Question 1

In the short run, the aggregate supply curve is

Accepted Answer

A)  vertical. 
B)  downward sloping. 
C)  horizontal. 
D)  upward sloping.

Question 2

Lower taxes

Accepted Answer

A)  decrease the aggregate quantity demanded. 
B)  decrease aggregate demand. 
C)  increase aggregate demand. 
D)  increase the aggregate quantity demanded.

Question 3

In 2008, the dollar appreciated relative to the euro. This appreciation caused and a
)

Accepted Answer

A)  a movement up along the U.S. aggregate demand curve; decrease in U.S. exports to Europe 
B)  an increase in U.S. exports to Europe; movement up along the U.S. aggregate demand curve 
C)  a decrease in U.S. exports to Europe; leftward shift in the U.S. aggregate demand curve 
D)  a decrease in U.S. exports to Europe; a movement up along the U.S. aggregate demand curve

Question 4

The U.S. exchange rate rises. As a result, there is a

Accepted Answer

A)  movement along the U.S. aggregate demand curve but the curve does not shift. 
B)  leftward shift in the U.S. aggregate demand curve. 
C)  rightward shift in the U.S. aggregate demand curve. 
D)  rightward shift in the long- run U.S. aggregate supply curve.

Question 5

The SAS curve and the LAS curve

Accepted Answer

A)  are perpendicular to one another at potential GDP. 
B)  are parallel at potential GDP. 
C)  intersect at potential GDP. 
D)  None of the above answers is correct.

Question 6

If the money wage rate has fully adjusted to any changes, the economy is

Accepted Answer

A)  experiencing a recessionary gap. 
B)  experiencing an inflationary gap. 
C)  at its long- run macroeconomic equilibrium. 
D)  at a short- run macroeconomic equilibrium but not at a long- run macroeconomic equilibrium.

Question 7

Which of the following does NOT shift the aggregate demand curve?

Accepted Answer

A)  a decrease in the quantity of money 
B)  an increase in current foreign income 
C)  an increase in people's expected future incomes 
D)  an increase in the price level

Question 8

The table above gives the aggregate demand and aggregate supply schedules in Lotus Land. The short- run macroeconomic equilibrium is a price level of and a real GDP of _ .

Accepted Answer

A)  90; $400 
B)  100; $400 
C)  120; $400 
D)  110; $500

Question 9

-The data in the above table indicate that when the price level is 100,

Accepted Answer

A)  inventories fall and the price level rises. 
B)  the unemployment rate is at its equilibrium level. 
C)  the economy is in a long- run macroeconomic equilibrium. 
D)  inventories rise and the price level falls.

Question 10

-Using the data in the above table, in the short- run macroeconomic equilibrium, the price level is
And the level of real GDP is _ .

Accepted Answer

A)  115; $10 trillion 
B)  105; $10 trillion 
C)  110; $11 trillion 
D)  110; $10 trillion

Question 11

In the macroeconomic short- run equilibrium,

Accepted Answer

A)  there is frictional unemployment. 
B)  there is structural unemployment. 
C)  the economy might not be at the natural unemployment. rate 
D)  All of the above answers are correct.

Question 12

A change in the capital stock _ the short- run aggregate supply curve and the long- run aggregate supply curve.

Accepted Answer

A)  shifts; does not shift 
B)  shifts; shifts 
C)  does not shift; does not shift 
D)  does not shift; shifts

Question 13

If the economy is at long run equilibrium then

Accepted Answer

A)  real GDP can be greater than, less than, or equal to potential GDP. 
B)  nominal GDP equals potential GDP. 
C)  real GDP cannot be equal to potential GDP. 
D)  real GDP equals potential GDP.

Question 14

-The figure above illustrates aggregate demand and aggregate supply in Sparta. Sparta's price level will rise above 100 if .

Accepted Answer

A)  the quantity of capital increases 
B)  the quantity of money increases 
C)  government expenditure decreases 
D)  taxes increase

Question 15

-In the above figure, which movement illustrates the impact of a falling price level and a constant money wage rate?

Accepted Answer

A)  E to I 
B)  E to H 
C)  E to J 
D)  E to F

Question 16

A change in the money wage rate shifts

Accepted Answer

A)  the LAS curve but not the SAS curve. 
B)  the SAS curve but not the LAS curve. 
C)  neither the SAS nor the LAS curve. 
D)  both the SAS and LAS curves.

Question 17

-Suppose the economy is at point B. If a recession in another country decreases exports, to what point might economy move in the short run?

Accepted Answer

A)  It shifts to a point such as C. 
B)  It shifts to a point such as A. 
C)  It stays at point B. 
D)  None of the above answers are correct because it is the SAS curve that shifts, not the AD curve.

Question 18

-In the above figure, the short- run aggregate supply curve is SAS1. Suppose that the price level in the economy increases. As a result there is

Accepted Answer

A)  a shift to SAS0. 
B)  a downward movement along SAS1. 
C)  an upward movement along SAS1. 
D)  a shift to SAS2.

Question 19

Which school of thought believes that recessions are the result of inappropriate monetary policy?

Accepted Answer

A)  both Keynesian and classical 
B)  only classical 
C)  only Keynesian 
D)  Monetarist

Question 20

The economy is in its short run equilibrium at the point where the

Accepted Answer

A)  AD curve intersects the LAS curve. 
B)  price level is stable. 
C)  SAS curve intersects the LAS curve. 
D)  AD curve intersects the SAS curve.

Exam 10: Aggregate Supply and Aggregate Demand