Question 1

If the money prices of resources changes

Accepted Answer

A)  the LAS curve shifts. 
B)  the SAS curve shifts. 
C)  the AD curve shifts. 
D)  the macroeconomic equilibrium is unaffected. 
A)  the LAS curve shifts. 
B)  the SAS curve shifts. 
C)  the AD curve shifts. 
D)  the macroeconomic equilibrium is unaffected.

Question 2

Which of the following decreases aggregate demand?

Accepted Answer

A)  The government increases taxes on both business and personal income. 
B)  Foreign incomes rise. 
C)  The quantity of money in the economy increases. 
D)  Households believe that the economy is headed for good times, with higher future incomes. 
A)  The government increases taxes on both business and personal income. 
B)  Foreign incomes rise. 
C)  The quantity of money in the economy increases. 
D)  Households believe that the economy is headed for good times, with higher future incomes.

Question 3

An individual holds $10,000 in a checking account and the price level rises significantly. Hence

Accepted Answer

A)  the individual's real wealth and consumption expenditure decrease. 
B)  the individual's real wealth decreases but real national wealth increases. 
C)  there is no change in the individual's real wealth. 
D)  the individual's real wealth increases. 
A)  the individual's real wealth and consumption expenditure decrease. 
B)  the individual's real wealth decreases but real national wealth increases. 
C)  there is no change in the individual's real wealth. 
D)  the individual's real wealth increases.

Question 4

A change in the capital stock ________ the short-run aggregate supply curve and ________ the long-run aggregate supply curve.

Accepted Answer

A)  shifts; shifts 
B)  shifts; does not shift 
C)  does not shift; shifts 
D)  does not shift; does not shift 
A)  shifts; shifts 
B)  shifts; does not shift 
C)  does not shift; shifts 
D)  does not shift; does not shift

Question 5

In the long run

Accepted Answer

A)  the aggregate supply curve is upward sloping. 
B)  real GDP is equal to potential GDP. 
C)  aggregate supply depends on the price level. 
D)  All of the above answers are correct. 
A)  the aggregate supply curve is upward sloping. 
B)  real GDP is equal to potential GDP. 
C)  aggregate supply depends on the price level. 
D)  All of the above answers are correct.

Question 6

According to the intertemporal substitution effect, when the price level rises and other things remain the same

Accepted Answer

A)  the interest rate falls. 
B)  the interest rate rises. 
C)  the quantity of money increases. 
D)  government taxes rise. 
A)  the interest rate falls. 
B)  the interest rate rises. 
C)  the quantity of money increases. 
D)  government taxes rise.

Question 7

Other things equal, along the aggregate demand curve, a higher price level is associated with

Accepted Answer

A)  an increase in the quantity of real GDP demanded. 
B)  a decrease in the quantity of real GDP demanded. 
C)  a decrease in the quantity of nominal GDP demanded. 
D)  higher income levels. 
A)  an increase in the quantity of real GDP demanded. 
B)  a decrease in the quantity of real GDP demanded. 
C)  a decrease in the quantity of nominal GDP demanded. 
D)  higher income levels.

Question 8

-In the above figure, the short-run equilibrium is at the price level of ________ and real GDP of ________.

Accepted Answer

A)  100; $15.5 trillion 
B)  120; $16 trillion 
C)  110; $15.5 trillion 
D)  100; $16 trillion 
A)  100; $15.5 trillion 
B)  120; $16 trillion 
C)  110; $15.5 trillion 
D)  100; $16 trillion

Question 9

The U.S. aggregate demand curve shifts leftward if

Accepted Answer

A)  the economic conditions in Europe improve so that European incomes increase. 
B)  there is a tax cut. 
C)  the Federal Reserve increases the interest rate. 
D)  the exchange rate falls. 
A)  the economic conditions in Europe improve so that European incomes increase. 
B)  there is a tax cut. 
C)  the Federal Reserve increases the interest rate. 
D)  the exchange rate falls.

Question 10

-In the above figure, the short-run aggregate supply curve is SAS and the aggregate demand curve is AD. A recessionary gap exists

Accepted Answer

A)  if the long-run aggregate supply curve is LAS1. 
B)  if the long-run aggregate supply curve is LAS2. 
C)  if the long-run aggregate supply curve is LAS3. 
D)  All of the above answers are correct. 
A)  if the long-run aggregate supply curve is LAS1. 
B)  if the long-run aggregate supply curve is LAS2. 
C)  if the long-run aggregate supply curve is LAS3. 
D)  All of the above answers are correct.

Question 11

-Based on the data in the table above, in the adjustment towards the long-run equilibrium

Accepted Answer

A)  money wage rates will rise. 
B)  the aggregate demand curve will shift leftward. 
C)  the short-run aggregate supply curve will shift leftward. 
D)  the short-run aggregate supply curve will shift rightward. 
A)  money wage rates will rise. 
B)  the aggregate demand curve will shift leftward. 
C)  the short-run aggregate supply curve will shift leftward. 
D)  the short-run aggregate supply curve will shift rightward.

Question 12

Explain the relationship of the long-run aggregate supply curve, the short-run aggregate supply curve and the aggregate demand curve in determining a long-run and short-run macroeconomic equilibrium.

Accepted Answer

Short-run macroeconomic equilibrium occu

Question 13

Substitution effects help explain the slope of the aggregate demand curve. One substitution effect refers to the

Accepted Answer

A)  inverse relationship between the interest rate and the price level. 
B)  direct relationship between the interest rate and the real value of wealth. 
C)  effect on investment expenditures that result from a change in interest rates produced by a change in the price level. 
D)  change in wealth that results from a change in the interest rate. 
A)  inverse relationship between the interest rate and the price level. 
B)  direct relationship between the interest rate and the real value of wealth. 
C)  effect on investment expenditures that result from a change in interest rates produced by a change in the price level. 
D)  change in wealth that results from a change in the interest rate.

Question 14

Suppose the current situation is such that the price level is 120, real GDP is $17 trillion, and GDP along the long-run aggregate supply curve is $16.6 trillion. What will take place to restore the long-run equilibrium?

Accepted Answer

A)  The price level will fall until long-run aggregate supply increases to $17 trillion. 
B)  The price level will fall and money wage rates will rise until real GDP along the long-run aggregate supply curve is $17 trillion. 
C)  Money wage rates will rise until real GDP reaches $16.6 trillion. 
D)  Aggregate demand will increase until both short-run and long-run aggregate supply equal $17 trillion. 
A)  The price level will fall until long-run aggregate supply increases to $17 trillion. 
B)  The price level will fall and money wage rates will rise until real GDP along the long-run aggregate supply curve is $17 trillion. 
C)  Money wage rates will rise until real GDP reaches $16.6 trillion. 
D)  Aggregate demand will increase until both short-run and long-run aggregate supply equal $17 trillion.

Question 15

Inflation occurs over time as a result of

Accepted Answer

A)  long-run aggregate supply increasing faster than aggregate demand. 
B)  long-run aggregate supply increasing faster than short-run aggregate supply. 
C)  decreases in aggregate demand. 
D)  aggregate demand increasing faster than long-run aggregate supply. 
A)  long-run aggregate supply increasing faster than aggregate demand. 
B)  long-run aggregate supply increasing faster than short-run aggregate supply. 
C)  decreases in aggregate demand. 
D)  aggregate demand increasing faster than long-run aggregate supply.

Question 16

Which of the following shifts the aggregate demand curve rightward?

Accepted Answer

A)  a decrease in the price level 
B)  a decrease in government expenditures 
C)  an increase in the quantity of money 
D)  a decrease in transfer payments 
A)  a decrease in the price level 
B)  a decrease in government expenditures 
C)  an increase in the quantity of money 
D)  a decrease in transfer payments

Question 17

-In the above figure, B is the current long-run aggregate supply curve and E is the current short-run aggregate supply curve. Technological advances mean the long-run aggregate supply curve and short-run aggregate supply curve

Accepted Answer

A)  remain B and E. 
B)  shift to A and D, respectively. 
C)  shift to C and F, respectively. 
D)  shift to C and remain E, respectively. 
A)  remain B and E. 
B)  shift to A and D, respectively. 
C)  shift to C and F, respectively. 
D)  shift to C and remain E, respectively.

Question 18

Economic growth in India has averaged about 8.5 percent in recent years and while inflation averaged almost 9 percent. The AS-AD model shows this process as

Accepted Answer

A)  rightward shifts in the short-run aggregate supply curve. 
B)  rightward shifts in the both the aggregate demand and long-run aggregate supply curves. 
C)  movements upward along the aggregate demand curve. 
D)  rightward shifts in the aggregate demand curve and leftward shifts in the short-run aggregate supply curve. 
A)  rightward shifts in the short-run aggregate supply curve. 
B)  rightward shifts in the both the aggregate demand and long-run aggregate supply curves. 
C)  movements upward along the aggregate demand curve. 
D)  rightward shifts in the aggregate demand curve and leftward shifts in the short-run aggregate supply curve.

Question 19

A decrease in government transfer payments

Accepted Answer

A)  increases aggregate demand. 
B)  increases the aggregate quantity demanded. 
C)  decreases the aggregate quantity demanded. 
D)  decreases aggregate demand. 
A)  increases aggregate demand. 
B)  increases the aggregate quantity demanded. 
C)  decreases the aggregate quantity demanded. 
D)  decreases aggregate demand.

Question 20

There are several reasons why the aggregate demand curve is downward sloping. Which of the following CORRECTLY describes one of these explanations?

Accepted Answer

A)  A rise in the price level raises the purchasing power wealth and increases desired consumption. 
B)  A rise in the price level raises interest rates and increases investment spending. 
C)  A fall in the price level, holding foreign prices and the exchange rate constant, increases net exports. 
D)  A rise in the price level lowers the interest rate and increases investment spending. 
A)  A rise in the price level raises the purchasing power wealth and increases desired consumption. 
B)  A rise in the price level raises interest rates and increases investment spending. 
C)  A fall in the price level, holding foreign prices and the exchange rate constant, increases net exports. 
D)  A rise in the price level lowers the interest rate and increases investment spending.

If the money prices of resources changes

Which of the following decreases aggregate demand?

An individual holds $10,000 in a checking account and the price level rises significantly. Hence

A change in the capital stock the short-run aggregate supply curve and the long-run aggregate supply curve.

In the long run

According to the intertemporal substitution effect, when the price level rises and other things remain the same

Other things equal, along the aggregate demand curve, a higher price level is associated with

-In the above figure, the short-run equilibrium is at the price level of and real GDP of .

The U.S. aggregate demand curve shifts leftward if

-In the above figure, the short-run aggregate supply curve is SAS and the aggregate demand curve is AD. A recessionary gap exists

-Based on the data in the table above, in the adjustment towards the long-run equilibrium

Explain the relationship of the long-run aggregate supply curve, the short-run aggregate supply curve and the aggregate demand curve in determining a long-run and short-run macroeconomic equilibrium.

Substitution effects help explain the slope of the aggregate demand curve. One substitution effect refers to the

Suppose the current situation is such that the price level is 120, real GDP is $17 trillion, and GDP along the long-run aggregate supply curve is $16.6 trillion. What will take place to restore the long-run equilibrium?

Inflation occurs over time as a result of

Which of the following shifts the aggregate demand curve rightward?

-In the above figure, B is the current long-run aggregate supply curve and E is the current short-run aggregate supply curve. Technological advances mean the long-run aggregate supply curve and short-run aggregate supply curve

Economic growth in India has averaged about 8.5 percent in recent years and while inflation averaged almost 9 percent. The AS-AD model shows this process as

A decrease in government transfer payments

There are several reasons why the aggregate demand curve is downward sloping. Which of the following CORRECTLY describes one of these explanations?

What Is Economics?

The Economic Problem

Demand and Supply

Measuring GDP and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Expenditure Multipliers

The Business Cycle, Inflation, and Deflation

Fiscal Policy

Monetary Policy

International Trade Policy

Filters

Exam 10: Aggregate Supply and Aggregate Demand

If the money prices of resources changes

Which of the following decreases aggregate demand?

An individual holds $10,000 in a checking account and the price level rises significantly. Hence

A change in the capital stock ________ the short-run aggregate supply curve and ________ the long-run aggregate supply curve.

In the long run

According to the intertemporal substitution effect, when the price level rises and other things remain the same

Other things equal, along the aggregate demand curve, a higher price level is associated with

-In the above figure, the short-run equilibrium is at the price level of ________ and real GDP of ________.

The U.S. aggregate demand curve shifts leftward if

-In the above figure, the short-run aggregate supply curve is SAS and the aggregate demand curve is AD. A recessionary gap exists

-Based on the data in the table above, in the adjustment towards the long-run equilibrium

Explain the relationship of the long-run aggregate supply curve, the short-run aggregate supply curve and the aggregate demand curve in determining a long-run and short-run macroeconomic equilibrium.

Substitution effects help explain the slope of the aggregate demand curve. One substitution effect refers to the

Suppose the current situation is such that the price level is 120, real GDP is $17 trillion, and GDP along the long-run aggregate supply curve is $16.6 trillion. What will take place to restore the long-run equilibrium?

Inflation occurs over time as a result of

Which of the following shifts the aggregate demand curve rightward?

-In the above figure, B is the current long-run aggregate supply curve and E is the current short-run aggregate supply curve. Technological advances mean the long-run aggregate supply curve and short-run aggregate supply curve

Economic growth in India has averaged about 8.5 percent in recent years and while inflation averaged almost 9 percent. The AS-AD model shows this process as

A decrease in government transfer payments

There are several reasons why the aggregate demand curve is downward sloping. Which of the following CORRECTLY describes one of these explanations?

What Is Economics?

The Economic Problem

Demand and Supply

Measuring GDP and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Expenditure Multipliers

The Business Cycle, Inflation, and Deflation

Fiscal Policy

Monetary Policy

International Trade Policy

Filters

A change in the capital stock the short-run aggregate supply curve and the long-run aggregate supply curve.

-In the above figure, the short-run equilibrium is at the price level of and real GDP of .