Question 1

Figure 10-12  In Figure 10-12, which of the following would most likely cause the movement from point E1 to point e2 for the United States?

Accepted Answer

A)  a severe drought in agricultural areas 
B)  a major technological improvement 
C)  business and consumer pessimism about the future direction of the economy 
D)  a decrease in the expected inflation rate

Question 2

If the general level of prices is lower than business decision makers anticipated when they entered into long-term contracts for raw materials and other resources, which of the following is most likely to occur?

Accepted Answer

A)  An economic boom. 
B)  Highly attractive profit margins. 
C)  An actual rate of unemployment that is greater than the natural rate of unemployment 
D)  A sharp increase in imports.

Question 3

Which of the following will most likely accompany an unanticipated increase in short-run aggregate supply?

Accepted Answer

A)  an increase in real GDP 
B)  an increase in the general level of prices 
C)  an increase in the actual rate of unemployment 
D)  an increase in the natural rate of unemployment

Question 4

If the U.S. price level increased relative to price levels in foreign countries, what would be the impact on domestic aggregate supply and aggregate demand curves?

Accepted Answer

A)  the aggregate supply curve would shift outward and the aggregate demand curve would remain unchanged 
B)  the aggregate supply curve would shift inward and the aggregate demand curve would remain unchanged 
C)  the aggregate demand curve would shift outward and the aggregate supply curve would remain unchanged 
D)  the aggregate demand curve would shift inward and the aggregate supply curve would remain unchanged 
E)  the domestic aggregate demand and supply curves would remain unchanged

Question 5

Figure 10-18  Beginning from a point of short-run equilibrium at point E2 in Figure 10-18, the economy's movement to a new position of long-run equilibrium from that point would best be described as

Accepted Answer

A)  a movement along the AD2 curve with a shift in the SRAS1 curve to SRAS2. 
B)  a movement along the SRAS2 curve with a shift in the AD2 curve. 
C)  a shift in the LRAS curve to an intersection at E3. 
D)  no shift of any kind.

Question 6

In the aggregate demand/aggregate supply model, an increase in a country's sustainable potential output is represented by

Accepted Answer

A)  an increase in aggregate demand. 
B)  a decrease in aggregate demand. 
C)  an increase in long-run aggregate supply. 
D)  an increase in the general level of prices.

Question 7

If an improvement in the quality of education in the United States increases the productivity of labor, this will

Accepted Answer

A)  increase aggregate demand and decrease aggregate supply. 
B)  increase short-run aggregate supply and reduce aggregate demand. 
C)  decrease aggregate demand and increase short-run aggregate supply. 
D)  increase both long-run and short-run aggregate supply.

Question 8

Which of the following will most likely accompany an unanticipated increase in aggregate demand?

Accepted Answer

A)  a decrease in prices 
B)  a decrease in resource prices 
C)  a decrease in real GDP 
D)  an increase in real GDP

Question 9

Within the AD/AS model, which one of the following adjustments will cause the economy to return to its long-run capacity when output is temporarily greater than the economy's long-run potential?

Accepted Answer

A)  Lower wage rates and resource prices reduce short-run aggregate supply. 
B)  Lower interest rates increase aggregate demand and, thereby, stimulate output. 
C)  Higher wage rates and resource prices reduce short-run aggregate supply. 
D)  A decrease in prices reduces aggregate demand.

Question 10

Which of the following will cause an increase in aggregate demand within the AS/AD model?

Accepted Answer

A)  a decrease in prices 
B)  a decrease in the real interest rate 
C)  a decrease in consumer optimism as measured by the consumer sentiment index 
D)  a decrease in foreign incomes abroad

Question 11

Which of the following would cause prices and real GDP to rise in the short run?

Accepted Answer

A)  Short-run aggregate supply shifts right. 
B)  Short-run aggregate supply shifts left. 
C)  Aggregate demand shifts right. 
D)  Aggregate demand shifts left.

Question 12

Suppose the economy is in long-run equilibrium. In a short span of time, there is a pessimistic revision of expectations about future business conditions and an unexpected rise in the value of the dollar. In the short run, we would expect

Accepted Answer

A)  the price level and real GDP both to rise. 
B)  the price level and real GDP both to fall. 
C)  the price level and real GDP both to stay the same. 
D)  All of the above are possible.

Question 13

Which of the following contributed to the crisis of 2008?

Accepted Answer

A)  a doubling of the price of imported oil during 2007-2008 
B)  a sharp increase in the price of housing during 2008 
C)  inclement weather in 2008 
D)  falling resource prices and a reduction in the cost of production

Question 14

Use the figure below to answer the following question(s). Figure 10-11
 In Figure 10-11, which of the following would most likely cause the movement from point E1 to point E2?

Accepted Answer

A)  an increase in the expected inflation rate 
B)  a decrease in the expected inflation rate 
C)  a major technological advance 
D)  a temporary reduction in oil prices

Question 15

Use the figure below to answer the following question(s). Figure 10-14
 At which of the following points in Figure 10-14 would short-run equilibrium occur immediately following an adverse supply-side shock?

Accepted Answer

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

Question 16

Which of the following would reduce the ability of the self-correcting mechanism to direct an economy out of a recession quickly?

Accepted Answer

A)  a decrease in the real rate of interest 
B)  resource prices that are inflexible in a downward direction 
C)  an increase in aggregate demand 
D)  a low level of savings

Question 17

Which of the following will most likely increase aggregate supply in the long run?

Accepted Answer

A)  unfavorable weather conditions in agricultural areas 
B)  an increase in the expected inflation rate 
C)  higher real interest rates 
D)  an increase in the rate of capital formation

Question 18

If there is an unanticipated decrease in aggregate demand, which of the following is most likely to occur?

Accepted Answer

A)  an increase in the price level 
B)  a reduction in employment 
C)  an increase in the growth rate of real GDP 
D)  an increase in consumption

Question 19

If the general level of prices is lower than business decision makers anticipated when they entered into long-term contracts for raw materials and other resources, which of the following is most likely to occur?

Accepted Answer

A)  an economic boom 
B)  highly attractive profit margins 
C)  output less than the economy's long-run potential 
D)  a sharp increase in imports

Question 20

If the economy is simultaneously in long-run and short-run equilibrium, which of the following is true?

Accepted Answer

A)  Aggregate quantity supplied is greater than potential output. 
B)  Aggregate quantity demanded is less than potential output. 
C)  Aggregate quantity demanded is equal to potential output. 
D)  The aggregate demand curve is horizontal at the potential output level.

Exam 10: Dynamic Change, Economic Fluctuations, and the Ad--As Model

Figure 10-12 In Figure 10-12, which of the following would most likely cause the movement from point E₁ to point e₂ for the United States?

If the general level of prices is lower than business decision makers anticipated when they entered into long-term contracts for raw materials and other resources, which of the following is most likely to occur?

Which of the following will most likely accompany an unanticipated increase in short-run aggregate supply?

If the U.S. price level increased relative to price levels in foreign countries, what would be the impact on domestic aggregate supply and aggregate demand curves?

Figure 10-18 Beginning from a point of short-run equilibrium at point E₂ in Figure 10-18, the economy's movement to a new position of long-run equilibrium from that point would best be described as

In the aggregate demand/aggregate supply model, an increase in a country's sustainable potential output is represented by

If an improvement in the quality of education in the United States increases the productivity of labor, this will

Which of the following will most likely accompany an unanticipated increase in aggregate demand?

Within the AD/AS model, which one of the following adjustments will cause the economy to return to its long-run capacity when output is temporarily greater than the economy's long-run potential?

Which of the following will cause an increase in aggregate demand within the AS/AD model?

Which of the following would cause prices and real GDP to rise in the short run?

Suppose the economy is in long-run equilibrium. In a short span of time, there is a pessimistic revision of expectations about future business conditions and an unexpected rise in the value of the dollar. In the short run, we would expect

Which of the following contributed to the crisis of 2008?

Use the figure below to answer the following question(s) . Figure 10-11 In Figure 10-11, which of the following would most likely cause the movement from point E₁ to point E₂?

Use the figure below to answer the following question(s) . Figure 10-14 At which of the following points in Figure 10-14 would short-run equilibrium occur immediately following an adverse supply-side shock?

Which of the following would reduce the ability of the self-correcting mechanism to direct an economy out of a recession quickly?

Which of the following will most likely increase aggregate supply in the long run?

If there is an unanticipated decrease in aggregate demand, which of the following is most likely to occur?

If the general level of prices is lower than business decision makers anticipated when they entered into long-term contracts for raw materials and other resources, which of the following is most likely to occur?

If the economy is simultaneously in long-run and short-run equilibrium, which of the following is true?

Exam 10: Dynamic Change, Economic Fluctuations, and the Ad--As Model

Figure 10-12 In Figure 10-12, which of the following would most likely cause the movement from point E1 to point e2 for the United States?

If the general level of prices is lower than business decision makers anticipated when they entered into long-term contracts for raw materials and other resources, which of the following is most likely to occur?

Which of the following will most likely accompany an unanticipated increase in short-run aggregate supply?

If the U.S. price level increased relative to price levels in foreign countries, what would be the impact on domestic aggregate supply and aggregate demand curves?

Figure 10-18 Beginning from a point of short-run equilibrium at point E2 in Figure 10-18, the economy's movement to a new position of long-run equilibrium from that point would best be described as

In the aggregate demand/aggregate supply model, an increase in a country's sustainable potential output is represented by

If an improvement in the quality of education in the United States increases the productivity of labor, this will

Which of the following will most likely accompany an unanticipated increase in aggregate demand?

Within the AD/AS model, which one of the following adjustments will cause the economy to return to its long-run capacity when output is temporarily greater than the economy's long-run potential?

Which of the following will cause an increase in aggregate demand within the AS/AD model?

Which of the following would cause prices and real GDP to rise in the short run?

Suppose the economy is in long-run equilibrium. In a short span of time, there is a pessimistic revision of expectations about future business conditions and an unexpected rise in the value of the dollar. In the short run, we would expect

Which of the following contributed to the crisis of 2008?

Use the figure below to answer the following question(s) . Figure 10-11 In Figure 10-11, which of the following would most likely cause the movement from point E1 to point E2?

Use the figure below to answer the following question(s) . Figure 10-14 At which of the following points in Figure 10-14 would short-run equilibrium occur immediately following an adverse supply-side shock?

Which of the following would reduce the ability of the self-correcting mechanism to direct an economy out of a recession quickly?

Which of the following will most likely increase aggregate supply in the long run?

If there is an unanticipated decrease in aggregate demand, which of the following is most likely to occur?

If the general level of prices is lower than business decision makers anticipated when they entered into long-term contracts for raw materials and other resources, which of the following is most likely to occur?

If the economy is simultaneously in long-run and short-run equilibrium, which of the following is true?

Figure 10-12 In Figure 10-12, which of the following would most likely cause the movement from point E₁ to point e₂ for the United States?

Figure 10-18 Beginning from a point of short-run equilibrium at point E₂ in Figure 10-18, the economy's movement to a new position of long-run equilibrium from that point would best be described as

Use the figure below to answer the following question(s) . Figure 10-11 In Figure 10-11, which of the following would most likely cause the movement from point E₁ to point E₂?