Question 1

A technological advance leads to a shift in

Accepted Answer

A)  only short-run aggregate supply. 
B)  only long-run aggregate supply. 
C)  neither short-run nor long-run aggregate supply. 
D)  both short-run and long-run aggregate supply. 
E)  only aggregate demand.

Question 2

An increase in the minimum wage leads to an increase in the unemployment rate for unskilled workers.How is this likely to impact equilibrium output and the price level in the short run?

Accepted Answer

The answer of An increase in the minimum wage leads...

Question 3

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

Accepted Answer

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. 
E)  The value of the dollar decreases.

Question 4

How does the wealth effect explain the slope of the aggregate demand curve?

Accepted Answer

The answer of How does the wealth effect explain the...

Question 5

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

Accepted Answer

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

Question 6

In the long run,a technological advance that improves communication can be expected to ________ labor productivity and ________ unemployment.

Accepted Answer

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

Question 7

Suppose interest rates increase from 1 percent to 3 percent.In the short run,one can expect output in the United States to ________ and the price level to ________.

Accepted Answer

A)  increase; increase 
B)  decrease; decrease 
C)  decrease; increase 
D)  increase; decrease 
E)  remain unchanged; remain unchanged

Question 8

Which of the following would cause an increase in employment in the short run?

Accepted Answer

A)  The minimum wage increases. 
B)  Exports decrease. 
C)  There is a negative supply shock. 
D)  There is an increase in the expected price level. 
E)  There is an increase in government spending.

Question 9

Increases in productivity will

Accepted Answer

A)  cause the price level to rise. 
B)  impact short-run aggregate supply but not long-run aggregate supply. 
C)  impact aggregate demand but not aggregate supply. 
D)  increase long-run aggregate supply. 
E)  increase the price level and aggregate supply.

Question 10

An increase in expected future prices causes

Accepted Answer

A)  an increase in short-run aggregate supply. 
B)  a decrease in short-run aggregate supply. 
C)  a supply shock. 
D)  an upward movement along the aggregate supply curve. 
E)  menu costs.

Question 11

The wealth effect,interest rate effect,and international trade effect all explain why the

Accepted Answer

A)  aggregate demand (A
D) curve has a negative slope. 
B)  aggregate demand (A
D) curve has a positive slope. 
C)  aggregate supply (AS)curve has a positive slope. 
D)  aggregate supply (AS)curve has a negative slope. 
E)  price level and real gross domestic product (GDP)are unrelated.

Question 12

Unemployment rises and real gross domestic product (GDP)growth slows during the ________ business cycle.

Accepted Answer

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

Question 13

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

Accepted Answer

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

Question 14

When foreign income rises,U.S.aggregate

Accepted Answer

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 15

The wealth effect is best described as resulting from a(n)

Accepted Answer

A)  increase in the price level,reducing the real value of wealth. 
B)  decrease in the price level,reducing the real value of wealth. 
C)  increase in wealth due to capital gains. 
D)  decrease in wealth due to capital gains. 
E)  increase in disposable income due to a reduction in taxes.

Question 16

Perfect summer weather increases farm output by 30 percent.In the short run,this can be expected to ________ the price level and ________ real wealth.

Accepted Answer

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

Question 17

The table identifies annual gross domestic product (GDP)(in billions of dollars)for country X.  Based on the table,during which years(s)was country X most likely to have been in a recession?

Accepted Answer

A)  2014 and 2015 
B)  2009,2012,2014,and 2015 
C)  2009,2012,2013,2014,and 2015 
D)  2012 through 2015 
E)  2009

Question 18

Adjustments in ________ naturally move the economy toward long-run equilibrium.

Accepted Answer

A)  aggregate demand 
B)  the price level 
C)  government spending 
D)  the productive capacity of firms 
E)  full-employment output

Question 19

A supply shock causes a shift in

Accepted Answer

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

Question 20

Explain the difference between the short-run and long-run aggregate supply curves.

Accepted Answer

The answer of Explain the difference between the short-run and...

Exam 26: The Aggregate Demandaggregate Supply Model