Question 1

Along a short-run aggregate supply curve, a decrease in the price level means that

Accepted Answer

A)  output does not change because firms do not change the quantity they produce. 
B)  more output is produced as consumer demand increases. 
C)  more output is produced as firms increase production because wages fall more than the price level falls, making it profitable to hire more workers. 
D)  less output is produced as firms decrease production. 
A)  output does not change because firms do not change the quantity they produce. 
B)  more output is produced as consumer demand increases. 
C)  more output is produced as firms increase production because wages fall more than the price level falls, making it profitable to hire more workers. 
D)  less output is produced as firms decrease production.

Question 2

Which of the following shifts the aggregate demand curve rightward?

Accepted Answer

A)  a decrease in the quantity of money and an increase in interest rates 
B)  a tax cut 
C)  expectations that future incomes will fall 
D)  a decrease in government expenditure 
A)  a decrease in the quantity of money and an increase in interest rates 
B)  a tax cut 
C)  expectations that future incomes will fall 
D)  a decrease in government expenditure

Question 3

Full-employment equilibrium occurs when

Accepted Answer

A)  real GDP exceeds potential GDP. 
B)  a result of an increase in long-run aggregate supply. 
C)  real GDP equals potential GDP. 
D)  potential GDP exceeds real GDP. 
A)  real GDP exceeds potential GDP. 
B)  a result of an increase in long-run aggregate supply. 
C)  real GDP equals potential GDP. 
D)  potential GDP exceeds real GDP.

Question 4

-In the above figure, the economy is initially at point B. If the government decreases transfer payments, there is

Accepted Answer

A)  a shift to AD2. 
B)  a shift to AD1. 
C)  a movement to point C. 
D)  a movement to point A. 
A)  a shift to AD2. 
B)  a shift to AD1. 
C)  a movement to point C. 
D)  a movement to point A.

Question 5

The table below shows data for India?s economy. Real GDP is measured in millions of rupees. $$\begin{array} { | l | l | l | l | } 
\hline & \text { Price level } & \begin{array} { l } 
\text { Real GDP } \
\text { supplied in the short } \
\text { run }
\end{array} & \text { Real GDP demanded } \
\hline \text { a } & 114 & 23,501 & 35,898 \
\hline \text { b } & 120 & 25,355 & 32,341 \
\hline \text { c } & 125 & 27,670 & 27,670 \
\hline \text { d } & 131 & 30,366 & 18,569 \
\hline \text { e } & 138 & 33,164 & 15,898 \
\hline
\end{array}$$ If potential GDP in India is ___________million rupees, India is experiencing___________ .

Accepted Answer

A)  28,500; an above full-employment gap 
B)  30,000; a potential GDP gap 
C)  26,500; an inflationary gap 
D)  26,500; a recessionary gap 
A)  28,500; an above full-employment gap 
B)  30,000; a potential GDP gap 
C)  26,500; an inflationary gap 
D)  26,500; a recessionary gap

Question 6

Which of the following helps determine the growth rate of potential GDP?
I. capital accumulation
II. technology advances
III. growth in the quantity of money

Accepted Answer

A)  I and III 
B)  I and II 
C)  I 
D)  I, II and III 
A)  I and III 
B)  I and II 
C)  I 
D)  I, II and III

Question 7

$$\begin{array} { | l | l | l | l | } 
\hline \begin{array} { l } 
\text { Price } \
\text { level }
\end{array} & \begin{array} { l } 
\text { A ggregate } \
\text { demand } \
\text { (trillions of } \
\text { 2005 dollars) }
\end{array} & \begin{array} { l } 
\text { Short-run } \
\text { aggregate } \
\text { supply } \
\text { (trillions of } \
\text { 2005 dollars) }
\end{array} & \begin{array} { l } 
\text { Long-run } \
\text { aggregate } \
\text { supply } \
\text { (trillions of } \
\text { 2005 dollars) }
\end{array} \
\hline 100 & 13 & 9 & 10 \
\hline 105 & 12 & 10 & 10 \
\hline 110 & 11 & 11 & 10 \
\hline 115 & 10 & 13 & 10 \
\hline
\end{array}$$
-Using the data in the above table, in the long -run macroeconomic equilibrium, the price level is____________  and the level of real GDP is____________  .

Accepted Answer

A)  115; $11 trillion 
B)  115; $10 trillion 
C)  105; $11 trillion 
D)  110; $10 trillion 
A)  115; $11 trillion 
B)  115; $10 trillion 
C)  105; $11 trillion 
D)  110; $10 trillion

Question 8

-In the above figure, B is the current long-run aggregate supply curve and E is the current
Short-run aggregate supply curve. Technological advances mean the long -run aggregate supply curve and short-run aggregate supply curve

Accepted Answer

A)  remain B and E. 
B)  shift to A and D, respectively. 
C)  shift to C and remain E, respectively. 
D)  shift to C and F, respectively. 
A)  remain B and E. 
B)  shift to A and D, respectively. 
C)  shift to C and remain E, respectively. 
D)  shift to C and F, respectively.

Question 9

Short-run equilibrium occurs at the intersection of

Accepted Answer

A)  the LAS and AD curves. 
B)  the SAS, LAS, and AD curves. 
C)  the SAS and AD curves. 
D)  the SAS and LAS curves. 
A)  the LAS and AD curves. 
B)  the SAS, LAS, and AD curves. 
C)  the SAS and AD curves. 
D)  the SAS and LAS curves.

Question 10

A change in the full-employment quantity of labor ___________the short-run aggregate supply curve and___________the long-run aggregate supply curve.

Accepted Answer

A)  shifts; does not shift 
B)  does not shift; does not shift 
C)  does not shift; shifts 
D)  shifts; shifts 
A)  shifts; does not shift 
B)  does not shift; does not shift 
C)  does not shift; shifts 
D)  shifts; shifts

Question 11

A decrease in foreign incomes

Accepted Answer

A)  decreases aggregate demand in the United States. 
B)  increases the aggregate quantity demanded in the United States. 
C)  increases aggregate demand in the United States. 
D)  decreases the aggregate quantity demanded in the United States. 
A)  decreases aggregate demand in the United States. 
B)  increases the aggregate quantity demanded in the United States. 
C)  increases aggregate demand in the United States. 
D)  decreases the aggregate quantity demanded in the United States.

Question 12

Last year in the country of Union, the price level increased and real GDP increased. Such an outcome might have occurred because short-run aggregate supply __________ and aggregate demand __________ .

Accepted Answer

A)  increased; did not change 
B)  did not change; increased 
C)  decreased; decreased 
D)  increased; decreased 
A)  increased; did not change 
B)  did not change; increased 
C)  decreased; decreased 
D)  increased; decreased

Question 13

When talking about aggregate supply, it is necessary to

Accepted Answer

A)  focus on the short run. 
B)  distinguish between long-run aggregate supply and short-run aggregate supply. 
C)  focus on the long run. 
D)  distinguish between long-run full employment and short-run full-employment. 
A)  focus on the short run. 
B)  distinguish between long-run aggregate supply and short-run aggregate supply. 
C)  focus on the long run. 
D)  distinguish between long-run full employment and short-run full-employment.

Question 14

-An inflationary gap means that short-run macroeconomic equilibrium GDP

Accepted Answer

A)  equals full-employment GDP. 
B)  is less than full-employment GDP. 
C)  is more than full-employment GDP. 
D)  may be less than, more than, or the same as full-employment GDP depending on the level of potential GDP. 
A)  equals full-employment GDP. 
B)  is less than full-employment GDP. 
C)  is more than full-employment GDP. 
D)  may be less than, more than, or the same as full-employment GDP depending on the level of potential GDP.

Question 15

Other things equal, along the aggregate demand curve, a higher price level is associated with

Accepted Answer

A)  a decrease in the quantity of real GDP demanded. 
B)  an increase in the quantity of real GDP demanded. 
C)  higher income levels. 
D)  a decrease in the quantity of nominal GDP demanded. 
A)  a decrease in the quantity of real GDP demanded. 
B)  an increase in the quantity of real GDP demanded. 
C)  higher income levels. 
D)  a decrease in the quantity of nominal GDP demanded.

Question 16

$\begin{array}{|l|l|l|}
\hline\begin{array}{l}
\text { Price level } \
\text { (GDP defl at or, } \
2005=100)
\end{array} & \begin{array}{l}
\text { Quantity of real } \
\text { GDP demanded } \
\text { (trillions of } 2005 \
\text { dollars) }
\end{array} & \begin{array}{l}
\text { Quantity of real } \
\text { GDP supplied } \
\text { (trillions of } 2005 \
\text { dollars) }
\end{array} \\hline 115 & 8.8 & 12.0 \
\hline 110 & 9.4 & 11.0 \
\hline 105 & 10.0 & 10.0 \
\hline 100 & 10.6 & 9.0 \
\hline 95 & 11.2 & 8.0 \
\hline 90 & 11.8 & 7.0 \
\hline
\end{array}$
-Based on the table above,
a) What is the equilibrium price level and real GDP?
b) If potential GDP is $11.0 trillion, what does that imply about the economyʹs level of employment?
c) If potential GDP is $9.0 trillion, what does that imply about the economyʹs level of employment?

Accepted Answer

a) The equilibrium price level is 105; t

Question 17

A recessionary gap occurs when

Accepted Answer

A)  nominal GDP is less than potential GDP. 
B)  nominal GDP is greater than potential GDP. 
C)  real GDP is less than potential GDP. 
D)  high rates of inflation occur. 
A)  nominal GDP is less than potential GDP. 
B)  nominal GDP is greater than potential GDP. 
C)  real GDP is less than potential GDP. 
D)  high rates of inflation occur.

Question 18

An economy currently has a inflationary gap. An increase in the money wage rate will___________ the inflationary gap and___________ the price level.

Accepted Answer

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

Question 19

Which of the following increases aggregate demand?

Accepted Answer

A)  an increase in the exchange rate 
B)  an increase in the quantity of money 
C)  an increase in taxes 
D)  a decrease in government expenditures 
A)  an increase in the exchange rate 
B)  an increase in the quantity of money 
C)  an increase in taxes 
D)  a decrease in government expenditures

Question 20

____________ economists believe that the economy is self-regulating and will be at full employment as long as monetary policy is not erratic.

Accepted Answer

A)  Keynesian 
B)  Classical 
C)  All 
D)  Monetarist 
A)  Keynesian 
B)  Classical 
C)  All 
D)  Monetarist

Along a short-run aggregate supply curve, a decrease in the price level means that

Which of the following shifts the aggregate demand curve rightward?

Full-employment equilibrium occurs when

-In the above figure, the economy is initially at point B. If the government decreases transfer payments, there is

Which of the following helps determine the growth rate of potential GDP? I. capital accumulation II. technology advances III. growth in the quantity of money

-In the above figure, B is the current long-run aggregate supply curve and E is the current Short-run aggregate supply curve. Technological advances mean the long -run aggregate supply curve and short-run aggregate supply curve

Short-run equilibrium occurs at the intersection of

A change in the full-employment quantity of labor _the short-run aggregate supply curve and_the long-run aggregate supply curve.

A decrease in foreign incomes

Last year in the country of Union, the price level increased and real GDP increased. Such an outcome might have occurred because short-run aggregate supply and aggregate demand .

When talking about aggregate supply, it is necessary to

-An inflationary gap means that short-run macroeconomic equilibrium GDP

Other things equal, along the aggregate demand curve, a higher price level is associated with

A recessionary gap occurs when

An economy currently has a inflationary gap. An increase in the money wage rate will_ the inflationary gap and_ the price level.

Which of the following increases aggregate demand?

____________ economists believe that the economy is self-regulating and will be at full employment as long as monetary policy is not erratic.

What Is Economics

The Economic Problem

Demand and Supply

Measuring Gdp and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Expenditure Multipliers: the Keynesian Model

U.S Inflation, Unemployment, and Business Cycle

Fiscal Policy

Monetary Policy

International Trade Policy

Review

Filters

Exam 10: Aggregate Supply and Aggregate Demand

Along a short-run aggregate supply curve, a decrease in the price level means that

Which of the following shifts the aggregate demand curve rightward?

Full-employment equilibrium occurs when

-In the above figure, the economy is initially at point B. If the government decreases transfer payments, there is

Which of the following helps determine the growth rate of potential GDP? I. capital accumulation II. technology advances III. growth in the quantity of money

-In the above figure, B is the current long-run aggregate supply curve and E is the current Short-run aggregate supply curve. Technological advances mean the long -run aggregate supply curve and short-run aggregate supply curve

Short-run equilibrium occurs at the intersection of

A change in the full-employment quantity of labor ___________the short-run aggregate supply curve and___________the long-run aggregate supply curve.

A decrease in foreign incomes

Last year in the country of Union, the price level increased and real GDP increased. Such an outcome might have occurred because short-run aggregate supply __________ and aggregate demand __________ .

When talking about aggregate supply, it is necessary to

-An inflationary gap means that short-run macroeconomic equilibrium GDP

Other things equal, along the aggregate demand curve, a higher price level is associated with

A recessionary gap occurs when

An economy currently has a inflationary gap. An increase in the money wage rate will___________ the inflationary gap and___________ the price level.

Which of the following increases aggregate demand?

____________ economists believe that the economy is self-regulating and will be at full employment as long as monetary policy is not erratic.

What Is Economics

The Economic Problem

Demand and Supply

Measuring Gdp and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Expenditure Multipliers: the Keynesian Model

U.S Inflation, Unemployment, and Business Cycle

Fiscal Policy

Monetary Policy

International Trade Policy

Review

Filters

A change in the full-employment quantity of labor _the short-run aggregate supply curve and_the long-run aggregate supply curve.

Last year in the country of Union, the price level increased and real GDP increased. Such an outcome might have occurred because short-run aggregate supply and aggregate demand .

An economy currently has a inflationary gap. An increase in the money wage rate will_ the inflationary gap and_ the price level.