Question 1

A fall in the money wage rate shifts

Accepted Answer

A)  both the SAS and LAS curves rightward. 
B)  both the SAS and LAS curves leftward. 
C)  the SAS curve rightward but leaves the LAS curve unchanged. 
D)  the LAS curve rightward but leaves the SAS curve unchanged.

Question 2

What is the difference between the long-run aggregate supply and the short-run aggregate supply curves?

Accepted Answer

The answer of What is the difference between the long-run...

Question 3

In the short run, firms expand their production when the price level rises because

Accepted Answer

A)  the money wage rate remains constant so the higher prices for their products makes it profitable for firms to expand production. 
B)  each firm must keep its production up to the level of its rivals, and some firms will expand production as the price level increases. 
C)  the higher prices allow the firm to hire more workers by offering higher wages, thereby increasing productivity and profits. 
D)  firms can increase their profits by increasing their maintenance.

Question 4

Suppose the price level, the money wage, and the price of all other resources rise by 10 percent. This set of changes leads to

Accepted Answer

A)  an upward movement along the LAS curve. 
B)  a downward movement along the LAS curve. 
C)  an upward movement along the SAS curve. 
D)  a leftward shift of the LAS curve.

Question 5

If taxes are increased, the AD curve

Accepted Answer

A)  is not affected because a change in taxes is a nominal change not real change. 
B)  shifts rightward and aggregate demand decreases. 
C)  shifts leftward and aggregate demand decreases. 
D)  does not shift but there is a movement down along the curve.

Question 6

If the economy is at long run equilibrium then

Accepted Answer

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

Question 7

In the macroeconomic long run

Accepted Answer

A)  real GDP equals potential GDP. 
B)  the economy is at full employment. 
C)  regardless of the price level, the economy is producing at potential GDP. 
D)  All of the above are correct.

Question 8

Which of the following events will increase short-run aggregate supply?

Accepted Answer

A)  an advance in technology 
B)  an increase in resource prices 
C)  an increase in the natural unemployment rate 
D)  an increase in foreign income

Question 9

If there is an increase in technology, the long-run aggregate supply curve shifts rightward, but the short-run aggregate supply curve does not shift.

Accepted Answer

A) True 
 B)False

Question 10

-In the figure above, potential GDP equals

Accepted Answer

A)  $17.5 trillion. 
B)  $18.0 trillion. 
C)  $18.5 trillion. 
D)  None of the above answers is correct.

Question 11

If real GDP is less than potential GDP, the economy is

Accepted Answer

A)  not in macroeconomic equilibrium. 
B)  at full employment. 
C)  in an above-full-employment equilibrium. 
D)  in a below-full-employment equilibrium.

Question 12

-In the above figure, the short-run aggregate supply curve is SAS1. If the money wage rate increases, there is

Accepted Answer

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

Question 13

What two variables are determined in an aggregate supply-aggregate demand figure? Is the slope of the short-run aggregate supply curve positive or negative? Is the slope of the aggregate demand curve positive or negative?

Accepted Answer

The answer of What two variables are determined in an...

Question 14

The long-run aggregate supply curve is vertical because

Accepted Answer

A)  at full employment, prices are stable. 
B)  there is no cyclical inflation. 
C)  potential GDP is independent of the price level. 
D)  the money wage rate increases faster than the price level.

Question 15

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

Accepted Answer

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

Question 16

-The above figure illustrates

Accepted Answer

A)  a recessionary gap. 
B)  a full-employment equilibrium. 
C)  an inflationary gap. 
D)  an equilibrium at the economy's physical limits.

Question 17

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

Accepted Answer

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

Question 18

As the price level falls and other things remain the same, real wealth ________ and ________.

Accepted Answer

A)  decreases; the short-run aggregate supply decreases 
B)  decreases; the quantity of real GDP demanded decreases 
C)  increases; aggregate demand increases 
D)  increases; the quantity of real GDP demanded increases

Question 19

Disposable income ________ when ________.

Accepted Answer

A)  decreases; taxes increase 
B)  decreases; transfer payments increase 
C)  increases; government expenditures decrease 
D)  decreases; aggregate income increases

Question 20

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

Exam 10: Aggregate Supply and Aggregate Demand