Question 1

At a peak in the business cycle, the macroeconomic equilibrium is ________ the level of potential real GDP.

Accepted Answer

A)  greater than 
B)  equal to 
C)  less than 
D)  falling below 
E)  None of the above answers is always correct because the relationship depends on whether the previous phase of the business cycle had been a recession or an expansion. 
A)  greater than 
B)  equal to 
C)  less than 
D)  falling below 
E)  None of the above answers is always correct because the relationship depends on whether the previous phase of the business cycle had been a recession or an expansion.

Question 2

Aggregate demand

Accepted Answer

A)  decreases if expected future income rises. 
B)  increases if the exchange rate rises. 
C)  increases if government expenditures decrease. 
D)  increases if the expected inflation rate increases. 
E)  increases if aggregate supply increases. 
A)  decreases if expected future income rises. 
B)  increases if the exchange rate rises. 
C)  increases if government expenditures decrease. 
D)  increases if the expected inflation rate increases. 
E)  increases if aggregate supply increases.

Question 3

Moving along the aggregate supply curve,

Accepted Answer

A)  the quantity of capital used increases. 
B)  only the price level changes. 
C)  technology advances. 
D)  the stock of human capital increases. 
E)  the real wage rate is constant. 
A)  the quantity of capital used increases. 
B)  only the price level changes. 
C)  technology advances. 
D)  the stock of human capital increases. 
E)  the real wage rate is constant.

Question 4

Along the aggregate supply curve, the quantity of real GDP supplied increases when the price level rises because

Accepted Answer

A)  profits decrease. 
B)  the real wage rate falls. 
C)  the real wage rate rises. 
D)  the real wage rate and profits both fall. 
E)  the demand for the goods and services increases. 
A)  profits decrease. 
B)  the real wage rate falls. 
C)  the real wage rate rises. 
D)  the real wage rate and profits both fall. 
E)  the demand for the goods and services increases.

Question 5

What two variables are determined in an aggregate supply-aggregate demand figure?
 Is the slope of the aggregate supply curve positive or negative?
 Is the slope of the aggregate demand curve positive or negative?

Accepted Answer

The aggregate supply-aggregate demand fr

Question 6

When the aggregate supply curve intersects the aggregate demand curve at a level of real GDP that exceeds potential GDP, is there an inflationary gap or a deflationary gap?
 What adjustments will take place?

Accepted Answer

There is an inflationary gap because rea

Question 7

If the money wage rate does not change, a decrease in the price level will ________ the real wage rate and ________ firms' profit.

Accepted Answer

A)  raise; decrease 
B)  raise; increase 
C)  lower; decrease 
D)  lower; increase 
E)  lower; not change 
A)  raise; decrease 
B)  raise; increase 
C)  lower; decrease 
D)  lower; increase 
E)  lower; not change

Question 8

A tax cut ________ aggregate demand and ________.

Accepted Answer

A)  decreases; shifts the AD curve rightward 
B)  increases; shifts the AD curve leftward 
C)  increases; shifts the AD curve rightward 
D)  decreases; shifts the AD curve leftward 
E)  does not change; does not shift the AD curve 
A)  decreases; shifts the AD curve rightward 
B)  increases; shifts the AD curve leftward 
C)  increases; shifts the AD curve rightward 
D)  decreases; shifts the AD curve leftward 
E)  does not change; does not shift the AD curve

Question 9

State how each of the following affect the aggregate demand curve.
a. The price level increases.
b. Consumers expect higher inflation in the future.
c. The exchange rate rises.
d. Foreign income decreases.

Accepted Answer

a. There is a movement upward along the

Question 10

The aggregate supply curve will shift

Accepted Answer

A)  rightward if potential GDP decreases. 
B)  rightward if the money wage rate falls. 
C)  rightward if the money wage rate rises. 
D)  leftward if potential GDP increases. 
E)  leftward if the aggregate demand curve shifts leftward. 
A)  rightward if potential GDP decreases. 
B)  rightward if the money wage rate falls. 
C)  rightward if the money wage rate rises. 
D)  leftward if potential GDP increases. 
E)  leftward if the aggregate demand curve shifts leftward.

Question 11

Changes in which of the following shifts the aggregate supply curve?
i. the price level.
ii. the money wage rate.
iii. potential GDP.

Accepted Answer

A)  i only 
B)  ii only 
C)  iii only 
D)  ii and iii 
E)  i, ii, and iii 
A)  i only 
B)  ii only 
C)  iii only 
D)  ii and iii 
E)  i, ii, and iii

Question 12

An increase in ________ increases potential GDP and ________ aggregate supply.

Accepted Answer

A)  technology; increases 
B)  technology; decreases 
C)  the money wage rate; increases 
D)  the money price of oil; decreases 
E)  the money wage rate; decreases 
A)  technology; increases 
B)  technology; decreases 
C)  the money wage rate; increases 
D)  the money price of oil; decreases 
E)  the money wage rate; decreases

Question 13

Aggregate demand ________ and shifts the AD curve ________ when ________.

Accepted Answer

A)  increases; rightward; government expenditure increases 
B)  increases; rightward; taxes increase 
C)  increases; rightward; future expected profit decreases 
D)  decreases; leftward; foreign income increases 
E)  increases; leftward; government expenditure increases 
A)  increases; rightward; government expenditure increases 
B)  increases; rightward; taxes increase 
C)  increases; rightward; future expected profit decreases 
D)  decreases; leftward; foreign income increases 
E)  increases; leftward; government expenditure increases

Question 14

Stagflation is defined as a period when real GDP ________ and the price level ________.

Accepted Answer

A)  increases; increases 
B)  increases; decreases 
C)  decreases; increases 
D)  decreases; decreases 
E)  is constant; rises rapidly 
A)  increases; increases 
B)  increases; decreases 
C)  decreases; increases 
D)  decreases; decreases 
E)  is constant; rises rapidly

Question 15

The figure above shows aggregate demand curves.
-Based on the figure above, the aggregate demand curve will shift from AD₀ to AD₂ when

Accepted Answer

A)  potential GDP increases. 
B)  the price level falls. 
C)  the price level rises. 
D)  government expenditure decreases. 
E)  taxes are lowered. 
A)  potential GDP increases. 
B)  the price level falls. 
C)  the price level rises. 
D)  government expenditure decreases. 
E)  taxes are lowered.

Question 16

The figure above shows aggregate demand curves.
-Based on the figure above, the aggregate demand curve will shift from AD₀ to AD₂ when

Accepted Answer

A)  potential GDP increases. 
B)  the price level falls. 
C)  the price level rises. 
D)  government expenditure decreases. 
E)  the Federal Reserve lowers the interest rate. 
A)  potential GDP increases. 
B)  the price level falls. 
C)  the price level rises. 
D)  government expenditure decreases. 
E)  the Federal Reserve lowers the interest rate.

Question 17

The AD curve is a graph depicting the

Accepted Answer

A)  relationship between the price level and the quantity of real GDP supplied. 
B)  business cycle during expansions and recessions. 
C)  relationship between the price level and the quantity of real GDP demanded. 
D)  relationship between the price level and potential GDP. 
E)  relationship between the aggregate quantity of real GDP demanded and the aggregate quantity of real GDP supplied. 
A)  relationship between the price level and the quantity of real GDP supplied. 
B)  business cycle during expansions and recessions. 
C)  relationship between the price level and the quantity of real GDP demanded. 
D)  relationship between the price level and potential GDP. 
E)  relationship between the aggregate quantity of real GDP demanded and the aggregate quantity of real GDP supplied.

Question 18

The slope of the aggregate supply curve shows that, all else the same, the

Accepted Answer

A)  quantity of real GDP supplied increases as the price level increases. 
B)  quantity of real GDP supplied decreases as the price level increases. 
C)  quantity of real GDP supplied remains constant as the price level increases. 
D)  price level remains constant as real GDP increases. 
E)  price level remains constant as potential GDP increases. 
A)  quantity of real GDP supplied increases as the price level increases. 
B)  quantity of real GDP supplied decreases as the price level increases. 
C)  quantity of real GDP supplied remains constant as the price level increases. 
D)  price level remains constant as real GDP increases. 
E)  price level remains constant as potential GDP increases.

Question 19

The figure above shows the aggregate demand curve.
-The aggregate demand curve in the figure above shifts rightward if

Accepted Answer

A)  potential GDP increases. 
B)  the money wage rate falls. 
C)  taxes are hiked. 
D)  government expenditure decreases. 
E)  the expected future profit increases so that investment increases. 
A)  potential GDP increases. 
B)  the money wage rate falls. 
C)  taxes are hiked. 
D)  government expenditure decreases. 
E)  the expected future profit increases so that investment increases.

Question 20

The ________ the ________ is the quantity of real GDP supplied and the ________ is the quantity of real GDP demanded.

Accepted Answer

A)  lower the price level; greater; smaller 
B)  higher the price level; greater; smaller 
C)  greater the demand for labor; smaller 
D)  lower the supply of labor; greater; smaller 
E)  lower aggregate demand; greater; smaller 
A)  lower the price level; greater; smaller 
B)  higher the price level; greater; smaller 
C)  greater the demand for labor; smaller 
D)  lower the supply of labor; greater; smaller 
E)  lower aggregate demand; greater; smaller

At a peak in the business cycle, the macroeconomic equilibrium is ________ the level of potential real GDP.

Aggregate demand

Moving along the aggregate supply curve,

Along the aggregate supply curve, the quantity of real GDP supplied increases when the price level rises because

What two variables are determined in an aggregate supply-aggregate demand figure? Is the slope of the aggregate supply curve positive or negative? Is the slope of the aggregate demand curve positive or negative?

When the aggregate supply curve intersects the aggregate demand curve at a level of real GDP that exceeds potential GDP, is there an inflationary gap or a deflationary gap? What adjustments will take place?

If the money wage rate does not change, a decrease in the price level will the real wage rate and firms' profit.

A tax cut aggregate demand and .

State how each of the following affect the aggregate demand curve. a. The price level increases. b. Consumers expect higher inflation in the future. c. The exchange rate rises. d. Foreign income decreases.

The aggregate supply curve will shift

Changes in which of the following shifts the aggregate supply curve? i. the price level. ii. the money wage rate. iii. potential GDP.

An increase in increases potential GDP and aggregate supply.

Aggregate demand and shifts the AD curve when .

Stagflation is defined as a period when real GDP and the price level .

The figure above shows aggregate demand curves. -Based on the figure above, the aggregate demand curve will shift from AD₀ to AD₂ when

The figure above shows aggregate demand curves. -Based on the figure above, the aggregate demand curve will shift from AD₀ to AD₂ when

The AD curve is a graph depicting the

The slope of the aggregate supply curve shows that, all else the same, the

The figure above shows the aggregate demand curve. -The aggregate demand curve in the figure above shifts rightward if

The the is the quantity of real GDP supplied and the is the quantity of real GDP demanded.

Getting Started

The Usand Global Economies

The Economic Problem

Demand and Supply

Gdp: a Measure of Total Production and Income

Jobs and Unemployment

The Cpi and the Cost of Living

Potential Gdp and the Natural Unemployment Rate

Economic Growth

Finance, Saving, and Investment

The Monetary System

Money, Interest, and Inflation

Aggregate Expenditure Multiplier

The Short-Run Policy Tradeoff

Fiscal Policy

Monetary Policy

International Trade Policy

International Finance

Filters

Exam 13: Aggregate Supply and Aggregate Demand

At a peak in the business cycle, the macroeconomic equilibrium is ________ the level of potential real GDP.

Aggregate demand

Moving along the aggregate supply curve,

Along the aggregate supply curve, the quantity of real GDP supplied increases when the price level rises because

What two variables are determined in an aggregate supply-aggregate demand figure? Is the slope of the aggregate supply curve positive or negative? Is the slope of the aggregate demand curve positive or negative?

When the aggregate supply curve intersects the aggregate demand curve at a level of real GDP that exceeds potential GDP, is there an inflationary gap or a deflationary gap? What adjustments will take place?

If the money wage rate does not change, a decrease in the price level will ________ the real wage rate and ________ firms' profit.

A tax cut ________ aggregate demand and ________.

State how each of the following affect the aggregate demand curve. a. The price level increases. b. Consumers expect higher inflation in the future. c. The exchange rate rises. d. Foreign income decreases.

The aggregate supply curve will shift

Changes in which of the following shifts the aggregate supply curve? i. the price level. ii. the money wage rate. iii. potential GDP.

An increase in ________ increases potential GDP and ________ aggregate supply.

Aggregate demand ________ and shifts the AD curve ________ when ________.

Stagflation is defined as a period when real GDP ________ and the price level ________.

The figure above shows aggregate demand curves. -Based on the figure above, the aggregate demand curve will shift from AD₀ to AD₂ when

The figure above shows aggregate demand curves. -Based on the figure above, the aggregate demand curve will shift from AD₀ to AD₂ when

The AD curve is a graph depicting the

The slope of the aggregate supply curve shows that, all else the same, the

The figure above shows the aggregate demand curve. -The aggregate demand curve in the figure above shifts rightward if

The ________ the ________ is the quantity of real GDP supplied and the ________ is the quantity of real GDP demanded.

Getting Started

The Usand Global Economies

The Economic Problem

Demand and Supply

Gdp: a Measure of Total Production and Income

Jobs and Unemployment

The Cpi and the Cost of Living

Potential Gdp and the Natural Unemployment Rate

Economic Growth

Finance, Saving, and Investment

The Monetary System

Money, Interest, and Inflation

Aggregate Expenditure Multiplier

The Short-Run Policy Tradeoff

Fiscal Policy

Monetary Policy

International Trade Policy

International Finance

Filters

If the money wage rate does not change, a decrease in the price level will the real wage rate and firms' profit.

A tax cut aggregate demand and .

An increase in increases potential GDP and aggregate supply.

Aggregate demand and shifts the AD curve when .

Stagflation is defined as a period when real GDP and the price level .

The the is the quantity of real GDP supplied and the is the quantity of real GDP demanded.