Question 1

Economic growth is represented by a rightward shift of the long-run aggregate supply curve (LRAS).

Accepted Answer

A) True 
 B)False

Question 2

Along the short-run aggregate supply curve (SRAS), an increase (rightward shift) in the aggregate demand curve will increase:

Accepted Answer

A)  both the price level and real GDP. 
B)  real GDP without raising the price level. 
C)  the price level without affecting real GDP. 
D)  the price level but reduce real GDP. 
A)  both the price level and real GDP. 
B)  real GDP without raising the price level. 
C)  the price level without affecting real GDP. 
D)  the price level but reduce real GDP.

Question 3

Exhibit 14A-1  Aggregate demand and supply model   Beginning from long-run equilibrium at point E1 in Exhibit 14A-1, the aggregate demand curve shifts to AD2 . The real GDP and price level (CPI) in short-run equilibrium will be:

Accepted Answer

A)  $12 billion and 200. 
B)  $8 billion and 250. 
C)  $8 billion and 150. 
D)  $12 billion and 250. 
A)  $12 billion and 200. 
B)  $8 billion and 250. 
C)  $8 billion and 150. 
D)  $12 billion and 250.

Question 4

In the short run, wages are assumed to be:

Accepted Answer

A)  constant. 
B)  sticky. 
C)  inflexible. 
D)  all of the above are true. 
A)  constant. 
B)  sticky. 
C)  inflexible. 
D)  all of the above are true.

Question 5

Exhibit 14A-3  Macro AD-AS Model   In Exhibit 14A-3, the level of real GDP associated with Y1:

Accepted Answer

A)  is equal to potential real GDP. 
B)  is an inflationary gap real GDP. 
C)  is a long-run equilibrium. 
D)  is caused by flexible wages and prices. 
A)  is equal to potential real GDP. 
B)  is an inflationary gap real GDP. 
C)  is a long-run equilibrium. 
D)  is caused by flexible wages and prices.

Question 6

The short-run aggregate supply curve is upward-sloping because:

Accepted Answer

A)  the quantity of real output supplied is inversely related to aggregate supply. 
B)  nominal incomes are fixed. 
C)  of the conjunction between the incremental capital-output ratio and the interbank offer rate. 
D)  an increase in price will increase the supply of money. 
A)  the quantity of real output supplied is inversely related to aggregate supply. 
B)  nominal incomes are fixed. 
C)  of the conjunction between the incremental capital-output ratio and the interbank offer rate. 
D)  an increase in price will increase the supply of money.

Question 7

Along the short-run supply curve (SRAS), a decrease in the aggregate demand curve will decrease:

Accepted Answer

A)  both the price level and real GDP. 
B)  real GDP without raising the price level. 
C)  the price level without affecting real GDP. 
D)  the price level but reduce real GDP. 
A)  both the price level and real GDP. 
B)  real GDP without raising the price level. 
C)  the price level without affecting real GDP. 
D)  the price level but reduce real GDP.

Question 8

Which of the following would produce a rightward shift in the short-run aggregate supply curve?

Accepted Answer

A)  An increase in consumption spending. 
B)  A decrease in investment. 
C)  A decrease in government spending. 
D)  A decrease in net exports. 
E)  None of the above. 
A)  An increase in consumption spending. 
B)  A decrease in investment. 
C)  A decrease in government spending. 
D)  A decrease in net exports. 
E)  None of the above.

Question 9

The short-run aggregate supply curve is:

Accepted Answer

A)  upward-sloping. 
B)  downward-sloping. 
C)  horizontal. 
D)  vertical. 
A)  upward-sloping. 
B)  downward-sloping. 
C)  horizontal. 
D)  vertical.

Question 10

In the self-correcting AD-AS model, the economy's short-run equilibrium position is indicated by the intersection of which two curves?

Accepted Answer

A)  Short-run aggregate supply and long-run aggregate supply. 
B)  Short-run aggregate supply and aggregate demand. 
C)  Long-run aggregate supply and aggregate demand. 
D)  Long-run aggregate demand and short-run personal consumption expenditures curve. 
E)  Short-run aggregate demand and long-run personal consumption expenditures curve. 
A)  Short-run aggregate supply and long-run aggregate supply. 
B)  Short-run aggregate supply and aggregate demand. 
C)  Long-run aggregate supply and aggregate demand. 
D)  Long-run aggregate demand and short-run personal consumption expenditures curve. 
E)  Short-run aggregate demand and long-run personal consumption expenditures curve.

Question 11

The position of the long-run aggregate supply curve corresponds to the economy's:

Accepted Answer

A)  full-employment real GDP. 
B)  maximum possible level of employment. 
C)  natural level of personal consumption expenditure. 
D)  maximum possible level of personal consumption expenditures. 
E)  maximum possible price level. 
A)  full-employment real GDP. 
B)  maximum possible level of employment. 
C)  natural level of personal consumption expenditure. 
D)  maximum possible level of personal consumption expenditures. 
E)  maximum possible price level.

Question 12

The adjustment of nominal incomes to changes in the price level (CPI) is fixed because of the:

Accepted Answer

A)  volatility of investment spending. 
B)  existence of long-term contracts. 
C)  complete information possessed by workers. 
D)  all of the above. 
A)  volatility of investment spending. 
B)  existence of long-term contracts. 
C)  complete information possessed by workers. 
D)  all of the above.

Question 13

Exhibit 14A-4  Macro AD-AS Model   In Exhibit 14A-4, the level of real GDP represented by Yp:

Accepted Answer

A)  would be associated with considerable unemployment. 
B)  indicates that the economy is experiencing zero inflation. 
C)  indicates that the economy is experiencing a recessionary gap. 
D)  is potential real GDP for this economy. 
A)  would be associated with considerable unemployment. 
B)  indicates that the economy is experiencing zero inflation. 
C)  indicates that the economy is experiencing a recessionary gap. 
D)  is potential real GDP for this economy.

Question 14

Economic growth is represented by a:

Accepted Answer

A)  leftward shift of a production possibilities curve. 
B)  rightward shift of the long-run aggregate supply curve (LRAS). 
C)  horizontal long-run aggregate supply curve (LRAS). 
D)  downward shift of an aggregate production function. 
A)  leftward shift of a production possibilities curve. 
B)  rightward shift of the long-run aggregate supply curve (LRAS). 
C)  horizontal long-run aggregate supply curve (LRAS). 
D)  downward shift of an aggregate production function.

Question 15

An explanation for why the short-run aggregate supply curve is upward-sloping is because:

Accepted Answer

A)  the quantity of real output supplied is inversely related to the aggregate supply curve. 
B)  nominal incomes are fixed. 
C)  the capital-output ratio is fixed. 
D)  an increase in price will increase the marginal aggregate output. 
A)  the quantity of real output supplied is inversely related to the aggregate supply curve. 
B)  nominal incomes are fixed. 
C)  the capital-output ratio is fixed. 
D)  an increase in price will increase the marginal aggregate output.

Question 16

Exhibit 14A-4  Macro AD-AS Model   In Exhibit 14A-4, point P2, Y1 represents:

Accepted Answer

A)  that the economy needs policies to reduce unemployment. 
B)  a long-run equilibrium. 
C)  a short-run equilibrium. 
D)  that the economy is at full employment. 
A)  that the economy needs policies to reduce unemployment. 
B)  a long-run equilibrium. 
C)  a short-run equilibrium. 
D)  that the economy is at full employment.

Question 17

Beginning from full-employment macro equilibrium, increase in government spending will cause real GDP to:

Accepted Answer

A)  increase in the short run. 
B)  decline in the long run. 
C)  decline in the short run. 
D)  increase in the long run. 
A)  increase in the short run. 
B)  decline in the long run. 
C)  decline in the short run. 
D)  increase in the long run.

Question 18

In the long run, wages and prices are considered to be:

Accepted Answer

A)  fixed. 
B)  sticky. 
C)  flexible. 
D)  unstable. 
A)  fixed. 
B)  sticky. 
C)  flexible. 
D)  unstable.

Question 19

Economic growth is represented by a:

Accepted Answer

A)  rightward shift of the rule of 72 curve. 
B)  movement along a production possibilities curve. 
C)  rightward shift in potential real GDP (LRAS). 
D)  leftward shift of the long-run aggregate supply curve (LRAS). 
A)  rightward shift of the rule of 72 curve. 
B)  movement along a production possibilities curve. 
C)  rightward shift in potential real GDP (LRAS). 
D)  leftward shift of the long-run aggregate supply curve (LRAS).

Question 20

Which of the following would cause an increase (rightward shift) in the short-run aggregate supply curve (SRAS)?

Accepted Answer

A)  An increase in the long-run aggregate supply curve (LRAS). 
B)  A decrease in the CPI. 
C)  An increase in the CPI. 
D)  A decrease in oil prices. 
A)  An increase in the long-run aggregate supply curve (LRAS). 
B)  A decrease in the CPI. 
C)  An increase in the CPI. 
D)  A decrease in oil prices.

Exam 14: Aggregate Demand and Supply

Economic growth is represented by a rightward shift of the long-run aggregate supply curve (LRAS).

Along the short-run aggregate supply curve (SRAS), an increase (rightward shift) in the aggregate demand curve will increase:

Exhibit 14A-1 Aggregate demand and supply model Beginning from long-run equilibrium at point E1 in Exhibit 14A-1, the aggregate demand curve shifts to AD2 . The real GDP and price level (CPI) in short-run equilibrium will be:

In the short run, wages are assumed to be:

Exhibit 14A-3 Macro AD-AS Model In Exhibit 14A-3, the level of real GDP associated with Y1:

The short-run aggregate supply curve is upward-sloping because:

Along the short-run supply curve (SRAS), a decrease in the aggregate demand curve will decrease:

Which of the following would produce a rightward shift in the short-run aggregate supply curve?

The short-run aggregate supply curve is:

In the self-correcting AD-AS model, the economy's short-run equilibrium position is indicated by the intersection of which two curves?

The position of the long-run aggregate supply curve corresponds to the economy's:

The adjustment of nominal incomes to changes in the price level (CPI) is fixed because of the:

Exhibit 14A-4 Macro AD-AS Model In Exhibit 14A-4, the level of real GDP represented by Yp:

Economic growth is represented by a:

An explanation for why the short-run aggregate supply curve is upward-sloping is because:

Exhibit 14A-4 Macro AD-AS Model In Exhibit 14A-4, point P2, Y1 represents:

Beginning from full-employment macro equilibrium, increase in government spending will cause real GDP to:

In the long run, wages and prices are considered to be:

Economic growth is represented by a:

Which of the following would cause an increase (rightward shift) in the short-run aggregate supply curve (SRAS)?

Introducing the Economic Way of Thinking

Production Possibilities, Opportunity Cost, and Economic Growth

Market Demand and Supply

Markets in Action

Price Elasticity of Demand

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets and Income Distribution

Gross Domestic Product

Business Cycles and Unemployment

Inflation

Fiscal Policy

The Public Sector

Federal Deficits, Surpluses, and the National Debt

Money and the Federal Reserve System

Money Creation

Policy Disputes Using the Self-Correcting Aggregate Demand and Supply Model

International Trade and Finance

Economies in Transition

Growth and the Less-Developed Countries

Filters

Exhibit 14A-1 Aggregate demand and supply model Beginning from long-run equilibrium at point E₁ in Exhibit 14A-1, the aggregate demand curve shifts to AD₂ . The real GDP and price level (CPI) in short-run equilibrium will be:

Exhibit 14A-3 Macro AD-AS Model In Exhibit 14A-3, the level of real GDP associated with Y₁:

Exhibit 14A-4 Macro AD-AS Model In Exhibit 14A-4, the level of real GDP represented by Y_p:

Exhibit 14A-4 Macro AD-AS Model In Exhibit 14A-4, point P₂, Y₁ represents: