Question 1

The short-run aggregate supply curve is vertical.

Accepted Answer

A) True 
 B)False

Question 2

According to Marx, which of the following factors of production did not contribute anything of value to production?

Accepted Answer

A)   labor
B)   capital
C)   natural resources
D)   entrepreneurshipE) C) and D)
F) A) and B)

Question 3

Explain how the economy moves back to full employment from recession. Be sure to detail what happens to short-run aggregate supply, unemployment, equilibrium GDP and the price level.

Accepted Answer

When an economy enters a recession, sale...

Question 4

Figure 24-1 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 24-1. Ceteris paribus, an increase in government spending 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) A) and B)
F) A) and C)

Question 5

Monetarists believe that the quantity of money should be increased at an increasing rate.

Accepted Answer

A) True 
 B)False

Question 6

What is a supply shock, and why might a supply shock lead to stagflation?

Accepted Answer

A supply shock is an unexpected event th...

Question 7

The international trade effect states that

Accepted Answer

A)   an increase in the price level will raise net exports.
B)   an increase in the price level will lower net exports.
C)   an increase in the price level will raise exports.
D)   an increase in the price level will lower imports.E) B) and C)
F) A) and D)

Question 8

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) A) and B)
F) B) and D)

Question 9

Figure 24-2 1 to SRAS2. B)  SRAS2 to SRAS1. C)  point A to point B. D)  point B to point A." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 24-2. Ceteris paribus, an increase in the number of workers and firms adjusting to having previously overestimated the 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.E) C) and D)
F) None of the above

Question 10

Figure 24-1 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 24-1. Ceteris paribus, an increase in the value of the domestic currency relative to foreign currencies 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) A) and B)
F) A) and C)

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

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 B)
F) All of the above

Question 13

When the price level rises from 110 to 115, the aggregate level of GDP supplied rises from $80 billion to $120 billion. This ________ relationship represents the ________ relationship between the quantity of real GDP firms are willing to supply and the price level.

Accepted Answer

A)   negative; short-run
B)   positive; short-run
C)   negative; long-run
D)   positive; long-runE) A) and B)
F) B) and D)

Question 14

Interest rates in the economy have risen. How will this affect aggregate demand and equilibrium in the short run?

Accepted Answer

A)   Aggregate demand will fall, the equilibrium price level will fall, and the equilibrium level of GDP will fall.
B)   Aggregate demand will fall, the equilibrium price level will rise, and the equilibrium level of GDP will fall.
C)   Aggregate demand will rise, the equilibrium price level will rise, and the equilibrium level of GDP will rise.
D)   Aggregate demand will rise, the equilibrium price level will fall, and the equilibrium level of GDP will rise.E) None of the above
F) A) and D)

Question 15

A decrease in disposable income will shift the aggregate demand curve to the left.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following would cause the short-run aggregate supply curve to shift to the left?

Accepted Answer

A)   an increase in the price level
B)   an increase in inflation expectations
C)   a technological advance
D)   a decrease in interest ratesE) None of the above
F) A) and D)

Question 17

Figure 24-2 1 to SRAS2. B)  SRAS2 to SRAS1. C)  point A to point B. D)  point B to point A." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 24-2. Ceteris paribus, a decrease in the size of the labor force 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.E) C) and D)
F) A) and C)

Question 18

Most recessions in the United States since World War II have begun with

Accepted Answer

A)   a decline in residential construction.
B)   a rapid increase in the price level.
C)   a substantial number of bank failures.
D)   a stock market crash.E) A) and B)
F) B) and D)

Question 19

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 accountE) A) and C)
F) B) and D)

Question 20

Stagflation occurs when aggregate supply and aggregate demand both increase.

Accepted Answer

A) True 
 B)False

Exam 24: Aggregate Demand and Aggregate Supply Analysis

Figure 24-1 -Refer to Figure 24-1. Ceteris paribus, an increase in the value of the domestic currency relative to foreign currencies would be represented by a movement from

Correct AnswerverifiedShow Answer

What is a supply shock, and why might a supply shock lead to stagflation?

Correct AnswerverifiedA supply shock is an unexpected event th...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

The short-run aggregate supply curve is vertical.

Correct AnswerverifiedShow Answer

Explain how the economy moves back to full employment from recession. Be sure to detail what happens to short-run aggregate supply, unemployment, equilibrium GDP and the price level.

Correct AnswerverifiedWhen an economy enters a recession, sale...View AnswerShow Answer

Most recessions in the United States since World War II have begun with

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Interest rates in the economy have risen. How will this affect aggregate demand and equilibrium in the short run?

Correct AnswerverifiedShow Answer

Which of the following would cause the short-run aggregate supply curve to shift to the left?

Correct AnswerverifiedShow Answer

Figure 24-2 -Refer to Figure 24-2. Ceteris paribus, an increase in the number of workers and firms adjusting to having previously overestimated the price level would be represented by a movement from

Correct AnswerverifiedShow Answer

Stagflation occurs when aggregate supply and aggregate demand both increase.

Correct AnswerverifiedShow Answer

The international trade effect states that

Correct AnswerverifiedShow Answer

Monetarists believe that the quantity of money should be increased at an increasing rate.

Correct AnswerverifiedShow Answer

Figure 24-2 -Refer to Figure 24-2. Ceteris paribus, a decrease in the size of the labor force would be represented by a movement from

Correct AnswerverifiedShow Answer

When the price level rises from 110 to 115, the aggregate level of GDP supplied rises from $80 billion to $120 billion. This ________ relationship represents the ________ relationship between the quantity of real GDP firms are willing to supply and the price level.

Correct AnswerverifiedShow Answer

According to Marx, which of the following factors of production did not contribute anything of value to production?

Correct AnswerverifiedShow Answer

A decrease in disposable income will shift the aggregate demand curve to the left.

Correct AnswerverifiedShow Answer

Figure 24-1 -Refer to Figure 24-1. Ceteris paribus, an increase in government spending would be represented by a movement from

Correct AnswerverifiedShow Answer

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

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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A supply shock is an unexpected event th...
View Answer

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When an economy enters a recession, sale...
View Answer

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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When the price level rises from 110 to 115, the aggregate level of GDP supplied rises from $80 billion to $120 billion. This relationship represents the relationship between the quantity of real GDP firms are willing to supply and the price level.

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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