Question 1

Figure 13-1 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 13-1.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 C)
F) B) and C)

Question 2

A decrease in aggregate demand results in a(n) ________ in the ________.

Accepted Answer

A)  recession; long run
B)  expansion; long run
C)  expansion; short run
D)  recession; short runE) B) and C)
F) All of the above

Question 3

A decrease in the price level results in a(n) ________ in the quantity of real GDP demanded because a lower price level ________ consumption,investment,and net exports.

Accepted Answer

A)  decrease; increases
B)  increase; increases
C)  decrease; decreases
D)  increase; decreasesE) None of the above
F) C) and D)

Question 4

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.E) A) and D)
F) A) and C)

Question 5

Following the bursting of the housing bubble in 2005,KB Homes sold ________ new homes and its stock price ________ dramatically.The result was total losses of $2.4 billion between 2007 and 2010.

Accepted Answer

A)  fewer; rose
B)  fewer; fell
C)  more; rose
D)  more; fellE) A) and B)
F) A) and C)

Question 6

Which of the following will shift the aggregate demand curve to the left,ceteris paribus?

Accepted Answer

A)  an increase in interest rates
B)  an increase in disposable income
C)  an increase in expected profits for firms
D)  an increase in net exportsE) B) and C)
F) A) and B)

Question 7

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

Question 8

On average,in the recessions since 1950,it has taken ________ for real GDP to return to its cyclical peak.

Accepted Answer

A)  about 6 months
B)  about 1 year
C)  about 18 months
D)  almost 2.5 yearsE) A) and D)
F) B) and C)

Question 9

The proponents of rational expectations and monetarism think that the Federal Reserve should adopt

Accepted Answer

A)  an inflation target.
B)  a monetary aggregate target.
C)  a constant monetary growth rule.
D)  an interest rate target.E) B) and C)
F) A) and D)

Question 10

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 D)
F) A) and B)

Question 11

Stagflation occurs when short-run aggregate supply decreases.

Accepted Answer

A) True 
 B)False

Question 12

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.E) A) and C)
F) B) and C)

Question 13

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

Accepted Answer

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

Question 14

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) None of the above
F) A) and D)

Question 15

Figure 13-1 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 13-1.Ceteris paribus,an increase in the price level 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 B)

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.E) B) and D)
F) A) and B)

Question 17

The basic aggregate demand and aggregate supply curve model helps explain

Accepted Answer

A)  short-term fluctuations in real GDP and the price level.
B)  long-term growth.
C)  price fluctuations in an individual market.
D)  output fluctuations in an individual market.E) A) and C)
F) All of the above

Question 18

If potential GDP is equal to $600 billion,what does the long-run aggregate supply curve look like?

Accepted Answer

A)  It is a horizontal line at $600 billion of GDP.
B)  It is a vertical line at a level of GDP below $600 billion.
C)  It is a vertical line at $600 billion of GDP.
D)  It is a vertical line at a level of GDP above $600 billion.E) B) and C)
F) All of the above

Question 19

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) A) and C)

Question 20

Why does the short-run aggregate supply curve shift to the right in the long run,following a decrease in aggregate demand?

Accepted Answer

A)  Workers and firms adjust their expectations of wages and prices downward and they accept lower wages and prices.
B)  Workers and firms adjust their expectations of wages and prices downward and they push for higher wages and prices.
C)  Workers and firms adjust their expectations of wages and prices upward and they push for higher wages and prices.
D)  Workers and firms adjust their expectations of wages and prices upward and they accept lower wages and prices.E) A) and D)
F) A) and C)

Exam 13: Aggregate Demand and Aggregate Supply Analysis

Figure 13-1 -Refer to Figure 13-1.Ceteris paribus,an increase in the price level would be represented by a movement from

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 basic aggregate demand and aggregate supply curve model helps explain

Correct AnswerverifiedShow Answer

The proponents of rational expectations and monetarism think that the Federal Reserve should adopt

Correct AnswerverifiedShow Answer

A decrease in aggregate demand results in a(n) ________ in the ________.

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

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

Correct AnswerverifiedShow Answer

Figure 13-1 -Refer to Figure 13-1.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

Which of the following will shift the aggregate demand curve to the left,ceteris paribus?

Correct AnswerverifiedShow Answer

Changes in the price level

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On average,in the recessions since 1950,it has taken ________ for real GDP to return to its cyclical peak.

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Why does the short-run aggregate supply curve shift to the right in the long run,following a decrease in aggregate demand?

Correct AnswerverifiedShow Answer

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

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Stagflation occurs when short-run aggregate supply decreases.

Correct AnswerverifiedShow Answer

Following the bursting of the housing bubble in 2005,KB Homes sold ________ new homes and its stock price ________ dramatically.The result was total losses of $2.4 billion between 2007 and 2010.

Correct AnswerverifiedShow Answer

Which of the following is considered a negative supply shock?

Correct AnswerverifiedShow 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

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

Correct AnswerverifiedShow Answer

A decrease in the price level results in a(n) ________ in the quantity of real GDP demanded because a lower price level ________ consumption,investment,and net exports.

Correct AnswerverifiedShow Answer

If potential GDP is equal to $600 billion,what does the long-run aggregate supply curve look like?

Correct AnswerverifiedShow Answer

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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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A decrease in aggregate demand results in a(n) in the .

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Following the bursting of the housing bubble in 2005,KB Homes sold new homes and its stock price dramatically.The result was total losses of $2.4 billion between 2007 and 2010.

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A decrease in the price level results in a(n) in the quantity of real GDP demanded because a lower price level consumption,investment,and net exports.

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