Question 1

The process of an economy adjusting from a recession back to potential GDP in the long run without any government intervention is known as

Accepted Answer

A) monetary policy. 
B) an automatic mechanism. 
C) "releasing sticky prices." 
D) fiscal policy. 
A) monetary policy. 
B) an automatic mechanism. 
C) "releasing sticky prices." 
D) fiscal policy.

Question 2

When potential GDP increases,short-run aggregate supply also increases,but long-run aggregate supply does not change.

Accepted Answer

A) True 
 B)False

Question 3

Starting from long-run equilibrium,use the basic aggregate demand and aggregate supply diagram to show what happens in both the long run and the short run when there is a decline in wealth.

Accepted Answer

@#IMG-DLM& Before the decline in demand,the econom

Question 4

The long-run aggregate supply curve shows the relationship between the ________ and ________.

Accepted Answer

A) inflation rate;quantity of real GDP demanded 
B) real interest rate;quantity of real GDP supplied 
C) nominal interest rate;quantity of real GDP supplied 
D) price level;quantity of real GDP supplied 
A) inflation rate;quantity of real GDP demanded 
B) real interest rate;quantity of real GDP supplied 
C) nominal interest rate;quantity of real GDP supplied 
D) price level;quantity of real GDP supplied

Question 5

Changes in ________ do not affect the level of aggregate supply in the long run.

Accepted Answer

A) technology 
B) the number of workers in the economy 
C) the price level 
D) the amount of accumulated capital equipment 
A) technology 
B) the number of workers in the economy 
C) the price level 
D) the amount of accumulated capital equipment

Question 6

A decrease 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 7

When people became ________ concerned with the underlying value of their houses and became ________ concerned with the expectations of the prices of their houses increasing,a housing bubble occurred.

Accepted Answer

A) less;less 
B) less;more 
C) more;less 
D) more;more 
A) less;less 
B) less;more 
C) more;less 
D) more;more

Question 8

In the dynamic aggregated demand and aggregate supply model,inflation occurs if

Accepted Answer

A) AD shifts faster than SRAS. 
B) AD shifts slower than SRAS. 
C) SRAS shifts faster than AD. 
D) LRAS shifts faster than AD. 
A) AD shifts faster than SRAS. 
B) AD shifts slower than SRAS. 
C) SRAS shifts faster than AD. 
D) LRAS shifts faster than AD.

Question 9

The international trade effect states that a(n)________ in the price level will ________ net exports.

Accepted Answer

A) increase;increase 
B) increase;decrease 
C) decrease;decrease 
D) decrease;not affect 
A) increase;increase 
B) increase;decrease 
C) decrease;decrease 
D) decrease;not affect

Question 10

What does the phrase "Keynesian revolution" refer to?

Accepted Answer

The Keynesian revolution is th

Question 11

An increase in aggregate demand results in a(n)________ in the ________.

Accepted Answer

A) recession;long run 
B) expansion;long run 
C) expansion;short run 
D) recession;short run 
A) recession;long run 
B) expansion;long run 
C) expansion;short run 
D) recession;short run

Question 12

At a short-run macroeconomic equilibrium,real GDP is always equal to potential GDP.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is one explanation as to why the aggregate demand curve slopes downward?

Accepted Answer

A) Decreases in the price level raise the interest rate and increase consumption spending. 
B) Decreases in the price level raise the interest rate and increase investment spending. 
C) Decreases in the U.S.price level relative to the price level in other countries lower net exports. 
D) Decreases in the price level raise real wealth and increase consumption spending. 
A) Decreases in the price level raise the interest rate and increase consumption spending. 
B) Decreases in the price level raise the interest rate and increase investment spending. 
C) Decreases in the U.S.price level relative to the price level in other countries lower net exports. 
D) Decreases in the price level raise real wealth and increase consumption spending.

Question 14

Workers and firms both expect that prices will be 2.5% higher next year than they are this year.As a result

Accepted Answer

A) workers will be willing to take lower wages next year,but not lower than a 2.5 percent decrease. 
B) the purchasing power of wages will rise if wages increase by 2.5%. 
C) the short-run aggregate supply curve will shift to the left as wages increase. 
D) aggregate demand will increase by 2.5%. 
A) workers will be willing to take lower wages next year,but not lower than a 2.5 percent decrease. 
B) the purchasing power of wages will rise if wages increase by 2.5%. 
C) the short-run aggregate supply curve will shift to the left as wages increase. 
D) aggregate demand will increase by 2.5%.

Question 15

New classical macroeconomic theory emphasizes the role of "sticky" prices in the economy.

Accepted Answer

A) True 
 B)False

Question 16

The "interest rate effect" can be described as an increase in the price level that raises the interest rate and chokes off

Accepted Answer

A) government spending. 
B) government spending and unplanned investment. 
C) investment and consumption spending. 
D) net exports. 
A) government spending. 
B) government spending and unplanned investment. 
C) investment and consumption spending. 
D) net exports.

Question 17

Figure 24-1  
-Refer to Figure 24-1.Ceteris paribus,an increase in the price level would be represented by a movement from

Accepted Answer

A) AD1 to AD2. 
B) AD2 to AD1. 
C) point A to point B. 
D) point B to point A. 
A) AD1 to AD2. 
B) AD2 to AD1. 
C) point A to point B. 
D) point B to point A.

Question 18

When the price level in the United States falls relative to the price level of other countries,________ will fall,________ will rise,and ________ will rise.

Accepted Answer

A) imports;exports;net exports 
B) exports;imports;net exports 
C) net exports;exports;imports 
D) net exports;imports;exports 
A) imports;exports;net exports 
B) exports;imports;net exports 
C) net exports;exports;imports 
D) net exports;imports;exports

Question 19

President Obama has discussed raising income taxes for individuals earning over $250,000 in income.Explain how these higher income taxes will affect the aggregate demand curve.

Accepted Answer

Raising the income tax decreases the amo

Question 20

If stricter immigration laws are imposed and many foreign workers in the United States are forced to go back to their home countries

Accepted Answer

A) the long-run aggregate supply curve will shift to the right. 
B) the long-run aggregate supply curve will shift to the left. 
C) we will move up along the long-run aggregate supply curve. 
D) we will move down along the long-run aggregate supply curve. 
A) the long-run aggregate supply curve will shift to the right. 
B) the long-run aggregate supply curve will shift to the left. 
C) we will move up along the long-run aggregate supply curve. 
D) we will move down along the long-run aggregate supply curve.

Exam 24: Aggregate Demand and Aggregate Supply Analysis

The process of an economy adjusting from a recession back to potential GDP in the long run without any government intervention is known as

When potential GDP increases,short-run aggregate supply also increases,but long-run aggregate supply does not change.

Starting from long-run equilibrium,use the basic aggregate demand and aggregate supply diagram to show what happens in both the long run and the short run when there is a decline in wealth.

The long-run aggregate supply curve shows the relationship between the ________ and ________.

Changes in ________ do not affect the level of aggregate supply in the long run.

A decrease in the price level will

When people became ________ concerned with the underlying value of their houses and became ________ concerned with the expectations of the prices of their houses increasing,a housing bubble occurred.

In the dynamic aggregated demand and aggregate supply model,inflation occurs if

The international trade effect states that a(n)________ in the price level will ________ net exports.

What does the phrase "Keynesian revolution" refer to?

An increase in aggregate demand results in a(n)________ in the ________.

At a short-run macroeconomic equilibrium,real GDP is always equal to potential GDP.

Which of the following is one explanation as to why the aggregate demand curve slopes downward?

Workers and firms both expect that prices will be 2.5% higher next year than they are this year.As a result

New classical macroeconomic theory emphasizes the role of "sticky" prices in the economy.

The "interest rate effect" can be described as an increase in the price level that raises the interest rate and chokes off

Figure 24-1 -Refer to Figure 24-1.Ceteris paribus,an increase in the price level would be represented by a movement from

When the price level in the United States falls relative to the price level of other countries,________ will fall,________ will rise,and ________ will rise.

President Obama has discussed raising income taxes for individuals earning over $250,000 in income.Explain how these higher income taxes will affect the aggregate demand curve.

If stricter immigration laws are imposed and many foreign workers in the United States are forced to go back to their home countries

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, government Price Setting, and Taxes

Externalities, environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms,the Stock Market,and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology,production,and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, taxes, and the Distribution of Income

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Money,banks,and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

The long-run aggregate supply curve shows the relationship between the and .

When people became concerned with the underlying value of their houses and became concerned with the expectations of the prices of their houses increasing,a housing bubble occurred.

The international trade effect states that a(n) in the price level will net exports.

An increase in aggregate demand results in a(n) in the .

When the price level in the United States falls relative to the price level of other countries, will fall, will rise,and will rise.