Question 1

Which of the following contributed to the sharp economic downturn during 2008?

Accepted Answer

A) rising housing and stock prices 
B) falling housing and stock prices 
C) rising housing prices but falling stock prices 
D) falling housing prices but rising stock prices 
A) rising housing and stock prices 
B) falling housing and stock prices 
C) rising housing prices but falling stock prices 
D) falling housing prices but rising stock prices

Question 2

Beginning from a point of short-run equilibrium at point E2 in Figure 10-18, the economy's movement to a new position of long-run equilibrium from that point would best be described as

Accepted Answer

A) a movement along the AD2 curve with a shift in the SRAS1 curve to SRAS2. 
B) a movement along the SRAS2 curve with a shift in the AD2 curve. 
C) a shift in the LRAS curve to an intersection at E3. 
D) no shift of any kind. 
A) a movement along the AD2 curve with a shift in the SRAS1 curve to SRAS2. 
B) a movement along the SRAS2 curve with a shift in the AD2 curve. 
C) a shift in the LRAS curve to an intersection at E3. 
D) no shift of any kind.

Question 3

The usual results of an adverse supply shock are

Accepted Answer

A) a rise in prices and a fall in output. 
B) a fall in prices and a rise in output. 
C) increased growth and lower inflation. 
D) a rise in prices and a rise in output. 
A) a rise in prices and a fall in output. 
B) a fall in prices and a rise in output. 
C) increased growth and lower inflation. 
D) a rise in prices and a rise in output.

Question 4

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

Accepted Answer

A) unfavorable weather conditions in the nation's agricultural areas 
B) an increase in income tax rates 
C) an increase in the expected inflation rate 
D) a reduction in resource prices 
A) unfavorable weather conditions in the nation's agricultural areas 
B) an increase in income tax rates 
C) an increase in the expected inflation rate 
D) a reduction in resource prices

Question 5

Which is most likely to cause a temporary spurt in the growth of GDP that cannot be maintained in the long run?

Accepted Answer

A) An unanticipated increase in aggregate demand. 
B) An anticipated increase in aggregate demand. 
C) An increase in long run aggregate supply (LRAS). 
D) An increase in wage rates 
A) An unanticipated increase in aggregate demand. 
B) An anticipated increase in aggregate demand. 
C) An increase in long run aggregate supply (LRAS). 
D) An increase in wage rates

Question 6

An increase in the consumer sentiment index indicates that consumers are

Accepted Answer

A) becoming more optimistic about their future income and employment prospects. 
B) becoming less optimistic about their future income and employment prospects. 
C) expecting the inflation rate to rise in the near future. 
D) expecting the inflation rate to fall in the near future. 
A) becoming more optimistic about their future income and employment prospects. 
B) becoming less optimistic about their future income and employment prospects. 
C) expecting the inflation rate to rise in the near future. 
D) expecting the inflation rate to fall in the near future.

Question 7

The expected price level is important because

Accepted Answer

A) it is the equilibrium price level in the short run 
B) it determines the actual price level in the short run 
C) it determines the actual price level in the long run 
D) firms and resource owners make long-term agreements based on the expected price level 
A) it is the equilibrium price level in the short run 
B) it determines the actual price level in the short run 
C) it determines the actual price level in the long run 
D) firms and resource owners make long-term agreements based on the expected price level

Question 8

Other things constant, a reduction in the real interest rate will

Accepted Answer

A) cause consumers to cut back on their purchases of durable items like automobiles. 
B) induce businesses to increase their level of investment. 
C) increase the natural rate of unemployment. 
D) increase the actual rate of unemployment. 
A) cause consumers to cut back on their purchases of durable items like automobiles. 
B) induce businesses to increase their level of investment. 
C) increase the natural rate of unemployment. 
D) increase the actual rate of unemployment.

Question 9

Within the AD/AS model, an unanticipated increase in short-run aggregate supply will cause real output to

Accepted Answer

A) increase and the general level of prices to fall. 
B) decrease and the general level of prices to rise. 
C) increase and the general level of prices to rise. 
D) decrease and the general level of prices to fall. 
A) increase and the general level of prices to fall. 
B) decrease and the general level of prices to rise. 
C) increase and the general level of prices to rise. 
D) decrease and the general level of prices to fall.

Question 10

The short-run effect of a sudden increase in stock prices will be

Accepted Answer

A) an increase in output and a decrease in prices. 
B) an increase in both output and prices. 
C) a decrease in both output and prices. 
D) a decrease in output and an increase in prices. 
A) an increase in output and a decrease in prices. 
B) an increase in both output and prices. 
C) a decrease in both output and prices. 
D) a decrease in output and an increase in prices.

Question 11

Use the figure below to answer the following question(s).
Figure 10-15  
-The economy's short-run (SRAS ) and long-run (LRAS) aggregate supply curves are shown in Figure 10-15, along with three alternative aggregate demand curves and the accompanying equilibrium points. At which point will resource prices naturally tend to increase?

Accepted Answer

A) A 
B) B 
C) C 
D) D 
A) A 
B) B 
C) C 
D) D

Question 12

If an improvement in the quality of education in the United States increases the productivity of labor, this will

Accepted Answer

A) increase aggregate demand and decrease aggregate supply. 
B) increase short-run aggregate supply and reduce aggregate demand. 
C) decrease aggregate demand and increase short-run aggregate supply. 
D) increase both long-run and short-run aggregate supply. 
A) increase aggregate demand and decrease aggregate supply. 
B) increase short-run aggregate supply and reduce aggregate demand. 
C) decrease aggregate demand and increase short-run aggregate supply. 
D) increase both long-run and short-run aggregate supply.

Question 13

Figure 10-18  
-Beginning in Figure 10-18 from long-run equilibrium at point E1, the aggregate demand curve shifts to AD2. The economy's path to a new long-run equilibrium is represented by a movement from

Accepted Answer

A) E3 to E1 to E2. 
B) E1 to E3 to E2. 
C) E2 to E1 to E2. 
D) E1 to E2 to E3. 
A) E3 to E1 to E2. 
B) E1 to E3 to E2. 
C) E2 to E1 to E2. 
D) E1 to E2 to E3.

Question 14

Use the figure below to answer the following question(s).
Figure 10-14  
-At which of the following points in Figure 10-14 would short-run equilibrium occur immediately following an adverse supply-side shock?

Accepted Answer

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

Question 15

Use the figure below to answer the following question(s).
Figure 10-11  
-In Figure 10-11, which of the following would most likely cause the movement from point E1 to point E2?

Accepted Answer

A) an increase in the expected inflation rate 
B) a decrease in the expected inflation rate 
C) a major technological advance 
D) a temporary reduction in oil prices 
A) an increase in the expected inflation rate 
B) a decrease in the expected inflation rate 
C) a major technological advance 
D) a temporary reduction in oil prices

Question 16

Starting from long-run equilibrium at point A, which of the following points would occur immediately following an unanticipated decrease in stock prices?

Accepted Answer

A) A 
B) B 
C) C 
D) D 
A) A 
B) B 
C) C 
D) D

Question 17

If the U.S. price level increased relative to price levels in foreign countries, what would be the impact on domestic aggregate supply and aggregate demand curves?

Accepted Answer

A) the aggregate supply curve would shift outward and the aggregate demand curve would remain unchanged 
B) the aggregate supply curve would shift inward and the aggregate demand curve would remain unchanged 
C) the aggregate demand curve would shift outward and the aggregate supply curve would remain unchanged 
D) the aggregate demand curve would shift inward and the aggregate supply curve would remain unchanged 
E) the domestic aggregate demand and supply curves would remain unchanged 
A) the aggregate supply curve would shift outward and the aggregate demand curve would remain unchanged 
B) the aggregate supply curve would shift inward and the aggregate demand curve would remain unchanged 
C) the aggregate demand curve would shift outward and the aggregate supply curve would remain unchanged 
D) the aggregate demand curve would shift inward and the aggregate supply curve would remain unchanged 
E) the domestic aggregate demand and supply curves would remain unchanged

Question 18

Use the figure below to answer the following question(s).
Figure 10-1  
-At which point in Figure 10-1 is the economy experiencing an economic boom?

Accepted Answer

A) A 
B) B 
C) C 
D) D 
A) A 
B) B 
C) C 
D) D

Question 19

Within the AD/AS model, if consumers increase their savings and cut back on their spending, the

Accepted Answer

A) natural rate of unemployment will increase. 
B) real interest rate will decrease and, thereby, cushion the reduction in consumption spending. 
C) real interest rate will increase because of the higher rate of saving. 
D) long-run aggregate supply will decrease to restore equilibrium. 
A) natural rate of unemployment will increase. 
B) real interest rate will decrease and, thereby, cushion the reduction in consumption spending. 
C) real interest rate will increase because of the higher rate of saving. 
D) long-run aggregate supply will decrease to restore equilibrium.

Question 20

Suppose there is an unexpected increase in real interest rates. Using the AD/AS model, describe the effects of this policy in the long run and the short run, assuming everything else equal.

Accepted Answer

In the short run, aggregate demand would

Which of the following contributed to the sharp economic downturn during 2008?

Beginning from a point of short-run equilibrium at point E₂ in Figure 10-18, the economy's movement to a new position of long-run equilibrium from that point would best be described as

The usual results of an adverse supply shock are

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

Which is most likely to cause a temporary spurt in the growth of GDP that cannot be maintained in the long run?

An increase in the consumer sentiment index indicates that consumers are

The expected price level is important because

Other things constant, a reduction in the real interest rate will

Within the AD/AS model, an unanticipated increase in short-run aggregate supply will cause real output to

The short-run effect of a sudden increase in stock prices will be

If an improvement in the quality of education in the United States increases the productivity of labor, this will

Figure 10-18 -Beginning in Figure 10-18 from long-run equilibrium at point E₁, the aggregate demand curve shifts to AD₂. The economy's path to a new long-run equilibrium is represented by a movement from

Use the figure below to answer the following question(s). Figure 10-14 -At which of the following points in Figure 10-14 would short-run equilibrium occur immediately following an adverse supply-side shock?

Use the figure below to answer the following question(s). Figure 10-11 -In Figure 10-11, which of the following would most likely cause the movement from point E₁ to point E₂?

Starting from long-run equilibrium at point A, which of the following points would occur immediately following an unanticipated decrease in stock prices?

If the U.S. price level increased relative to price levels in foreign countries, what would be the impact on domestic aggregate supply and aggregate demand curves?

Use the figure below to answer the following question(s). Figure 10-1 -At which point in Figure 10-1 is the economy experiencing an economic boom?

Within the AD/AS model, if consumers increase their savings and cut back on their spending, the

Suppose there is an unexpected increase in real interest rates. Using the AD/AS model, describe the effects of this policy in the long run and the short run, assuming everything else equal.

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Taking the Nations Economic Pulse

Economic Fluctuations, Unemployment, and Inflation

An Introduction to Basic Macroeconomic Markets

Fiscal Policy: the Keynesian View and the Historical Development of Macroeconomics

Fiscal Policy, Incentives, and Secondary Effects

Money and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, Output, and Employment

Creating an Environment for Growth and Prosperity

Institutions, Policies, and Cross-Country Differences in Income and Growth

Gaining From International Trade

International Finance and the Foreign Exchange Market

Filters

Exam 10: Dynamic Change, Economic Fluctuations, and the Ad-As Model

Which of the following contributed to the sharp economic downturn during 2008?

Beginning from a point of short-run equilibrium at point E2 in Figure 10-18, the economy's movement to a new position of long-run equilibrium from that point would best be described as

The usual results of an adverse supply shock are

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

Which is most likely to cause a temporary spurt in the growth of GDP that cannot be maintained in the long run?

An increase in the consumer sentiment index indicates that consumers are

The expected price level is important because

Other things constant, a reduction in the real interest rate will

Within the AD/AS model, an unanticipated increase in short-run aggregate supply will cause real output to

The short-run effect of a sudden increase in stock prices will be

If an improvement in the quality of education in the United States increases the productivity of labor, this will

Figure 10-18 -Beginning in Figure 10-18 from long-run equilibrium at point E1, the aggregate demand curve shifts to AD2. The economy's path to a new long-run equilibrium is represented by a movement from

Use the figure below to answer the following question(s). Figure 10-14 -At which of the following points in Figure 10-14 would short-run equilibrium occur immediately following an adverse supply-side shock?

Use the figure below to answer the following question(s). Figure 10-11 -In Figure 10-11, which of the following would most likely cause the movement from point E1 to point E2?

Starting from long-run equilibrium at point A, which of the following points would occur immediately following an unanticipated decrease in stock prices?

If the U.S. price level increased relative to price levels in foreign countries, what would be the impact on domestic aggregate supply and aggregate demand curves?

Use the figure below to answer the following question(s). Figure 10-1 -At which point in Figure 10-1 is the economy experiencing an economic boom?

Within the AD/AS model, if consumers increase their savings and cut back on their spending, the

Suppose there is an unexpected increase in real interest rates. Using the AD/AS model, describe the effects of this policy in the long run and the short run, assuming everything else equal.

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Taking the Nations Economic Pulse

Economic Fluctuations, Unemployment, and Inflation

An Introduction to Basic Macroeconomic Markets

Fiscal Policy: the Keynesian View and the Historical Development of Macroeconomics

Fiscal Policy, Incentives, and Secondary Effects

Money and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, Output, and Employment

Creating an Environment for Growth and Prosperity

Institutions, Policies, and Cross-Country Differences in Income and Growth

Gaining From International Trade

International Finance and the Foreign Exchange Market

Filters

Beginning from a point of short-run equilibrium at point E₂ in Figure 10-18, the economy's movement to a new position of long-run equilibrium from that point would best be described as

Figure 10-18 -Beginning in Figure 10-18 from long-run equilibrium at point E₁, the aggregate demand curve shifts to AD₂. The economy's path to a new long-run equilibrium is represented by a movement from

Use the figure below to answer the following question(s). Figure 10-11 -In Figure 10-11, which of the following would most likely cause the movement from point E₁ to point E₂?