Figure 7-6 -Refer to Figure 7-6. Suppose the economy is initially at point A. Now suppose an increase in government purchases shifts the aggregate demand curve to AD2. Which of the following statements best explains how the economy responds to restore long-run macroeconomic equilibrium?

A) The increase in the price level to Pb reduces real GDP demanded, shifting the aggregate demand curve back to AD1, returning the economy to its potential output at A. B) Firms produce more in anticipation of future higher prices, thus shifting the SRAS curve upward until the gap is eliminated at D. C) Firms and workers will negotiate higher nominal wages to restore lost purchasing power. This shifts the SRAS curve to the left until the gap is eliminated at D. D) The increase in the price level to Pb decreases consumption which in turn leads firms to cut production shifting the SRAS curve to the left until the gap is eliminated at D. A) The increase in the price level to Pb reduces real GDP demanded, shifting the aggregate demand curve back to AD1, returning the economy to its potential output at A. B) Firms produce more in anticipation of future higher prices, thus shifting the SRAS curve upward until the gap is eliminated at D. C) Firms and workers will negotiate higher nominal wages to restore lost purchasing power. This shifts the SRAS curve to the left until the gap is eliminated at D. D) The increase in the price level to Pb decreases consumption which in turn leads firms to cut production shifting the SRAS curve to the left until the gap is eliminated at D.

Exam 7: Aggregate Demand and Aggregate Supply

Figure 7-3 -Refer to Figure 7-3. Suppose that the economy is in long-run equilibrium at point A. Now suppose the stock market crashes, significantly reducing household wealth. As a result,

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Question 1

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Which of the following will decrease the aggregate quantity of output supplied?

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Question 2

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The short-run aggregate supply curve slopes upward because of

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Question 3

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Which of the following statements is true of the economy in the long run? In the long run, I. real GDP eventually moves to potential output because all wages and prices are assumed to be flexible. II. the economy can achieve its natural level of employment and potential output at any price level. III. there is no cyclical unemployment.

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Question 4

Figure 7-7 -Refer to Figure 7-7. Suppose the economy is initially in short-run equilibrium at point K. If the policy-makers adopt a nonintervention policy, over time, I. real wages will fall as long as unemployment remains above the natural rate. II. lower nominal wages will result in a gradual shift from SRAS₂ to SRAS₁. III. long-run equilibrium will be established at Y_P and P_h.

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Question 5

Changes in aggregate demand can be caused by changes in I. wages. II. raw materials costs. III. government spending. IV. government regulations that increase the cost of doing business.

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Question 6

Suppose that an increase in government purchases of $100 million caused the aggregate demand curve to shift to the right by $350 million at each price level. What is the value of the multiplier?

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Question 7

Suppose net exports decreases by $100 million due to a slump in foreign economies. If the the value of the multiplier is 2, what happens to the domestic aggregate demand curve?

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Question 8

Aggregate demand is the total value of real GDP that

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Question 9

What happens in the domestic economy when there is an increase in foreign prices, all other things unchanged?

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Question 10

All other things unchanged, an increase in government spending will

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Question 11

The interest rate effect suggests that the negative slope of the aggregate demand curve results because changes in the price level affect

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Question 12

An economy adjusts on its own to close a recessionary gap because there is

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Question 13

What is the difference between a change in aggregate demand and a change in aggregate quantity of real GDP demanded?

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Question 14

Figure 7-6 -Refer to Figure 7-6. Suppose the economy is initially at point A. Now suppose an increase in government purchases shifts the aggregate demand curve to AD₂. As a result,

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Question 15

To eliminate a recessionary gap, policy-makers may pursue

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Question 16

The use of government purchases, transfer payments, and taxes to influence the level of economic activity is called

(Multiple Choice)

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Question 17

Figure 7-3 -Refer to Figure 7-3. Suppose that the economy is in long-run equilibrium at point A. Now suppose the stock market crashes, significantly reducing household wealth. What happens in the short-run?

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Question 18

Figure 7-6 -Refer to Figure 7-6. Suppose the economy is initially at point A. Now suppose an increase in government purchases shifts the aggregate demand curve to AD₂. Which of the following statements best explains how the economy responds to restore long-run macroeconomic equilibrium?

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Question 19

The potential level of real GDP is the level of output a society can achieve when labor is employed at its natural level.

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Question 20

Showing 1 - 20 of 166

Figure 7-3 -Refer to Figure 7-3. Suppose that the economy is in long-run equilibrium at point A. Now suppose the stock market crashes, significantly reducing household wealth. As a result,

Which of the following will decrease the aggregate quantity of output supplied?

The short-run aggregate supply curve slopes upward because of

Changes in aggregate demand can be caused by changes in I. wages. II. raw materials costs. III. government spending. IV. government regulations that increase the cost of doing business.

Suppose that an increase in government purchases of $100 million caused the aggregate demand curve to shift to the right by $350 million at each price level. What is the value of the multiplier?

Suppose net exports decreases by $100 million due to a slump in foreign economies. If the the value of the multiplier is 2, what happens to the domestic aggregate demand curve?

Aggregate demand is the total value of real GDP that

What happens in the domestic economy when there is an increase in foreign prices, all other things unchanged?

All other things unchanged, an increase in government spending will

The interest rate effect suggests that the negative slope of the aggregate demand curve results because changes in the price level affect

An economy adjusts on its own to close a recessionary gap because there is

What is the difference between a change in aggregate demand and a change in aggregate quantity of real GDP demanded?

Figure 7-6 -Refer to Figure 7-6. Suppose the economy is initially at point A. Now suppose an increase in government purchases shifts the aggregate demand curve to AD₂. As a result,

To eliminate a recessionary gap, policy-makers may pursue

The use of government purchases, transfer payments, and taxes to influence the level of economic activity is called

Figure 7-3 -Refer to Figure 7-3. Suppose that the economy is in long-run equilibrium at point A. Now suppose the stock market crashes, significantly reducing household wealth. What happens in the short-run?

Figure 7-6 -Refer to Figure 7-6. Suppose the economy is initially at point A. Now suppose an increase in government purchases shifts the aggregate demand curve to AD₂. Which of the following statements best explains how the economy responds to restore long-run macroeconomic equilibrium?

The potential level of real GDP is the level of output a society can achieve when labor is employed at its natural level.

Economics: the Study of Choice

Demand and Supply

Applications of Demand and Supply

Macroeconomics: the Big Picture

Measuring Total Output and Income

Economic Growth

The Nature and Creation of Money

Financial Markets and the Economy

Monetary Policy and the Fed

Government and Fiscal Policy

Consumption and the Aggregate Expenditures Model

Investment and Economic Activity

Net Exports and International Finance

Inflation and Unemployment

A Brief History of Macroeconomic Thought and Policy

Inequality, Poverty, and Discrimination

Economic Development

Socialist Economies in Transition

Filters

Exam 7: Aggregate Demand and Aggregate Supply

Figure 7-3 -Refer to Figure 7-3. Suppose that the economy is in long-run equilibrium at point A. Now suppose the stock market crashes, significantly reducing household wealth. As a result,

Which of the following will decrease the aggregate quantity of output supplied?

The short-run aggregate supply curve slopes upward because of

Changes in aggregate demand can be caused by changes in I. wages. II. raw materials costs. III. government spending. IV. government regulations that increase the cost of doing business.

Suppose that an increase in government purchases of $100 million caused the aggregate demand curve to shift to the right by $350 million at each price level. What is the value of the multiplier?

Suppose net exports decreases by $100 million due to a slump in foreign economies. If the the value of the multiplier is 2, what happens to the domestic aggregate demand curve?

Aggregate demand is the total value of real GDP that

What happens in the domestic economy when there is an increase in foreign prices, all other things unchanged?

All other things unchanged, an increase in government spending will

The interest rate effect suggests that the negative slope of the aggregate demand curve results because changes in the price level affect

An economy adjusts on its own to close a recessionary gap because there is

What is the difference between a change in aggregate demand and a change in aggregate quantity of real GDP demanded?

Figure 7-6 -Refer to Figure 7-6. Suppose the economy is initially at point A. Now suppose an increase in government purchases shifts the aggregate demand curve to AD2. As a result,

To eliminate a recessionary gap, policy-makers may pursue

The use of government purchases, transfer payments, and taxes to influence the level of economic activity is called

Figure 7-3 -Refer to Figure 7-3. Suppose that the economy is in long-run equilibrium at point A. Now suppose the stock market crashes, significantly reducing household wealth. What happens in the short-run?

Figure 7-6 -Refer to Figure 7-6. Suppose the economy is initially at point A. Now suppose an increase in government purchases shifts the aggregate demand curve to AD2. Which of the following statements best explains how the economy responds to restore long-run macroeconomic equilibrium?

The potential level of real GDP is the level of output a society can achieve when labor is employed at its natural level.

Economics: the Study of Choice

Demand and Supply

Applications of Demand and Supply

Macroeconomics: the Big Picture

Measuring Total Output and Income

Economic Growth

The Nature and Creation of Money

Financial Markets and the Economy

Monetary Policy and the Fed

Government and Fiscal Policy

Consumption and the Aggregate Expenditures Model

Investment and Economic Activity

Net Exports and International Finance

Inflation and Unemployment

A Brief History of Macroeconomic Thought and Policy

Inequality, Poverty, and Discrimination

Economic Development

Socialist Economies in Transition

Filters

Figure 7-6 -Refer to Figure 7-6. Suppose the economy is initially at point A. Now suppose an increase in government purchases shifts the aggregate demand curve to AD₂. As a result,

Figure 7-6 -Refer to Figure 7-6. Suppose the economy is initially at point A. Now suppose an increase in government purchases shifts the aggregate demand curve to AD₂. Which of the following statements best explains how the economy responds to restore long-run macroeconomic equilibrium?