Question 1

The proponents of ________ and ________ think that the Federal Reserve should adopt a constant monetary growth rule.

Accepted Answer

A) new Keynesianism; the new classical model 
B) the real business cycle model; Marxism 
C) rational expectations; monetarism 
D) the monetarist model; the Keynesian model

Question 2

Explain how "menu costs" affect the slope of the short-run aggregate supply curve.

Accepted Answer

The answer of Explain how "menu costs" affect the slope...

Question 3

An increase in the price level will

Accepted Answer

A) shift the short-run aggregate supply curve to the left. 
B) shift the short-run aggregate supply curve to the right. 
C) move the economy up along a stationary short-run aggregate supply curve. 
D) move the economy down along a stationary short-run aggregate supply curve.

Question 4

Potential GDP refers to the level of

Accepted Answer

A) real GDP in the long run. 
B) nominal GDP in the long run. 
C) real GDP in the short run. 
D) nominal GDP in the short run.

Question 5

According to the "wealth effect," when the ________ falls,the ________ rises.

Accepted Answer

A) inflation rate; nominal value of household assets 
B) unemployment rate; average level of household income 
C) price level; the nominal value of household wealth 
D) price level; the real value of household wealth

Question 6

Explain how each of the following events would affect the aggregate demand curve.
a.Lower interest rates
b.A decrease in net exports
c.A decrease in the price level
d.Slower income growth in other countries
e.A decrease in imports

Accepted Answer

The answer of Explain how each of the following events...

Question 7

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

Accepted Answer

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

Question 8

A decrease 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 9

An adverse supply shock causes the short-run aggregate supply curve to shift left,increasing the price level.

Accepted Answer

A) True 
 B)False

Question 10

In the dynamic aggregate demand and aggregate supply model,what is the result of aggregate demand increasing slower than potential real GDP?

Accepted Answer

The answer of In the dynamic aggregate demand and aggregate...

Question 11

Monetarism is a school of thought put forth by Milton Friedman.He argued that the economy would most likely

Accepted Answer

A) be below potential GDP. 
B) be at potential GDP. 
C) be unstable. 
D) be above potential GDP.

Question 12

An increase in government spending will result in an increase in the price level and an increase in real GDP in the long run.

Accepted Answer

A) True 
 B)False

Question 13

Figure 15-3
 
-Refer to Figure 15-3.Suppose the economy is at point C.If investment spending decreases in the economy,where will the eventual long-run equilibrium be?

Accepted Answer

A) A 
B) B 
C) C 
D) D

Question 14

Figure 15-2
 
-Refer to Figure 15-2.Ceteris paribus,an increase in workers and firms adjusting to having previously overestimated the price level would be represented by a movement from

Accepted Answer

A) SRAS₁ to SRAS₂. 
B) SRAS₂ to SRAS₁. 
C) point A to point B. 
D) point B to point A.

Question 15

Explain how the static aggregate demand and aggregate supply model gives us misleading results about the price level,particularly with respect to decreases in aggregate demand.Describe how the aggregate demand curve is different in the dynamic model as compared to the static model.Describe how potential GDP is different in the dynamic model as compared to the static model.

Accepted Answer

The answer of Explain how the static aggregate demand and...

Question 16

An increase in aggregate demand causes an increase in ________ only in the short run,but causes an increase in ________ in both the short run and the long run.

Accepted Answer

A) the price level; real GDP 
B) real GDP; real GDP 
C) the price level; the price level 
D) real GDP; the price level

Question 17

A decrease in the price level will

Accepted Answer

A) shift the short-run aggregate supply curve to the left. 
B) shift the short-run aggregate supply curve to the right. 
C) move the economy up along a stationary short-run aggregate supply curve. 
D) move the economy down along a stationary short-run aggregate supply curve.

Question 18

Explain how each of the following events would affect the long-run aggregate supply curve.
a.A lower price level
b.A decrease in the labor force
c.A decrease in the quantity of capital goods
d.Technological change

Accepted Answer

The answer of Explain how each of the following events...

Question 19

Lower personal income taxes

Accepted Answer

A) increase aggregate demand. 
B) decrease disposable income. 
C) decrease aggregate demand. 
D) increase transfer payments.

Question 20

Starting from long-run equilibrium,use the basic aggregate demand and aggregate supply diagram to show what happens in both the long run and the short run when there is an increase in wealth.

Accepted Answer

The answer of Starting from long-run equilibrium,use the basic aggregate...

Exam 15: Aggregate Demand and Aggregate Supply Analysis

The proponents of and think that the Federal Reserve should adopt a constant monetary growth rule.

Explain how "menu costs" affect the slope of the short-run aggregate supply curve.

An increase in the price level will

Potential GDP refers to the level of

According to the "wealth effect," when the falls,the rises.

Explain how each of the following events would affect the aggregate demand curve. a.Lower interest rates b.A decrease in net exports c.A decrease in the price level d.Slower income growth in other countries e.A decrease in imports

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

A decrease in aggregate demand results in a(n) in the .

An adverse supply shock causes the short-run aggregate supply curve to shift left,increasing the price level.

In the dynamic aggregate demand and aggregate supply model,what is the result of aggregate demand increasing slower than potential real GDP?

Monetarism is a school of thought put forth by Milton Friedman.He argued that the economy would most likely

An increase in government spending will result in an increase in the price level and an increase in real GDP in the long run.

Figure 15-3 -Refer to Figure 15-3.Suppose the economy is at point C.If investment spending decreases in the economy,where will the eventual long-run equilibrium be?

Figure 15-2 -Refer to Figure 15-2.Ceteris paribus,an increase in workers and firms adjusting to having previously overestimated the price level would be represented by a movement from

An increase in aggregate demand causes an increase in only in the short run,but causes an increase in in both the short run and the long run.

A decrease in the price level will

Explain how each of the following events would affect the long-run aggregate supply curve. a.A lower price level b.A decrease in the labor force c.A decrease in the quantity of capital goods d.Technological change

Lower personal income taxes

Starting from long-run equilibrium,use the basic aggregate demand and aggregate supply diagram to show what happens in both the long run and the short run when there is an increase in wealth.

Exam 15: Aggregate Demand and Aggregate Supply Analysis

The proponents of ________ and ________ think that the Federal Reserve should adopt a constant monetary growth rule.

Explain how "menu costs" affect the slope of the short-run aggregate supply curve.

An increase in the price level will

Potential GDP refers to the level of

According to the "wealth effect," when the ________ falls,the ________ rises.

Explain how each of the following events would affect the aggregate demand curve. a.Lower interest rates b.A decrease in net exports c.A decrease in the price level d.Slower income growth in other countries e.A decrease in imports

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

A decrease in aggregate demand results in a(n) ________ in the ________.

An adverse supply shock causes the short-run aggregate supply curve to shift left,increasing the price level.

In the dynamic aggregate demand and aggregate supply model,what is the result of aggregate demand increasing slower than potential real GDP?

Monetarism is a school of thought put forth by Milton Friedman.He argued that the economy would most likely

An increase in government spending will result in an increase in the price level and an increase in real GDP in the long run.

Figure 15-3 -Refer to Figure 15-3.Suppose the economy is at point C.If investment spending decreases in the economy,where will the eventual long-run equilibrium be?

Figure 15-2 -Refer to Figure 15-2.Ceteris paribus,an increase in workers and firms adjusting to having previously overestimated the price level would be represented by a movement from

An increase in aggregate demand causes an increase in ________ only in the short run,but causes an increase in ________ in both the short run and the long run.

A decrease in the price level will

Explain how each of the following events would affect the long-run aggregate supply curve. a.A lower price level b.A decrease in the labor force c.A decrease in the quantity of capital goods d.Technological change

Lower personal income taxes

Starting from long-run equilibrium,use the basic aggregate demand and aggregate supply diagram to show what happens in both the long run and the short run when there is an increase in wealth.

The proponents of and think that the Federal Reserve should adopt a constant monetary growth rule.

According to the "wealth effect," when the falls,the rises.

A decrease in aggregate demand results in a(n) in the .

An increase in aggregate demand causes an increase in only in the short run,but causes an increase in in both the short run and the long run.