Question 1

President Bush lowered income taxes for individuals in 2001.Explain how lower income taxes affect the aggregate demand curve.

Accepted Answer

The answer of President Bush lowered income taxes for individuals...

Question 2

One factor which brought on the recession of 2007-2009 was the end of the housing bubble.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following correctly describes the automatic mechanism through which the economy adjusts to long-run equilibrium?

Accepted Answer

A) the leftward shift of the short-run aggregate supply curve that occurs after a recession 
B) the rightward shift of the short-run aggregate supply curve that occurs after a recession 
C) the leftward shift of the aggregate demand curve that occurs after a recession 
D) the rightward shift of the aggregate demand curve that occurs after a recession

Question 4

German luxury car exports were hurt in 2009 as a result of the recession.How would this decrease in exports have affected Germany's aggregate demand curve?

Accepted Answer

A) The aggregate demand curve would have shifted to the right. 
B) The aggregate demand curve would not have shifted, but there would have been a movement up the aggregate demand curve. 
C) The aggregate demand curve would not have shifted, but there would have been a movement down the aggregate demand curve. 
D) The aggregate demand curve would have shifted to the left.

Question 5

Figure 15-1
 
-Refer to Figure 15-1.Ceteris paribus,a decrease in the growth rate of domestic GDP relative to the growth rate of foreign GDP would be represented by a movement from

Accepted Answer

A) AD₁ to AD₂. 
B) AD₂ to AD₁. 
C) point A to point B. 
D) point B to point A.

Question 6

An increase in aggregate demand results in a(n)________ in the ________.

Accepted Answer

A) recession; long run 
B) expansion; long run 
C) expansion; short run 
D) recession; short run

Question 7

All of the following are reasons why the wages of workers and the prices of inputs rise more slowly than the prices of final goods and services except

Accepted Answer

A) unions are successful in pushing up wages. 
B) firms are often slow to adjust wages. 
C) contracts make prices and wages "sticky." 
D) menu costs make some prices sticky.

Question 8

Using an aggregate demand graph,illustrate the impact of an increase in the interest rate.

Accepted Answer

The answer of Using an aggregate demand graph,illustrate the impact...

Question 9

Potential GDP is also referred to as

Accepted Answer

A) realized GDP. 
B) full-employment GDP. 
C) politico-economic GDP. 
D) balanced-budget GDP.

Question 10

When the price level in the United States falls relative to the price level of other countries,________ will fall,________ will rise,and ________ will rise.

Accepted Answer

A) imports; exports; net exports 
B) exports; imports; net exports 
C) net exports; exports; imports 
D) net exports; imports; exports

Question 11

The ________ curve is vertical.

Accepted Answer

A) short-run aggregate supply 
B) short-run aggregate demand 
C) long-run aggregate supply 
D) long-run aggregate demand

Question 12

An increase in the price level results in a(n)________ in the quantity of real GDP demanded because ________.

Accepted Answer

A) decrease; a higher price level reduces consumption, investment, and net exports. 
B) increase; a higher price level reduces consumption, investment, and net exports. 
C) decrease; a higher price level increases consumption, investment, and net exports. 
D) increase; a higher price level increases consumption, investment, and net exports.

Question 13

Suppose the economy is at a short-run equilibrium GDP that lies above potential GDP.Which of the following will occur because of the automatic mechanism adjusting the economy back to potential GDP?

Accepted Answer

A) Output will increase. 
B) Prices will decline. 
C) Unemployment will decline. 
D) Short-run aggregate supply will shift to the left.

Question 14

Figure 15-1
 
-Refer to Figure 15-1.Ceteris paribus,an increase in interest rates would be represented by a movement from

Accepted Answer

A) AD₁ to AD₂. 
B) AD₂ to AD₁. 
C) point A to point B. 
D) point B to point A.

Question 15

What is the relationship among the AD,SRAS and LRAS curves when the economy is in macroeconomic equilibrium?

Accepted Answer

The answer of What is the relationship among the AD,SRAS...

Question 16

Which of the following is considered a negative supply shock?

Accepted Answer

A) increasing immigration in the economy causes the labor supply to rise 
B) an improvement in technology 
C) an increase in unemployment 
D) an unexpected decrease in the refining capacity for oil

Question 17

If workers and firms have rational expectations,they form their expectations using

Accepted Answer

A) all the information available to them. 
B) only information from the past. 
C) only information provided to them by the government. 
D) only information gathered from random sources.

Question 18

Which of the following will shift the aggregate demand curve to the right,ceteris paribus?

Accepted Answer

A) an increase in interest rates 
B) a decrease in disposable income 
C) a decrease in expected profits for firms 
D) an increase in net exports

Question 19

Most economists agree that an automatic mechanism brings the economy back to potential GDP in the long run.In mid-2011,two years after the recession of 2007-2009 had ended,real GDP in the United States

Accepted Answer

A) had returned to potential GDP. 
B) had exceeded potential GDP by 1.5 percent. 
C) remained more than 7 percent below potential GDP. 
D) was predicted to never return to potential GDP.

Question 20

A negative supply shock in the short run causes

Accepted Answer

A) the aggregate supply curve to shift to the left. 
B) the price level to fall. 
C) unemployment to fall. 
D) equilibrium real GDP to rise.

Exam 15: Aggregate Demand and Aggregate Supply Analysis

President Bush lowered income taxes for individuals in 2001.Explain how lower income taxes affect the aggregate demand curve.

One factor which brought on the recession of 2007-2009 was the end of the housing bubble.

Which of the following correctly describes the automatic mechanism through which the economy adjusts to long-run equilibrium?

German luxury car exports were hurt in 2009 as a result of the recession.How would this decrease in exports have affected Germany's aggregate demand curve?

Figure 15-1 -Refer to Figure 15-1.Ceteris paribus,a decrease in the growth rate of domestic GDP relative to the growth rate of foreign GDP would be represented by a movement from

An increase in aggregate demand results in a(n) in the .

All of the following are reasons why the wages of workers and the prices of inputs rise more slowly than the prices of final goods and services except

Using an aggregate demand graph,illustrate the impact of an increase in the interest rate.

Potential GDP is also referred to as

When the price level in the United States falls relative to the price level of other countries, will fall, will rise,and will rise.

The ________ curve is vertical.

An increase in the price level results in a(n) in the quantity of real GDP demanded because .

Suppose the economy is at a short-run equilibrium GDP that lies above potential GDP.Which of the following will occur because of the automatic mechanism adjusting the economy back to potential GDP?

Figure 15-1 -Refer to Figure 15-1.Ceteris paribus,an increase in interest rates would be represented by a movement from

What is the relationship among the AD,SRAS and LRAS curves when the economy is in macroeconomic equilibrium?

Which of the following is considered a negative supply shock?

If workers and firms have rational expectations,they form their expectations using

Which of the following will shift the aggregate demand curve to the right,ceteris paribus?

Most economists agree that an automatic mechanism brings the economy back to potential GDP in the long run.In mid-2011,two years after the recession of 2007-2009 had ended,real GDP in the United States

A negative supply shock in the short run causes

Exam 15: Aggregate Demand and Aggregate Supply Analysis

President Bush lowered income taxes for individuals in 2001.Explain how lower income taxes affect the aggregate demand curve.

One factor which brought on the recession of 2007-2009 was the end of the housing bubble.

Which of the following correctly describes the automatic mechanism through which the economy adjusts to long-run equilibrium?

German luxury car exports were hurt in 2009 as a result of the recession.How would this decrease in exports have affected Germany's aggregate demand curve?

Figure 15-1 -Refer to Figure 15-1.Ceteris paribus,a decrease in the growth rate of domestic GDP relative to the growth rate of foreign GDP would be represented by a movement from

An increase in aggregate demand results in a(n) ________ in the ________.

All of the following are reasons why the wages of workers and the prices of inputs rise more slowly than the prices of final goods and services except

Using an aggregate demand graph,illustrate the impact of an increase in the interest rate.

Potential GDP is also referred to as

When the price level in the United States falls relative to the price level of other countries,________ will fall,________ will rise,and ________ will rise.

The ________ curve is vertical.

An increase in the price level results in a(n) ________ in the quantity of real GDP demanded because ________.

Suppose the economy is at a short-run equilibrium GDP that lies above potential GDP.Which of the following will occur because of the automatic mechanism adjusting the economy back to potential GDP?

Figure 15-1 -Refer to Figure 15-1.Ceteris paribus,an increase in interest rates would be represented by a movement from

What is the relationship among the AD,SRAS and LRAS curves when the economy is in macroeconomic equilibrium?

Which of the following is considered a negative supply shock?

If workers and firms have rational expectations,they form their expectations using

Which of the following will shift the aggregate demand curve to the right,ceteris paribus?

Most economists agree that an automatic mechanism brings the economy back to potential GDP in the long run.In mid-2011,two years after the recession of 2007-2009 had ended,real GDP in the United States

A negative supply shock in the short run causes

An increase in aggregate demand results in a(n) in the .

When the price level in the United States falls relative to the price level of other countries, will fall, will rise,and will rise.

An increase in the price level results in a(n) in the quantity of real GDP demanded because .