Question 1

Suppose the economy is in long-run equilibrium.If there is an increase in government purchases at the same time there is a large increase in the price of oil,then in the short-run

Accepted Answer

A) real GDP will rise and the price level might rise,fall,or stay the same. 
B) real GDP will fall and the price level might rise,fall,or stay the same. 
C) the price level will rise,and real GDP might rise,fall,or stay the same. 
D) the price level will fall,and real GDP might rise,fall,or stay the same.

Question 2

Suppose the economy is in long-run equilibrium.If there is a sharp increase in the minimum wage as well as an increase in taxes,then in the short run,real GDP will

Accepted Answer

A) rise and the price level might rise,fall,or stay the same.In the long run,the price level might rise,fall,or stay the same but real GDP will be unaffected. 
B) fall and the price level might rise,fall,or stay the same.In the long run,the price level might rise,fall,or stay the same but real GDP will be unaffected. 
C) rise and the price level might rise,fall,or stay the same.In the long run,the price level might rise,fall,or stay the same but real GDP will be lower. 
D) fall and the price level might rise,fall,or stay the same.In the long run,the price level might rise,fall,or stay the same but real GDP will be lower.

Question 3

Which of the following would raise the price level in both the short and long run?

Accepted Answer

A) an increase in taxes 
B) an increase in government expenditures 
C) a decrease in the minimum wage 
D) an increase in the capital stock

Question 4

Pessimism
Suppose the economy is in long-run equilibrium. Then because of corporate scandal, international tensions, and loss of confidence in policymakers, people become pessimistic regarding the future and retain that level of pessimism for some time.

-Refer to Stock Market Boom 2015.In the short run what happens to the price level and real GDP?

Accepted Answer

A) both the price level and real GDP rise. 
B) both the price level and real GDP fall. 
C) the price level rises and real GDP falls. 
D) the price level falls and real GDP rises.

Question 5

The economic boom of the early 1940s resulted mostly from

Accepted Answer

A) increased government expenditures. 
B) falling prices of oil and other natural resources. 
C) an increase in the growth rate of the money supply. 
D) rapid developments in transportation,electronics,and communication.

Question 6

A decrease in the availability of an important major resource such as oil shifts

Accepted Answer

A) aggregate supply right. 
B) aggregate supply left. 
C) aggregate demand right. 
D) aggregate demand left.

Question 7

In the mid-1970s the price of oil rose dramatically.This

Accepted Answer

A) shifted aggregate supply left,the price level rose,and real GDP fell. 
B) caused U.S.prices to fall,and real GDP rose. 
C) caused an increase in U.S.prices and real GDP. 
D) caused a decrease in U.S.prices and real GDP.

Question 8

Figure 33-9. 
-Refer to Figure 33-9.Suppose the economy starts where LRAS = AD1 = SRAS1.A decrease in short-run aggregate supply would be consistent with the movement to

Accepted Answer

A) P1,Y1. 
B) P2,Y1. 
C) P1,Y2. 
D) P3,Y2.

Question 9

Suppose the economy is in long-run equilibrium.If there is a sharp decline in government purchases combined with a significant increase in immigration of skilled workers,then in the short run,

Accepted Answer

A) real GDP will rise and the price level might rise,fall,or stay the same.In the long-run,real GDP will rise and the price level might rise,fall,or stay the same. 
B) the price level will fall,and real GDP might rise,fall,or stay the same.In the long-run,real GDP and the price level will be unaffected. 
C) the price level will rise,and real GDP might rise,fall,or stay the same.In the long run,real GDP will rise and the price level will fall. 
D) the price level will fall,and real GDP might rise,fall,or stay the same.In the long run,real GDP will rise and the price level will fall.

Question 10

Which of the following would cause stagflation?

Accepted Answer

A) aggregate demand shifts right 
B) aggregate demand shifts left 
C) aggregate supply shifts right 
D) aggregate supply shifts left

Question 11

An increase in the price level and a reduction in output would result from

Accepted Answer

A) an increase in the money supply. 
B) an increase in government expenditures. 
C) a fall in stock prices. 
D) bad weather in farm states.

Question 12

An increase in the price level and a reduction in output would result from

Accepted Answer

A) a fall in stock prices. 
B) a decrease in the supply of an important resource. 
C) an increase in government expenditures. 
D) an increase in taxes.

Question 13

Pessimism
Suppose the economy is in long-run equilibrium. Then because of corporate scandal, international tensions, and loss of confidence in policymakers, people become pessimistic regarding the future and retain that level of pessimism for some time.

-Refer to Financial Crisis.If nominal wages are sticky,which of the following helps explains the change in output?

Accepted Answer

A) real wages fall,so firms choose to produce less 
B) real wages fall,so firms choose to produce more 
C) real wages rise,so firms choose to produce less 
D) real wages rise,so firms choose to produce more

Question 14

Which of the following would increase the price level?

Accepted Answer

A) an increase in the money supply. 
B) an increase in taxes. 
C) a decrease in the expected price level. 
D) a decrease in the natural rate of unemployment.

Question 15

Pessimism
Suppose the economy is in long-run equilibrium. Then because of corporate scandal, international tensions, and loss of confidence in policymakers, people become pessimistic regarding the future and retain that level of pessimism for some time.

-Refer to Pessimism.In the short run what happens to the price level and real GDP?

Accepted Answer

A) Both the price level and real GDP rise. 
B) Both the price level and real GDP fall. 
C) The price level rises and real GDP falls. 
D) The price level falls and real GDP rises.

Question 16

Pessimism
Suppose the economy is in long-run equilibrium. Then because of corporate scandal, international tensions, and loss of confidence in policymakers, people become pessimistic regarding the future and retain that level of pessimism for some time.

-Refer to Figure 33-7.If the economy starts at Y,then a recession occurs at

Accepted Answer

A) V. 
B) W. 
C) X. 
D) Z.

Question 17

Which of the following affected aggregate demand during the recession of 2008-2009?

Accepted Answer

A) a decline in residential construction and a decrease in lending 
B) a decline in residential construction but not a decrease in lending 
C) a decrease in lending but not a decline in residential construction 
D) neither a decrease in residential construction nor a decrease in lending

Question 18

Which of the following is a lesson concerning shifts in aggregate demand?

Accepted Answer

A) they contribute to fluctuations in output. 
B) in the long-run they change real output,but not the price level. 
C) policymakers are unable to mitigate the severity of economic fluctuations. 
D) All of the above are correct.

Question 19

Which of the following would cause prices to fall and output 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 20

During the 2008-2009 recession real GDP fell by about

Accepted Answer

A) 2% 
B) 4% 
C) 6% 
D) 8%

Exam 20: Aggregate Demand and Aggregate Supply: Two Causes of Economic Fluctuations

Suppose the economy is in long-run equilibrium.If there is an increase in government purchases at the same time there is a large increase in the price of oil,then in the short-run

Suppose the economy is in long-run equilibrium.If there is a sharp increase in the minimum wage as well as an increase in taxes,then in the short run,real GDP will

Which of the following would raise the price level in both the short and long run?

The economic boom of the early 1940s resulted mostly from

A decrease in the availability of an important major resource such as oil shifts

In the mid-1970s the price of oil rose dramatically.This

Figure 33-9. -Refer to Figure 33-9.Suppose the economy starts where LRAS = AD1 = SRAS₁.A decrease in short-run aggregate supply would be consistent with the movement to

Suppose the economy is in long-run equilibrium.If there is a sharp decline in government purchases combined with a significant increase in immigration of skilled workers,then in the short run,

Which of the following would cause stagflation?

An increase in the price level and a reduction in output would result from

An increase in the price level and a reduction in output would result from

Which of the following would increase the price level?

Which of the following affected aggregate demand during the recession of 2008-2009?

Which of the following is a lesson concerning shifts in aggregate demand?

Which of the following would cause prices to fall and output to rise in the short run?

During the 2008-2009 recession real GDP fell by about

Exam 20: Aggregate Demand and Aggregate Supply: Two Causes of Economic Fluctuations

Suppose the economy is in long-run equilibrium.If there is an increase in government purchases at the same time there is a large increase in the price of oil,then in the short-run

Suppose the economy is in long-run equilibrium.If there is a sharp increase in the minimum wage as well as an increase in taxes,then in the short run,real GDP will

Which of the following would raise the price level in both the short and long run?

The economic boom of the early 1940s resulted mostly from

A decrease in the availability of an important major resource such as oil shifts

In the mid-1970s the price of oil rose dramatically.This

Figure 33-9. -Refer to Figure 33-9.Suppose the economy starts where LRAS = AD1 = SRAS1.A decrease in short-run aggregate supply would be consistent with the movement to

Suppose the economy is in long-run equilibrium.If there is a sharp decline in government purchases combined with a significant increase in immigration of skilled workers,then in the short run,

Which of the following would cause stagflation?

An increase in the price level and a reduction in output would result from

An increase in the price level and a reduction in output would result from

Which of the following would increase the price level?

Which of the following affected aggregate demand during the recession of 2008-2009?

Which of the following is a lesson concerning shifts in aggregate demand?

Which of the following would cause prices to fall and output to rise in the short run?

During the 2008-2009 recession real GDP fell by about

Figure 33-9. -Refer to Figure 33-9.Suppose the economy starts where LRAS = AD1 = SRAS₁.A decrease in short-run aggregate supply would be consistent with the movement to