Question 1

Changes in the price level

Accepted Answer

A)  increase the level of aggregate supply in the long run.
B)  decrease the level of aggregate supply in the long run.
C)  do not affect the level of aggregate supply in the long run.
D)  increase the level of aggregate supply in the long run only at very high levels of output.E) A) and B)
F) None of the above

Question 2

Explain how "menu costs" affect the slope of the short-run aggregate supply curve.

Accepted Answer

Menu costs make some prices sticky.As th...

Question 3

Workers and firms both expect that prices will be 2.5% higher next year than they are this year.As a result,

Accepted Answer

A)  workers will be willing to take lower wages next year,but not lower than a 2.5 percent decrease.
B)  the purchasing power of wages will rise if wages increase by 2.5%.
C)  the short-run aggregate supply curve will shift to the left as wages increase.
D)  aggregate demand will increase by 2.5%E) C) and D)
F) A) and B)

Question 4

Explain why the long-run aggregate supply curve is vertical.

Accepted Answer

The long-run aggregate supply curve is v...

Question 5

In the United States,because shipping plays such an important role in the economy,declines in cargo volumes reflect

Accepted Answer

A)  increases in short-run aggregate supply.
B)  increases in inflation.
C)  declines in aggregate demand.
D)  decreases in long-run aggregate supply.E) A) and B)
F) C) and D)

Question 6

In the dynamic aggregated demand and aggregate supply model,if AD shifts faster than AS

Accepted Answer

A)  inflation occurs.
B)  deflation occurs.
C)  stagflation occurs.
D)  disinflation occurs.E) A) and B)
F) A) and C)

Question 7

An increase in the price level will

Accepted Answer

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

Question 8

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

Accepted Answer

Aggregate demand inc...

Question 9

Figure 15-1 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 15-1.Ceteris paribus,a decrease in the growth rate of domestic GDP relative to the growth rate of foreign GDP 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) C) and D)
F) A) and D)

Question 10

Suppose a developing country receives more machinery and capital equipment as foreign entrepreneurs increase 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.E) B) and C)
F) A) and D)

Question 11

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

Question 12

Which of the following best describes the "wealth effect"?

Accepted Answer

A)  When the price level falls,the real value of household wealth falls.
B)  When the price level falls,the nominal value of household wealth falls.
C)  When the price level falls,the nominal value of household wealth rises.
D)  When the price level falls,the real value of household wealth rises.E) None of the above
F) B) and D)

Question 13

Figure 15-1 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 15-1.Ceteris paribus,an increase in interest rates 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 D)

Question 14

The long-run aggregate supply curve will shift to the right if the economy

Accepted Answer

A)  experiences technological change.
B)  has a decrease in population.
C)  experiences high levels of inflation.
D)  net exports decrease.E) C) and D)
F) All of the above

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

The level of aggregate supply in the long-run is not affected by

Accepted Answer

A)  changes in technology.
B)  changes in the capital stock.
C)  changes in the price level.
D)  changes in the number of workers.E) None of the above
F) A) and B)

Question 17

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.E) A) and C)
F) All of the above

Question 18

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) B) and D)
F) B) and C)

Question 19

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 oilE) All of the above
F) A) and B)

Question 20

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

Accepted Answer

A)  A
B)  B
C)  C
D)  DE) None of the above
F) B) and C)

Exam 15: Aggregate Demand and Aggregate Supply Analysis

Figure 15-1 -Refer to Figure 15-1.Ceteris paribus,an increase in interest rates would be represented by a movement from

Correct AnswerverifiedShow Answer

Suppose a developing country receives more machinery and capital equipment as foreign entrepreneurs increase the amount of investment in the economy.As a result,

Correct AnswerverifiedShow Answer

The level of aggregate supply in the long-run is not affected by

Correct AnswerverifiedShow Answer

Figure 15-1 -Refer to Figure 15-1.Ceteris paribus,a decrease in the growth rate of domestic GDP relative to the growth rate of foreign GDP would be represented by a movement from

Correct AnswerverifiedShow Answer

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

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In the dynamic aggregated demand and aggregate supply model,if AD shifts faster than AS

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedAggregate demand inc...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Changes in the price level

Correct AnswerverifiedShow Answer

Explain how "menu costs" affect the slope of the short-run aggregate supply curve.

Correct AnswerverifiedMenu costs make some prices sticky.As th...View AnswerShow Answer

Which of the following best describes the "wealth effect"?

Correct AnswerverifiedShow Answer

An increase in the price level will

Correct AnswerverifiedShow Answer

In the United States,because shipping plays such an important role in the economy,declines in cargo volumes reflect

Correct AnswerverifiedShow Answer

Workers and firms both expect that prices will be 2.5% higher next year than they are this year.As a result,

Correct AnswerverifiedShow Answer

The long-run aggregate supply curve will shift to the right if the economy

Correct AnswerverifiedShow Answer

Explain why the long-run aggregate supply curve is vertical.

Correct AnswerverifiedThe long-run aggregate supply curve is v...View AnswerShow Answer

Which of the following is considered a negative supply shock?

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

Correct AnswerverifiedShow Answer

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

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Menu costs make some prices sticky.As th...
View Answer

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The long-run aggregate supply curve is v...
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