Question 1

The long-run adjustment to a negative supply shock results in

Accepted Answer

A) the short-run aggregate supply curve shifting to the right. 
B) the price level rising. 
C) unemployment rising. 
D) workers being willing to accept higher wages.

Question 2

After an unexpected ________ in the price of oil,the long-run adjustment decreases the price level and ________ the unemployment rate as they return to their original levels.

Accepted Answer

A) increase;increases 
B) increase;decreases 
C) decrease;increases 
D) decrease;decreases

Question 3

In September of 2007,the Federal Reserve Board Open Market Committee voted to lower interest rates for the first time that year.Explain how lower interest rates affect the aggregate demand curve.

Accepted Answer

The answer of In September of 2007,the Federal Reserve Board...

Question 4

Which of the following is not an assumption made by the dynamic model of aggregate demand and aggregate supply?

Accepted Answer

A) Potential real GDP increases continuously. 
B) The aggregate demand curve shifts to the right during most periods. 
C) The short-run aggregate supply curve shifts to the right except during periods when workers and firms expect higher wages. 
D) Aggregate demand and potential real GDP decrease continuously.

Question 5

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 6

Figure 15-4 
-Refer to Figure 15-4.In the figure above,LRAS1 and SRAS1 denote LRAS and SRAS in year 1,while LRAS2 and SRAS2 denote LRAS and SRAS in year 2.Given the economy is at point A in year 1,what is the growth rate in potential GDP in year 2?

Accepted Answer

A) 8% 
B) 9.1% 
C) 10% 
D) 12%

Question 7

Because of the slope of the aggregate demand curve,we can say that

Accepted Answer

A) a decrease in the price level leads to a lower level of real GDP demanded. 
B) an increase in the price level leads to no change in the level of real GDP demanded. 
C) a decrease in the price level leads to a higher level of real GDP demanded. 
D) an increase in the price level leads to a higher level of real GDP demanded.

Question 8

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 9

Which of the following models relies on emphasizing the importance of sticky wages and prices?

Accepted Answer

A) the monetarist model 
B) the new classical model 
C) the real business cycle model 
D) the new Keynesian model

Question 10

If the U.S.dollar decreases in value relative to other currencies,how does this affect the aggregate demand curve?

Accepted Answer

A) This will move the economy up along a stationary aggregate demand curve. 
B) This will move the economy down along a stationary aggregate demand curve. 
C) This will shift the aggregate demand curve to the left. 
D) This will shift the aggregate demand curve to the right.

Question 11

Suppose the economy is at full employment and firms become more optimistic about the future profitability of new investment.Which of the following will happen in the short run?

Accepted Answer

A) Output will decline. 
B) Prices will decline. 
C) Unemployment will decline. 
D) The aggregate demand curve will shift to the left.

Question 12

Which of the following is one explanation as to why the aggregate demand curve slopes downward?

Accepted Answer

A) Decreases in the price level raise the interest rate and increase consumption spending. 
B) Decreases in the price level raise the interest rate and increase investment spending. 
C) Decreases in the U.S.price level relative to the price level in other countries lower net exports. 
D) Decreases in the price level raise real wealth and increase consumption spending.

Question 13

The short-run aggregate supply curve has a(n)________ slope because as prices of ________ rise,prices of ________ rise more slowly.

Accepted Answer

A) positive;final goods and services;inputs 
B) infinite;final goods and services;inputs 
C) positive;inputs;final goods and services 
D) infinite;inputs;final goods and services

Question 14

On the long-run aggregate supply curve,

Accepted Answer

A) a decrease in the price level decreases the level of potential GDP. 
B) a decrease in the price level increases the aggregate quantity of GDP supplied. 
C) a decrease in the price level decreases the aggregate quantity of GDP supplied. 
D) a decrease in the price level has no effect on the aggregate quantity of GDP supplied.

Question 15

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 16

The basic aggregate demand and aggregate supply curve model helps explain

Accepted Answer

A) short term fluctuations in real GDP and the price level. 
B) long term growth. 
C) price fluctuations in an individual market. 
D) output fluctuations in an individual market.

Question 17

When the aggregate demand curve and the short-run aggregate supply curve intersect,

Accepted Answer

A) the long-run aggregate supply curve must also intersect at the same point. 
B) inflation must be increasing. 
C) structural and frictional unemployment equal zero. 
D) the economy is in short-run macroeconomic equilibrium.

Question 18

Figure 15-1 
-Refer to Figure 15-1.Ceteris paribus,a decrease in government spending 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 19

Forecasts made by White House economists and economists at the Congressional Budget Office in 2011 project that real GDP

Accepted Answer

A) would return to potential GDP by the end of 2011. 
B) would not return to potential GDP until the first quarter of 2013. 
C) would not return to potential GDP until 2016. 
D) would never return to potential GDP.

Question 20

Using the aggregate supply and demand model,illustrate what happens in the long run when the economy suffers a supply shock.Begin your analysis by assuming the economy has suffered the supply shock in the short run,but has not yet adjusted to it in the long run.

Accepted Answer

The answer of Using the aggregate supply and demand model,illustrate...

Exam 15: Aggregate Demand and Aggregate Supply Analysis

The long-run adjustment to a negative supply shock results in

After an unexpected in the price of oil,the long-run adjustment decreases the price level and the unemployment rate as they return to their original levels.

In September of 2007,the Federal Reserve Board Open Market Committee voted to lower interest rates for the first time that year.Explain how lower interest rates affect the aggregate demand curve.

Which of the following is not an assumption made by the dynamic model of aggregate demand and aggregate supply?

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 15-4 -Refer to Figure 15-4.In the figure above,LRAS₁ and SRAS₁ denote LRAS and SRAS in year 1,while LRAS₂ and SRAS₂ denote LRAS and SRAS in year 2.Given the economy is at point A in year 1,what is the growth rate in potential GDP in year 2?

Because of the slope of the aggregate demand curve,we can say that

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

Which of the following models relies on emphasizing the importance of sticky wages and prices?

If the U.S.dollar decreases in value relative to other currencies,how does this affect the aggregate demand curve?

Suppose the economy is at full employment and firms become more optimistic about the future profitability of new investment.Which of the following will happen in the short run?

Which of the following is one explanation as to why the aggregate demand curve slopes downward?

The short-run aggregate supply curve has a(n) slope because as prices of rise,prices of rise more slowly.

On the long-run aggregate supply curve,

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

The basic aggregate demand and aggregate supply curve model helps explain

When the aggregate demand curve and the short-run aggregate supply curve intersect,

Figure 15-1 -Refer to Figure 15-1.Ceteris paribus,a decrease in government spending would be represented by a movement from

Forecasts made by White House economists and economists at the Congressional Budget Office in 2011 project that real GDP

Using the aggregate supply and demand model,illustrate what happens in the long run when the economy suffers a supply shock.Begin your analysis by assuming the economy has suffered the supply shock in the short run,but has not yet adjusted to it in the long run.

Exam 15: Aggregate Demand and Aggregate Supply Analysis

The long-run adjustment to a negative supply shock results in

After an unexpected ________ in the price of oil,the long-run adjustment decreases the price level and ________ the unemployment rate as they return to their original levels.

In September of 2007,the Federal Reserve Board Open Market Committee voted to lower interest rates for the first time that year.Explain how lower interest rates affect the aggregate demand curve.

Which of the following is not an assumption made by the dynamic model of aggregate demand and aggregate supply?

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 15-4 -Refer to Figure 15-4.In the figure above,LRAS1 and SRAS1 denote LRAS and SRAS in year 1,while LRAS2 and SRAS2 denote LRAS and SRAS in year 2.Given the economy is at point A in year 1,what is the growth rate in potential GDP in year 2?

Because of the slope of the aggregate demand curve,we can say that

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

Which of the following models relies on emphasizing the importance of sticky wages and prices?

If the U.S.dollar decreases in value relative to other currencies,how does this affect the aggregate demand curve?

Suppose the economy is at full employment and firms become more optimistic about the future profitability of new investment.Which of the following will happen in the short run?

Which of the following is one explanation as to why the aggregate demand curve slopes downward?

The short-run aggregate supply curve has a(n) ________ slope because as prices of ________ rise,prices of ________ rise more slowly.

On the long-run aggregate supply curve,

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

The basic aggregate demand and aggregate supply curve model helps explain

When the aggregate demand curve and the short-run aggregate supply curve intersect,

Figure 15-1 -Refer to Figure 15-1.Ceteris paribus,a decrease in government spending would be represented by a movement from

Forecasts made by White House economists and economists at the Congressional Budget Office in 2011 project that real GDP

Using the aggregate supply and demand model,illustrate what happens in the long run when the economy suffers a supply shock.Begin your analysis by assuming the economy has suffered the supply shock in the short run,but has not yet adjusted to it in the long run.

After an unexpected in the price of oil,the long-run adjustment decreases the price level and the unemployment rate as they return to their original levels.

Figure 15-4 -Refer to Figure 15-4.In the figure above,LRAS₁ and SRAS₁ denote LRAS and SRAS in year 1,while LRAS₂ and SRAS₂ denote LRAS and SRAS in year 2.Given the economy is at point A in year 1,what is the growth rate in potential GDP in year 2?

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 short-run aggregate supply curve has a(n) slope because as prices of rise,prices of rise more slowly.