-run aggregate supply curve. 
C)  a leftward shift of the long-run aggregate supply curve. 
D)  a rightward shift of the long-run aggregate supply curve. 
E)  no change in the long-run aggregate supply curve.

Question 6

The long-run output of an economy depends on

Accepted Answer

A)  the level of spending. 
B)  the level of unemployment. 
C)  the level of inflation. 
D)  the level of aggregate demand. 
E)  resources,technology,and institutions.

Question 7

Which of the following is true about the price level and aggregate supply?

Accepted Answer

A)  The price level influences aggregate supply in both the long run and short run. 
B)  The price level influences aggregate supply in the long run but not in the short run. 
C)  The price level influences aggregate supply in the short run but not in the long run. 
D)  The price level never impacts aggregate supply. 
E)  There is no clear relationship between the price level and aggregate supply.

Question 8

If inflation turns out to be higher than expected,this will

Accepted Answer

A)  shift long-run aggregate supply to the right. 
B)  shift long-run aggregate supply to the left. 
C)  shift short-run aggregate supply to the left. 
D)  shift short-run aggregate supply to the right. 
E)  have no effect on aggregate supply.

Question 9

An increase in aggregate demand is harmful because

Accepted Answer

A)  workers with sticky wages are paying more for goods and services. 
B)  firms have sticky input prices and earn less profit. 
C)  unemployment rises. 
D)  output has risen above the full-employment level. 
E)  wages will have to fall in the long run.

Question 10

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

Accepted Answer

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

Question 11

China's working-age population is expected to decline in the next 20 years.In the long run,we can expect this to

Accepted Answer

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

Question 12

Refer to the following figure to answer the following questions. 
-Based on the figure,a negative supply shock is best represented by a movement from

Accepted Answer

A)  C to B. 
B)  D to A. 
C)  A to D. 
D)  C to D. 
E)  A to B.

Question 13

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

Accepted Answer

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 14

A new government program reduces the cost of a college education at public universities by 50 percent.In the long run,this can be expected to ________ long-run aggregate supply and ________ aggregate demand.

Accepted Answer

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

Question 15

When a change in the price level leads to a change in saving,this is known as the ________ effect.

Accepted Answer

A)  wealth 
B)  international trade 
C)  savings 
D)  interest rate 
E)  output

Question 16

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

Accepted Answer

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

Question 17

A supply shock is defined as

Accepted Answer

A)  a decrease in full-employment output. 
B)  a surprise event that changes the firm's production costs. 
C)  a reduction in aggregate demand that has a negative impact on the firm's revenue. 
D)  a sudden upward movement along the short-run aggregate supply curve. 
E)  an attempt by employees to negotiate a wage increase.

Question 18

If short-run equilibrium output is above full-employment output,then in the long run input prices will

Accepted Answer

A)  decrease and output will increase. 
B)  increase and output will be unaffected. 
C)  increase and short-run aggregate supply will increase. 
D)  increase and output will fall. 
E)  decrease and output will fall.

Question 19

A rightward shift of the long-run aggregate supply curve means there has been

Accepted Answer

A)  a decrease in the cyclical unemployment rate. 
B)  an increase in the cyclical unemployment rate. 
C)  an increase in the price level. 
D)  a decrease in the price level. 
E)  economic growth.

Question 20

If the price level falls by 5 percent,then all else being equal,the long-run aggregate supply curve will

Accepted Answer

A)  remain unchanged. 
B)  shift to the right to reflect an increase in output of 5 percent. 
C)  shift to the right to reflect an increase in output of more than 5 percent. 
D)  shift to the left to reflect a decrease in output of 5 percent. 
E)  shift to the left to reflect a decrease in output of more than 5 percent.

Exam 26: The Aggregate Demandaggregate Supply Model