Question 1

Why are the long-run effects of an increase in aggregate demand on price and output different from the short-run effects?

Accepted Answer

The answer of Why are the long-run effects of an...

Question 2

Which of the following is one reason for the decline in aggregate demand that led to the recession of 2007-2009?

Accepted Answer

A) falling oil prices 
B) an increase in net exports 
C) the end of the housing bubble 
D) a decline in government spending

Question 3

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 4

When the price of oil rises unexpectedly,the equilibrium price level ________ and the unemployment rate ________ in the short run.

Accepted Answer

A) rises; falls 
B) rises; rises 
C) falls; falls 
D) falls; rises

Question 5

In the long run

Accepted Answer

A) GDP = potential GDP. 
B) unemployment is below its natural rate. 
C) LRAS and SRAS lie on the same line. 
D) unemployment is above its natural rate.

Question 6

Figure 13-4 
-Refer to Figure 13-4.Given the economy is at point A in year 1,what is the inflation rate between year 1 and year 2?

Accepted Answer

A) 0.9% 
B) 1.8% 
C) 2.7% 
D) 3.0%

Question 7

Using aggregate demand and aggregate supply,explain what happens in the short run if the Federal Reserve raises interest rates in the economy.Be sure to detail what happens to aggregate demand,the price level,the level of GDP,and unemployment.Assume that the economy is at full employment before the interest rate increase.

Accepted Answer

The answer of Using aggregate demand and aggregate supply,explain what...

Question 8

Figure 13-2 
-Refer to Figure 13-2.Ceteris paribus,a decrease in the size of the labor force 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 9

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 10

If the economy receives an influx of new workers from immigration

Accepted Answer

A) the long-run aggregate supply curve will shift to the right. 
B) the long-run aggregate supply curve will shift to the left. 
C) we will move up along the long-run aggregate supply curve. 
D) we will move down along the long-run aggregate supply curve.

Question 11

Why does the short-run aggregate supply curve shift to the left in the long run,following an increase in aggregate demand?

Accepted Answer

A) Workers and firms adjust their expectations of wages and prices downward and they accept lower wages and prices. 
B) Workers and firms adjust their expectations of wages and prices downward and they push for higher wages and prices. 
C) Workers and firms adjust their expectations of wages and prices upward and they push for higher wages and prices. 
D) Workers and firms adjust their expectations of wages and prices upward and they accept lower wages and prices.

Question 12

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

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

Question 13

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 14

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 15

The level of long-run aggregate supply is affected by all of the following except

Accepted Answer

A) changes in the price level. 
B) changes in the technology. 
C) changes in the capital stock. 
D) changes in the number of workers.

Question 16

If aggregate demand just increased,which of the following may have caused the increase?

Accepted Answer

A) an increase in government purchases 
B) an increase in the interest rate 
C) an increase in the price level 
D) an increase in imports

Question 17

Interest rates in the economy have risen.How will this affect aggregate demand and equilibrium in the short run?

Accepted Answer

A) Aggregate demand will fall,the equilibrium price level will fall,and the equilibrium level of GDP will fall. 
B) Aggregate demand will fall,the equilibrium price level will rise,and the equilibrium level of GDP will fall. 
C) Aggregate demand will rise,the equilibrium price level will rise,and the equilibrium level of GDP will rise. 
D) Aggregate demand will rise,the equilibrium price level will fall,and the equilibrium level of GDP will rise.

Question 18

If stricter immigration laws are imposed and many foreign workers in the United States are forced to go back to their home countries

Accepted Answer

A) the long-run aggregate supply curve will shift to the right. 
B) the long-run aggregate supply curve will shift to the left. 
C) we will move up along the long-run aggregate supply curve. 
D) we will move down along the long-run aggregate supply curve.

Question 19

An increase in aggregate demand in the economy will have what effect on macroeconomic equilibrium in the long run?

Accepted Answer

A) The price level will fall,and the level of GDP will rise. 
B) The price level will fall,and the level of GDP will fall. 
C) The price level will rise,and the level of GDP will fall. 
D) The price level will rise,and the level of GDP will be unaffected.

Question 20

Explain whether KB Homes' sales are likely to fluctuate more or less than the sales of each of the following firms as the economy moves from recession to expansion and back to recession.
Whirlpool Corporation (appliance manufacturer)
Taco Bell
The Boeing Company (aircraft manufacturer)
GameStop (video game sales and rentals)

Accepted Answer

The answer of Explain whether KB Homes' sales are likely...

Exam 13: Aggregate Demand and Aggregate Supply Analysis