Question 1

A rightward shift of the long-run aggregate supply curve is caused by

Accepted Answer

A)  an increase in the minimum wage. 
B)  an increase in the average duration of unemployment. 
C)  improvements in technology and resource endowments. 
D)  an increase in the GDP deflator. 
A)  an increase in the minimum wage. 
B)  an increase in the average duration of unemployment. 
C)  improvements in technology and resource endowments. 
D)  an increase in the GDP deflator.

Question 2

When the aggregate demand curve shifts ________ than the long-run aggregate supply shifts rightward, the result will be inflation.

Accepted Answer

A)  rightward at a slower rate 
B)  leftward at a slower rate 
C)  rightward at a faster rate 
D)  leftward at the same rate 
A)  rightward at a slower rate 
B)  leftward at a slower rate 
C)  rightward at a faster rate 
D)  leftward at the same rate

Question 3

An increase in the U.S. price level causes a

Accepted Answer

A)  shift of the U.S. aggregate demand curve to the right. 
B)  shift of the U.S. aggregate demand curve to the left. 
C)  movement up the U.S. aggregate demand curve. 
D)  movement down the U.S. aggregate demand curve. 
A)  shift of the U.S. aggregate demand curve to the right. 
B)  shift of the U.S. aggregate demand curve to the left. 
C)  movement up the U.S. aggregate demand curve. 
D)  movement down the U.S. aggregate demand curve.

Question 4

The slope of the long-run aggregate supply curve is

Accepted Answer

A)  positive. 
B)  negative. 
C)  zero. 
D)  undefined. 
A)  positive. 
B)  negative. 
C)  zero. 
D)  undefined.

Question 5

What is the real-balance effect of an increase in the price level?

Accepted Answer

The real-balance effect is the change in

Question 6

Suppose total planned expenditures equal $14.4 trillion when the value of the price level is 95. If the price level dropped to 90, total planned real expenditures will equal

Accepted Answer

A)  less than $14.4 trillion but more than $1 trillion. 
B)  less than $14.4 trillion. 
C)  more than $14.4 trillion. 
D)  $14.4 trillion. 
A)  less than $14.4 trillion but more than $1 trillion. 
B)  less than $14.4 trillion. 
C)  more than $14.4 trillion. 
D)  $14.4 trillion.

Question 7

Which of the following would likely result in a decrease in aggregate demand?

Accepted Answer

A)  tax increases 
B)  a reduction in the real interest rate 
C)  increased job and future income security 
D)  a rise in the quantity of money in circulation 
A)  tax increases 
B)  a reduction in the real interest rate 
C)  increased job and future income security 
D)  a rise in the quantity of money in circulation

Question 8

A shift away from expenditures on domestic goods and a shift toward expenditures on foreign goods when the domestic price level increases is known as

Accepted Answer

A)  the real-balance effect. 
B)  the interest rate effect. 
C)  the open economy effect. 
D)  demand side inflation. 
A)  the real-balance effect. 
B)  the interest rate effect. 
C)  the open economy effect. 
D)  demand side inflation.

Question 9

The open economy effect and interest rate effect are two of the reasons why

Accepted Answer

A)  higher price levels increase long-run aggregate supply. 
B)  the aggregate demand curve slopes downward. 
C)  capital formation does not contribute to economic growth in poor countries. 
D)  growth of the labor force does not contribute to economic growth in wealthy countries. 
A)  higher price levels increase long-run aggregate supply. 
B)  the aggregate demand curve slopes downward. 
C)  capital formation does not contribute to economic growth in poor countries. 
D)  growth of the labor force does not contribute to economic growth in wealthy countries.

Question 10

The values on the axes of the long-run aggregate supply diagram are

Accepted Answer

A)  real GDP per year and the price level. 
B)  nominal GDP and the price level. 
C)  real GDP and interest rates. 
D)  real GDP and nominal GDP. 
A)  real GDP per year and the price level. 
B)  nominal GDP and the price level. 
C)  real GDP and interest rates. 
D)  real GDP and nominal GDP.

Question 11

When the economy is in long-run equilibrium, the price level adjusts so as to equate which two values with one another?

Accepted Answer

A)  import and export spending 
B)  the inflation rate and the unemployment rate 
C)  government spending and tax revenues 
D)  total planned real expenditures and total planned production 
A)  import and export spending 
B)  the inflation rate and the unemployment rate 
C)  government spending and tax revenues 
D)  total planned real expenditures and total planned production

Question 12

Which of the following would likely result in a shift of the aggregate demand curve to the right?

Accepted Answer

A)  a tax cut 
B)  a decrease in job security 
C)  a rise in the real interest rate 
D)  a decrease in the quantity of money in circulation 
A)  a tax cut 
B)  a decrease in job security 
C)  a rise in the real interest rate 
D)  a decrease in the quantity of money in circulation

Question 13

The aggregate demand curve will shift to the left if

Accepted Answer

A)  people are more optimistic about their future. 
B)  a reduction in the price level pushes down borrowing costs. 
C)  government expenditures increase. 
D)  the national incomes of our trading partners decrease. 
A)  people are more optimistic about their future. 
B)  a reduction in the price level pushes down borrowing costs. 
C)  government expenditures increase. 
D)  the national incomes of our trading partners decrease.

Question 14

-Consider the above figure. At a price level of 120,

Accepted Answer

A)  total planned real expenditures exceed total planned production. 
B)  total planned production exceeds total planned expenditures. 
C)  prices would fall. 
D)  inventories would begin to accumulate. 
A)  total planned real expenditures exceed total planned production. 
B)  total planned production exceeds total planned expenditures. 
C)  prices would fall. 
D)  inventories would begin to accumulate.

Question 15

The interest rate effect suggests that

Accepted Answer

A)  an increase in the price level decreases the interest rate, which causes businesses and consumers to reduce desired spending. 
B)  an increase in the price level increases the interest rate, which causes businesses and consumers to reduce desired spending. 
C)  a decrease in the price level decreases the interest rate, which causes businesses and consumers to reduce desired spending. 
D)  an increase in the price level increases the money supply, which causes businesses and consumers to increase desired spending. 
A)  an increase in the price level decreases the interest rate, which causes businesses and consumers to reduce desired spending. 
B)  an increase in the price level increases the interest rate, which causes businesses and consumers to reduce desired spending. 
C)  a decrease in the price level decreases the interest rate, which causes businesses and consumers to reduce desired spending. 
D)  an increase in the price level increases the money supply, which causes businesses and consumers to increase desired spending.

Question 16

Economic growth can be shown by

Accepted Answer

A)  a leftward shift in the aggregate supply curve. 
B)  no change in the aggregate supply curve. 
C)  a rightward shift in the aggregate supply curve. 
D)  a leftward shift in the production possibilities curve. 
A)  a leftward shift in the aggregate supply curve. 
B)  no change in the aggregate supply curve. 
C)  a rightward shift in the aggregate supply curve. 
D)  a leftward shift in the production possibilities curve.

Question 17

Whenever the general level of prices rises because of continual increases in aggregate demand, we say that the economy is experiencing

Accepted Answer

A)  supply-side inflation. 
B)  monetary stagflation. 
C)  demand-side inflation. 
D)  aggregate supply shock. 
A)  supply-side inflation. 
B)  monetary stagflation. 
C)  demand-side inflation. 
D)  aggregate supply shock.

Question 18

In looking back over the past 40 years, which of the following has the U.S. economy experienced?

Accepted Answer

A)  Persistent deflation 
B)  Consistent inflation at a slow constant rate 
C)  Persistent inflation 
D)  Years of both inflation and deflation 
A)  Persistent deflation 
B)  Consistent inflation at a slow constant rate 
C)  Persistent inflation 
D)  Years of both inflation and deflation

Question 19

Which of the following statements is correct? I. A drop in the foreign exchange value of the dollar would decrease aggregate demand
II) A decrease in the amount of money in circulation would increase aggregate demand

Accepted Answer

A)  I only 
B)  II only 
C)  Both I and II 
D)  Neither I nor II 
A)  I only 
B)  II only 
C)  Both I and II 
D)  Neither I nor II

Question 20

The downward slope of the aggregate demand curve shows that

Accepted Answer

A)  an increase in aggregate demand reduces the long-run aggregate supply. 
B)  an increase in aggregate demand increases the long-run aggregate supply. 
C)  a higher price level will cause planned purchase rates for final goods and services to be higher. 
D)  a lower price level will cause planned purchase rates for final goods and services to be higher. 
A)  an increase in aggregate demand reduces the long-run aggregate supply. 
B)  an increase in aggregate demand increases the long-run aggregate supply. 
C)  a higher price level will cause planned purchase rates for final goods and services to be higher. 
D)  a lower price level will cause planned purchase rates for final goods and services to be higher.

Exam 10: Real GDP and the Price Level in the Long Run

A rightward shift of the long-run aggregate supply curve is caused by

When the aggregate demand curve shifts ________ than the long-run aggregate supply shifts rightward, the result will be inflation.

An increase in the U.S. price level causes a

The slope of the long-run aggregate supply curve is

What is the real-balance effect of an increase in the price level?

Suppose total planned expenditures equal $14.4 trillion when the value of the price level is 95. If the price level dropped to 90, total planned real expenditures will equal

Which of the following would likely result in a decrease in aggregate demand?

A shift away from expenditures on domestic goods and a shift toward expenditures on foreign goods when the domestic price level increases is known as

The open economy effect and interest rate effect are two of the reasons why

The values on the axes of the long-run aggregate supply diagram are

When the economy is in long-run equilibrium, the price level adjusts so as to equate which two values with one another?

Which of the following would likely result in a shift of the aggregate demand curve to the right?

The aggregate demand curve will shift to the left if

-Consider the above figure. At a price level of 120,

The interest rate effect suggests that

Economic growth can be shown by

Whenever the general level of prices rises because of continual increases in aggregate demand, we say that the economy is experiencing

In looking back over the past 40 years, which of the following has the U.S. economy experienced?

Which of the following statements is correct? I. A drop in the foreign exchange value of the dollar would decrease aggregate demand II) A decrease in the amount of money in circulation would increase aggregate demand

The downward slope of the aggregate demand curve shows that

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Measuring the Economys Performance

Global Economic Growth and Development

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money, Banking, and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Demand and Supply Elasticity

Consumer Choice

Rents, Profits, and the Financial Environment of Business

The Firm: Cost and Output Determination

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Regulation and Antitrust Policy in a Globalized Economy

The Labor Market: Demand, Supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, Poverty, and Health Care

Environmental Economics

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

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