Question 1

Figure 24-2  
-Refer to Figure 24-2. Ceteris paribus, a decrease in the size of the labor force would be represented by a movement from

Accepted Answer

A)  SRAS1 to SRAS2. 
B)  SRAS2 to SRAS1. 
C)  point A to point B. 
D)  point B to point A. 
A)  SRAS1 to SRAS2. 
B)  SRAS2 to SRAS1. 
C)  point A to point B. 
D)  point B to point A.

Question 2

Figure 24-2  
-Refer to Figure 24-2. Ceteris paribus, an increase in the number of workers and firms adjusting to having previously overestimated the price level would be represented by a movement from

Accepted Answer

A)  SRAS1 to SRAS2. 
B)  SRAS2 to SRAS1. 
C)  point A to point B. 
D)  point B to point A. 
A)  SRAS1 to SRAS2. 
B)  SRAS2 to SRAS1. 
C)  point A to point B. 
D)  point B to point A.

Question 3

The basic aggregate demand and aggregate supply curve model helps explain ________ fluctuations in real GDP and the price level.

Accepted Answer

A)  short-term 
B)  long-term 
C)  both short-term and long-term 
D)  unrelated 
A)  short-term 
B)  long-term 
C)  both short-term and long-term 
D)  unrelated

Question 4

When the price level rises from 110 to 115, the aggregate level of GDP supplied rises from $80 billion to $120 billion. This ________ relationship represents the ________ relationship between the quantity of real GDP firms are willing to supply and the price level.

Accepted Answer

A)  negative; short-run 
B)  positive; short-run 
C)  negative; long-run 
D)  positive; long-run 
A)  negative; short-run 
B)  positive; short-run 
C)  negative; long-run 
D)  positive; long-run

Question 5

According to Marx, which of the following factors of production did not contribute anything of value to production?

Accepted Answer

A)  labor 
B)  capital 
C)  natural resources 
D)  entrepreneurship 
A)  labor 
B)  capital 
C)  natural resources 
D)  entrepreneurship

Question 6

What is a supply shock, and why might a supply shock lead to stagflation?

Accepted Answer

A supply shock is an unexpected event th

Question 7

Monetarists believe that the quantity of money should be increased at an increasing rate.

Accepted Answer

A) True 
 B)False

Question 8

The short-run aggregate supply curve is vertical.

Accepted Answer

A) True 
 B)False

Question 9

Figure 24-1  
-Refer to Figure 24-1. Ceteris paribus, an increase in the value of the domestic currency relative to foreign currencies would be represented by a movement from

Accepted Answer

A)  AD1 to AD2. 
B)  AD2 to AD1. 
C)  point A to point B. 
D)  point B to point A. 
A)  AD1 to AD2. 
B)  AD2 to AD1. 
C)  point A to point B. 
D)  point B to point A.

Question 10

Which of the following would not be considered a positive addition to household wealth?

Accepted Answer

A)  the equity in one's home 
B)  1,000 shares of Microsoft stock 
C)  a credit card balance 
D)  the balance in your checking account 
A)  the equity in one's home 
B)  1,000 shares of Microsoft stock 
C)  a credit card balance 
D)  the balance in your checking account

Question 11

If full-employment GDP is equal to $4.2 trillion, what does the long-run aggregate supply curve look like?

Accepted Answer

A)  It is a horizontal line at $4.2 trillion of GDP. 
B)  It is a vertical line at a level of GDP below $4.2 trillion. 
C)  It is a vertical line at $4.2 trillion of GDP. 
D)  It is a vertical line at a level of GDP above $4.2 trillion. 
A)  It is a horizontal line at $4.2 trillion of GDP. 
B)  It is a vertical line at a level of GDP below $4.2 trillion. 
C)  It is a vertical line at $4.2 trillion of GDP. 
D)  It is a vertical line at a level of GDP above $4.2 trillion.

Question 12

Most recessions in the United States since World War II have begun with

Accepted Answer

A)  a decline in residential construction. 
B)  a rapid increase in the price level. 
C)  a substantial number of bank failures. 
D)  a stock market crash. 
A)  a decline in residential construction. 
B)  a rapid increase in the price level. 
C)  a substantial number of bank failures. 
D)  a stock market crash.

Question 13

Interest rates in the economy have risen. How will this affect aggregate demand and equilibrium in the short run?

Accepted Answer

A)  Aggregate demand will fall, the equilibrium price level will fall, and the equilibrium level of GDP will fall. 
B)  Aggregate demand will fall, the equilibrium price level will rise, and the equilibrium level of GDP will fall. 
C)  Aggregate demand will rise, the equilibrium price level will rise, and the equilibrium level of GDP will rise. 
D)  Aggregate demand will rise, the equilibrium price level will fall, and the equilibrium level of GDP will rise. 
A)  Aggregate demand will fall, the equilibrium price level will fall, and the equilibrium level of GDP will fall. 
B)  Aggregate demand will fall, the equilibrium price level will rise, and the equilibrium level of GDP will fall. 
C)  Aggregate demand will rise, the equilibrium price level will rise, and the equilibrium level of GDP will rise. 
D)  Aggregate demand will rise, the equilibrium price level will fall, and the equilibrium level of GDP will rise.

Question 14

Which of the following would cause the short-run aggregate supply curve to shift to the left?

Accepted Answer

A)  an increase in the price level 
B)  an increase in inflation expectations 
C)  a technological advance 
D)  a decrease in interest rates 
A)  an increase in the price level 
B)  an increase in inflation expectations 
C)  a technological advance 
D)  a decrease in interest rates

Question 15

Explain how the economy moves back to full employment from recession. Be sure to detail what happens to short-run aggregate supply, unemployment, equilibrium GDP and the price level.

Accepted Answer

When an economy enters a recession, sale

Question 16

A decrease in disposable income will shift the aggregate demand curve to the left.

Accepted Answer

A) True 
 B)False

Question 17

Stagflation occurs when aggregate supply and aggregate demand both increase.

Accepted Answer

A) True 
 B)False

Question 18

The international trade effect states that

Accepted Answer

A)  an increase in the price level will raise net exports. 
B)  an increase in the price level will lower net exports. 
C)  an increase in the price level will raise exports. 
D)  an increase in the price level will lower imports. 
A)  an increase in the price level will raise net exports. 
B)  an increase in the price level will lower net exports. 
C)  an increase in the price level will raise exports. 
D)  an increase in the price level will lower imports.

Question 19

Figure 24-1  
-Refer to Figure 24-1. Ceteris paribus, an increase in government spending would be represented by a movement from

Accepted Answer

A)  AD1 to AD2. 
B)  AD2 to AD1. 
C)  point A to point B. 
D)  point B to point A. 
A)  AD1 to AD2. 
B)  AD2 to AD1. 
C)  point A to point B. 
D)  point B to point A.

Question 20

One factor which brought on the recession of 2007-2009 was the end of the housing bubble.

Accepted Answer

A) True 
 B)False

Exam 24: Aggregate Demand and Aggregate Supply Analysis

Figure 24-2 -Refer to Figure 24-2. Ceteris paribus, a decrease in the size of the labor force would be represented by a movement from

Figure 24-2 -Refer to Figure 24-2. Ceteris paribus, an increase in the number of workers and firms adjusting to having previously overestimated the price level would be represented by a movement from

The basic aggregate demand and aggregate supply curve model helps explain ________ fluctuations in real GDP and the price level.

When the price level rises from 110 to 115, the aggregate level of GDP supplied rises from $80 billion to $120 billion. This ________ relationship represents the ________ relationship between the quantity of real GDP firms are willing to supply and the price level.

According to Marx, which of the following factors of production did not contribute anything of value to production?

What is a supply shock, and why might a supply shock lead to stagflation?

Monetarists believe that the quantity of money should be increased at an increasing rate.

The short-run aggregate supply curve is vertical.

Figure 24-1 -Refer to Figure 24-1. Ceteris paribus, an increase in the value of the domestic currency relative to foreign currencies would be represented by a movement from

Which of the following would not be considered a positive addition to household wealth?

If full-employment GDP is equal to $4.2 trillion, what does the long-run aggregate supply curve look like?

Most recessions in the United States since World War II have begun with

Interest rates in the economy have risen. How will this affect aggregate demand and equilibrium in the short run?

Which of the following would cause the short-run aggregate supply curve to shift to the left?

Explain how the economy moves back to full employment from recession. Be sure to detail what happens to short-run aggregate supply, unemployment, equilibrium GDP and the price level.

A decrease in disposable income will shift the aggregate demand curve to the left.

Stagflation occurs when aggregate supply and aggregate demand both increase.

The international trade effect states that

Figure 24-1 -Refer to Figure 24-1. Ceteris paribus, an increase in government spending would be represented by a movement from

One factor which brought on the recession of 2007-2009 was the end of the housing bubble.

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Externalities, Environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Money, Banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, Unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

When the price level rises from 110 to 115, the aggregate level of GDP supplied rises from $80 billion to $120 billion. This relationship represents the relationship between the quantity of real GDP firms are willing to supply and the price level.