Question 1

If a natural disaster causes a negative long-run supply shock to the economy, the new equilibrium will occur at a _______ price level and _______ level of output once the economy adjusts.

Accepted Answer

A)   higher; lower
B)   lower; higher
C)   higher; higher
D)   lower; lowerE) A) and B)
F) A) and C)

Question 2

When a nonprice change affects any of the four components of GDP, the:

Accepted Answer

A)   aggregate demand curve will shift.
B)   economy will move up or down along the aggregate demand curve.
C)   aggregate demand curve will remain unaffected.
D)   aggregate supply curve will shift.E) B) and D)
F) A) and C)

Question 3

In the short run, the aggregate supply curve:

Accepted Answer

A)   slopes upward.
B)   slopes downward.
C)   is perfectly elastic.
D)   is perfectly inelastic.E) B) and D)
F) B) and C)

Question 4

The aggregate demand curve:

Accepted Answer

A)   has a constant slope.
B)   slopes downward.
C)   slopes upward.
D)   can slope upward or downward depending on economic conditions.E) C) and D)
F) All of the above

Question 5

When the economy experiences a permanent supply side shock that shifts the long-run aggregate supply curve to the right, the short-run aggregate supply curve will:

Accepted Answer

A)   instantly shift to the left to a new long-run equilibrium.
B)   shift to the left initially, and then over time be pulled rightward toward the long-run aggregate supply.
C)   gradually shift to the right until it reaches long-run aggregate supply and the new long-run equilibrium.
D)   None of these are true.E) A) and B)
F) A) and C)

Question 6

If U.S. prices increase relative to the rest of the world, what effect would we expect to see on traded goods?

Accepted Answer

A)   Imports and net exports would increase.
B)   Exports and net exports would decrease.
C)   Imports would decrease and net exports would increase.
D)   Exports would decrease and net exports would increase.E) C) and D)
F) A) and B)

Question 7

In the long run, changes in the prices of goods and services have no effect on:

Accepted Answer

A)   the macroeconomy.
B)   aggregate supply.
C)   aggregate demand.
D)   All of these are true.E) A) and C)
F) A) and B)

Question 8

The figure shown displays various economic outcomes. 1 to AD2, the resulting price and output in the short run would be: A)  P 1 and Y 2. B)  P 3 and Y 1. C)  P 2 and Y 3. D)  P 2 and Y 2." class="answers-bank-image d-inline" rel="preload" > If the aggregate demand curve shifts from AD1 to AD2, the resulting price and output in the short run would be:

Accepted Answer

A)   P 1 and Y 2.
B)   P 3 and Y 1.
C)   P 2 and Y 3.
D)   P 2 and Y 2.E) A) and B)
F) A) and C)

Question 9

Which of the following is not a property of the aggregate demand curve?

Accepted Answer

A)   It shows the relationship between the overall price level and the level of total demand.
B)   It maps to the price level on the vertical axis and output on the horizontal axis.
C)   It slopes downward.
D)   It shows the relationship between the overall price level and the level of consumption.E) C) and D)
F) A) and C)

Question 10

In macroeconomics, the long run refers to:

Accepted Answer

A)   one year.
B)   two years.
C)   ten years.
D)   None of these are true.E) B) and C)
F) C) and D)

Question 11

When the economy is operating at a point where aggregate demand equals short-run aggregate supply:

Accepted Answer

A)   aggregate demand must also equal long-run aggregate supply.
B)   the short-run level of output is not the same as long-run potential output.
C)   the economy is in long-run equilibrium.
D)   None of are true.E) A) and D)
F) C) and D)

Question 12

Which component of GDP is not correlated with the price level?

Accepted Answer

A)   Consumption
B)   Investment
C)   Government spending
D)   Net exportsE) None of the above
F) A) and C)

Question 13

When the U.S. price level increases, we would expect a(n)  _______ the aggregate demand curve.

Accepted Answer

A)   downward movement along
B)   upward movement along
C)   rightward shift of
D)   leftward shift ofE) A) and C)
F) A) and B)

Question 14

A decrease in the price level will cause:

Accepted Answer

A)   the short-run aggregate supply curve to shift to the right.
B)   the aggregate demand curve to shift to the right.
C)   a movement rightward along the short-run aggregate supply curve.
D)   the long-run aggregate supply curve to shift to the right.E) All of the above
F) C) and D)

Question 15

"Sticky prices" refer to the fact that:

Accepted Answer

A)   some inputs take longer to adjust to the price level than the output created.
B)   some outputs take longer to adjust to the price level than the inputs used.
C)   the prices of final goods sometimes "stick," rather than adjusting to the price level.
D)   government intervention in the economy can keep the price level down.E) B) and C)
F) A) and C)

Question 16

Suppose OPEC announces it will be expanding the production of oil, decreasing its cost in the world market. How would this be represented in the AD/AS model?

Accepted Answer

A)   The long-run aggregate supply curve would shift to the left
B)   The long-run aggregate supply curve would shift to the right
C)   The short-run aggregate supply curve would shift to the left.
D)   The short-run aggregate supply curve would shift to the right.E) A) and D)
F) A) and C)

Question 17

If consumption increases, the aggregate demand curve will:

Accepted Answer

A)   shift to the left.
B)   shift to the right.
C)   remain unchanged, but the economy will move upward along the curve to a higher quantity demanded.
D)   remain unchanged, but the economy will move downward along the curve to a lower quantity demanded.E) C) and D)
F) All of the above

Question 18

The figure shown displays various economic outcomes. 2 to AD1, the resulting price and output in the long run would be: A)  P 5 and Y 1. B)  P 5 and Y 2. C)  P 4 and Y 1. D)  P 4 and Y 2." class="answers-bank-image d-inline" rel="preload" > If the aggregate demand curve shifts from AD2 to AD1, the resulting price and output in the long run would be:

Accepted Answer

A)   P 5 and Y 1.
B)   P 5 and Y 2.
C)   P 4 and Y 1.
D)   P 4 and Y 2.E) None of the above
F) B) and D)

Question 19

If the government implements a new, more stringent minimum wage law, we would expect the _______ aggregate supply curve to shift to the _______.

Accepted Answer

A)   long-run; left
B)   long-run; right
C)   short-run; left
D)   short-run rightE) All of the above
F) None of the above

Question 20

A spike in oil prices caused by labor disputes would shift the:

Accepted Answer

A)   aggregate demand curve, but not the aggregate supply curve.
B)   aggregate demand curve and the short-run aggregate supply curve.
C)   short-run aggregate supply curve only.
D)   short-run and long-run aggregate supply curves.E) A) and C)
F) B) and C)

Exam 12: Aggregatedemand and Aggregate Supply

The aggregate demand curve:

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When the U.S. price level increases, we would expect a(n) _______ the aggregate demand curve.

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In the short run, the aggregate supply curve:

Correct AnswerverifiedShow Answer

Suppose OPEC announces it will be expanding the production of oil, decreasing its cost in the world market. How would this be represented in the AD/AS model?

Correct AnswerverifiedShow Answer

A spike in oil prices caused by labor disputes would shift the:

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The figure shown displays various economic outcomes. If the aggregate demand curve shifts from AD2 to AD1, the resulting price and output in the long run would be:

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In the long run, changes in the prices of goods and services have no effect on:

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If a natural disaster causes a negative long-run supply shock to the economy, the new equilibrium will occur at a _______ price level and _______ level of output once the economy adjusts.

Correct AnswerverifiedShow Answer

Which component of GDP is not correlated with the price level?

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If U.S. prices increase relative to the rest of the world, what effect would we expect to see on traded goods?

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The figure shown displays various economic outcomes. If the aggregate demand curve shifts from AD1 to AD2, the resulting price and output in the short run would be:

Correct AnswerverifiedShow Answer

When a nonprice change affects any of the four components of GDP, the:

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"Sticky prices" refer to the fact that:

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Which of the following is not a property of the aggregate demand curve?

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When the economy experiences a permanent supply side shock that shifts the long-run aggregate supply curve to the right, the short-run aggregate supply curve will:

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A decrease in the price level will cause:

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If the government implements a new, more stringent minimum wage law, we would expect the _______ aggregate supply curve to shift to the _______.

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When the economy is operating at a point where aggregate demand equals short-run aggregate supply:

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If consumption increases, the aggregate demand curve will:

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In macroeconomics, the long run refers to:

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The figure shown displays various economic outcomes. If the aggregate demand curve shifts from AD₂ to AD₁, the resulting price and output in the long run would be:

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If a natural disaster causes a negative long-run supply shock to the economy, the new equilibrium will occur at a _ price level and _ level of output once the economy adjusts.

Correct Answer
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The figure shown displays various economic outcomes. If the aggregate demand curve shifts from AD₁ to AD₂, the resulting price and output in the short run would be:

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If the government implements a new, more stringent minimum wage law, we would expect the _ aggregate supply curve to shift to the _.

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