Question 1

Use the following to answer questions: 1 and investment spending increases: A)  AD1 will shift to the left,reflecting a multiplied decrease in real GDP at every price level. B)  AD1 will shift to the right,reflecting a multiplied increase in real GDP at every price level. C)  an upward movement along the AD1 will take place,reflecting an increase in the price level. D)  a downward movement along the AD1 will take place,reflecting a decrease in the price level." class="answers-bank-image d-inline" rel="preload" >
-(Figure: The Multiplier) Refer to Figure: The Multiplier.If this economy is at Y1 and investment spending increases:

Accepted Answer

A)   AD1 will shift to the left,reflecting a multiplied decrease in real GDP at every price level.
B)   AD1 will shift to the right,reflecting a multiplied increase in real GDP at every price level.
C)   an upward movement along the AD1 will take place,reflecting an increase in the price level.
D)   a downward movement along the AD1 will take place,reflecting a decrease in the price level.E) A) and D)
F) All of the above

Question 2

A movement along the aggregate demand curve is caused by a(n) :

Accepted Answer

A)   change in the aggregate price level.
B)   increase in consumer spending.
C)   reduction in taxes.
D)   reduction in government spending.E) A) and C)
F) None of the above

Question 3

When short-run aggregate supply increases,it means that the short-run aggregate supply curve shifts to the right,showing that producers are willing to produce more at each price level.

Accepted Answer

A) True 
 B)False

Question 4

The long-run aggregate supply curve is:

Accepted Answer

A)   upward sloping.
B)   downward sloping.
C)   horizontal.
D)   vertical.E) A) and B)
F) None of the above

Question 5

The negative relationship between the aggregate price level and aggregate output demanded gives the aggregate demand curve a _____ slope.

Accepted Answer

A)   positive
B)   vertical
C)   horizontal
D)   negativeE) B) and D)
F) None of the above

Question 6

When the price level increases,people want to hold more money.

Accepted Answer

A) True 
 B)False

Question 7

In the income-expenditure model,if the price level increases,the wealth and interest rate effects will decrease planned expenditures.

Accepted Answer

A) True 
 B)False

Question 8

If the price level decreases by 20%,the purchasing power of $1 000 will increase to $1 200.

Accepted Answer

A) True 
 B)False

Question 9

Sticky wages and prices occur:

Accepted Answer

A)   in the long run.
B)   in the short run.
C)   in both the short and long run.
D)   only when the economy is operating above its potential real GDP.E) A) and C)
F) None of the above

Question 10

Use the following to answer questions: 1 and price level P2.At real GDP level Y1 there is: A)  an inflationary gap. B)  a recessionary gap. C)  no gap. D)  long-run equilibrium. " class="answers-bank-image d-inline" rel="preload" >
-(Figure: Policy Alternatives) Refer to Figure: Policy Alternatives.The economy in panel (b) is initially in short-run equilibrium at real GDP level Y1 and price level P2.At real GDP level Y1 there is:

Accepted Answer

A)   an inflationary gap.
B)   a recessionary gap.
C)   no gap.
D)   long-run equilibrium.E) B) and C)
F) A) and B)

Question 11

In long-run macroeconomic equilibrium,actual aggregate output equals potential output.

Accepted Answer

A) True 
 B)False

Question 12

When short-run aggregate supply decreases,it means that the short-run aggregate supply curve shifts to the _____ and the quantity of aggregate output that producers are willing to supply _____.

Accepted Answer

A)   right;decreases
B)   right;increases
C)   left;decreases
D)   left;increasesE) A) and B)
F) A) and C)

Question 13

Use the following to answer questions: 2 level of real GDP: A)  an inflationary gap equal to the sum of Y2 and YP occurs. B)  an inflationary gap equal to the difference between Y2 and YP occurs. C)  the solution at Y2 is a long-run equilibrium. D)  a recessionary gap equal to the difference between Y2 and YP occurs. " class="answers-bank-image d-inline" rel="preload" >
-(Figure: An Increase in Aggregate Demand) Refer to Figure: An Increase in Aggregate Demand.At the Y2 level of real GDP:

Accepted Answer

A)   an inflationary gap equal to the sum of Y2 and YP occurs.
B)   an inflationary gap equal to the difference between Y2 and YP occurs.
C)   the solution at Y2 is a long-run equilibrium.
D)   a recessionary gap equal to the difference between Y2 and YP occurs.E) B) and C)
F) None of the above

Question 14

Which factor will increase short-run aggregate supply?

Accepted Answer

A)   a law that requires health insurance for all employees
B)   an increase in the aggregate price level
C)   a large decrease in the price of oil
D)   an increase in the minimum wageE) A) and C)
F) None of the above

Question 15

When the price level increases,firms in perfectly competitive markets will:

Accepted Answer

A)   decrease output and increase the price.
B)   decrease output.
C)   increase output and decrease the price.
D)   increase output.E) B) and C)
F) A) and B)

Question 16

Stagflation is a combination of _____ unemployment and _____ inflation.

Accepted Answer

A)   increasing;increasing
B)   decreasing;decreasing
C)   increasing;decreasing
D)   decreasing;increasingE) B) and C)
F) B) and D)

Question 17

If nominal wages fall,then the short-run aggregate _____ curve shifts to the _____.

Accepted Answer

A)   supply;right
B)   supply;left
C)   demand;right
D)   demand;leftE) All of the above
F) B) and D)

Question 18

A negative supply shock raises production costs and increases the quantity producers are willing to supply at any given price level.

Accepted Answer

A) True 
 B)False

Question 19

The nominal wage is the dollar amount of the wage paid.

Accepted Answer

A) True 
 B)False

Question 20

According to the interest rate effect,a decrease in the price level causes people to _____ their money holdings,which _____ interest rates and _____ investment spending.

Accepted Answer

A)   increase;increases;decreases
B)   decrease;increases;decreases
C)   increase;decreases;decreases
D)   decrease;decreases;increasesE) A) and C)
F) None of the above

Exam 12: Aggregate Demand and Aggregate Supply

Use the following to answer questions: -(Figure: Policy Alternatives) Refer to Figure: Policy Alternatives.The economy in panel (b) is initially in short-run equilibrium at real GDP level Y1 and price level P2.At real GDP level Y1 there is:

Correct AnswerverifiedShow Answer

Stagflation is a combination of _____ unemployment and _____ inflation.

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A negative supply shock raises production costs and increases the quantity producers are willing to supply at any given price level.

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A movement along the aggregate demand curve is caused by a(n) :

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The long-run aggregate supply curve is:

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When short-run aggregate supply decreases,it means that the short-run aggregate supply curve shifts to the _____ and the quantity of aggregate output that producers are willing to supply _____.

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When the price level increases,people want to hold more money.

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Which factor will increase short-run aggregate supply?

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Use the following to answer questions: -(Figure: The Multiplier) Refer to Figure: The Multiplier.If this economy is at Y1 and investment spending increases:

Correct AnswerverifiedShow Answer

In long-run macroeconomic equilibrium,actual aggregate output equals potential output.

Correct AnswerverifiedShow Answer

Sticky wages and prices occur:

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If nominal wages fall,then the short-run aggregate _____ curve shifts to the _____.

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In the income-expenditure model,if the price level increases,the wealth and interest rate effects will decrease planned expenditures.

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Use the following to answer questions: -(Figure: An Increase in Aggregate Demand) Refer to Figure: An Increase in Aggregate Demand.At the Y2 level of real GDP:

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The negative relationship between the aggregate price level and aggregate output demanded gives the aggregate demand curve a _____ slope.

Correct AnswerverifiedShow Answer

According to the interest rate effect,a decrease in the price level causes people to _____ their money holdings,which _____ interest rates and _____ investment spending.

Correct AnswerverifiedShow Answer

If the price level decreases by 20%,the purchasing power of $1 000 will increase to $1 200.

Correct AnswerverifiedShow Answer

When short-run aggregate supply increases,it means that the short-run aggregate supply curve shifts to the right,showing that producers are willing to produce more at each price level.

Correct AnswerverifiedShow Answer

When the price level increases,firms in perfectly competitive markets will:

Correct AnswerverifiedShow Answer

The nominal wage is the dollar amount of the wage paid.

Correct AnswerverifiedShow Answer

Use the following to answer questions: -(Figure: Policy Alternatives) Refer to Figure: Policy Alternatives.The economy in panel (b) is initially in short-run equilibrium at real GDP level Y₁ and price level P₂.At real GDP level Y₁ there is:

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Stagflation is a combination of _ unemployment and _ inflation.

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When short-run aggregate supply decreases,it means that the short-run aggregate supply curve shifts to the _ and the quantity of aggregate output that producers are willing to supply _.

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Use the following to answer questions: -(Figure: The Multiplier) Refer to Figure: The Multiplier.If this economy is at Y₁ and investment spending increases:

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If nominal wages fall,then the short-run aggregate _ curve shifts to the _.

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Use the following to answer questions: -(Figure: An Increase in Aggregate Demand) Refer to Figure: An Increase in Aggregate Demand.At the Y₂ level of real GDP:

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According to the interest rate effect,a decrease in the price level causes people to ___ their money holdings,which _ interest rates and ___ investment spending.

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