Question 1

The short run in macroeconomics is a period in which wages and some other prices are sticky.

Accepted Answer

A) True 
 B)False

Question 2

Figure 7-5  
-Refer to Figure 7-5. For the economy represented in the figure,

Accepted Answer

A)  the real wage rate is higher than full-employment real wage. 
B)  the real wage rate is lower than full-employment real wage 
C)  the nominal wage rate is higher than full-employment nominal wage 
D)  the nominal wage rate is higher than full-employment nominal wage. 
A)  the real wage rate is higher than full-employment real wage. 
B)  the real wage rate is lower than full-employment real wage 
C)  the nominal wage rate is higher than full-employment nominal wage 
D)  the nominal wage rate is higher than full-employment nominal wage.

Question 3

Which of the following will decrease the short-run aggregate supply?

Accepted Answer

A)  An increase in wages 
B)  An increase in the labor force 
C)  A decrease in net exports 
D)  A decrease in the personal income tax rates 
A)  An increase in wages 
B)  An increase in the labor force 
C)  A decrease in net exports 
D)  A decrease in the personal income tax rates

Question 4

All of the following contributed to the U.S. recession of 2001 except

Accepted Answer

A)  a decrease in business investment both for computers and software and in structures. 
B)  an appreciation in the value of the U.S. dollar relative to the currencies of its trading partners. 
C)  an increase in new residential construction. 
D)  a fall in stock market prices. 
A)  a decrease in business investment both for computers and software and in structures. 
B)  an appreciation in the value of the U.S. dollar relative to the currencies of its trading partners. 
C)  an increase in new residential construction. 
D)  a fall in stock market prices.

Question 5

In the long run, a decrease in aggregate demand, all other things unchanged, will cause the price level to

Accepted Answer

A)  increase and potential output to increase. 
B)  decrease and potential output to decrease. 
C)  increase and potential output to remain stable. 
D)  decrease and potential output to remain stable. 
A)  increase and potential output to increase. 
B)  decrease and potential output to decrease. 
C)  increase and potential output to remain stable. 
D)  decrease and potential output to remain stable.

Question 6

Table 7-1
   Table 7-1 shows the aggregate demand and short-run aggregate supply curves for an economy. The potential level of output is $7.6 trillion.
-Refer to Table 7-1. If policymakers adopt a nonintervention policy, the economy gap

Accepted Answer

A)  would return to potential output at a price level of 2.8. 
B)  would return to potential output at a price level of 1.2. 
C)  would return to potential output at a price level of 2.0. 
D)  would return to long-run equilibrium at an output level of $6 trillion. 
A)  would return to potential output at a price level of 2.8. 
B)  would return to potential output at a price level of 1.2. 
C)  would return to potential output at a price level of 2.0. 
D)  would return to long-run equilibrium at an output level of $6 trillion.

Question 7

Which of the following best explains the multiplier effect as a result of a $100 million increase in government spending on highways?

Accepted Answer

A)  To fund the government spending, more money must be printed. The resulting increase in money supply lowers interest rates which in turn stimulates consumption and investment spending. 
B)  The initial change in spending will cause an increase in real GDP and it also becomes income to someone else. As a result, the government's tax revenue increases which in turn allows the government to further increase its spending. 
C)  The government spending creates a demand for domestically produced goods and services which in turn increases income and higher incomes will lead to increased consumption. 
D)  The initial change in government spending creates a supply of jobs and stimulates production of domestically produced goods and services. The resulting increases in wages and investment demand leads to increased real GDP. 
A)  To fund the government spending, more money must be printed. The resulting increase in money supply lowers interest rates which in turn stimulates consumption and investment spending. 
B)  The initial change in spending will cause an increase in real GDP and it also becomes income to someone else. As a result, the government's tax revenue increases which in turn allows the government to further increase its spending. 
C)  The government spending creates a demand for domestically produced goods and services which in turn increases income and higher incomes will lead to increased consumption. 
D)  The initial change in government spending creates a supply of jobs and stimulates production of domestically produced goods and services. The resulting increases in wages and investment demand leads to increased real GDP.

Question 8

The strong dollar in 2001

Accepted Answer

A)  made U.S. exports more attractive relative to foreign goods, thereby increasing U.S. exports. 
B)  made U.S. exports more expensive relative to foreign goods, thereby reducing U.S. exports. 
C)  made U.S. imports more expensive, thereby reducing aggregate demand. 
D)  made U.S. imports more attractive, thereby increasing aggregate demand. 
A)  made U.S. exports more attractive relative to foreign goods, thereby increasing U.S. exports. 
B)  made U.S. exports more expensive relative to foreign goods, thereby reducing U.S. exports. 
C)  made U.S. imports more expensive, thereby reducing aggregate demand. 
D)  made U.S. imports more attractive, thereby increasing aggregate demand.

Question 9

Public policy to eliminate inflationary or recessionary gaps is called stabilization policy.

Accepted Answer

A) True 
 B)False

Question 10

Suppose the U.S. government decides to increase its imports from Turkey. All other things unchanged,

Accepted Answer

A)  U.S. aggregate demand increases and Turkey's aggregate demand decreases. 
B)  U.S. aggregate demand decreases and Turkey's aggregate demand increases. 
C)  U.S. aggregate demand and Turkey's aggregate demand increase. 
D)  U.S. aggregate demand is not affected but Turkey's aggregate demand increases. 
A)  U.S. aggregate demand increases and Turkey's aggregate demand decreases. 
B)  U.S. aggregate demand decreases and Turkey's aggregate demand increases. 
C)  U.S. aggregate demand and Turkey's aggregate demand increase. 
D)  U.S. aggregate demand is not affected but Turkey's aggregate demand increases.

Question 11

Suppose investment rises by $50 billion at each price level. If the value of the multiplier is 1.5, what is the amount of change in real GDP demanded at each price level?

Accepted Answer

A)  $50 billion 
B)  $75 billion 
C)  $125 billion 
D)  $150 billion 
A)  $50 billion 
B)  $75 billion 
C)  $125 billion 
D)  $150 billion

Question 12

Inflationary and recessionary gaps are closed by the economy's self-correcting adjustments mechanism that shift

Accepted Answer

A)  the SRAS curve. 
B)  the AD curve. 
C)  the LRAS curve. 
D)  both the SRAS and the LRAS curves. 
A)  the SRAS curve. 
B)  the AD curve. 
C)  the LRAS curve. 
D)  both the SRAS and the LRAS curves.

Question 13

Discuss why the short-run aggregate supply curve is upward sloping unlike the long-run aggregate supply curve which is vertical.

Accepted Answer

The short-run aggregate supply curve is

Question 14

Which of the following will increase the short-run aggregate supply?

Accepted Answer

A)  An increase in wages 
B)  A decrease in the price of capital 
C)  An increase in government spending on education 
D)  An increase in consumption spending 
A)  An increase in wages 
B)  A decrease in the price of capital 
C)  An increase in government spending on education 
D)  An increase in consumption spending

Question 15

In a graph that shows the aggregate supply and aggregate demand curves, what are the variables on the axes of the graph?

Accepted Answer

A)  The price level measured by the implicit price deflator is on the horizontal axis and real GDP is on the vertical axis. 
B)  The price level measured by the consumer price index is on the vertical axis and real GDP is on the horizontal axis. 
C)  The price level measured by the implicit price deflator is on the vertical axis and real GDP is on the horizontal axis. 
D)  The price level measured by the implicit price deflator is on the vertical axis and employment is on the horizontal axis. 
A)  The price level measured by the implicit price deflator is on the horizontal axis and real GDP is on the vertical axis. 
B)  The price level measured by the consumer price index is on the vertical axis and real GDP is on the horizontal axis. 
C)  The price level measured by the implicit price deflator is on the vertical axis and real GDP is on the horizontal axis. 
D)  The price level measured by the implicit price deflator is on the vertical axis and employment is on the horizontal axis.

Question 16

What is the difference between a change in aggregate supply and a change in aggregate output supplied?

Accepted Answer

A)  A change in aggregate supply is represented by a movement along the aggregate supply curve in response to a price change, while a change in aggregate output supplied is represented by a shift of the aggregate supply curve in response to a change in a determinant of aggregate supply other than the price level. 
B)  A change in aggregate supply is represented by a shift of the aggregate supply curve in response to a change in the actual price level, while a change in aggregate output supplied is represented by a movement along the aggregate supply curve in response to a change in the expected price level. 
C)  A change in aggregate supply is represented by a shift of the aggregate supply curve in response to a change in a determinant of aggregate supply other than the price level, while a change in aggregate output supplied is represented by a movement along the aggregate supply curve in response to a change in the price level. 
D)  There is no difference between the two terms. 
A)  A change in aggregate supply is represented by a movement along the aggregate supply curve in response to a price change, while a change in aggregate output supplied is represented by a shift of the aggregate supply curve in response to a change in a determinant of aggregate supply other than the price level. 
B)  A change in aggregate supply is represented by a shift of the aggregate supply curve in response to a change in the actual price level, while a change in aggregate output supplied is represented by a movement along the aggregate supply curve in response to a change in the expected price level. 
C)  A change in aggregate supply is represented by a shift of the aggregate supply curve in response to a change in a determinant of aggregate supply other than the price level, while a change in aggregate output supplied is represented by a movement along the aggregate supply curve in response to a change in the price level. 
D)  There is no difference between the two terms.

Question 17

In the long run, real output can be less than, equal to, or greater than the economy's potential output.

Accepted Answer

A) True 
 B)False

Question 18

All of the following statements are true about the short-run aggregate supply curve except

Accepted Answer

A)  it is a graphical representation of the relationship between production and the price level. 
B)  it is a result of the stickiness or inflexibility of some prices and wages. 
C)  it is upward-sloping. 
D)  it is drawn holding price level constant. 
A)  it is a graphical representation of the relationship between production and the price level. 
B)  it is a result of the stickiness or inflexibility of some prices and wages. 
C)  it is upward-sloping. 
D)  it is drawn holding price level constant.

Question 19

Taking no action and allowing an economy to adjust by itself is called a nonintervention policy.

Accepted Answer

A) True 
 B)False

Question 20

How will a recession in the economies of our foreign trading partners affect U.S. aggregate demand?

Accepted Answer

A)  It will have no effect on our aggregate demand. 
B)  U.S. aggregate demand will increase. 
C)  U.S. aggregate demand will decrease. 
D)  It depends on whether the U.S. offers financial aid to these countries. 
A)  It will have no effect on our aggregate demand. 
B)  U.S. aggregate demand will increase. 
C)  U.S. aggregate demand will decrease. 
D)  It depends on whether the U.S. offers financial aid to these countries.

The short run in macroeconomics is a period in which wages and some other prices are sticky.

Figure 7-5 -Refer to Figure 7-5. For the economy represented in the figure,

Which of the following will decrease the short-run aggregate supply?

All of the following contributed to the U.S. recession of 2001 except

In the long run, a decrease in aggregate demand, all other things unchanged, will cause the price level to

Table 7-1 Table 7-1 shows the aggregate demand and short-run aggregate supply curves for an economy. The potential level of output is $7.6 trillion. -Refer to Table 7-1. If policymakers adopt a nonintervention policy, the economy gap

Which of the following best explains the multiplier effect as a result of a $100 million increase in government spending on highways?

The strong dollar in 2001

Public policy to eliminate inflationary or recessionary gaps is called stabilization policy.

Suppose the U.S. government decides to increase its imports from Turkey. All other things unchanged,

Suppose investment rises by $50 billion at each price level. If the value of the multiplier is 1.5, what is the amount of change in real GDP demanded at each price level?

Inflationary and recessionary gaps are closed by the economy's self-correcting adjustments mechanism that shift

Discuss why the short-run aggregate supply curve is upward sloping unlike the long-run aggregate supply curve which is vertical.

Which of the following will increase the short-run aggregate supply?

In a graph that shows the aggregate supply and aggregate demand curves, what are the variables on the axes of the graph?

What is the difference between a change in aggregate supply and a change in aggregate output supplied?

In the long run, real output can be less than, equal to, or greater than the economy's potential output.

All of the following statements are true about the short-run aggregate supply curve except

Taking no action and allowing an economy to adjust by itself is called a nonintervention policy.

How will a recession in the economies of our foreign trading partners affect U.S. aggregate demand?

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

The short run in macroeconomics is a period in which wages and some other prices are sticky.

Figure 7-5 -Refer to Figure 7-5. For the economy represented in the figure,

Which of the following will decrease the short-run aggregate supply?

All of the following contributed to the U.S. recession of 2001 except

In the long run, a decrease in aggregate demand, all other things unchanged, will cause the price level to

Table 7-1 Table 7-1 shows the aggregate demand and short-run aggregate supply curves for an economy. The potential level of output is $7.6 trillion. -Refer to Table 7-1. If policymakers adopt a nonintervention policy, the economy gap

Which of the following best explains the multiplier effect as a result of a $100 million increase in government spending on highways?

The strong dollar in 2001

Public policy to eliminate inflationary or recessionary gaps is called stabilization policy.

Suppose the U.S. government decides to increase its imports from Turkey. All other things unchanged,

Suppose investment rises by $50 billion at each price level. If the value of the multiplier is 1.5, what is the amount of change in real GDP demanded at each price level?

Inflationary and recessionary gaps are closed by the economy's self-correcting adjustments mechanism that shift

Discuss why the short-run aggregate supply curve is upward sloping unlike the long-run aggregate supply curve which is vertical.

Which of the following will increase the short-run aggregate supply?

In a graph that shows the aggregate supply and aggregate demand curves, what are the variables on the axes of the graph?

What is the difference between a change in aggregate supply and a change in aggregate output supplied?

In the long run, real output can be less than, equal to, or greater than the economy's potential output.

All of the following statements are true about the short-run aggregate supply curve except

Taking no action and allowing an economy to adjust by itself is called a nonintervention policy.

How will a recession in the economies of our foreign trading partners affect U.S. aggregate demand?

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