Question 1

Economic growth in the rest of the world slows down. In the short run, one can expect output in the United States to ________ and the price level to________.

Accepted Answer

A)   increase; increase
B)   decrease; decrease
C)   decrease; increase
D)   increase; decrease
E)   remain unchanged; remain unchanged

Question 2

An increase in aggregate demand is harmful because

Accepted Answer

A)   workers with sticky wages are paying more for goods and services.
B)   firms have sticky input prices and earn less profit.
C)   unemployment rises.
D)   output has risen above the full-employment level.
E)   wages will have to fall in the long run.

Question 3

Suppose interest rates increase from 1 percent to 3 percent. In the short run, one can expect output in
the United States to ________ and the price level to ________.

Accepted Answer

A)   increase; increase
B)   decrease; decrease
C)   decrease; increase
D)   increase; decrease
E)   remain unchanged; remain unchanged

Question 4

Which of the following causes an increase in short-run aggregate supply?

Accepted Answer

A)   The price level increases.
B)   The price level decreases.
C)   Firms and workers expect the price level to fall.
D)   Firms and workers expect the price level to rise.
E)   There are fewer workers in the labor force.

Question 5

All else being equal, an increase in ________ would shift the long-run aggregate supply curve to the left.

Accepted Answer

A)   the cyclical unemployment rate
B)   the inflation rate
C)   economic growth
D)   government spending
E)   the rate at which capital depreciates

Question 6

The long run is best defined as a period of time such that

Accepted Answer

A)   more than one year has passed.
B)   more than five years have passed.
C)   some prices have adjusted.
D)   all prices have adjusted.
E)   all firms are maximizing profit.

Question 7

New drilling technologies lead to a 50 percent increase in oil reserves. How will this impact equilibrium output and the price level?

Accepted Answer

The increase in oil reserves w...

Question 8

According to the interest rate effect, an increase in the price level leads to ________ in the interest rate, and therefore to ________ in the quantity of aggregate demand.

Accepted Answer

A)   no change; no change
B)   a rise; a fall
C)   a rise; a rise
D)   a fall; a fall
E)   a fall; a rise

Question 9

Suppose an economy has a law that requires all wages to be adjusted quarterly to reflect changes in the general price level. This means wages either increase or decrease depending on the percent change in the general price level. In this economy

Accepted Answer

A)   there are recessions but no expansions.
B)   output is always at the full-employment level.
C)   business cycles are less severe.
D)   the price level will remain fixed.
E)   workers are worse off in real terms than if wages were not indexed.

Question 10

When a change in the price level leads to a change in the quantity of net exports demanded, it is called
the ________ effect.

Accepted Answer

A)   international trade
B)   export
C)   import
D)   net export
E)   interest rate

Question 11

Menu costs help to explain

Accepted Answer

A)   the negative slope of the aggregate demand curve.
B)   the negative slope of the aggregate supply curve.
C)   the positive slope of the short-run aggregate supply curve.
D)   why the long-run aggregate supply curve is vertical.
E)   why the long-run aggregate supply curve is horizontal.

Question 12

Suppose housing values fall during a recession. In the short run,

Accepted Answer

A)   the price level will fall as we move down the aggregate demand curve.
B)   the price level will fall as we move down the short-run aggregate supply curve.
C)   short-run aggregate supply will decrease and the price level will fall.
D)   short-run aggregate supply will increase because wages will fall.
E)   aggregate demand will increase because the demand for houses will increase.

Question 13

Refer to the following figure to answer the next questions.
 
-Based on the figure, starting at point A, if there is an increase in government spending, then in the short run we would move to point ________ and in the long run to point ________.

Accepted Answer

A)   B; E
B)   B; C
C)   D; A
D)   D; C
E)   B; A

Question 14

If the price level rises by 10 percent, then all else being equal, the long-run quantity of aggregate supply will

Accepted Answer

A)   increase by 10 percent.
B)   decrease by 10 percent.
C)   remain unchanged.
D)   increase by more than 10 percent.
E)   increase by less than 10 percent.

Question 15

Refer to the following figure to answer the next  questions.
 
-Based on the figure, if the economy is currently at point B because of a shift in aggregate demand, then in the long run, we can expect we will move to

Accepted Answer

A)   point C.
B)   point A.
C)   point D.
D)   point C and then point D.
E)   point A and then point C.

Question 16

Suppose advances in computer technology lead to a surge in worker productivity. In the long run,output will ________ and the price level will ________.

Accepted Answer

A)   increase; increase
B)   increase; decrease
C)   increase; remain unchanged
D)   decrease; decrease
E)   remain unchanged; remain unchanged

Question 17

Which of the following would cause an increase in long-run aggregate supply?

Accepted Answer

A)   The price level increases.
B)   The price level decreases.
C)   Firms and workers expect the price level to fall.
D)   Firms and workers expect the price level to rise.
E)   The stock of capital increases.

Question 18

An increase in short-run aggregate supply immediately leads to an)

Accepted Answer

A)   increase in real wealth and a shift of the aggregate demand curve.
B)   increase in real wealth and a movement along the aggregate demand curve.
C)   shift of the aggregate demand curve caused by menu costs.
D)   shift of the aggregate demand curve caused by money illusion.
E)   increase in money illusion and a movement along the aggregate demand curve.

Question 19

Refer to the following figure to answer the next  questions.
 
-Based on the figure, which of the following would cause the long-run equilibrium point to change from point B to point D?

Accepted Answer

A)   The population has aged and there are fewer people in the labor force.
B)   Firms and workers expected the price level to rise.
C)   The economy experienced an increase in government spending.
D)   The economy was in an expansion and has adjusted.
E)   The country's overall productivity increased.

Question 20

A technological advance leads to a shift in

Accepted Answer

A)   only short-run aggregate supply.
B)   only long-run aggregate supply.
C)   neither short-run nor long-run aggregate supply.
D)   both short-run and long-run aggregate supply.
E)   only aggregate demand.

Exam 13: The Aggregate Demandaggregate Supply Model

The long run is best defined as a period of time such that

Correct AnswerverifiedShow Answer

Economic growth in the rest of the world slows down. In the short run, one can expect output in the United States to ________ and the price level to________.

Correct AnswerverifiedShow Answer

An increase in short-run aggregate supply immediately leads to an)

Correct AnswerverifiedShow Answer

Refer to the following figure to answer the next questions. -Based on the figure, starting at point A, if there is an increase in government spending, then in the short run we would move to point ________ and in the long run to point ________.

Correct AnswerverifiedShow Answer

Refer to the following figure to answer the next questions. -Based on the figure, if the economy is currently at point B because of a shift in aggregate demand, then in the long run, we can expect we will move to

Correct AnswerverifiedShow Answer

Which of the following causes an increase in short-run aggregate supply?

Correct AnswerverifiedShow Answer

An increase in aggregate demand is harmful because

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According to the interest rate effect, an increase in the price level leads to ________ in the interest rate, and therefore to ________ in the quantity of aggregate demand.

Correct AnswerverifiedShow Answer

Suppose housing values fall during a recession. In the short run,

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Suppose interest rates increase from 1 percent to 3 percent. In the short run, one can expect output in the United States to ________ and the price level to ________.

Correct AnswerverifiedShow Answer

Menu costs help to explain

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If the price level rises by 10 percent, then all else being equal, the long-run quantity of aggregate supply will

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All else being equal, an increase in ________ would shift the long-run aggregate supply curve to the left.

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A technological advance leads to a shift in

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When a change in the price level leads to a change in the quantity of net exports demanded, it is called the ________ effect.

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Refer to the following figure to answer the next questions. -Based on the figure, which of the following would cause the long-run equilibrium point to change from point B to point D?

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New drilling technologies lead to a 50 percent increase in oil reserves. How will this impact equilibrium output and the price level?

Correct AnswerverifiedThe increase in oil reserves w...View AnswerShow Answer

Suppose advances in computer technology lead to a surge in worker productivity. In the long run,output will ________ and the price level will ________.

Correct AnswerverifiedShow Answer

Which of the following would cause an increase in long-run aggregate supply?

Correct AnswerverifiedShow Answer

Suppose an economy has a law that requires all wages to be adjusted quarterly to reflect changes in the general price level. This means wages either increase or decrease depending on the percent change in the general price level. In this economy

Correct AnswerverifiedShow Answer

Correct Answer
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Economic growth in the rest of the world slows down. In the short run, one can expect output in the United States to and the price level to.

Correct Answer
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Refer to the following figure to answer the next questions. -Based on the figure, starting at point A, if there is an increase in government spending, then in the short run we would move to point and in the long run to point .

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According to the interest rate effect, an increase in the price level leads to in the interest rate, and therefore to in the quantity of aggregate demand.

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Suppose interest rates increase from 1 percent to 3 percent. In the short run, one can expect output in the United States to and the price level to .

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The increase in oil reserves w...
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Suppose advances in computer technology lead to a surge in worker productivity. In the long run,output will and the price level will .

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