Question 1

Figure 14.1  
-In Figure 14.1,which of the points are possible long-run equilibriums?

Accepted Answer

A)  A and B 
B)  A and C 
C)  A and D 
D)  B and D 
A)  A and B 
B)  A and C 
C)  A and D 
D)  B and D

Question 2

Which of the following is not a phase in the business cycle?

Accepted Answer

A)  Shutdown 
B)  Trough 
C)  Peak 
D)  Expansion 
A)  Shutdown 
B)  Trough 
C)  Peak 
D)  Expansion

Question 3

After an unexpected increase in the price of oil,the long-run adjustment ________ the price level and ________ the unemployment rate as they return to their original levels.

Accepted Answer

A)  increases; increases 
B)  increases; decreases 
C)  decreases; increases 
D)  decreases; decreases 
A)  increases; increases 
B)  increases; decreases 
C)  decreases; increases 
D)  decreases; decreases

Question 4

Outline the phases of the business cycle.

Accepted Answer

The phases are: the expansion

Question 5

The short-run aggregate supply curve has a

Accepted Answer

A)  negative slope. 
B)  positive slope. 
C)  vertical slope. 
D)  horizontal slope. 
A)  negative slope. 
B)  positive slope. 
C)  vertical slope. 
D)  horizontal slope.

Question 6

A period of expansion in the business cycle ends when

Accepted Answer

A)  real GDP is equal to potential GDP. 
B)  the business cycle reaches its peak. 
C)  the business cycle reaches its trough. 
D)  real GDP is less than potential GDP. 
A)  real GDP is equal to potential GDP. 
B)  the business cycle reaches its peak. 
C)  the business cycle reaches its trough. 
D)  real GDP is less than potential GDP.

Question 7

The level of real GDP in the long-run is called

Accepted Answer

A)  potential GDP. 
B)  short-run GDP. 
C)  frictional GDP. 
D)  low capacity GDP. 
A)  potential GDP. 
B)  short-run GDP. 
C)  frictional GDP. 
D)  low capacity GDP.

Question 8

A recession is often defined as

Accepted Answer

A)  two consecutive quarters experiencing a decline in the economic growth rate. 
B)  two consecutive quarters of declining nominal GDP. 
C)  a significant decline in activity visible in industrial production, employment, real income and wholesale/retail trade lasting more than a few months. 
D)  a significant decline in inflation and unemployment lasting more than a few months. 
A)  two consecutive quarters experiencing a decline in the economic growth rate. 
B)  two consecutive quarters of declining nominal GDP. 
C)  a significant decline in activity visible in industrial production, employment, real income and wholesale/retail trade lasting more than a few months. 
D)  a significant decline in inflation and unemployment lasting more than a few months.

Question 9

Using the following table,calculate the unplanned change in inventories for each level of GDP,and explain what will happen to GDP.The numbers in the table are in billions of dollars.

Accepted Answer

The macroeconomic equilibrium is determi

Question 10

If the economy is currently in equilibrium at a level of GDP that is below potential GDP,which of the following would move the economy back to potential GDP?

Accepted Answer

A)  An increase in wealth. 
B)  An increase in interest rates. 
C)  A decrease in business confidence. 
D)  An increase in the value of the dollar relative to other currencies. 
A)  An increase in wealth. 
B)  An increase in interest rates. 
C)  A decrease in business confidence. 
D)  An increase in the value of the dollar relative to other currencies.

Question 11

During an expansion,how do inflation and unemployment typically change?

Accepted Answer

A)  Inflation and unemployment both rise. 
B)  Inflation and unemployment both fall. 
C)  Inflation falls and unemployment rises. 
D)  Inflation rises and unemployment falls. 
A)  Inflation and unemployment both rise. 
B)  Inflation and unemployment both fall. 
C)  Inflation falls and unemployment rises. 
D)  Inflation rises and unemployment falls.

Question 12

An increase in the price level will

Accepted Answer

A)  shift the short-run aggregate supply curve to the left. 
B)  shift the short-run aggregate supply curve to the right. 
C)  move the economy up along a stationary short-run aggregate supply curve. 
D)  move the economy down along a stationary short-run aggregate supply curve. 
A)  shift the short-run aggregate supply curve to the left. 
B)  shift the short-run aggregate supply curve to the right. 
C)  move the economy up along a stationary short-run aggregate supply curve. 
D)  move the economy down along a stationary short-run aggregate supply curve.

Question 13

Figure 14.3  
-In Figure 14.3,if the economy is in equilibrium,it is at a level of aggregate expenditure given by point

Accepted Answer

A)  J. 
B)  K. 
C)  L. 
D)  Points J, K and L all represent equilibrium. 
A)  J. 
B)  K. 
C)  L. 
D)  Points J, K and L all represent equilibrium.

Question 14

The aggregate demand and aggregate supply model helps explain

Accepted Answer

A)  short-run fluctuations in real GDP and the price level. 
B)  long-run economic growth. 
C)  price fluctuations in an individual market. 
D)  output fluctuations in an individual market. 
A)  short-run fluctuations in real GDP and the price level. 
B)  long-run economic growth. 
C)  price fluctuations in an individual market. 
D)  output fluctuations in an individual market.

Question 15

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 16

Figure 14.3  
-In Figure 14.3,if the economy is at point L,what will happen?

Accepted Answer

A)  Inventories have fallen below their desired level, and firms decrease production. 
B)  Inventories have fallen below their desired level, and firms increase production. 
C)  Inventories have risen above their desired level, and firms decrease production. 
D)  Inventories have risen above their desired level, and firms increase production. 
A)  Inventories have fallen below their desired level, and firms decrease production. 
B)  Inventories have fallen below their desired level, and firms increase production. 
C)  Inventories have risen above their desired level, and firms decrease production. 
D)  Inventories have risen above their desired level, and firms increase production.

Question 17

The level of long-run aggregate supply is not affected by changes in

Accepted Answer

A)  technology. 
B)  the capital stock. 
C)  the price level. 
D)  the size of the labour force. 
A)  technology. 
B)  the capital stock. 
C)  the price level. 
D)  the size of the labour force.

Question 18

Which of the following is considered to be a supply shock?

Accepted Answer

A)  Increasing investment in the economy causing the capital stock to rise. 
B)  An unexpected large increase in the price of natural gas. 
C)  A decline in wages. 
D)  An improvement in technology. 
A)  Increasing investment in the economy causing the capital stock to rise. 
B)  An unexpected large increase in the price of natural gas. 
C)  A decline in wages. 
D)  An improvement in technology.

Question 19

Changes in the price level

Accepted Answer

A)  increase the level of aggregate supply in the long run. 
B)  decrease the level of aggregate supply in the long run. 
C)  do not affect the level of aggregate supply in the long run. 
D)  increase the level of aggregate supply in the long run only at very high levels of output. 
A)  increase the level of aggregate supply in the long run. 
B)  decrease the level of aggregate supply in the long run. 
C)  do not affect the level of aggregate supply in the long run. 
D)  increase the level of aggregate supply in the long run only at very high levels of output.

Question 20

Use the dynamic aggregate demand and aggregate supply model to illustrate a supply shock that causes an increase in the price level and a decline in real GDP.Assume that potential GDP continues to grow due to other factors,and that the aggregate demand curve does not change.

Accepted Answer

The economy begins at the point P₁Y₁ on th

Figure 14.1 -In Figure 14.1,which of the points are possible long-run equilibriums?

Which of the following is not a phase in the business cycle?

After an unexpected increase in the price of oil,the long-run adjustment the price level and the unemployment rate as they return to their original levels.

Outline the phases of the business cycle.

The short-run aggregate supply curve has a

A period of expansion in the business cycle ends when

The level of real GDP in the long-run is called

A recession is often defined as

Using the following table,calculate the unplanned change in inventories for each level of GDP,and explain what will happen to GDP.The numbers in the table are in billions of dollars.

If the economy is currently in equilibrium at a level of GDP that is below potential GDP,which of the following would move the economy back to potential GDP?

During an expansion,how do inflation and unemployment typically change?

An increase in the price level will

Figure 14.3 -In Figure 14.3,if the economy is in equilibrium,it is at a level of aggregate expenditure given by point

The aggregate demand and aggregate supply model helps explain

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

Figure 14.3 -In Figure 14.3,if the economy is at point L,what will happen?

The level of long-run aggregate supply is not affected by changes in

Which of the following is considered to be a supply shock?

Changes in the price level

Use the dynamic aggregate demand and aggregate supply model to illustrate a supply shock that causes an increase in the price level and a decline in real GDP.Assume that potential GDP continues to grow due to other factors,and that the aggregate demand curve does not change.

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Healthcare

Firms,the Stock Market,and Corporate Governance

Consumer Choice and Elasticity

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust

Monopolistic Competition and Oligopoly

GDP: Measuring Total Production and Income

Unemployment and Inflation

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, international Trade, and Exchange Rates

Filters

Exam 14: Economic Growth, the Financial System and Business Cycles

Figure 14.1 -In Figure 14.1,which of the points are possible long-run equilibriums?

Which of the following is not a phase in the business cycle?

After an unexpected increase in the price of oil,the long-run adjustment ________ the price level and ________ the unemployment rate as they return to their original levels.

Outline the phases of the business cycle.

The short-run aggregate supply curve has a

A period of expansion in the business cycle ends when

The level of real GDP in the long-run is called

A recession is often defined as

Using the following table,calculate the unplanned change in inventories for each level of GDP,and explain what will happen to GDP.The numbers in the table are in billions of dollars.

If the economy is currently in equilibrium at a level of GDP that is below potential GDP,which of the following would move the economy back to potential GDP?

During an expansion,how do inflation and unemployment typically change?

An increase in the price level will

Figure 14.3 -In Figure 14.3,if the economy is in equilibrium,it is at a level of aggregate expenditure given by point

The aggregate demand and aggregate supply model helps explain

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

Figure 14.3 -In Figure 14.3,if the economy is at point L,what will happen?

The level of long-run aggregate supply is not affected by changes in

Which of the following is considered to be a supply shock?

Changes in the price level

Use the dynamic aggregate demand and aggregate supply model to illustrate a supply shock that causes an increase in the price level and a decline in real GDP.Assume that potential GDP continues to grow due to other factors,and that the aggregate demand curve does not change.

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Healthcare

Firms,the Stock Market,and Corporate Governance

Consumer Choice and Elasticity

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust

Monopolistic Competition and Oligopoly

GDP: Measuring Total Production and Income

Unemployment and Inflation

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, international Trade, and Exchange Rates

Filters

After an unexpected increase in the price of oil,the long-run adjustment the price level and the unemployment rate as they return to their original levels.