Question 1

-In the above figure,the inflationary gap when AD₂ is the aggregate demand curve equals

Accepted Answer

A)  the difference between 110 and 100. 
B)  the difference between $13.5 trillion and $13.0 trillion. 
C)  LAS minus SAS at a price level of 100. 
D)  AD₁.

Question 2

Which school of thought believes that real GDP always equals potential GDP?

Accepted Answer

A)  only classical 
B)  only Keynesian 
C)  Monetarist 
D)  both Keynesian and classical

Question 3

The supply of real GDP is a function of

Accepted Answer

A)  the total expenditures of consumers, investors and government. 
B)  the sum of wages, salaries, corporate profits, rents and interest. 
C)  only the state of technology. 
D)  the quantities of labor, capital and the state of technology.

Question 4

What two variables are determined in an aggregate supply-aggregate demand figure?
Is the slope of the short-run aggregate supply curve positive or negative?
Is the slope of the aggregate demand curve positive or negative?

Accepted Answer

The answer of What two variables are determined in an...

Question 5

-In the above figure,the movement from point B to point A might be the result of

Accepted Answer

A)  an increase in government expenditures because of a war. 
B)  an increase in government expenditures because of increases in education expenditures. 
C)  an increase in the demand for manufacturing goods because of new technology. 
D)  a fall in the price level.

Question 6

When the prices of U.S.-produced goods rise and the price of foreign-produced goods do not change,the result is

Accepted Answer

A)  an increase in exports. 
B)  a decrease in exports. 
C)  a decrease in imports. 
D)  no change in imports or exports.

Question 7

In 2008,the Bank of England increased the country's money supply and lowered its interest rate. This policy was designed to

Accepted Answer

A)  encourage people to buy more goods and services. 
B)  shift the aggregate demand curve rightward. 
C)  cause a movement up along the aggregate demand curve. 
D)  Both A and B are correct.

Question 8

Inflation occurs over time as a result of

Accepted Answer

A)  long-run aggregate supply increasing faster than aggregate demand. 
B)  long-run aggregate supply increasing faster than short-run aggregate supply. 
C)  decreases in aggregate demand. 
D)  aggregate demand increasing faster than long-run aggregate supply.

Question 9

The long-run aggregate supply (LAS) curve

Accepted Answer

A)  has a positive slope. 
B)  has a negative slope. 
C)  is vertical. 
D)  is horizontal.

Question 10

Which of the following statements is TRUE?

Accepted Answer

A)  The long-run aggregate supply curve is upward sloping. 
B)  The long-run aggregate demand curve is upward sloping. 
C)  The short-run aggregate supply curve is vertical. 
D)  The long-run aggregate supply curve is vertical.

Question 11

What is the effect on the aggregate demand curve from an increase in the price level?
In particular,does the aggregate demand curve shift leftward or rightward?

Accepted Answer

The answer of What is the effect on the aggregate...

Question 12

-The above figure illustrates

Accepted Answer

A)  a recessionary gap. 
B)  a full-employment equilibrium. 
C)  an inflationary gap. 
D)  an equilibrium at the economy's physical limits.

Question 13

$$\begin{array} { | c | c | c | c | } 
\hline \begin{array} { c } 
\text { Price } \
\text { level }
\end{array} & \begin{array} { c } 
\text { Aggregate } \
\text { demand } \
\text { (trillions of } \
\text { 2005 dollars) }
\end{array} & \begin{array} { c } 
\text { Short-run } \
\text { aggregate } \
\text { supply } \
\text { (trillions of } \
\text { 2005 dollars) }
\end{array} & \begin{array} { c } 
\text { Long-run } \
\text { aggregate } \
\text { supply } \
\text { (trillions of } \
\text { 2005 dollars) }
\end{array} \
\hline 130 & 8 & 12 & 10 \
\hline 120 & 9 & 11 & 10 \
\hline 110 & 10 & 10 & 10 \
\hline 100 & 11 & 9 & 10 \
\hline 90 & 12 & 8 & 10 \
\hline
\end{array}$$
-The data in the above table indicate that when the price level is 100,

Accepted Answer

A)  firms have unexpectedly low inventories, so prices will rise. 
B)  inventories are at levels planned by firms. 
C)  firms will plan to decrease the level of output. 
D)  firms have unexpectedly high inventories, so prices fall.

Question 14

In a change to immigration policy during 2012,"people younger than 30 who came to the United States before the age of 16,pose no criminal or security threat,and were successful students or served in the military can get a two-year deferral from deportation,Homeland Security Secretary Janet Napolitano said," according to CNN,06/16/2012. If many of these immigrates had previously been afraid to work,now as a result of being able to work legally,

Accepted Answer

A)  the long-run aggregate supply curve shifts leftward and potential GDP decreases. 
B)  the short-run aggregate supply curve shifts rightward but potential GDP does not increase. 
C)  the long-run aggregate supply curve shifts rightward and potential GDP increases. 
D)  neither the short-run nor the long-run supply curve shifts.

Question 15

Aggregate demand in India increased in 2008.In addition,real GDP grew strongly and inflation approached 10 percent.The best explanation for this inflation is that

Accepted Answer

A)  aggregate supply did not change. 
B)  potential GDP decreased. 
C)  there was a movement up along the aggregate demand curve in 2008. 
D)  potential GDP increased, but at a slower rate than aggregate demand.

Question 16

If the quantity of money increases,the

Accepted Answer

A)  price level rises and the AD curve does not shift. 
B)  AD curve shifts leftward and aggregate demand decreases. 
C)  AD curve does not shift and there is a movement upward along the curve. 
D)  AD curve shifts rightward and aggregate demand increases.

Question 17

What are the substitution effects that affect aggregate demand?

Accepted Answer

The answer of What are the substitution effects that affect...

Question 18

Assume the equilibrium price level is 140 and the equilibrium real GDP is $15 trillion.What happens if the current price level equals 125?

Accepted Answer

The answer of Assume the equilibrium price level is 140...

Exam 10: Aggregate Supply and Aggregate Demand