Question 1

At a long-run macroeconomic equilibrium,real GDP is always equal to potential GDP.

Accepted Answer

A) True 
 B)False

Question 2

The impact of Hurricane Katrina on consumers in the economy was to make them very pessimistic about their future incomes. How does this increased pessimism 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.E) A) and B)
F) None of the above

Question 3

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.E) A) and B)
F) B) and D)

Question 4

Figure 24-1
 
-Refer to Figure 24-1.Ceteris paribus,an increase in the growth rate of domestic GDP relative to the growth rate of foreign GDP 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.E) None of the above
F) A) and B)

Question 5

What are sticky prices,and how can contracts make them "sticky"?

Accepted Answer

Prices or wages are said to be "sticky" ...

Question 6

Which of the following models focuses on how productivity shocks explain fluctuations in real GDP?

Accepted Answer

A)   the monetarist model
B)   the new classical model
C)   the real business cycle model
D)   the new Keynesian modelE) B) and C)
F) A) and B)

Question 7

Starting from long-run equilibrium,use the basic aggregate demand and aggregate supply diagram to show what happens in both the long run and the short run when there is an increase in wealth.

Accepted Answer

<img  loading="lazy" src="/assets/images/blured-textbook.svg" class="d-inline m-1" alt="blured image" width="139" height="30"> Before the increase in demand,the econo...

Question 8

Why are the long-run effects of an increase in aggregate demand on price and output different from the short-run effects?

Accepted Answer

The long-run effects differ from the sho...

Question 9

In the dynamic aggregated demand and aggregate supply model,inflation occurs if

Accepted Answer

A)   AD shifts faster than SRAS.
B)   AD shifts slower than SRAS.
C)   SRAS shifts faster than AD.
D)   LRAS shifts faster than AD.E) A) and B)
F) A) and C)

Question 10

If rapid increases in oil prices caused price levels to increase and real GDP to decrease in the short run,the economy would experience

Accepted Answer

A)   stagflation.
B)   long-run economic decline.
C)   hyperinflation.
D)   an increase in the natural rate of unemployment.E) B) and D)
F) None of the above

Question 11

Figure 24-1
 
-Refer to Figure 24-1.Ceteris paribus,an increase in government spending 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.E) A) and B)
F) All of the above

Question 12

Changes in ________ do not affect the level of aggregate supply in the long run.

Accepted Answer

A)   technology
B)   the number of workers in the economy
C)   the price level
D)   the amount of accumulated capital equipmentE) B) and C)
F) A) and B)

Question 13

In the long run,

Accepted Answer

A)   GDP = potential GDP.
B)   unemployment is below its natural rate.
C)   LRAS and SRAS lie on the same line.
D)   unemployment is above its natural rate.E) C) and D)
F) B) and C)

Question 14

The business cycle ________ on FedEx since the company's inception over 40 years ago.

Accepted Answer

A)   has had virtually no effect
B)   has always had a negative effect
C)   has had a large effect
D)   has always had a positive effectE) None of the above
F) A) and D)

Question 15

Which of the following will shift the aggregate demand curve to the left,ceteris paribus?

Accepted Answer

A)   an increase in interest rates
B)   an increase in disposable income
C)   an increase in expected profits for firms
D)   an increase in net exportsE) A) and B)
F) None of the above

Question 16

Which of the following best describes the "interest rate effect"?

Accepted Answer

A)   An increase in the price level raises the interest rate and chokes off government spending.
B)   An increase in the price level lowers the interest rate and chokes off government spending.
C)   An increase in the price level raises the interest rate and chokes off investment and consumption spending.
D)   An increase in the price level lowers the interest rate and chokes off investment and consumption spending.E) None of the above
F) B) and D)

Question 17

Which of the following would cause the short-run aggregate supply curve to shift to the left?

Accepted Answer

A)   an increase in the price level
B)   an increase in inflation expectations
C)   a technological advance
D)   a decrease in interest ratesE) None of the above
F) A) and C)

Question 18

Figure 24-2
 
-Refer to Figure 24-2.Ceteris paribus,a decrease in productivity 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.E) A) and D)
F) A) and C)

Question 19

Ceteris paribus,in the long run,a negative supply shock causes

Accepted Answer

A)   the long-run aggregate supply curve to shift to the left.
B)   the price level to rise initially, and then return to its lower level.
C)   unemployment to fall below its short-run level.
D)   equilibrium real GDP to fall.E) A) and B)
F) All of the above

Question 20

Which of the following is considered a negative supply shock?

Accepted Answer

A)   increasing investment in the economy causes the capital stock to rise
B)   an unexpected increase in the price of natural gas
C)   a decline in wages
D)   an improvement in technologyE) A) and B)
F) B) and C)

Exam 13: Aggregate Demand and Aggregate Supply Analysis

Which of the following is considered a negative supply shock?

Correct AnswerverifiedShow Answer

Starting from long-run equilibrium,use the basic aggregate demand and aggregate supply diagram to show what happens in both the long run and the short run when there is an increase in wealth.

Correct Answerverified Before the increase in demand,the econo...View AnswerShow Answer

Which of the following would cause the short-run aggregate supply curve to shift to the left?

Correct AnswerverifiedShow Answer

Which of the following models focuses on how productivity shocks explain fluctuations in real GDP?

Correct AnswerverifiedShow Answer

At a long-run macroeconomic equilibrium,real GDP is always equal to potential GDP.

Correct AnswerverifiedShow Answer

What are sticky prices,and how can contracts make them "sticky"?

Correct AnswerverifiedPrices or wages are said to be "sticky" ...View AnswerShow Answer

In the long run,

Correct AnswerverifiedShow Answer

The impact of Hurricane Katrina on consumers in the economy was to make them very pessimistic about their future incomes. How does this increased pessimism affect the aggregate demand curve?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Changes in ________ do not affect the level of aggregate supply in the long run.

Correct AnswerverifiedShow Answer

Figure 24-1 -Refer to Figure 24-1.Ceteris paribus,an increase in government spending would be represented by a movement from

Correct AnswerverifiedShow Answer

In the dynamic aggregated demand and aggregate supply model,inflation occurs if

Correct AnswerverifiedShow Answer

Ceteris paribus,in the long run,a negative supply shock causes

Correct AnswerverifiedShow Answer

Figure 24-2 -Refer to Figure 24-2.Ceteris paribus,a decrease in productivity would be represented by a movement from

Correct AnswerverifiedShow Answer

Which of the following will shift the aggregate demand curve to the left,ceteris paribus?

Correct AnswerverifiedShow Answer

If rapid increases in oil prices caused price levels to increase and real GDP to decrease in the short run,the economy would experience

Correct AnswerverifiedShow Answer

Figure 24-1 -Refer to Figure 24-1.Ceteris paribus,an increase in the growth rate of domestic GDP relative to the growth rate of foreign GDP would be represented by a movement from

Correct AnswerverifiedShow Answer

Why are the long-run effects of an increase in aggregate demand on price and output different from the short-run effects?

Correct AnswerverifiedThe long-run effects differ from the sho...View AnswerShow Answer

The business cycle ________ on FedEx since the company's inception over 40 years ago.

Correct AnswerverifiedShow Answer

Which of the following best describes the "interest rate effect"?

Correct AnswerverifiedShow Answer

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Before the increase in demand,the econo...
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Prices or wages are said to be "sticky" ...
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The long-run effects differ from the sho...
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