Question 1

Which of the following shifts both the short-run aggregate supply curve and the long-run aggregate supply curve?
I. changes in the size of the labor force
II. changes in the money wage rate
III. changes in the quantity of capital

Accepted Answer

A)  II only 
B)  both I and II 
C)  both I and III 
D)  I, II and III

Question 2

-In the above figure, point B depicts

Accepted Answer

A)  an inflationary gap with real GDP in excess of potential GDP. 
B)  an inflationary gap with real GDP less than potential GDP. 
C)  a recessionary gap with real GDP in excess of potential GDP. 
D)  a recessionary gap with real GDP less than potential GDP.

Question 3

A change in the money wage rate shifts

Accepted Answer

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

Question 4

If the money prices of resources changes

Accepted Answer

A)  the LAS curve shifts. 
B)  the SAS curve shifts. 
C)  the AD curve shifts. 
D)  the macroeconomic equilibrium is unaffected.

Question 5

-The curve labeled A in the above figure will shift rightward when

Accepted Answer

A)  the price level falls. 
B)  technology increases. 
C)  population falls. 
D)  the price level rises.

Question 6

An increase in the quantity of capital increases ________ and increase in the full-employment quantity of labor increases ________.

Accepted Answer

A)  both the SAS and the LAS; only the SAS 
B)  both the SAS and the LAS; only the LAS 
C)  both the SAS and the LAS; both the SAS and the LAS 
D)  only the LAS; both the SAS and the LAS

Question 7

When the price level rises, the long-run aggregate supply curve

Accepted Answer

A)  shifts rightward. 
B)  does not shift. 
C)  slopes upward. 
D)  shifts leftward.

Question 8

Last year in the country of Union, the price level increased and real GDP increased. Such an outcome might have occurred because short-run aggregate supply ________ and aggregate demand ________.

Accepted Answer

A)  decreased; decreased 
B)  increased; did not change 
C)  increased; decreased 
D)  did not change; increased

Question 9

If aggregate demand decreases and neither short-run nor long-run aggregate supply changes, then

Accepted Answer

A)  the price level increases in the short-run and decreases in the long run. 
B)  there is an inflationary gap. 
C)  there is a recessionary gap. 
D)  in the long run, the long-run aggregate supply will decrease.

Question 10

When an increase in aggregate demand exceeds the increase in aggregate supply

Accepted Answer

A)  real GDP decreases while nominal GDP increases. 
B)  the price level falls while real GDP increases. 
C)  nominal GDP decreases and real GDP decreases. 
D)  the economy will experience inflation as the price level rises.

Question 11

If the money prices of resources changes, the SAS curve shifts.

Accepted Answer

A) True 
 B)False

Question 12

In 2008 the money wage rate in Ireland increased by 4 percent while the price level increased by 8 percent. As a result, Ireland's

Accepted Answer

A)  short-run aggregate supply curve shifted leftward. 
B)  short-run aggregate supply curve shifted rightward. 
C)  long-run aggregate supply curve shifted rightward. 
D)  short-run and long-run aggregate supply curves shifted rightward.

Question 13

The AS/AD model studies the relationship between

Accepted Answer

A)  the price level and unemployment. 
B)  the price level and real GDP. 
C)  unemployment and real GDP. 
D)  nominal GDP and inflation.

Question 14

In 2009, just after taking office, President Obama approved an $800 billion stimulus package of tax cuts and increased government spending to combat the recession brought on by the financial crisis of 2007. Which group of economists most approved of President Obama's actions?

Accepted Answer

A)  Keynesian economists 
B)  classical economists 
C)  monetarists 
D)  free market economists

Question 15

-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; $300 
B)  100; $400 
C)  110; $500 
D)  120; $400

Question 16

The long-run aggregate supply curve is vertical.

Accepted Answer

A) True 
 B)False

Question 17

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

Question 18

If you have $5,000 in wealth and the price level decreases by 20 percent, then

Accepted Answer

A)  the $5,000 will buy fewer goods and services. 
B)  the $5,000 will buy more goods and services. 
C)  the real value of the $5,000 decreases. 
D)  the real value of the $5,000 remains constant.

Question 19

-Based on the data in the table above, the economy will be in short-run equilibrium at a price level of

Accepted Answer

A)  90. 
B)  110. 
C)  100. 
D)  120.

Question 20

The country of Epsilon has continuous strong economic growth and a steady price level. This situation is most likely the result of aggregate demand growing ________ aggregate supply.

Accepted Answer

A)  at the same pace as long-run 
B)  slower than long-run 
C)  slower than short-run 
D)  faster than long-run

Exam 10: Aggregate Supply and Aggregate Demand

Which of the following shifts both the short-run aggregate supply curve and the long-run aggregate supply curve? I. changes in the size of the labor force II. changes in the money wage rate III. changes in the quantity of capital