Question 1

An increase in aggregate demand in the economy will have what effect on macroeconomic equilibrium in the long run?

Accepted Answer

A)  The price level will fall,and the level of GDP will rise.
B)  The price level will fall,and the level of GDP will fall.
C)  The price level will rise,and the level of GDP will fall.
D)  The price level will rise,and the level of GDP will be unaffected.E) C) and D)
F) B) and D)

Question 2

Last week,six Swedish kronor could purchase one U.S.dollar.This week,it takes eight Swedish kronor to purchase one U.S.dollar.This change in the value of the dollar will ________ exports from the United States to Sweden and ________ U.S.aggregate demand.

Accepted Answer

A)  increase;increase
B)  decrease;decrease
C)  increase;decrease
D)  decrease;increaseE) B) and C)
F) A) and D)

Question 3

The new Keynesians emphasize the importance of

Accepted Answer

A)  rational expectations.
B)  the monetary growth rule.
C)  real causes of the business cycle.
D)  sticky wages and prices.E) C) and D)
F) None of the above

Question 4

In the long run,

Accepted Answer

A)  GDP > potential GDP.
B)  unemployment is at its natural rate.
C)  LRAS and SRAS lie on the same line.
D)  the inflation rate is zero.E) None of the above
F) A) and C)

Question 5

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.E) None of the above
F) C) and D)

Question 6

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 7

Potential GDP refers to the level of

Accepted Answer

A)  real GDP in the long run.
B)  nominal GDP in the long run.
C)  real GDP in the short run.
D)  nominal GDP in the short run.E) B) and D)
F) None of the above

Question 8

When the economy enters a recession,your employer is unlikely to reduce your wages because ________ during a recession.

Accepted Answer

A)  output and input prices generally fall
B)  lower wages increase your incentive to find employment elsewhere
C)  output prices always fall
D)  output prices generally fall and input prices generally riseE) A) and B)
F) A) and C)

Question 9

Figure 13-4 
-Refer to Figure 13-4.Given the economy is at point A in year 1,what will happen to the price level in year 2?

Accepted Answer

A)  It will rise.
B)  It will fall.
C)  It will remain constant.
D)  not enough information to answer the questionE) A) and B)
F) B) and C)

Question 10

Refer to the Article Summary.The unexpected increase in the supply of oil mentioned in the article summary resulted in a decrease in the price of oil.When the price of oil falls unexpectedly due to a supply shock,the equilibrium price level ________ and the unemployment rate ________ in the short run.

Accepted Answer

A)  rises;falls
B)  rises;rises
C)  falls;falls
D)  falls;risesE) A) and D)
F) A) and C)

Question 11

There has been a decrease in investment.As a result,real GDP will ________ in the short run,and ________ in the long run.

Accepted Answer

A)  increase;increase further
B)  increase;decrease to its initial value
C)  decrease;decrease further
D)  decrease;increase to its initial levelE) None of the above
F) A) and D) D

Question 12

Long-run macroeconomic equilibrium occurs when aggregate demand ________ short-run aggregate supply and they ________ the long-run supply curve.

Accepted Answer

A)  equals;intersect at a point to the right of
B)  equals;intersect at a point on
C)  is greater than;intersect at a point to the left of
D)  is less than;intersect at a point to the right ofE) A) and D)
F) All of the above

Question 13

At the beginning of the recession of 2007-2009,real GDP in the United States was ________ potential GDP,and in June 2009,real GDP was ________ potential GDP.

Accepted Answer

A)  below;above
B)  below;below
C)  above;below
D)  above;aboveE) B) and C)
F) A) and B) C

Question 14

Proponents of the ________ model argue that the short-run supply curve is vertical.

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) All of the above

Question 15

If aggregate demand just increased,which of the following may have caused the increase?

Accepted Answer

A)  an increase in government purchases
B)  an increase in the interest rate
C)  an increase in the price level
D)  an increase in importsE) A) and D)
F) None of the above

Question 16

The basic aggregate demand and aggregate supply curve model helps explain ________ fluctuations in real GDP and the price level.

Accepted Answer

A)  short-term
B)  long-term
C)  both short-term and long-term
D)  unrelatedE) A) and D)
F) None of the above

Question 17

According to the "wealth effect," when the ________ falls,the ________ rises.

Accepted Answer

A)  inflation rate;nominal value of household assets
B)  unemployment rate;average level of household income
C)  price level;the nominal value of household wealth
D)  price level;the real value of household wealthE) A) and B)
F) C) and D) D

Question 18

Figure 13-3 
-Refer to Figure 13-3.Which of the points in the above graph are possible short-run equilibria?

Accepted Answer

A)  A and B
B)  A and C
C)  A and D
D)  A,B,C,and DE) All of the above
F) A) and B)

Question 19

The ________ curve has a positive slope because as prices of final goods and services rise,prices of inputs rise more slowly.

Accepted Answer

A)  short-run aggregate supply
B)  long-run aggregate supply
C)  short-run aggregate demand
D)  long-run aggregate demandE) A) and C)
F) None of the above

Question 20

Explain how the aggregate demand and aggregate supply model can be made more dynamic.

Accepted Answer

We can make the aggregate demand and agg...

Exam 13: Aggregate Demand and Aggregate Supply Analysis

An increase in aggregate demand in the economy will have what effect on macroeconomic equilibrium in the long run?

Correct AnswerverifiedShow Answer

Last week,six Swedish kronor could purchase one U.S.dollar.This week,it takes eight Swedish kronor to purchase one U.S.dollar.This change in the value of the dollar will ________ exports from the United States to Sweden and ________ U.S.aggregate demand.

Correct AnswerverifiedShow Answer

The new Keynesians emphasize the importance of

Correct AnswerverifiedShow Answer

In the long run,

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

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

Correct AnswerverifiedShow Answer

Potential GDP refers to the level of

Correct AnswerverifiedShow Answer

When the economy enters a recession,your employer is unlikely to reduce your wages because ________ during a recession.

Correct AnswerverifiedShow Answer

Figure 13-4 -Refer to Figure 13-4.Given the economy is at point A in year 1,what will happen to the price level in year 2?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

There has been a decrease in investment.As a result,real GDP will ________ in the short run,and ________ in the long run.

Correct AnswerverifiedD

Long-run macroeconomic equilibrium occurs when aggregate demand ________ short-run aggregate supply and they ________ the long-run supply curve.

Correct AnswerverifiedShow Answer

At the beginning of the recession of 2007-2009,real GDP in the United States was ________ potential GDP,and in June 2009,real GDP was ________ potential GDP.

Correct AnswerverifiedC

Proponents of the ________ model argue that the short-run supply curve is vertical.

Correct AnswerverifiedShow Answer

If aggregate demand just increased,which of the following may have caused the increase?

Correct AnswerverifiedShow Answer

The basic aggregate demand and aggregate supply curve model helps explain ________ fluctuations in real GDP and the price level.

Correct AnswerverifiedShow Answer

According to the "wealth effect," when the ________ falls,the ________ rises.

Correct AnswerverifiedD

Figure 13-3 -Refer to Figure 13-3.Which of the points in the above graph are possible short-run equilibria?

Correct AnswerverifiedShow Answer

The ________ curve has a positive slope because as prices of final goods and services rise,prices of inputs rise more slowly.

Correct AnswerverifiedShow Answer

Explain how the aggregate demand and aggregate supply model can be made more dynamic.

Correct AnswerverifiedWe can make the aggregate demand and agg...View AnswerShow Answer

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Last week,six Swedish kronor could purchase one U.S.dollar.This week,it takes eight Swedish kronor to purchase one U.S.dollar.This change in the value of the dollar will exports from the United States to Sweden and U.S.aggregate demand.

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There has been a decrease in investment.As a result,real GDP will in the short run,and in the long run.

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D

Long-run macroeconomic equilibrium occurs when aggregate demand short-run aggregate supply and they the long-run supply curve.

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At the beginning of the recession of 2007-2009,real GDP in the United States was potential GDP,and in June 2009,real GDP was potential GDP.

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C

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According to the "wealth effect," when the falls,the rises.

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D

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We can make the aggregate demand and agg...
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