Question 1

The impact of Hurricane Katrina on consumers in the economy was to make them very pessimistic about their future incomes.How does this increased pessimism 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 2

Suppose there has been an increase in investment.As a result,real GDP will ________ in the short run,and ________ in the long run.

Accepted Answer

A) increase;increase further 
B) increase;decrease to its initial value 
C) decrease;decrease further 
D) decrease;increase to its initial level

Question 3

The new classical model has as its central idea that

Accepted Answer

A) wage and price stickiness explain fluctuations in real GDP. 
B) workers and firms have rational expectations. 
C) the Federal Reserve should adopt a monetary growth rule. 
D) shifts in aggregate demand have no impact on real GDP.

Question 4

Figure 13-2 
-Refer to Figure 13-2.Ceteris paribus,a decrease in productivity 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 5

Proponents of the real business cycle model argue that the short-run aggregate supply curve is

Accepted Answer

A) flat. 
B) positively sloped. 
C) vertical. 
D) negatively sloped.

Question 6

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 7

As the recession persisted into 2009,the unemployment rate in the United States rose to ________,the highest rate since the recession of 2001-2002 and the second highest since the Great Depression.

Accepted Answer

A) 5.5 percent 
B) 9.3 percent 
C) 17.6 percent 
D) 25.1 percent

Question 8

Figure 13-1 
-Refer to Figure 13-1.Ceteris paribus,a decrease in the price level 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 9

All of the following would be considered a positive addition to household wealth except

Accepted Answer

A) the equity in one's home. 
B) 500 shares of Google stock. 
C) the balance in your savings account. 
D) a credit card balance.

Question 10

New Keynesian macroeconomic theory emphasizes the role of "sticky" prices in the economy.

Accepted Answer

A) True 
 B)False

Question 11

Figure 13-1 
-Refer to Figure 13-1.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 12

Workers and firms both expect that prices will be 3% higher next year than they are this year.As a result,

Accepted Answer

A) workers will be willing to take lower wages next year. 
B) the purchasing power of wages will rise if wages increase by 3%. 
C) the short-run aggregate supply curve will shift to the left as wages increase. 
D) aggregate demand will increase by 3%.

Question 13

According to the real business cycle model,________ in aggregate demand ________ GDP.

Accepted Answer

A) increases;decrease 
B) increases;increase 
C) increases;do not affect 
D) decreases;increase

Question 14

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 15

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 16

The long-run aggregate supply curve shows the relationship between the ________ and ________.

Accepted Answer

A) inflation rate;quantity of real GDP demanded 
B) real interest rate;quantity of real GDP supplied 
C) nominal interest rate;quantity of real GDP supplied 
D) price level;quantity of real GDP supplied

Question 17

When potential GDP increases,short-run aggregate supply also increases,but long-run aggregate supply does not change.

Accepted Answer

A) True 
 B)False

Question 18

Refer to the Article Summary.The unexpected increase in the supply of oil mentioned in the article summary resulted in a decrease in the price of oil.After an unexpected decrease in the price of oil,the long-run adjustment ________ the price level and ________ the unemployment rate as they return to their original levels.

Accepted Answer

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

Question 19

Briefly describe monetarism and the monetary growth rule.

Accepted Answer

The answer of Briefly describe monetarism and the monetary growth...

Question 20

Figure 13-2 
-Refer to Figure 13-2.Ceteris paribus,an increase in productivity 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.

Exam 13: Aggregate Demand and Aggregate Supply Analysis

The impact of Hurricane Katrina on consumers in the economy was to make them very pessimistic about their future incomes.How does this increased pessimism affect the aggregate demand curve?

Suppose there has been an increase in investment.As a result,real GDP will in the short run,and in the long run.

The new classical model has as its central idea that

Figure 13-2 -Refer to Figure 13-2.Ceteris paribus,a decrease in productivity would be represented by a movement from

Proponents of the real business cycle model argue that the short-run aggregate supply curve is

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

As the recession persisted into 2009,the unemployment rate in the United States rose to ________,the highest rate since the recession of 2001-2002 and the second highest since the Great Depression.

Figure 13-1 -Refer to Figure 13-1.Ceteris paribus,a decrease in the price level would be represented by a movement from

All of the following would be considered a positive addition to household wealth except

New Keynesian macroeconomic theory emphasizes the role of "sticky" prices in the economy.

Figure 13-1 -Refer to Figure 13-1.Ceteris paribus,a decrease in government spending would be represented by a movement from

Workers and firms both expect that prices will be 3% higher next year than they are this year.As a result,

According to the real business cycle model, in aggregate demand GDP.

The ________ curve is vertical.

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

The long-run aggregate supply curve shows the relationship between the and .

When potential GDP increases,short-run aggregate supply also increases,but long-run aggregate supply does not change.

Briefly describe monetarism and the monetary growth rule.

Figure 13-2 -Refer to Figure 13-2.Ceteris paribus,an increase in productivity would be represented by a movement from