Question 1

An aggregate supply curve depicts the relationship between

Accepted Answer

A)  household expenditures and household income. 
B)  the price level and nominal GDP. 
C)  the price level and the aggregate quantity demanded. 
D)  the price level and the aggregate quantity supplied. 
A)  household expenditures and household income. 
B)  the price level and nominal GDP. 
C)  the price level and the aggregate quantity demanded. 
D)  the price level and the aggregate quantity supplied.

Question 2

In the short run, the equilibrium level of real GDP

Accepted Answer

A)  is necessarily greater than potential GDP. 
B)  could be less than, equal to, or greater than potential GDP. 
C)  is necessarily equal to potential GDP. 
D)  is necessarily less than potential GDP. 
A)  is necessarily greater than potential GDP. 
B)  could be less than, equal to, or greater than potential GDP. 
C)  is necessarily equal to potential GDP. 
D)  is necessarily less than potential GDP.

Question 3

An increase in the quantity of capital shifts both the long-run and short-run aggregate supply curves.

Accepted Answer

A) True 
 B)False

Question 4

$$\begin{array} { | l | l | l | l | } 
\hline \begin{array} { l } 
\text { Price } \
\text { level }
\end{array} & \begin{array} { l } 
\text { A ggregate } \
\text { demand } \
\text { (trillions of } \
\text { 2005 dollars) }
\end{array} & \begin{array} { l } 
\text { Short-run } \
\text { aggregate } \
\text { supply } \
\text { (trillions of } \
\text { 2005 dollars) }
\end{array} & \begin{array} { l } 
\text { Long-run } \
\text { aggregate } \
\text { supply } \
\text { (trillions of } \
\text { 2005 dollars) }
\end{array} \
\hline 140 & 4 & 8 & 7 \
\hline 130 & 5 & 7 & 7 \
\hline 120 & 6 & 6 & 7 \
\hline 110 & 7 & 5 & 7 \
\hline 100 & 8 & 4 & 7 \
\hline
\end{array}$$
-The data in the above table show that when the price level is 120, if aggregate demand does not change then the

Accepted Answer

A)  long-run aggregate supply curve will shift rightward. 
B)  long-run aggregate supply curve will shift leftward. 
C)  short-run aggregate supply curve will shift rightward. 
D)  short-run aggregate supply curve will shift leftward. 
A)  long-run aggregate supply curve will shift rightward. 
B)  long-run aggregate supply curve will shift leftward. 
C)  short-run aggregate supply curve will shift rightward. 
D)  short-run aggregate supply curve will shift leftward.

Question 5

Which of the following occurs while moving along a short-run aggregate supply curve?

Accepted Answer

A)  Neither the price level nor the money wage rate changes. 
B)  The money wage rate and the price level change by the same percentage. 
C)  The price level changes and the money wage rate is constant. 
D)  The money wage rate changes and the price level is constant. 
A)  Neither the price level nor the money wage rate changes. 
B)  The money wage rate and the price level change by the same percentage. 
C)  The price level changes and the money wage rate is constant. 
D)  The money wage rate changes and the price level is constant.

Question 6

According to the intertemporal substitution effect, when the price level rises and other things remain the same

Accepted Answer

A)  government taxes rise. 
B)  the quantity of money increases. 
C)  the interest rate falls. 
D)  the interest rate rises. 
A)  government taxes rise. 
B)  the quantity of money increases. 
C)  the interest rate falls. 
D)  the interest rate rises.

Question 7

The Federal Reserve lowers interest rates. As a result, in the short run, real GDP_____________ and the price level _____________.

Accepted Answer

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

Question 8

$$\begin{array}{l}
\text { Real GDP supplied }\
\begin{array} { | l | l | l | l | } 
\hline \text { Price level } & \begin{array} { l } 
\text { Real GDP } \
\text { demanded } \
\text { (dollars) }
\end{array} & \begin{array} { l } 
\text { Short run } \
\text { (dollars) }
\end{array} & \begin{array} { l } 
\text { Long run } \
\text { (dollars) }
\end{array} \
\hline 90 & 700 & 300 & 600 \
\hline 100 & 600 & 400 & 600 \
\hline 110 & 500 & 500 & 600 \
\hline 120 & 400 & 600 & 600 \
\hline
\end{array}
\end{array}$$
-The table above gives the aggregate demand and aggregate supply schedules in Lotus Land. The short-run macroeconomic equilibrium is a price level of ____________and a real GDP of____________ .

Accepted Answer

A)  100; $400 
B)  120; $400 
C)  110; $500 
D)  90; $400 
A)  100; $400 
B)  120; $400 
C)  110; $500 
D)  90; $400

Question 9

If you are have $1,000 of money in the bank and the price level rises 5 percent, your

Accepted Answer

A)  money is worth less in terms of what it can purchase. 
B)  money is worth the same in terms of what it can purchase. 
C)  money is worth more in terms of what it can purchase. 
D)  purchasing power has risen. 
A)  money is worth less in terms of what it can purchase. 
B)  money is worth the same in terms of what it can purchase. 
C)  money is worth more in terms of what it can purchase. 
D)  purchasing power has risen.

Question 10

What happens if the economy is at its long-run equilibrium and aggregate demand increases?

Accepted Answer

The increase in aggregate demand means t

Question 11

The short-run aggregate supply curve shifts when
i. the full-employment quantity of capital changes.
ii. technology advances.

Accepted Answer

A)  neither i nor ii 
B)  i only 
C)  ii only 
D)  i and ii 
A)  neither i nor ii 
B)  i only 
C)  ii only 
D)  i and ii

Question 12

In the short run, firms expand their production when the price level rises because

Accepted Answer

A)  firms can increase their profits by increasing their maintenance. 
B)  the money wage rate remains constant so the higher prices for their product makes it profitable for firms to expand production. 
C)  the higher prices allow the firm to hire more workers by offering higher wages, thereby increasing productivity and profits. 
D)  each firm must keep its production up to the level of its rivals, and some firms will expand production as the price level increases. 
A)  firms can increase their profits by increasing their maintenance. 
B)  the money wage rate remains constant so the higher prices for their product makes it profitable for firms to expand production. 
C)  the higher prices allow the firm to hire more workers by offering higher wages, thereby increasing productivity and profits. 
D)  each firm must keep its production up to the level of its rivals, and some firms will expand production as the price level increases.

Question 13

Give examples of factors that decrease short-run aggregate supply. Which way does the SAS curve shift?

Accepted Answer

Aggregate supply decreases if potential

Question 14

A change in _____________results in a movement along the short -run aggregate supply curve but does not shift the short-run aggregate supply curve.

Accepted Answer

A)  the quantity of capital 
B)  technology 
C)  the price level 
D)  the money wage rate 
A)  the quantity of capital 
B)  technology 
C)  the price level 
D)  the money wage rate

Question 15

The short-run aggregate supply curve is upward sloping because in the short run the

Accepted Answer

A)  both the money wage rate and the price level change. 
B)  money wage rate changes but the price level does not. 
C)  neither the money wage rate nor the price level can change. 
D)  price level changes but the money wage rate does not. 
A)  both the money wage rate and the price level change. 
B)  money wage rate changes but the price level does not. 
C)  neither the money wage rate nor the price level can change. 
D)  price level changes but the money wage rate does not.

Question 16

A change in__________ creates a movement along the aggregate demand curve, while a change in__________ Shifts the aggregate demand curve.

Accepted Answer

A)  expected profits; tax rates 
B)  foreign income; the foreign exchange rate 
C)  real wealth; human capital 
D)  the price level; government expenditures 
A)  expected profits; tax rates 
B)  foreign income; the foreign exchange rate 
C)  real wealth; human capital 
D)  the price level; government expenditures

Question 17

-In the above figure, the movement from point B to point A might be the result of

Accepted Answer

A)  an increase in government expenditures because of a war. 
B)  an increase in the demand for manufacturing goods because of new technology. 
C)  an increase in government expenditures because of increases in education expenditures. 
D)  a fall in the price level. 
A)  an increase in government expenditures because of a war. 
B)  an increase in the demand for manufacturing goods because of new technology. 
C)  an increase in government expenditures because of increases in education expenditures. 
D)  a fall in the price level.

Question 18

When the labor market is int full employment,

Accepted Answer

A)  the price level is stable. 
B)  the price level equals potential prices. 
C)  real GDP equals potential GDP. 
D)  the SAS curve is horizontal. 
A)  the price level is stable. 
B)  the price level equals potential prices. 
C)  real GDP equals potential GDP. 
D)  the SAS curve is horizontal.

Question 19

-The above figure illustrates

Accepted Answer

A)  an inflationary gap. 
B)  a full-employment equilibrium. 
C)  a recessionary gap. 
D)  an equilibrium at the economyʹs physical limits. 
A)  an inflationary gap. 
B)  a full-employment equilibrium. 
C)  a recessionary gap. 
D)  an equilibrium at the economyʹs physical limits.

Question 20

Which of the following changes while moving along the aggregate demand curve?

Accepted Answer

A)  the amount of money in the economy 
B)  future profits from investment projects 
C)  the price level 
D)  future incomes of households 
A)  the amount of money in the economy 
B)  future profits from investment projects 
C)  the price level 
D)  future incomes of households

An aggregate supply curve depicts the relationship between

In the short run, the equilibrium level of real GDP

An increase in the quantity of capital shifts both the long-run and short-run aggregate supply curves.

Which of the following occurs while moving along a short-run aggregate supply curve?

According to the intertemporal substitution effect, when the price level rises and other things remain the same

The Federal Reserve lowers interest rates. As a result, in the short run, real GDP_ and the price level _.

If you are have $1,000 of money in the bank and the price level rises 5 percent, your

What happens if the economy is at its long-run equilibrium and aggregate demand increases?

The short-run aggregate supply curve shifts when i. the full-employment quantity of capital changes. ii. technology advances.

In the short run, firms expand their production when the price level rises because

Give examples of factors that decrease short-run aggregate supply. Which way does the SAS curve shift?

A change in _____________results in a movement along the short -run aggregate supply curve but does not shift the short-run aggregate supply curve.

The short-run aggregate supply curve is upward sloping because in the short run the

A change in creates a movement along the aggregate demand curve, while a change in Shifts the aggregate demand curve.

-In the above figure, the movement from point B to point A might be the result of

When the labor market is int full employment,

-The above figure illustrates

Which of the following changes while moving along the aggregate demand curve?

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

An aggregate supply curve depicts the relationship between

In the short run, the equilibrium level of real GDP

An increase in the quantity of capital shifts both the long-run and short-run aggregate supply curves.

Which of the following occurs while moving along a short-run aggregate supply curve?

According to the intertemporal substitution effect, when the price level rises and other things remain the same

The Federal Reserve lowers interest rates. As a result, in the short run, real GDP_____________ and the price level _____________.

If you are have $1,000 of money in the bank and the price level rises 5 percent, your

What happens if the economy is at its long-run equilibrium and aggregate demand increases?

The short-run aggregate supply curve shifts when i. the full-employment quantity of capital changes. ii. technology advances.

In the short run, firms expand their production when the price level rises because

Give examples of factors that decrease short-run aggregate supply. Which way does the SAS curve shift?

A change in _____________results in a movement along the short -run aggregate supply curve but does not shift the short-run aggregate supply curve.

The short-run aggregate supply curve is upward sloping because in the short run the

A change in__________ creates a movement along the aggregate demand curve, while a change in__________ Shifts the aggregate demand curve.

-In the above figure, the movement from point B to point A might be the result of

When the labor market is int full employment,

-The above figure illustrates

Which of the following changes while moving along the aggregate demand curve?

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

The Federal Reserve lowers interest rates. As a result, in the short run, real GDP_ and the price level _.

A change in creates a movement along the aggregate demand curve, while a change in Shifts the aggregate demand curve.