Question 1

Suppose housing values fall during a recession.In the short run:

Accepted Answer

A)  the price level will fall as we move down the aggregate demand curve. 
B)  the price level will fall as we move down the short-run aggregate supply curve. 
C)  short-run aggregate supply will decrease and the price level will fall. 
D)  short-run aggregate supply will increase because wages will fall. 
E)  aggregate demand will increase because the demand for houses will increase.

Question 2

Perfect summer weather increases farm output by 30%.In the short run,this can be expected to __________ the price level and __________ real wealth.

Accepted Answer

A)  increase; increase 
B)  increase; decrease 
C)  decrease; increase 
D)  decrease; decrease 
E)  have no effect on; have no effect on

Question 3

If the current short-run equilibrium level of output is less than full employment output,we can then expect that in the long run:

Accepted Answer

A)  the price level will fall. 
B)  the price level will rise. 
C)  aggregate demand will decrease. 
D)  aggregate demand will increase. 
E)  long-run aggregate supply will decrease.

Question 4

When a change in the price level leads to a change in saving,this is known as the:

Accepted Answer

A)  wealth effect. 
B)  international trade effect. 
C)  savings effect. 
D)  interest rate effect. 
E)  output effect.

Question 5

If the economy is in a recession caused by lower aggregate demand,then in the absence of policy action,the price level will __________,output will __________,and employment will __________ in the long run.

Accepted Answer

A)  increase; remain unchanged; increase 
B)  remain unchanged; increase; increase 
C)  decrease; increase; increase 
D)  decrease; decrease; increase 
E)  increase; increase; increase

Question 6

Suppose the majority of students who are graduating in May from a large university have found jobs and signed employment contracts by February.Starting in February,these students are likely to __________ spending and __________ saving.

Accepted Answer

A)  increase; increase 
B)  decrease; decrease 
C)  decrease; increase 
D)  increase; decrease 
E)  not change their rate of; not change their rate of

Question 7

When decision makers have time to fully adjust to changes in the overall price level,we refer to this as:

Accepted Answer

A)  the short run. 
B)  the long run. 
C)  short-run equilibrium. 
D)  a period of time longer than one year. 
E)  equilibrium.

Question 8

If the current short-run equilibrium level of output is greater than full employment output,we can then expect that in the long run:

Accepted Answer

A)  the price level will rise and short-run aggregate supply will fall. 
B)  the price level will rise and aggregate demand will fall. 
C)  the price level will fall and short-run aggregate supply will rise. 
D)  the price level will fall and aggregate demand will rise. 
E)  the long-run aggregate supply will increase.

Question 9

What is the difference between a movement along the aggregate demand curve and a shift of the aggregate demand curve? Explain in terms of what causes a movement and what causes a shift.

Accepted Answer

The answer of What is the difference between a movement...

Question 10

When median home prices rise,the value of real wealth __________ and aggregate demand __________.

Accepted Answer

A)  increases; is unaffected 
B)  increases; increases 
C)  increases; decreases 
D)  decreases; decreases 
E)  is unaffected; is unaffected

Question 11

If the price level falls by 5%,then all else being equal,the long-run aggregate supply curve will:

Accepted Answer

A)  remain unchanged. 
B)  shift to the right to reflect an increase in output of 5%. 
C)  shift to the right to reflect an increase in output of more than 5%. 
D)  shift to the left to reflect a decrease in output of 5%. 
E)  shift to the left to reflect a decrease in output of more than 5%.

Question 12

Refer to the following figure to answer the next five questions.
 
-Based on the figure,if the economy starts at point A and ends up at point E,then in the short run,there was:

Accepted Answer

A)  a decrease in aggregate demand. 
B)  an increase in aggregate demand. 
C)  a decrease in short-run aggregate supply. 
D)  an increase in short-run aggregate supply. 
E)  an increase in long-run aggregate supply.

Question 13

All else being equal,as the population ages and many people leave the labor force:

Accepted Answer

A)  the unemployment rate will rise. 
B)  the price level will fall. 
C)  long-run aggregate supply will fall. 
D)  long-run aggregate supply will be unaffected. 
E)  aggregate demand must rise.

Question 14

Which of the following would shift aggregate demand to the right?

Accepted Answer

A)  College graduates are having a difficult time finding jobs. 
B)  There is a decline in consumer confidence. 
C)  Stock market values increase by 20%. 
D)  A fall in the price level increases the value of real wealth. 
E)  The value of the dollar increases.

Question 15

When foreign income rises,U.S.aggregate:

Accepted Answer

A)  demand will shift to the right. 
B)  supply will shift to the right. 
C)  demand will shift to the left. 
D)  supply will shift to the left. 
E)  demand and aggregate supply will be unaffected.

Question 16

The economy is in short-run equilibrium when:

Accepted Answer

A)  aggregate demand intersects short-run aggregate supply. 
B)  short-run aggregate supply intersects long-run aggregate supply. 
C)  aggregate demand intersects long-run aggregate supply. 
D)  aggregate demand intersects both long-run and short-run aggregate supply. 
E)  the economy is at full employment output.

Question 17

Refer to the following figure to answer the next five questions.
 
-Based on the figure,starting at point A,if there is an increase in government spending,then in the short run we would move to point __________ and in the long run to point __________.

Accepted Answer

A)  B; E 
B)  B; C 
C)  D; A 
D)  D; C 
E)  B; A

Question 18

You read a study that predicts that rising oil prices projected for this summer are certain to fuel inflation.Having taken an economics class,due to this expected change in prices,you predict that spending today will _________ and aggregate demand today will _________.

Accepted Answer

A)  be unaffected; be unaffected 
B)  increase; increase 
C)  decrease; decrease 
D)  decrease; increase 
E)  increase; decrease

Question 19

A rightward shift of the long-run aggregate supply curve means there has been:

Accepted Answer

A)  a decrease in the unemployment rate. 
B)  an increase in the unemployment rate. 
C)  an increase in the price level. 
D)  a decrease in the price level. 
E)  economic growth.

Question 20

When saving declines,the quantity of investment will __________,and therefore aggregate demand will __________.

Accepted Answer

A)  increase; increase 
B)  decrease; decrease 
C)  decrease; increase 
D)  increase; decrease 
E)  remain unchanged; decrease

Exam 13: The Aggregate Demandaggregate Supply Model

Suppose housing values fall during a recession.In the short run:

Perfect summer weather increases farm output by 30%.In the short run,this can be expected to the price level and real wealth.

If the current short-run equilibrium level of output is less than full employment output,we can then expect that in the long run:

When a change in the price level leads to a change in saving,this is known as the:

If the economy is in a recession caused by lower aggregate demand,then in the absence of policy action,the price level will ,output will ,and employment will __ in the long run.

Suppose the majority of students who are graduating in May from a large university have found jobs and signed employment contracts by February.Starting in February,these students are likely to spending and saving.

When decision makers have time to fully adjust to changes in the overall price level,we refer to this as:

If the current short-run equilibrium level of output is greater than full employment output,we can then expect that in the long run:

What is the difference between a movement along the aggregate demand curve and a shift of the aggregate demand curve? Explain in terms of what causes a movement and what causes a shift.

When median home prices rise,the value of real wealth and aggregate demand .

If the price level falls by 5%,then all else being equal,the long-run aggregate supply curve will:

Refer to the following figure to answer the next five questions. -Based on the figure,if the economy starts at point A and ends up at point E,then in the short run,there was:

All else being equal,as the population ages and many people leave the labor force:

Which of the following would shift aggregate demand to the right?

When foreign income rises,U.S.aggregate:

The economy is in short-run equilibrium when:

Refer to the following figure to answer the next five questions. -Based on the figure,starting at point A,if there is an increase in government spending,then in the short run we would move to point and in the long run to point .

You read a study that predicts that rising oil prices projected for this summer are certain to fuel inflation.Having taken an economics class,due to this expected change in prices,you predict that spending today will _ and aggregate demand today will _.

A rightward shift of the long-run aggregate supply curve means there has been:

When saving declines,the quantity of investment will ,and therefore aggregate demand will .

Exam 13: The Aggregate Demandaggregate Supply Model

Suppose housing values fall during a recession.In the short run:

Perfect summer weather increases farm output by 30%.In the short run,this can be expected to __________ the price level and __________ real wealth.

If the current short-run equilibrium level of output is less than full employment output,we can then expect that in the long run:

When a change in the price level leads to a change in saving,this is known as the:

If the economy is in a recession caused by lower aggregate demand,then in the absence of policy action,the price level will __________,output will __________,and employment will __________ in the long run.

Suppose the majority of students who are graduating in May from a large university have found jobs and signed employment contracts by February.Starting in February,these students are likely to __________ spending and __________ saving.

When decision makers have time to fully adjust to changes in the overall price level,we refer to this as:

If the current short-run equilibrium level of output is greater than full employment output,we can then expect that in the long run:

What is the difference between a movement along the aggregate demand curve and a shift of the aggregate demand curve? Explain in terms of what causes a movement and what causes a shift.

When median home prices rise,the value of real wealth __________ and aggregate demand __________.

If the price level falls by 5%,then all else being equal,the long-run aggregate supply curve will:

Refer to the following figure to answer the next five questions. -Based on the figure,if the economy starts at point A and ends up at point E,then in the short run,there was:

All else being equal,as the population ages and many people leave the labor force:

Which of the following would shift aggregate demand to the right?

When foreign income rises,U.S.aggregate:

The economy is in short-run equilibrium when:

Refer to the following figure to answer the next five questions. -Based on the figure,starting at point A,if there is an increase in government spending,then in the short run we would move to point __________ and in the long run to point __________.

You read a study that predicts that rising oil prices projected for this summer are certain to fuel inflation.Having taken an economics class,due to this expected change in prices,you predict that spending today will _________ and aggregate demand today will _________.

A rightward shift of the long-run aggregate supply curve means there has been:

When saving declines,the quantity of investment will __________,and therefore aggregate demand will __________.

Perfect summer weather increases farm output by 30%.In the short run,this can be expected to the price level and real wealth.

If the economy is in a recession caused by lower aggregate demand,then in the absence of policy action,the price level will ,output will ,and employment will __ in the long run.

Suppose the majority of students who are graduating in May from a large university have found jobs and signed employment contracts by February.Starting in February,these students are likely to spending and saving.

When median home prices rise,the value of real wealth and aggregate demand .

Refer to the following figure to answer the next five questions. -Based on the figure,starting at point A,if there is an increase in government spending,then in the short run we would move to point and in the long run to point .

You read a study that predicts that rising oil prices projected for this summer are certain to fuel inflation.Having taken an economics class,due to this expected change in prices,you predict that spending today will _ and aggregate demand today will _.

When saving declines,the quantity of investment will ,and therefore aggregate demand will .