Question 1

If higher inflation is expected in the future, then the

Accepted Answer

A)  AD curve shifts rightward. 
B)  SAS curve shifts rightward. 
C)  LAS curve shifts rightward. 
D)  None of the above answers is correct. 
A)  AD curve shifts rightward. 
B)  SAS curve shifts rightward. 
C)  LAS curve shifts rightward. 
D)  None of the above answers is correct.

Question 2

Which school of thought believes that recessions are the result of inappropriate monetary policy?

Accepted Answer

A)  only classical 
B)  Monetarist 
C)  only Keynesian 
D)  both Keynesian and classical 
A)  only classical 
B)  Monetarist 
C)  only Keynesian 
D)  both Keynesian and classical

Question 3

If the money wage and other resource prices do not change when the price level rises by 10 percent, .

Accepted Answer

A)  the short-run aggregate supply curve shifts leftward 
B)  there is movement along the short-run aggregate supply curve 
C)  the long-run aggregate supply curve shifts leftward 
D)  the long-run aggregate supply curve shifts rightward 
A)  the short-run aggregate supply curve shifts leftward 
B)  there is movement along the short-run aggregate supply curve 
C)  the long-run aggregate supply curve shifts leftward 
D)  the long-run aggregate supply curve shifts rightward

Question 4

Aggregate demand in India increased in 2008. In addition, real GDP grew strongly and inflation approached 10 percent. The best explanation for this inflation is that

Accepted Answer

A)  aggregate supply did not change. 
B)  potential GDP increased, but at a slower rate than aggregate demand. 
C)  there was a movement up along the aggregate demand curve in 2008. 
D)  potential GDP decreased. 
A)  aggregate supply did not change. 
B)  potential GDP increased, but at a slower rate than aggregate demand. 
C)  there was a movement up along the aggregate demand curve in 2008. 
D)  potential GDP decreased.

Question 5

In 2008, the Bank of England increased the countryʹs money supply and lowered its interest rate. This policy was designed to

Accepted Answer

A)  encourage people to buy more goods and services. 
B)  shift the aggregate demand curve rightward. 
C)  cause a movement up along the aggregate demand curve. 
D)  Both A and B are correct. 
A)  encourage people to buy more goods and services. 
B)  shift the aggregate demand curve rightward. 
C)  cause a movement up along the aggregate demand curve. 
D)  Both A and B are correct.

Question 6

In the short run, an increase in aggregate demand

Accepted Answer

A)  lowers the price level and increases real GDP. 
B)  raises the price level and decreases real GDP. 
C)  raises the price level and increases real GDP. 
D)  lowers the price level and decreases real GDP. 
A)  lowers the price level and increases real GDP. 
B)  raises the price level and decreases real GDP. 
C)  raises the price level and increases real GDP. 
D)  lowers the price level and decreases real GDP.

Question 7

-In the above figure, if the economy is at point a, an increase in __________will move the economy to__________

Accepted Answer

A)  expected future income; point d 
B)  real wealth from the fall in the price level; point b 
C)  expected future income; point c 
D)  real wealth from the fall in the price level; point c 
A)  expected future income; point d 
B)  real wealth from the fall in the price level; point b 
C)  expected future income; point c 
D)  real wealth from the fall in the price level; point c

Question 8

-In the above figure, which movement illustrates the impact of a falling price level and a constant money wage rate?

Accepted Answer

A)  E to F 
B)  E to J 
C)  E to I 
D)  E to H 
A)  E to F 
B)  E to J 
C)  E to I 
D)  E to H

Question 9

A change in the capital stock ___________the short-run aggregate supply curve and ___________the long-run aggregate supply curve.

Accepted Answer

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

Question 10

In a short-run macroeconomic equilibrium, real GDP exceeds potential GDP. If aggregate demand does not change, then the

Accepted Answer

A)  long-run aggregate supply curve will shift leftward as the money wage rate rises. 
B)  short-run aggregate supply curve will shift rightward as the money wage rate falls. 
C)  long-run aggregate supply curve will shift leftward as the money wage rate falls. 
D)  short-run aggregate supply curve will shift leftward as the money wage rate rises. 
A)  long-run aggregate supply curve will shift leftward as the money wage rate rises. 
B)  short-run aggregate supply curve will shift rightward as the money wage rate falls. 
C)  long-run aggregate supply curve will shift leftward as the money wage rate falls. 
D)  short-run aggregate supply curve will shift leftward as the money wage rate rises.

Question 11

The aggregate demand curve shows that, if other factors are held constant, a

Accepted Answer

A)  higher price level results in a lower interest rate. 
B)  higher price level results in an increase in the quantity of real GDP demanded. 
C)  lower price level results in inflationary conditions. 
D)  higher price level results in a decrease in the quantity of real GDP demanded. 
A)  higher price level results in a lower interest rate. 
B)  higher price level results in an increase in the quantity of real GDP demanded. 
C)  lower price level results in inflationary conditions. 
D)  higher price level results in a decrease in the quantity of real GDP demanded.

Question 12

-If the actual real GDP is less than potential real GDP, the economy is

Accepted Answer

A)  at full employment. 
B)  in a below full-employment equilibrium. 
C)  not in macroeconomic equilibrium. 
D)  in an above full-employment equilibrium. 
A)  at full employment. 
B)  in a below full-employment equilibrium. 
C)  not in macroeconomic equilibrium. 
D)  in an above full-employment equilibrium.

Question 13

In the long-run, the quantity of real GDP supplied increases when the price level increases.

Accepted Answer

A) True 
 B)False

Question 14

The short-run aggregate supply curve

Accepted Answer

A)  shows a negative relationship between the price level and real national income holding constant potential GDP and all resource prices. 
B)  shows what each producer is willing and able to produce at each level of income holding constant potential GDP and all resource prices. 
C)  shows the relationship between aggregate production and the price level holding constant potential GDP and all resource prices. 
D)  becomes vertical if there is excess production capacity within the economy. 
A)  shows a negative relationship between the price level and real national income holding constant potential GDP and all resource prices. 
B)  shows what each producer is willing and able to produce at each level of income holding constant potential GDP and all resource prices. 
C)  shows the relationship between aggregate production and the price level holding constant potential GDP and all resource prices. 
D)  becomes vertical if there is excess production capacity within the economy.

Question 15

Which of the following statements regarding aggregate supply are correct?

Accepted Answer

A)  Moving along the long-run aggregate supply curve, the money wage rate changes but the price level is constant. 
B)  Moving along the short-run aggregate supply curve, the money wage rate changes but the price level is constant. 
C)  Moving along the long-run aggregate supply curve, both the price level and the money wage rate change by the same percentage. 
D)  Moving along the short-run aggregate supply curve, both the price level and the money wage rate change by the same percentage. 
A)  Moving along the long-run aggregate supply curve, the money wage rate changes but the price level is constant. 
B)  Moving along the short-run aggregate supply curve, the money wage rate changes but the price level is constant. 
C)  Moving along the long-run aggregate supply curve, both the price level and the money wage rate change by the same percentage. 
D)  Moving along the short-run aggregate supply curve, both the price level and the money wage rate change by the same percentage.

Question 16

In long-run macroeconomic equilibrium,

Accepted Answer

A)  the price level is fixed and aggregate demand determines real GDP. 
B)  real GDP equals potential GDP. 
C)  real GDP is less than potential GDP. 
D)  real GDP and the price level are determined by short-run aggregate supply and aggregate demand and long-run aggregate supply is irrelevant. 
A)  the price level is fixed and aggregate demand determines real GDP. 
B)  real GDP equals potential GDP. 
C)  real GDP is less than potential GDP. 
D)  real GDP and the price level are determined by short-run aggregate supply and aggregate demand and long-run aggregate supply is irrelevant.

Question 17

-In the above figure, the economy initially is at point B. Then price level rises by 10. The wealth effect will help

Accepted Answer

A)  keep the economy to point B. 
B)  move the economy to point C. 
C)  move the economy to point D. 
D)  move the economy to point A. 
A)  keep the economy to point B. 
B)  move the economy to point C. 
C)  move the economy to point D. 
D)  move the economy to point A.

Question 18

The wealth effect points out that consumption decreases when peopleʹs real wealth decreases.

Accepted Answer

A) True 
 B)False

Question 19

As the price level falls, the quantity of real wealth__________ and the aggregate quantity of real GDP demanded __________ .

Accepted Answer

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

Question 20

Higher resource prices shift the

Accepted Answer

A)  short-run aggregate supply curve rightward, raising the price level and decreasing real GDP so it is less than potential GDP. 
B)  short-run aggregate supply curve leftward, raising the price level and decreasing real GDP so it is less than potential GDP. 
C)  long-run aggregate supply curve leftward, decreasing real GDP and increasing potential GDP. 
D)  short-run aggregate supply curve leftward, raising the price level and decreasing potential GDP. 
A)  short-run aggregate supply curve rightward, raising the price level and decreasing real GDP so it is less than potential GDP. 
B)  short-run aggregate supply curve leftward, raising the price level and decreasing real GDP so it is less than potential GDP. 
C)  long-run aggregate supply curve leftward, decreasing real GDP and increasing potential GDP. 
D)  short-run aggregate supply curve leftward, raising the price level and decreasing potential GDP.

If higher inflation is expected in the future, then the

Which school of thought believes that recessions are the result of inappropriate monetary policy?

If the money wage and other resource prices do not change when the price level rises by 10 percent, .

Aggregate demand in India increased in 2008. In addition, real GDP grew strongly and inflation approached 10 percent. The best explanation for this inflation is that

In 2008, the Bank of England increased the countryʹs money supply and lowered its interest rate. This policy was designed to

In the short run, an increase in aggregate demand

-In the above figure, if the economy is at point a, an increase in will move the economy to

-In the above figure, which movement illustrates the impact of a falling price level and a constant money wage rate?

A change in the capital stock _the short-run aggregate supply curve and _the long-run aggregate supply curve.

In a short-run macroeconomic equilibrium, real GDP exceeds potential GDP. If aggregate demand does not change, then the

The aggregate demand curve shows that, if other factors are held constant, a

-If the actual real GDP is less than potential real GDP, the economy is

In the long-run, the quantity of real GDP supplied increases when the price level increases.

The short-run aggregate supply curve

Which of the following statements regarding aggregate supply are correct?

In long-run macroeconomic equilibrium,

-In the above figure, the economy initially is at point B. Then price level rises by 10. The wealth effect will help

The wealth effect points out that consumption decreases when peopleʹs real wealth decreases.

As the price level falls, the quantity of real wealth and the aggregate quantity of real GDP demanded .

Higher resource prices shift the

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

If higher inflation is expected in the future, then the

Which school of thought believes that recessions are the result of inappropriate monetary policy?

If the money wage and other resource prices do not change when the price level rises by 10 percent, .

Aggregate demand in India increased in 2008. In addition, real GDP grew strongly and inflation approached 10 percent. The best explanation for this inflation is that

In 2008, the Bank of England increased the countryʹs money supply and lowered its interest rate. This policy was designed to

In the short run, an increase in aggregate demand

-In the above figure, if the economy is at point a, an increase in __________will move the economy to__________

-In the above figure, which movement illustrates the impact of a falling price level and a constant money wage rate?

A change in the capital stock ___________the short-run aggregate supply curve and ___________the long-run aggregate supply curve.

In a short-run macroeconomic equilibrium, real GDP exceeds potential GDP. If aggregate demand does not change, then the

The aggregate demand curve shows that, if other factors are held constant, a

-If the actual real GDP is less than potential real GDP, the economy is

In the long-run, the quantity of real GDP supplied increases when the price level increases.

The short-run aggregate supply curve

Which of the following statements regarding aggregate supply are correct?

In long-run macroeconomic equilibrium,

-In the above figure, the economy initially is at point B. Then price level rises by 10. The wealth effect will help

The wealth effect points out that consumption decreases when peopleʹs real wealth decreases.

As the price level falls, the quantity of real wealth__________ and the aggregate quantity of real GDP demanded __________ .

Higher resource prices shift the

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

-In the above figure, if the economy is at point a, an increase in will move the economy to

A change in the capital stock _the short-run aggregate supply curve and _the long-run aggregate supply curve.

As the price level falls, the quantity of real wealth and the aggregate quantity of real GDP demanded .