Question 1

As the recession persisted into 2009,the unemployment rate in the United States rose to ________,the highest rate since the recession of 2001-2002 and the second highest since the Great Depression.

Accepted Answer

A)   5.5 percent
B)   9.3 percent
C)   17.6 percent
D)   25.1 percent

Question 2

Which of the following is considered a negative supply shock?

Accepted Answer

A)   increasing immigration in the economy causes the labor supply to rise
B)   an improvement in technology
C)   an increase in unemployment
D)   an unexpected decrease in the refining capacity for oil

Question 3

Hurricane Katrina resulted in a decline in oil production infrastructure along the gulf coast.As a result there was an unexpected decline in oil and natural gas supplies in 2005.Suppose that this caused an increase in the price level and a decline in real GDP in 2006.Also assume that potential real GDP continued to grow due to other factors.You can assume the aggregate demand curve did not change.Show the macroeconomic equilibrium for 2005 and 2006 using the dynamic aggregate supply and aggregate demand model.

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 began at the point (Y₁,P₁)o...

Question 4

An increase in disposable income will shift the aggregate demand curve to the right.

Accepted Answer

A) True 
 B)False

Question 5

All of the following are reasons why the wages of workers and the prices of inputs rise more slowly than the prices of final goods and services except

Accepted Answer

A)   unions are successful in pushing up wages.
B)   firms are often slow to adjust wages.
C)   contracts make prices and wages sticky.
D)   menu costs make some prices sticky.

Question 6

If the U.S.dollar increases in value relative to other currencies,how does this 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.

Question 7

Workers and firms both expect that prices will be 3% higher next year than they are this year.As a result

Accepted Answer

A)   workers will be willing to take lower wages next year.
B)   the purchasing power of wages will rise if wages increase by 3%.
C)   the short-run aggregate supply curve will shift to the left as wages increase.
D)   aggregate demand will increase by 3%.

Question 8

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.

Question 9

One factor which brought on the recession of 2007-2009 was the end of the housing bubble.

Accepted Answer

A) True 
 B)False

Question 10

Suppose the economy is at a short-run equilibrium GDP that lies below potential GDP.Which of the following will occur because of the automatic mechanism adjusting the economy back to potential GDP?

Accepted Answer

A)   Output will decrease.
B)   Prices will increase.
C)   Unemployment will rise.
D)   Short-run aggregate supply will shift to the right.

Question 11

The invention of the cotton gin ushered in the Industrial Revolution and began a long period of technological innovation.What did this technological change do the short-run supply curve?

Accepted Answer

A)   It shifted the short-run aggregate supply curve to the left.
B)   It shifted the short-run aggregate supply curve to the right.
C)   It moved the economy up along a stationary short-run aggregate supply curve.
D)   It moved the economy down along a stationary short-run aggregate supply curve.

Question 12

Deflation will

Accepted Answer

A)   increase aggregate demand.
B)   increase the quantity of real GDP demanded.
C)   decrease aggregate demand.
D)   decrease the quantity of real GDP demanded.

Question 13

Figure 15-3
 
-Refer to Figure 15-3.Suppose the economy is at point C.If investment spending decreases in the economy,where will the eventual long-run equilibrium be?

Accepted Answer

A)   A
B)   B
C)   C
D)   D

Question 14

Figure 15-2
 
-Refer to Figure 15-2.Ceteris paribus,a decrease in the expected future 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.

Question 15

Suppose the economy is at full employment and firms become more optimistic about the future profitability of new investment.Which of the following will happen in the short run?

Accepted Answer

A)   Output will decline.
B)   Prices will decline.
C)   Unemployment will decline.
D)   The aggregate demand curve will shift to the left.

Question 16

Suppose a developing country experiences a reduction in machinery and capital equipment as foreign entrepreneurs decrease the amount of investment in the economy.As a result

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)   the economy will move up along the long-run aggregate supply curve.
D)   the economy will move down along the long-run aggregate supply curve.

Question 17

A decrease in investment causes the price level to ________ in the short run and ________ in the long run.

Accepted Answer

A)   increase; increase further
B)   increase; decrease
C)   decrease; decrease further
D)   decrease; increase

Question 18

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 account

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

Which of the following could explain why there is an increase in potential GDP but the equilibrium level of GDP falls?

Accepted Answer

A)   SRAS shifted to the right by more than LRAS.
B)   AD shifted to the right by more than SRAS.
C)   AD shifted to the right by less than SRAS.
D)   AD did not shift and SRAS shifted to the left.

Exam 15: Aggregate Demand and Aggregate Supply Analysis

Deflation will

Correct Answer
verified

One factor which brought on the recession of 2007-2009 was the end of the housing bubble.

Correct Answer
verified

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

Correct Answer
verified

A decrease in investment causes the price level to in the short run and in the long run.

Correct Answer
verified

The invention of the cotton gin ushered in the Industrial Revolution and began a long period of technological innovation.What did this technological change do the short-run supply curve?

Correct Answer
verified

If the U.S.dollar increases in value relative to other currencies,how does this affect the aggregate demand curve?

Correct Answer
verified

Which of the following is considered a negative supply shock?

Correct Answer
verified

Suppose the economy is at a short-run equilibrium GDP that lies below potential GDP.Which of the following will occur because of the automatic mechanism adjusting the economy back to potential GDP?

Correct Answer
verified

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

Correct Answer
verified

Suppose the economy is at full employment and firms become more optimistic about the future profitability of new investment.Which of the following will happen in the short run?

Correct Answer
verified

Figure 15-2 -Refer to Figure 15-2.Ceteris paribus,a decrease in the expected future price level would be represented by a movement from

Correct Answer
verified

Figure 15-3 -Refer to Figure 15-3.Suppose the economy is at point C.If investment spending decreases in the economy,where will the eventual long-run equilibrium be?

Correct Answer
verified

Workers and firms both expect that prices will be 3% higher next year than they are this year.As a result

Correct Answer
verified

As the recession persisted into 2009,the unemployment rate in the United States rose to ________,the highest rate since the recession of 2001-2002 and the second highest since the Great Depression.

Correct Answer
verified

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

Correct Answer
verified

All of the following are reasons why the wages of workers and the prices of inputs rise more slowly than the prices of final goods and services except

Correct Answer
verified

An increase in disposable income will shift the aggregate demand curve to the right.

Correct Answer
verified

Correct Answer
verified
The economy began at the point (Y₁,P₁)o...
View Answer

Suppose a developing country experiences a reduction in machinery and capital equipment as foreign entrepreneurs decrease the amount of investment in the economy.As a result

Correct Answer
verified

Which of the following could explain why there is an increase in potential GDP but the equilibrium level of GDP falls?

Correct Answer
verified

Exam 15: Aggregate Demand and Aggregate Supply Analysis

Deflation will

Correct AnswerverifiedShow Answer

One factor which brought on the recession of 2007-2009 was the end of the housing bubble.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A decrease in investment causes the price level to ________ in the short run and ________ in the long run.

Correct AnswerverifiedShow Answer

The invention of the cotton gin ushered in the Industrial Revolution and began a long period of technological innovation.What did this technological change do the short-run supply curve?

Correct AnswerverifiedShow Answer

If the U.S.dollar increases in value relative to other currencies,how does this affect the aggregate demand curve?

Correct AnswerverifiedShow Answer

Which of the following is considered a negative supply shock?

Correct AnswerverifiedShow Answer

Suppose the economy is at a short-run equilibrium GDP that lies below potential GDP.Which of the following will occur because of the automatic mechanism adjusting the economy back to potential GDP?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Suppose the economy is at full employment and firms become more optimistic about the future profitability of new investment.Which of the following will happen in the short run?

Correct AnswerverifiedShow Answer

Figure 15-2 -Refer to Figure 15-2.Ceteris paribus,a decrease in the expected future price level would be represented by a movement from

Correct AnswerverifiedShow Answer

Figure 15-3 -Refer to Figure 15-3.Suppose the economy is at point C.If investment spending decreases in the economy,where will the eventual long-run equilibrium be?

Correct AnswerverifiedShow Answer

Workers and firms both expect that prices will be 3% higher next year than they are this year.As a result

Correct AnswerverifiedShow Answer

As the recession persisted into 2009,the unemployment rate in the United States rose to ________,the highest rate since the recession of 2001-2002 and the second highest since the Great Depression.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

All of the following are reasons why the wages of workers and the prices of inputs rise more slowly than the prices of final goods and services except

Correct AnswerverifiedShow Answer

An increase in disposable income will shift the aggregate demand curve to the right.

Correct AnswerverifiedShow Answer

Correct Answerverified The economy began at the point (Y₁,P₁)o...View AnswerShow Answer

Suppose a developing country experiences a reduction in machinery and capital equipment as foreign entrepreneurs decrease the amount of investment in the economy.As a result

Correct AnswerverifiedShow Answer

Which of the following could explain why there is an increase in potential GDP but the equilibrium level of GDP falls?

Correct AnswerverifiedShow Answer

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Correct Answer
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Correct Answer
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A decrease in investment causes the price level to in the short run and in the long run.

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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The economy began at the point (Y₁,P₁)o...
View Answer

Correct Answer
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Correct Answer
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