Question 1

Which of the following changes would NOT shift the aggregate demand curve?

Accepted Answer

A)   a change in fiscal policy
B)   a change in monetary policy
C)   a change in expectations about future income
D)   an increase in technologyE) A) and C)
F) A) and B)

Question 2

An aggregate supply curve depicts the relationship between

Accepted Answer

A)   the price level and nominal GDP.
B)   household expenditures and household income.
C)   the price level and the aggregate quantity supplied.
D)   the price level and the aggregate quantity demanded.E) None of the above
F) A) and C)

Question 3

-In the above figure, the economy is at point A and the money wage rate rises by 10 percent. If the price level is constant, firms will be willing to supply output equal to

Accepted Answer

A)   less than $18.0 trillion.
B)   $18.0 trillion.
C)   more than $18.0 trillion.
D)   Without more information, it is impossible to determine which of the above answers is correct.E) None of the above
F) A) and B)

Question 4

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.E) A) and D)
F) None of the above

Question 5

-The data in the above table show that when the price level is 120, the economy

Accepted Answer

A)   is in a long-run macroeconomic equilibrium.
B)   has an inflationary gap.
C)   has a recessionary gap.
D)   will have falling money wage rates sometime in the future.E) B) and C)
F) A) and D)

Question 6

In recent years, Japan's capital stock has increased by about 6 percent from one year to the next. As a result, we would expect

Accepted Answer

A)   a leftward shift in Japan's aggregate demand curve.
B)   a movement up along Japan's short-run aggregate supply curve.
C)   only Japan's long-run aggregate supply curve to shift rightward.
D)   rightward shifts in both Japan's short-run aggregate supply and long-run aggregate supply curves.E) C) and D)
F) B) and C)

Question 7

What happens if the economy is at its long-run equilibrium and aggregate demand increases?

Accepted Answer

The increase in aggregate demand means t...

Question 8

The quantity of real GDP demanded equals $18.2 trillion when the price level is 90. If the price level rises to 95, the quantity of real GDP demanded equals

Accepted Answer

A)   less than $18.2 trillion.
B)   $18.2 trillion.
C)   more than $18.2 trillion.
D)   more information is needed to determine if the quantity of real GDP demanded increases, decreases, or does not change.E) A) and B)
F) A) and C)

Question 9

At long-run macroeconomic equilibrium,

Accepted Answer

A)   an inflationary gap exists.
B)   real GDP equals potential GDP.
C)   a recessionary gap exists.
D)   real GDP is less than potential GDP but is as close as it is possible to be.E) C) and D)
F) A) and B)

Question 10

In the short run, the equilibrium level of real GDP

Accepted Answer

A)   is necessarily less than potential GDP.
B)   is necessarily equal to potential GDP.
C)   is necessarily greater than potential GDP.
D)   could be less than, equal to, or greater than potential GDP.E) A) and B)
F) None of the above

Question 11

The SAS curve shifts if there is a change in

Accepted Answer

A)   the price level.
B)   real GDP.
C)   nominal GDP.
D)   potential GDP.E) C) and D)
F) A) and B)

Question 12

Along a short-run aggregate supply curve, a decrease in the price level means that

Accepted Answer

A)   more output is produced as consumer demand increases.
B)   less output is produced as firms decrease production.
C)   more output is produced as firms increase production because wages fall more than the price level falls, making it profitable to hire more workers.
D)   output does not change because firms do not change the quantity they produce.E) None of the above
F) A) and B)

Question 13

What could Keynes have meant by his now famous statement, "in the long run we are all dead?"

Accepted Answer

A)   Government intervention is destabilizing, will lead to slower growth in the long run, and will prevent an economy from self-regulating.
B)   Government intervention in the economy is necessary in times of recession because an economy rarely restores itself to full-employment.
C)   Government intervention in the economy is useless because it takes too long to take effect.
D)   Government intervention in the economy is only effective if it is not erratic.E) None of the above
F) A) and D)

Question 14

Starting at full employment, a business cycle can be described by the following sequence: ________ equilibrium, ________ equilibrium, ________ equilibrium.

Accepted Answer

A)   full-employment; below full-employment; above full-employment
B)   below full-employment; full-employment; above full-employment
C)   above full-employment; below full-employment; full-employment
D)   below full-employment; full-employment; below full-employmentE) A) and B)
F) A) and C)

Question 15

An increase in the money wage rate

Accepted Answer

A)   increases the long-run aggregate supply.
B)   decreases the long-run aggregate supply.
C)   increases the short-run aggregate supply.
D)   decreases the short-run aggregate supply.E) None of the above
F) B) and C)

Question 16

In the United States, of the following decades inflation was highest during the

Accepted Answer

A)   1970s.
B)   1990s.
C)   1960s.
D)   2000s.E) All of the above
F) A) and B)

Question 17

As a result of a tax increase

Accepted Answer

A)   the aggregate demand curve shifts leftward.
B)   the aggregate demand curve shifts rightward.
C)   the aggregate supply curve shifts leftward.
D)   the aggregate supply curve shifts rightward.E) A) and B)
F) A) and C)

Question 18

Moving along which curve does the money wage rate and the price level change in the same proportions?

Accepted Answer

A)   the AD curve
B)   the SAS curve
C)   the LAS curve
D)   None of the above because there is no curve along which both the money wage rate and the price level change in the same proportions.E) A) and D)
F) None of the above

Question 19

Aggregate demand increases when

Accepted Answer

A)   foreign incomes fall.
B)   interest rates rise.
C)   the exchange rate rises.
D)   None of the above answers is correct.E) A) and D)
F) C) and D)

Question 20

The SAS curve and the LAS curve

Accepted Answer

A)   intersect at potential GDP.
B)   are parallel at potential GDP.
C)   are perpendicular to one another at potential GDP.
D)   None of the above answers is correct.E) A) and B)
F) A) and C)

Exam 10: Aggregate Supply and Aggregate Demand

The SAS curve and the LAS curve

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What could Keynes have meant by his now famous statement, "in the long run we are all dead?"

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Aggregate demand increases when

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Which of the following changes would NOT shift the aggregate demand curve?

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At long-run macroeconomic equilibrium,

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In recent years, Japan's capital stock has increased by about 6 percent from one year to the next. As a result, we would expect

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Moving along which curve does the money wage rate and the price level change in the same proportions?

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Along a short-run aggregate supply curve, a decrease in the price level means that

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Which of the following statements is TRUE?

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In the short run, the equilibrium level of real GDP

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An increase in the money wage rate

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As a result of a tax increase

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Starting at full employment, a business cycle can be described by the following sequence: ________ equilibrium, ________ equilibrium, ________ equilibrium.

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An aggregate supply curve depicts the relationship between

Correct AnswerverifiedShow Answer

-In the above figure, the economy is at point A and the money wage rate rises by 10 percent. If the price level is constant, firms will be willing to supply output equal to

Correct AnswerverifiedShow Answer

The quantity of real GDP demanded equals $18.2 trillion when the price level is 90. If the price level rises to 95, the quantity of real GDP demanded equals

Correct AnswerverifiedShow Answer

In the United States, of the following decades inflation was highest during the

Correct AnswerverifiedShow Answer

The SAS curve shifts if there is a change in

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What happens if the economy is at its long-run equilibrium and aggregate demand increases?

Correct AnswerverifiedThe increase in aggregate demand means t...View AnswerShow Answer

-The data in the above table show that when the price level is 120, the economy

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Starting at full employment, a business cycle can be described by the following sequence: equilibrium, equilibrium, equilibrium.

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The increase in aggregate demand means t...
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