Question 1

If full-employment GDP is equal to $4.2 trillion,what does the long-run aggregate supply curve look like?

Accepted Answer

A)  It is a horizontal line at $4.2 trillion of GDP.
B)  It is a vertical line at a level of GDP below $4.2 trillion.
C)  It is a vertical line at $4.2 trillion of GDP.
D)  It is a vertical line at a level of GDP above $4.2 trillion.E) A) and B)
F) C) and D)

Question 2

Higher personal income taxes

Accepted Answer

A)  increase aggregate demand.
B)  increase disposable income.
C)  decrease aggregate demand.
D)  both B and CE) A) and C)
F) A) and B)

Question 3

An increase in the price level causes a movement down the aggregate demand curve.

Accepted Answer

A) True 
 B)False

Question 4

Figure 13-4 1,LRAS1 and SRAS1 denote AD,LRAS and SRAS in year 1,while AD2,LRAS2 and SRAS2 denote AD,LRAS and SRAS in year 2.Given the economy is at point A in year 1,what is the actual growth rate in GDP in year 2? A) 2.5% B) 7.3% C) 8.0% D) 10.0%" class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 13-4.In the figure above,AD1,LRAS1 and SRAS1 denote AD,LRAS and SRAS in year 1,while AD2,LRAS2 and SRAS2 denote AD,LRAS and SRAS in year 2.Given the economy is at point A in year 1,what is the actual growth rate in GDP in year 2?

Accepted Answer

A)  2.5%
B)  7.3%
C)  8.0%
D)  10.0%E) C) and D)
F) None of the above

Question 5

Which of the following correctly describes the automatic mechanism through which the economy adjusts to long-run equilibrium?

Accepted Answer

A)  the leftward shift of the short-run aggregate supply curve that occurs after a recession
B)  the rightward shift of the short-run aggregate supply curve that occurs after a recession
C)  the leftward shift of the aggregate demand curve that occurs after a recession
D)  the rightward shift of the aggregate demand curve that occurs after a recessionE) All of the above
F) A) and B)

Question 6

If workers leave a country to seek out better opportunities in another country,then this will

Accepted Answer

A)  shift the short-run aggregate supply curve of the original country to the left.
B)  shift the short-run aggregate supply curve of the original country to the right.
C)  move the original economy up along a stationary short-run aggregate supply curve.
D)  move the original economy down along a stationary short-run aggregate supply curve.E) B) and C)
F) A) and D)

Question 7

Which of the following would not be considered a positive addition to household wealth?

Accepted Answer

A)  the equity in one's home
B)  1,000 shares of Microsoft stock
C)  a credit card balance
D)  the balance in your checking accountE) None of the above
F) A) and B)

Question 8

Using the aggregate supply and demand model,illustrate what happens in the long run when the economy suffers a supply shock.Begin your analysis by assuming the economy has suffered the supply shock in the short run,but has not yet adjusted to it in the long run.

Accepted Answer

<img  loading="lazy" src="/assets/images/blured-textbook.svg" class="d-inline m-1" alt="blured image" width="139" height="30"> The economy is at point B with the pric...

Question 9

Figure 13-1 1 to AD2. B) AD2 to AD1. C) point A to point B. D) point B to point A." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 13-1.Ceteris paribus,a decrease in the price level 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) B) and C)
F) A) and B)

Question 10

If aggregate demand just decreased,which of the following may have caused the decrease?

Accepted Answer

A)  a decrease in exports
B)  a decrease in the interest rate
C)  a decrease in the price level
D)  a decrease in importsE) A) and D)
F) B) and D)

Question 11

Figure 13-2 1 to SRAS2. B) SRAS2 to SRAS1. C) point A to point B. D) point B to point A." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 13-2.Ceteris paribus,an increase in the price level 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 B)
F) C) and D)

Question 12

If the economy receives an influx of new workers from immigration,

Accepted Answer

A)  the long-run aggregate supply curve will shift to the right.
B)  the long-run aggregate supply curve will shift to the left.
C)  we will move up along the long-run aggregate supply curve.
D)  we will move down along the long-run aggregate supply curve.E) A) and D)
F) C) and D)

Question 13

An increase in government spending will result in an increase in the price level and an increase in real GDP in the long run.

Accepted Answer

A) True 
 B)False

Question 14

Spending on the war in Afghanistan is essentially categorized as government purchases.How do increases in spending on the war in Afghanistan affect the aggregate demand curve?

Accepted Answer

A)  They will move the economy down along a stationary aggregate demand curve.
B)  They will move the economy up along a stationary aggregate demand curve.
C)  They will shift the aggregate demand curve to the right.
D)  They will shift the aggregate demand curve to the left.E) A) and D)
F) A) and C)

Question 15

Figure 13-1 1 to AD2. B) AD2 to AD1. C) point A to point B. D) point B to point A." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 13-1.Ceteris paribus,a decrease 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.E) None of the above
F) C) and D)

Question 16

Figure 13-2 1 to SRAS2. B) SRAS2 to SRAS1. C) point A to point B. D) point B to point A." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 13-2.Ceteris paribus,an increase 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.E) A) and D)
F) None of the above

Question 17

Studies have shown that

Accepted Answer

A)  firms often cut nominal wages during recessions and allow inflation to gradually increase real wages.
B)  firms are reluctant to cut nominal wages during recessions but instead increase workers' nominal wages and allow inflation to gradually increase real wages.
C)  firms are reluctant to cut nominal wages during recessions but instead freeze workers' nominal wages and allow inflation to gradually reduce real wages.
D)  firms often freeze workers' nominal wages during a recession and keep the wages frozen well after the recession has ended.E) All of the above
F) B) and C)

Question 18

One factor which brought on the recession of 2007-2009 was the financial crisis in 2008.

Accepted Answer

A) True 
 B)False

Question 19

In the dynamic aggregate demand and aggregate supply model,what is the result of aggregate demand increasing faster than potential real GDP?

Accepted Answer

Aggregate demand inc...

Question 20

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) B) and D)

Exam 13: Aggregate Demand and Aggregate Supply Analysis

Studies have shown that

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

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Figure 13-1 -Refer to Figure 13-1.Ceteris paribus,a decrease in the price level would be represented by a movement from

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Higher personal income taxes

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

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

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One factor which brought on the recession of 2007-2009 was the financial crisis in 2008.

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If workers leave a country to seek out better opportunities in another country,then this will

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An increase in government spending will result in an increase in the price level and an increase in real GDP in the long run.

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Which of the following would not be considered a positive addition to household wealth?

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An increase in the price level causes a movement down the aggregate demand curve.

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Using the aggregate supply and demand model,illustrate what happens in the long run when the economy suffers a supply shock.Begin your analysis by assuming the economy has suffered the supply shock in the short run,but has not yet adjusted to it in the long run.

Correct Answerverified The economy is at point B with the pric...View AnswerShow Answer

Which of the following correctly describes the automatic mechanism through which the economy adjusts to long-run equilibrium?

Correct AnswerverifiedShow Answer

If full-employment GDP is equal to $4.2 trillion,what does the long-run aggregate supply curve look like?

Correct AnswerverifiedShow Answer

In the dynamic aggregate demand and aggregate supply model,what is the result of aggregate demand increasing faster than potential real GDP?

Correct AnswerverifiedAggregate demand inc...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Spending on the war in Afghanistan is essentially categorized as government purchases.How do increases in spending on the war in Afghanistan affect the aggregate demand curve?

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If aggregate demand just decreased,which of the following may have caused the decrease?

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Figure 13-4 -Refer to Figure 13-4.In the figure above,AD1,LRAS1 and SRAS1 denote AD,LRAS and SRAS in year 1,while AD2,LRAS2 and SRAS2 denote AD,LRAS and SRAS in year 2.Given the economy is at point A in year 1,what is the actual growth rate in GDP in year 2?

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If the economy receives an influx of new workers from immigration,

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The economy is at point B with the pric...
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Aggregate demand inc...
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Figure 13-4 -Refer to Figure 13-4.In the figure above,AD₁,LRAS₁ and SRAS₁ denote AD,LRAS and SRAS in year 1,while AD₂,LRAS₂ and SRAS₂ denote AD,LRAS and SRAS in year 2.Given the economy is at point A in year 1,what is the actual growth rate in GDP in year 2?

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Correct Answer
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