Question 1

An economic expansion caused by a shift in aggregate demand causes prices to

Accepted Answer

A) rise in the short run,and rise even more in the long run. 
B) rise in the short run,and fall back to their original level in the long run. 
C) fall in the short run,and fall even more in the long run. 
D) fall in the short run,and rise back to their original level in the long run. 
A) rise in the short run,and rise even more in the long run. 
B) rise in the short run,and fall back to their original level in the long run. 
C) fall in the short run,and fall even more in the long run. 
D) fall in the short run,and rise back to their original level in the long run.

Question 2

Which of the following shifts short-run aggregate supply left?

Accepted Answer

A) an increase in price expectations 
B) an increase in the actual price level 
C) a decrease in the money supply 
D) a decrease in the price of oil 
A) an increase in price expectations 
B) an increase in the actual price level 
C) a decrease in the money supply 
D) a decrease in the price of oil

Question 3

Pessimism
Suppose the economy is in long-run equilibrium. Then because of corporate scandal, international tensions, and loss of confidence in policymakers, people become pessimistic regarding the future and retain that level of pessimism for some time.

-Refer to Pessimism.Which curve shifts and in which direction?

Accepted Answer

A) aggregate demand shifts right 
B) aggregate demand shifts left 
C) aggregate supply shifts right. 
D) aggregate supply shifts left. 
A) aggregate demand shifts right 
B) aggregate demand shifts left 
C) aggregate supply shifts right. 
D) aggregate supply shifts left.

Question 4

In the early 1930s in the United States,there was a

Accepted Answer

A) large increase in output.In the early 1940s there was also a large increase in output. 
B) large increase in output.In the early 1940s there was a large decrease in output. 
C) large decrease in output.In the early 1940s there was a large increase in output. 
D) large decrease in output.In the early 1940s there was also a large decrease in output. 
A) large increase in output.In the early 1940s there was also a large increase in output. 
B) large increase in output.In the early 1940s there was a large decrease in output. 
C) large decrease in output.In the early 1940s there was a large increase in output. 
D) large decrease in output.In the early 1940s there was also a large decrease in output.

Question 5

In which case can we be sure real GDP rises in the short run?

Accepted Answer

A) government purchases increase and taxes rise. 
B) government purchases increase and taxes fall. 
C) government purchases decrease and taxes rise. 
D) government purchases decrease and taxes fall. 
A) government purchases increase and taxes rise. 
B) government purchases increase and taxes fall. 
C) government purchases decrease and taxes rise. 
D) government purchases decrease and taxes fall.

Question 6

Pessimism
Suppose the economy is in long-run equilibrium. Then because of corporate scandal, international tensions, and loss of confidence in policymakers, people become pessimistic regarding the future and retain that level of pessimism for some time.

-Refer to Optimism.What happens to the expected price level and what's the result for wage bargaining?

Accepted Answer

A) The expected price level falls.Bargains are struck for higher wages. 
B) The expected price level falls.Bargains are struck for lower wages. 
C) The expected price level rises.Bargains are struck for higher wages. 
D) The expected price level rises.Bargains are struck for lower wages. 
A) The expected price level falls.Bargains are struck for higher wages. 
B) The expected price level falls.Bargains are struck for lower wages. 
C) The expected price level rises.Bargains are struck for higher wages. 
D) The expected price level rises.Bargains are struck for lower wages.

Question 7

If output is above its natural rate,then according to sticky-wage theory

Accepted Answer

A) workers and firms will strike bargains for lower wages.In response to the lower wages firms will produce less at any given price level. 
B) workers and firms will strike bargains for lower wages.In response to the lower wages firms will produce more at any given price level. 
C) workers will strike bargains for higher wages.In response to the higher wages firms will produce less at any given price level. 
D) workers and firms will strike bargains for higher wages.In response to the higher wages firms will produce more at any given price level. 
A) workers and firms will strike bargains for lower wages.In response to the lower wages firms will produce less at any given price level. 
B) workers and firms will strike bargains for lower wages.In response to the lower wages firms will produce more at any given price level. 
C) workers will strike bargains for higher wages.In response to the higher wages firms will produce less at any given price level. 
D) workers and firms will strike bargains for higher wages.In response to the higher wages firms will produce more at any given price level.

Question 8

Consider the exhibit below for the following questions.
Figure 33-4  
-Refer to Figure 33-4.If the economy is in long-run equilibrium,then an adverse shift in aggregate supply would move the economy from

Accepted Answer

A) A to B. 
B) C to D. 
C) B to A. 
D) D to C. 
A) A to B. 
B) C to D. 
C) B to A. 
D) D to C.

Question 9

Which of the following would cause prices and real GDP to rise in the short run?

Accepted Answer

A) an increase in the expected price level 
B) an increase in the money supply 
C) a decrease in the capital stock 
D) an increase in taxes. 
A) an increase in the expected price level 
B) an increase in the money supply 
C) a decrease in the capital stock 
D) an increase in taxes.

Question 10

The recession of 2008-2009 was preceded by

Accepted Answer

A) a sharp decline in housing prices. 
B) large losses among financial institutions that owned mortgage-backed securities. 
C) rises in mortgage defaults and home foreclosures. 
D) all of the above 
A) a sharp decline in housing prices. 
B) large losses among financial institutions that owned mortgage-backed securities. 
C) rises in mortgage defaults and home foreclosures. 
D) all of the above

Question 11

Suppose the economy is in long-run equilibrium and the government decreases its expenditures.Which of the following helps explain the logic of why the economy moves back to long-run equilibrium?

Accepted Answer

A) as people revise their price-level expectations upward,firms and workers strike bargains for higher nominal wages. 
B) as people revise their price-level expectations upward,firms and workers strike bargains for lower nominal wages. 
C) as people revise their price-level expectations downward,firms and workers strike bargains for higher nominal wages. 
D) as people revise their price-level expectations downward,firms and workers strike bargains for lower nominal wages. 
A) as people revise their price-level expectations upward,firms and workers strike bargains for higher nominal wages. 
B) as people revise their price-level expectations upward,firms and workers strike bargains for lower nominal wages. 
C) as people revise their price-level expectations downward,firms and workers strike bargains for higher nominal wages. 
D) as people revise their price-level expectations downward,firms and workers strike bargains for lower nominal wages.

Question 12

Figure 33-6.  
-Refer to Figure 33-6.Which of the long-run aggregate-supply curves is consistent with a recession?

Accepted Answer

A) LRAS1 
B) LRAS2 
C) LRAS3 
D) Both LRAS1 and LRAS3 
A) LRAS1 
B) LRAS2 
C) LRAS3 
D) Both LRAS1 and LRAS3

Question 13

Consider the exhibit below for the following questions.
Figure 33-4  
-Refer to Figure 33-4.In the short run,a favorable shift in aggregate supply would move the economy from

Accepted Answer

A) A to B. 
B) B to C. 
C) C to D. 
D) D to A. 
A) A to B. 
B) B to C. 
C) C to D. 
D) D to A.

Question 14

Figure 33-5.  
-Refer to Figure 33-5.In Figure 33-5,

Accepted Answer

A) Point B represents a short-run equilibrium and a long-run equilibrium. 
B) Point B represents a short-run equilibrium,and Point A represents a long-run equilibrium. 
C) Point B represents a long-run equilibrium,and Point A represents a short-run equilibrium. 
D) Point B represents a long-run equilibrium,and Point C represents a short-run equilibrium. 
A) Point B represents a short-run equilibrium and a long-run equilibrium. 
B) Point B represents a short-run equilibrium,and Point A represents a long-run equilibrium. 
C) Point B represents a long-run equilibrium,and Point A represents a short-run equilibrium. 
D) Point B represents a long-run equilibrium,and Point C represents a short-run equilibrium.

Question 15

Suppose the economy is in long-run equilibrium.If there is an increase in the supply of labor as well as an increase in the money supply,then we would expect that in the short-run,

Accepted Answer

A) real GDP will rise and the price level might rise,fall,or stay the same. 
B) real GDP will fall and the price level might rise,fall,or stay the same. 
C) the price level will rise,and real GDP might rise,fall,or stay the same. 
D) the price level will fall,and real GDP might rise,fall,or stay the same. 
A) real GDP will rise and the price level might rise,fall,or stay the same. 
B) real GDP will fall and the price level might rise,fall,or stay the same. 
C) the price level will rise,and real GDP might rise,fall,or stay the same. 
D) the price level will fall,and real GDP might rise,fall,or stay the same.

Question 16

Pessimism
Suppose the economy is in long-run equilibrium. Then because of corporate scandal, international tensions, and loss of confidence in policymakers, people become pessimistic regarding the future and retain that level of pessimism for some time.

-Refer to Financial Crisis.In the long run,if the Fed does not respond,the change in price expectations created by the crisis shifts

Accepted Answer

A) aggregate demand right. 
B) aggregate demand left. 
C) short-run aggregate supply right. 
D) short-run aggregate supply left. 
A) aggregate demand right. 
B) aggregate demand left. 
C) short-run aggregate supply right. 
D) short-run aggregate supply left.

Question 17

Suppose the economy is in long-run equilibrium.If the government increases its expenditures,eventually the increase in aggregate demand causes price expectations to

Accepted Answer

A) rise.This rise in price expectations shifts the short-run aggregate supply curve to the right. 
B) rise.This rise in price expectations shifts the short-run aggregate supply curve to the left. 
C) fall.This fall in price expectations shifts the short-run aggregate supply curve to the right. 
D) fall.This fall in price expectations shifts the short-run aggregate supply curve to the left. 
A) rise.This rise in price expectations shifts the short-run aggregate supply curve to the right. 
B) rise.This rise in price expectations shifts the short-run aggregate supply curve to the left. 
C) fall.This fall in price expectations shifts the short-run aggregate supply curve to the right. 
D) fall.This fall in price expectations shifts the short-run aggregate supply curve to the left.

Question 18

Figure 33-10.  
-Refer to Figure 33-10.If the economy starts at point C,stagflation would be consistent with point

Accepted Answer

A) A. 
B) B. 
C) C. 
D) D. 
A) A. 
B) B. 
C) C. 
D) D.

Question 19

Which of the following would cause stagflation?

Accepted Answer

A) rising government expenditures 
B) rising oil prices 
C) a falling money supply 
D) technical progress 
A) rising government expenditures 
B) rising oil prices 
C) a falling money supply 
D) technical progress

Question 20

Suppose that the economy is at long-run equilibrium.If there is a sharp rise in the stock market combined with a significant increase in the minimum wage,then in the short run

Accepted Answer

A) real GDP will rise and the price level might rise,fall,or stay the same. 
B) real GDP will fall and the price level might rise,fall,or stay the same. 
C) the price level will rise,and real GDP might rise,fall,or stay the same. 
D) the price level will fall,and real GDP might rise,fall,or stay the same. 
A) real GDP will rise and the price level might rise,fall,or stay the same. 
B) real GDP will fall and the price level might rise,fall,or stay the same. 
C) the price level will rise,and real GDP might rise,fall,or stay the same. 
D) the price level will fall,and real GDP might rise,fall,or stay the same.

Exam 20: Aggregate Demand and Aggregate Supply: Two Causes of Economic Fluctuations

An economic expansion caused by a shift in aggregate demand causes prices to

Which of the following shifts short-run aggregate supply left?

In the early 1930s in the United States,there was a

In which case can we be sure real GDP rises in the short run?

If output is above its natural rate,then according to sticky-wage theory

Consider the exhibit below for the following questions. Figure 33-4 -Refer to Figure 33-4.If the economy is in long-run equilibrium,then an adverse shift in aggregate supply would move the economy from

Which of the following would cause prices and real GDP to rise in the short run?

The recession of 2008-2009 was preceded by

Suppose the economy is in long-run equilibrium and the government decreases its expenditures.Which of the following helps explain the logic of why the economy moves back to long-run equilibrium?

Figure 33-6. -Refer to Figure 33-6.Which of the long-run aggregate-supply curves is consistent with a recession?

Consider the exhibit below for the following questions. Figure 33-4 -Refer to Figure 33-4.In the short run,a favorable shift in aggregate supply would move the economy from

Figure 33-5. -Refer to Figure 33-5.In Figure 33-5,

Suppose the economy is in long-run equilibrium.If there is an increase in the supply of labor as well as an increase in the money supply,then we would expect that in the short-run,

Suppose the economy is in long-run equilibrium.If the government increases its expenditures,eventually the increase in aggregate demand causes price expectations to

Figure 33-10. -Refer to Figure 33-10.If the economy starts at point C,stagflation would be consistent with point

Which of the following would cause stagflation?

Suppose that the economy is at long-run equilibrium.If there is a sharp rise in the stock market combined with a significant increase in the minimum wage,then in the short run

Ten Principles of Economics

Ten Principles of Economics: How People Make Decisions

Ten Principles of Economics: How People Interact

Ten Principles of Economics: How the Economy As a Whole Works

Ten Principles of Economics: Part A

Ten Principles of Economics: Part B

Thinking Like an Economist

Thinking Like an Economist: The Economist As Scientist

Thinking Like an Economist: The Economist As Policy Adviser

Thinking Like an Economist: Why Economists Disagree

Thinking Like an Economist: Lets Get Going

Thinking Like an Economist: Graphing a Brief Review

Thinking Like an Economist: Part A

Thinking Like an Economist: Part B

Interdependence and the Gains From Trade

Interdependence and the Gains From Trade: A Parable for the Modern Economy

Interdependence and the Gains From Trade: Comparative Advantage the Driving Force of Specialization

Interdependence and the Gains From Trade: Applications of Comparative Advantage

Interdependence and the Gains From Trade: Conclusion

Interdependence and the Gains From Trade: Part A

Interdependence and the Gains From Trade: Part B

The Market Forces of Supply and Demand

The Market Forces of Supply and Demand:Markets and Competition

The Market Forces of Supply and Demand: Demand

The Market Forces of Supply and Demand: Supply

The Market Forces of Supply and Demand: Supply and Demand Together

The Market Forces of Supply and DemandConclusion How Prices Allocate Resources

The Market Forces of Supply and Demand: Part A

The Market Forces of Supply and Demand: Part B

Elasticity and Its Applications

Elasticity and Its Applications: The Elasticity of Demand

Elasticity and Its Applications: The Elasticity of Supply

Elasticity and Its Applications: Three Applications of Supply,demand,and Elasticity

Elasticity and Its Applications: Part A

Elasticity and Its Applications: Part B

Supply Demand and Government Policies

Supply Demand and Government Policies: Controls on Prices

Supply Demand and Government Policies: Taxes

Supply Demand and Government Policies: Part A

Supply Demand and Government Policies: Part B

Consumers Producers and the Efficiency of Markets

Consumers Producers and the Efficiency of Markets: Consumer Surplus

Consumers Producers and the Efficiency of Markets: Producer Surplus

Consumers Producers and the Efficiency of Markets: Market Efficiency

Consumers Producers and the Efficiency of Markets: Conclusion Market Efficiency and Market Failure

Consumers Producers and the Efficiency of Markets: Part A

Consumers Producers and the Efficiency of Markets: Part B

Application the Cost of Taxation

Application the Cost of Taxation: The Deadweight Loss of Taxation

Application the Cost of Taxation: The Determinants of the Deadweight Loss

Application the Cost of Taxation: Deadweight Loss and Tax Revenue As Taxes Vary

Application the Cost of Taxation: Conclusion

Application the Cost of Taxation: Part A

Application the Cost of Taxation: Part B

Application International Trade

Application International Trade: The Determinants of Trade

Application International Trade: The Winners and Losers From Trade

Application International Trade: The Arguments for Restricting Trade

Application International Trade: Conclusion

Application International Trade: Part A

Application International Trade: Part B

Measuring a Nations Income