Question 1

Suppose new immigration legislation permanently limits the number of people who are able to enter the country through H1-B visas. Which type of shock would this legislation cause?

Accepted Answer

A)  Long-run supply shock 
B)  Short-run supply shock 
C)  Demand shock 
D)  Change in price level

Question 2

The aggregate supply and aggregate demand model describes the interaction of which macroeconomic variables?

Accepted Answer

A)  Output and the price level 
B)  Employment and the price level 
C)  Prices and immigration 
D)  Output and the number of sellers

Question 3

The figure shown displays various economic outcomes.  If the aggregate demand curve shifts from AD2 to AD3, the resulting price and output in the long run would be:

Accepted Answer

A)  P 1 and Y 2. 
B)  P 2 and Y 2. 
C)  P 1 and Y 1. 
D)  P 4 and Y 2.

Question 4

The long-run aggregate supply curve is:

Accepted Answer

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

Question 5

Higher interest rates occur at higher price levels, which explains the _______ relationship between the price level and investment spending.

Accepted Answer

A)  negative 
B)  positive 
C)  constant 
D)  direct

Question 6

If prices increase in the United States only, then:

Accepted Answer

A)  U.S. goods will become relatively more expensive than goods from other countries. 
B)  the cost of production will fall in other countries. 
C)  the prices of goods from other countries will rise. 
D)  the income level in the United States will rise.

Question 7

Aggregate supply is the market value of the total quantity of:

Accepted Answer

A)  home production in the economy. 
B)  goods or services supplied by producers in a single market. 
C)  intermediate goods supplied in the economy. 
D)  goods and services supplied in the economy.

Question 8

To counteract the effects of a recession, policymakers can:

Accepted Answer

A)  reduce government spending. 
B)  increase government spending. 
C)  increase tariffs. 
D)  increase tax rates.

Question 9

The figure shown displays various economic outcomes.  If the aggregate demand curve shifts from AD3 to AD2, the resulting price and output in the short run would be:

Accepted Answer

A)  P 1 and Y 2. 
B)  P 3 and Y 1. 
C)  P 2 and Y 3. 
D)  P 2 and Y 1.

Question 10

The wealth effect partially explains why the aggregate _______ curve is _______.

Accepted Answer

A)  demand; downward-sloping 
B)  demand; upward-sloping 
C)  supply; downward-sloping 
D)  supply; upward-sloping

Question 11

A reduction in the amount of land a nation has that is capable of growing crops would cause the _______ aggregate supply curve to shift to the _______.

Accepted Answer

A)  long-run; right 
B)  long-run; left 
C)  short-run; right 
D)  None of these shifts would occur.

Question 12

If the government decides not to respond to a negative supply shock, the economy will:

Accepted Answer

A)  experience lower prices. 
B)  experience increased output. 
C)  experience stagflation. 
D)  stay at the same price and output levels.

Question 13

Which of the following macroeconomic variables is perfectly inelastic?

Accepted Answer

A)  Aggregate demand 
B)  Short-run aggregate supply 
C)  Long-run aggregate supply 
D)  The price of inputs in the short run

Question 14

If a hurricane were to destroy the major oil refineries on the Gulf Coast, it would likely cause a:

Accepted Answer

A)  short-run supply shock. 
B)  long-run supply shock. 
C)  short-run demand shock. 
D)  long-run demand shock.

Question 15

Sticky wages cause the short-run aggregate supply curve to:

Accepted Answer

A)  slope upward. 
B)  slope downward. 
C)  shift to the left. 
D)  shift to the right.

Question 16

The long-run aggregate supply curve represents the level of output possible if the economy:

Accepted Answer

A)  is operating at full capacity. 
B)  is operating at an unemployment rate of zero. 
C)  has a zero inflation rate. 
D)  has no structural unemployment.

Question 17

An increase in a nation's education level would cause the _______ aggregate supply curve to shift to the _______.

Accepted Answer

A)  long-run; right 
B)  long-run; left 
C)  short-run; left 
D)  short-run; right

Question 18

Demand-side shifts change:

Accepted Answer

A)  the price level in the long run, while output eventually returns to its long-run potential level. 
B)  the output level in the long run, while prices eventually return to their long-run potential levels. 
C)  the price level in the short run, while output remains unaffected. 
D)  the output level in the short run, while prices remain unaffected.

Question 19

If the aggregate demand curve shifts to the left, the long-run equilibrium will occur at a _______ price level and _______ level of output.

Accepted Answer

A)  higher; the same 
B)  higher; lower 
C)  lower; the same 
D)  lower; lower

Question 20

Expenditures by _______ will remain unaffected as the U.S. price level increases.

Accepted Answer

A)  consumers 
B)  businesses 
C)  the government 
D)  the rest of the world

Exam 12: Aggregatedemand and Aggregate Supply