Question 1

The monetary growth rule is a plan for increasing the quantity of money

Accepted Answer

A) at a fixed rate that does not respond to changes in the economic condition. 
B) at a rate which increases as the economy grows. 
C) at a rate which decreases as the economy declines. 
D) at a rate which increases during recessions and decreases during expansions. 
A) at a fixed rate that does not respond to changes in the economic condition. 
B) at a rate which increases as the economy grows. 
C) at a rate which decreases as the economy declines. 
D) at a rate which increases during recessions and decreases during expansions.

Question 2

A decrease in investment causes the price level to ________ in the short run and ________ in the long run.

Accepted Answer

A) increase;increase further 
B) increase;decrease 
C) decrease;decrease further 
D) decrease;increase 
A) increase;increase further 
B) increase;decrease 
C) decrease;decrease further 
D) decrease;increase

Question 3

Figure 13-1  
-Refer to Figure 13-1.Ceteris paribus,an increase in the value of the domestic currency relative to foreign currencies 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 4

Inflation will

Accepted Answer

A) increase aggregate demand. 
B) increase the quantity of real GDP demanded. 
C) decrease aggregate demand. 
D) decrease the quantity of real GDP demanded. 
A) increase aggregate demand. 
B) increase the quantity of real GDP demanded. 
C) decrease aggregate demand. 
D) decrease the quantity of real GDP demanded.

Question 5

Explain why the long-run aggregate supply curve is vertical.

Accepted Answer

The long-run aggregate supply curve is v

Question 6

How do changes in income tax policies affect aggregate demand?

Accepted Answer

A) Higher taxes increase disposable income,consumption,and aggregate demand. 
B) Higher taxes reduce disposable income,consumption,and aggregate demand. 
C) Higher taxes increase corporate investment and aggregate demand. 
D) Higher taxes increase aggregate supply and thus increase aggregate demand as well. 
A) Higher taxes increase disposable income,consumption,and aggregate demand. 
B) Higher taxes reduce disposable income,consumption,and aggregate demand. 
C) Higher taxes increase corporate investment and aggregate demand. 
D) Higher taxes increase aggregate supply and thus increase aggregate demand as well.

Question 7

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

Accepted Answer

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

Question 8

Figure 13-2  
-Refer to Figure 13-2.Ceteris paribus,a decrease in the capital stock 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 9

Figure 13-1  
-Refer to Figure 13-1.Ceteris paribus,an increase in interest rates 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 10

If workers and firms have rational expectations,they form their expectations using

Accepted Answer

A) all the information available to them. 
B) only information from the past. 
C) only information provided to them by the government. 
D) only information gathered from random sources. 
A) all the information available to them. 
B) only information from the past. 
C) only information provided to them by the government. 
D) only information gathered from random sources.

Question 11

Figure 13-2  
-Refer to Figure 13-2.Ceteris paribus,a decrease 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 12

Suppose the economy is at full employment and firms become more optimistic about the future profitability of new investment.Which of the following will happen in the short run?

Accepted Answer

A) Output will decline. 
B) Prices will decline. 
C) Unemployment will decline. 
D) The aggregate demand curve will shift to the left. 
A) Output will decline. 
B) Prices will decline. 
C) Unemployment will decline. 
D) The aggregate demand curve will shift to the left.

Question 13

How do lower taxes affect aggregate demand?

Accepted Answer

A) They increase disposable income,consumption,and aggregate demand. 
B) They reduce disposable income,consumption,and aggregate demand. 
C) they increase corporate investment and aggregate demand. 
D) They increase aggregate supply and thus increase aggregate demand as well. 
A) They increase disposable income,consumption,and aggregate demand. 
B) They reduce disposable income,consumption,and aggregate demand. 
C) they increase corporate investment and aggregate demand. 
D) They increase aggregate supply and thus increase aggregate demand as well.

Question 14

Explain whether Delta Airlines' sales are likely to fluctuate more or less than the sales of each of the following firms as the economy moves from recession to expansion and back to recession.
Whirlpool Corporation (appliance manufacturer)
Taco Bell
The Boeing Company (aircraft manufacturer)
GameStop (video game sales and rentals)

Accepted Answer

Delta's sales are likely to fluctuate du

Question 15

Monetarism is a school of thought put forth by Milton Friedman.He argued that the economy would most likely

Accepted Answer

A) be below potential GDP. 
B) be at potential GDP. 
C) be unstable. 
D) be above potential GDP. 
A) be below potential GDP. 
B) be at potential GDP. 
C) be unstable. 
D) be above potential GDP.

Question 16

A supply shock causes the long-run aggregate supply curve to shift left,decreasing the price level.

Accepted Answer

A) True 
 B)False

Question 17

Explain how each of the following events would affect the short-run aggregate supply curve.
a.A decrease in the price level
b.A decrease in what the price level is expected to be in the future
c.A price level that is currently lower than expected
d.An unexpected decrease in the price of an important raw material
e.A decrease in the labor force

Accepted Answer

a.A lower price level would cause a move

Question 18

Japanese electronics exports were hurt in 2008 as a result of the recession.How would this decrease in exports have affected Japan's aggregate demand curve?

Accepted Answer

A) The aggregate demand curve would have shifted to the right. 
B) The aggregate demand curve would not have shifted,but there would have been a movement up the aggregate demand curve. 
C) The aggregate demand curve would not have shifted,but there would have been a movement down the aggregate demand curve. 
D) The aggregate demand curve would have shifted to the left. 
A) The aggregate demand curve would have shifted to the right. 
B) The aggregate demand curve would not have shifted,but there would have been a movement up the aggregate demand curve. 
C) The aggregate demand curve would not have shifted,but there would have been a movement down the aggregate demand curve. 
D) The aggregate demand curve would have shifted to the left.

Question 19

Figure 13-2  
-Refer to Figure 13-2.Ceteris paribus,an increase in the labor force 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 20

Figure 13-3  
-Refer to Figure 13-3.Suppose the economy is at point C.If government 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

The monetary growth rule is a plan for increasing the quantity of money

A decrease in investment causes the price level to in the short run and in the long run.

Figure 13-1 -Refer to Figure 13-1.Ceteris paribus,an increase in the value of the domestic currency relative to foreign currencies would be represented by a movement from

Inflation will

Explain why the long-run aggregate supply curve is vertical.

How do changes in income tax policies affect aggregate demand?

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

Figure 13-2 -Refer to Figure 13-2.Ceteris paribus,a decrease in the capital stock would be represented by a movement from

Figure 13-1 -Refer to Figure 13-1.Ceteris paribus,an increase in interest rates would be represented by a movement from

If workers and firms have rational expectations,they form their expectations using

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

Suppose the economy is at full employment and firms become more optimistic about the future profitability of new investment.Which of the following will happen in the short run?

How do lower taxes affect aggregate demand?

Monetarism is a school of thought put forth by Milton Friedman.He argued that the economy would most likely

A supply shock causes the long-run aggregate supply curve to shift left,decreasing the price level.

Japanese electronics exports were hurt in 2008 as a result of the recession.How would this decrease in exports have affected Japan's aggregate demand curve?

Figure 13-2 -Refer to Figure 13-2.Ceteris paribus,an increase in the labor force would be represented by a movement from

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

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 monetary growth rule is a plan for increasing the quantity of money

A decrease in investment causes the price level to ________ in the short run and ________ in the long run.

Figure 13-1 -Refer to Figure 13-1.Ceteris paribus,an increase in the value of the domestic currency relative to foreign currencies would be represented by a movement from

Inflation will

Explain why the long-run aggregate supply curve is vertical.

How do changes in income tax policies affect aggregate demand?

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

Figure 13-2 -Refer to Figure 13-2.Ceteris paribus,a decrease in the capital stock would be represented by a movement from

Figure 13-1 -Refer to Figure 13-1.Ceteris paribus,an increase in interest rates would be represented by a movement from

If workers and firms have rational expectations,they form their expectations using

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

Suppose the economy is at full employment and firms become more optimistic about the future profitability of new investment.Which of the following will happen in the short run?

How do lower taxes affect aggregate demand?

Monetarism is a school of thought put forth by Milton Friedman.He argued that the economy would most likely

A supply shock causes the long-run aggregate supply curve to shift left,decreasing the price level.

Japanese electronics exports were hurt in 2008 as a result of the recession.How would this decrease in exports have affected Japan's aggregate demand curve?

Figure 13-2 -Refer to Figure 13-2.Ceteris paribus,an increase in the labor force would be represented by a movement from

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

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

A decrease in investment causes the price level to in the short run and in the long run.

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