Question 1

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 2

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

Accepted Answer

A) changes in technology. 
B) changes in the capital stock. 
C) changes in the price level. 
D) changes in the number of workers. 
A) changes in technology. 
B) changes in the capital stock. 
C) changes in the price level. 
D) changes in the number of workers.

Question 3

Using aggregate demand and aggregate supply,explain what happens in the short run if the Federal Reserve raises interest rates in the economy.Be sure to detail what happens to aggregate demand,the price level,the level of GDP,and unemployment.Assume that the economy is at full employment before the interest rate increase.

Accepted Answer

An increase in the interest rate will ca

Question 4

Figure 13-2  
-Refer to Figure 13-2.Ceteris paribus,an increase in the expected price of an important natural resource would be represented by a movement from

Accepted Answer

A) SRAS1 to SRAS2. 
B) SRAS2 to SRAS1. 
C) point A to point B. 
D) point B to point A. 
A) SRAS1 to SRAS2. 
B) SRAS2 to SRAS1. 
C) point A to point B. 
D) point B to point A.

Question 5

The short-run aggregate supply curve has a(n)________ slope because as prices of ________ rise,prices of ________ rise more slowly.

Accepted Answer

A) positive;final goods and services;inputs 
B) infinite;final goods and services;inputs 
C) positive;inputs;final goods and services 
D) infinite;inputs;final goods and services 
A) positive;final goods and services;inputs 
B) infinite;final goods and services;inputs 
C) positive;inputs;final goods and services 
D) infinite;inputs;final goods and services

Question 6

A decrease in disposable income will shift the aggregate demand curve to the left.

Accepted Answer

A) True 
 B)False

Question 7

Most recessions in the United States since World War II have begun with

Accepted Answer

A) a decline in residential construction. 
B) a rapid increase in the price level. 
C) a substantial number of bank failures. 
D) a stock market crash. 
A) a decline in residential construction. 
B) a rapid increase in the price level. 
C) a substantial number of bank failures. 
D) a stock market crash.

Question 8

Figure 13-3  
-Refer to Figure 13-3.Suppose the economy is at point C.If investment spending decreases in the economy,where will the eventual long-run equilibrium be?

Accepted Answer

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

Question 9

One factor which brought on the recession of 2007-2009 was the financial crisis in 2008.

Accepted Answer

A) True 
 B)False

Question 10

A decrease 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 11

Studies have shown that

Accepted Answer

A) firms often cut nominal wages during recessions and allow inflation to gradually increase real wages. 
B) firms are reluctant to cut nominal wages during recessions but instead increase workers' nominal wages and allow inflation to gradually increase real wages. 
C) firms are reluctant to cut nominal wages during recessions but instead freeze workers' nominal wages and allow inflation to gradually reduce real wages. 
D) firms often freeze workers' nominal wages during a recession and keep the wages frozen well after the recession has ended. 
A) firms often cut nominal wages during recessions and allow inflation to gradually increase real wages. 
B) firms are reluctant to cut nominal wages during recessions but instead increase workers' nominal wages and allow inflation to gradually increase real wages. 
C) firms are reluctant to cut nominal wages during recessions but instead freeze workers' nominal wages and allow inflation to gradually reduce real wages. 
D) firms often freeze workers' nominal wages during a recession and keep the wages frozen well after the recession has ended.

Question 12

A decrease in aggregate demand causes a decrease in ________ only in the short run,but causes a decrease in ________ in both the short run and the long run.

Accepted Answer

A) the price level;real GDP 
B) real GDP;real GDP 
C) the price level;the price level 
D) real GDP;the price level 
A) the price level;real GDP 
B) real GDP;real GDP 
C) the price level;the price level 
D) real GDP;the price level

Question 13

Monetarists believe that the quantity of money should be increased at an increasing rate.

Accepted Answer

A) True 
 B)False

Question 14

If the U.S.dollar decreases in value relative to other currencies,how does this affect the aggregate demand curve?

Accepted Answer

A) This will move the economy up along a stationary aggregate demand curve. 
B) This will move the economy down along a stationary aggregate demand curve. 
C) This will shift the aggregate demand curve to the left. 
D) This will shift the aggregate demand curve to the right. 
A) This will move the economy up along a stationary aggregate demand curve. 
B) This will move the economy down along a stationary aggregate demand curve. 
C) This will shift the aggregate demand curve to the left. 
D) This will shift the aggregate demand curve to the right.

Question 15

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 16

Interest rates in the economy have fallen.How will this affect aggregate demand and equilibrium in the short run?

Accepted Answer

A) Aggregate demand will rise,the equilibrium price level will rise,and the equilibrium level of GDP will rise. 
B) Aggregate demand will rise,the equilibrium price level will fall,and the equilibrium level of GDP will rise. 
C) Aggregate demand will fall,the equilibrium price level will fall,and the equilibrium level of GDP will fall. 
D) Aggregate demand will fall,the equilibrium price level will rise,and the equilibrium level of GDP will fall. 
A) Aggregate demand will rise,the equilibrium price level will rise,and the equilibrium level of GDP will rise. 
B) Aggregate demand will rise,the equilibrium price level will fall,and the equilibrium level of GDP will rise. 
C) Aggregate demand will fall,the equilibrium price level will fall,and the equilibrium level of GDP will fall. 
D) Aggregate demand will fall,the equilibrium price level will rise,and the equilibrium level of GDP will fall.

Question 17

Why does the short-run aggregate supply curve slope upward?

Accepted Answer

The short-run aggregate supply curve slo

Question 18

An increase in the price level causes a movement down the aggregate demand curve.

Accepted Answer

A) True 
 B)False

Question 19

Which aggregate supply curve has a positive slope?

Accepted Answer

A) long run only 
B) short run only 
C) both long run and short run 
D) neither long run nor short run 
A) long run only 
B) short run only 
C) both long run and short run 
D) neither long run nor short run

Question 20

An increase in disposable income will shift the aggregate demand curve to the right.

Accepted Answer

A) True 
 B)False

The level of real GDP in the long run is called

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

Figure 13-2 -Refer to Figure 13-2.Ceteris paribus,an increase in the expected price of an important natural resource would be represented by a movement from

The short-run aggregate supply curve has a(n) slope because as prices of rise,prices of rise more slowly.

A decrease in disposable income will shift the aggregate demand curve to the left.

Most recessions in the United States since World War II have begun with

Figure 13-3 -Refer to Figure 13-3.Suppose the economy is at point C.If investment spending decreases in the economy,where will the eventual long-run equilibrium be?

One factor which brought on the recession of 2007-2009 was the financial crisis in 2008.

A decrease in aggregate demand results in a(n) in the .

Studies have shown that

A decrease in aggregate demand causes a decrease in only in the short run,but causes a decrease in in both the short run and the long run.

Monetarists believe that the quantity of money should be increased at an increasing rate.

If the U.S.dollar decreases in value relative to other currencies,how does this affect the aggregate demand curve?

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.

Interest rates in the economy have fallen.How will this affect aggregate demand and equilibrium in the short run?

Why does the short-run aggregate supply curve slope upward?

An increase in the price level causes a movement down the aggregate demand curve.

Which aggregate supply curve has a positive slope?

An increase in disposable income will shift the aggregate demand curve to the right.

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

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

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

Exam 13: Aggregate Demand and Aggregate Supply Analysis

The level of real GDP in the long run is called

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

Figure 13-2 -Refer to Figure 13-2.Ceteris paribus,an increase in the expected price of an important natural resource would be represented by a movement from

The short-run aggregate supply curve has a(n)________ slope because as prices of ________ rise,prices of ________ rise more slowly.

A decrease in disposable income will shift the aggregate demand curve to the left.

Most recessions in the United States since World War II have begun with

Figure 13-3 -Refer to Figure 13-3.Suppose the economy is at point C.If investment spending decreases in the economy,where will the eventual long-run equilibrium be?

One factor which brought on the recession of 2007-2009 was the financial crisis in 2008.

A decrease in aggregate demand results in a(n)________ in the ________.

Studies have shown that

A decrease in aggregate demand causes a decrease in ________ only in the short run,but causes a decrease in ________ in both the short run and the long run.

Monetarists believe that the quantity of money should be increased at an increasing rate.

If the U.S.dollar decreases in value relative to other currencies,how does this affect the aggregate demand curve?

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.

Interest rates in the economy have fallen.How will this affect aggregate demand and equilibrium in the short run?

Why does the short-run aggregate supply curve slope upward?

An increase in the price level causes a movement down the aggregate demand curve.

Which aggregate supply curve has a positive slope?

An increase in disposable income will shift the aggregate demand curve to the right.

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

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

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 short-run aggregate supply curve has a(n) slope because as prices of rise,prices of rise more slowly.

A decrease in aggregate demand results in a(n) in the .

A decrease in aggregate demand causes a decrease in only in the short run,but causes a decrease in in both the short run and the long run.