Question 1

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

Question 2

Suppose the U.S.GDP growth rate is slower relative to other countries' GDP growth rates.This will

Accepted Answer

A)  move the economy up along a stationary aggregate demand curve.
B)  move the economy down along a stationary aggregate demand curve.
C)  shift the aggregate demand curve to the left.
D)  shift the aggregate demand curve to the right.E) All of the above
F) B) and C)

Question 3

An increase in the price level will

Accepted Answer

A)  shift the aggregate demand curve to the left.
B)  shift the aggregate demand curve to the right.
C)  move the economy up along a stationary aggregate demand curve.
D)  move the economy down along a stationary aggregate demand curve.E) All of the above
F) A) and B)

Question 4

If rapid increases in oil prices caused price levels to increase and real GDP to decrease in the short run,the economy would experience

Accepted Answer

A)  stagflation.
B)  long-run economic decline.
C)  hyperinflation.
D)  an increase in the natural rate of unemployment.E) B) and D)
F) All of the above

Question 5

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

Question 6

At a short-run macroeconomic equilibrium,real GDP is always equal to potential GDP.

Accepted Answer

A) True 
 B)False

Question 7

Stagflation occurs when inflation ________ and GDP ________.

Accepted Answer

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

Question 8

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) All of the above

Question 9

Which of the following is not a reason why the wages of workers and the prices of inputs rise more slowly than the prices of final goods and services?

Accepted Answer

A)  Contracts make prices and wages "sticky."
B)  Firms are often slow to adjust wages.
C)  Menu costs make some prices sticky.
D)  Unions are successful in pushing up wages.E) A) and B)
F) A) and C)

Question 10

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 11

Proponents of the real business cycle model argue that the short-run aggregate supply curve is

Accepted Answer

A)  flat.
B)  positively sloped.
C)  vertical.
D)  negatively sloped.E) A) and D)
F) C) and D)

Question 12

Figure 13-4 
-Refer to Figure 13-4.Given the economy is at point A in year 1,what will happen to the unemployment rate 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) B) and D)
F) All of the above

Question 13

Why does the short-run aggregate supply curve slope upward?

Accepted Answer

The short-run aggregate supply curve slo...

Question 14

An increase in the price level results in a(n) ________ in the quantity of real GDP demanded because ________.

Accepted Answer

A)  decrease; a higher price level reduces consumption,investment,and net exports.
B)  increase; a higher price level reduces consumption,investment,and net exports.
C)  decrease; a higher price level increases consumption,investment,and net exports.
D)  increase; a higher price level increases consumption,investment,and net exports.E) C) and D)
F) B) and C)

Question 15

Article Summary
According to the International Energy Agency (IEA) , increased oil production resulting from U.S. shale oil has invigorated the North American oil industry and has created a global supply shock. The shale oil and gas industry has generated tens of billions of dollars in revenues and hundreds of thousands of new jobs, and could result in the United States changing from being the world's largest oil importer to a net exporter within a few years. An IEA forecast predicts that because of shale oil, the United States will become the world's largest oil producer by 2017, with supply growing by 3.9 million barrels per day from 2012-2018.
Source: Denise Roland, and AFP, "US shale energy creates global oil 'supply shock'," Telegraph, May 14, 2013.

-Refer to the Article Summary.The supply shock mentioned in the article summary may well result in a decrease in the price of oil.After an unexpected decrease in the price of oil,the long-run adjustment ________ the price level and ________ the unemployment rate as they return to their original levels.

Accepted Answer

A)  increases; increases
B)  increases; decreases
C)  decreases; increases
D)  decreases; decreasesE) A) and B)
F) All of the above

Question 16

Figure 13-3 
-Refer to Figure 13-3.Suppose the economy is at point C.If investment spending decreases in the economy,where will the eventual long-run equilibrium be?

Accepted Answer

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

Question 17

A decrease in aggregate demand causes a decrease in ________ only in the short run,but causes a decrease in ________ in both the short run and the long run.

Accepted Answer

A)  the price level; real GDP
B)  real GDP; real GDP
C)  the price level; the price level
D)  real GDP; the price levelE) All of the above
F) B) and C)

Question 18

The dynamic aggregate demand and aggregate supply model assumes that potential GDP increases over time.

Accepted Answer

A) True 
 B)False

Question 19

All of the following would be considered a positive addition to household wealth except

Accepted Answer

A)  the equity in one's home.
B)  500 shares of Google stock.
C)  the balance in your savings account.
D)  a credit card balance.E) None of the above
F) All of the above

Question 20

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

Exam 13: Aggregate Demand and Aggregate Supply Analysis

Which of the following is not a reason why the wages of workers and the prices of inputs rise more slowly than the prices of final goods and services?

Correct Answer
verified

Potential GDP refers to the level of

Correct Answer
verified

If rapid increases in oil prices caused price levels to increase and real GDP to decrease in the short run,the economy would experience

Correct Answer
verified

Figure 13-3 -Refer to Figure 13-3.Suppose the economy is at point C.If investment spending decreases in the economy,where will the eventual long-run equilibrium be?

Correct Answer
verified

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

Correct Answer
verified

Proponents of the real business cycle model argue that the short-run aggregate supply curve is

Correct Answer
verified

Stagflation occurs when inflation and GDP .

Correct Answer
verified

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

Correct Answer
verified
Aggregate demand inc...
View Answer

At a short-run macroeconomic equilibrium,real GDP is always equal to potential GDP.

Correct Answer
verified

All of the following would be considered a positive addition to household wealth except

Correct Answer
verified

Suppose the U.S.GDP growth rate is slower relative to other countries' GDP growth rates.This will

Correct Answer
verified

Why does the short-run aggregate supply curve slope upward?

Correct Answer
verified
The short-run aggregate supply curve slo...
View Answer

The international trade effect states that

Correct Answer
verified

An increase in the price level results in a(n) in the quantity of real GDP demanded because .

Correct Answer
verified

A decrease in aggregate demand causes a decrease in only in the short run,but causes a decrease in in both the short run and the long run.

Correct Answer
verified

An increase in the price level will

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

The dynamic aggregate demand and aggregate supply model assumes that potential GDP increases over time.

Correct Answer
verified

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

Correct Answer
verified

Exam 13: Aggregate Demand and Aggregate Supply Analysis

Which of the following is not a reason why the wages of workers and the prices of inputs rise more slowly than the prices of final goods and services?

Correct AnswerverifiedShow Answer

Potential GDP refers to the level of

Correct AnswerverifiedShow Answer

If rapid increases in oil prices caused price levels to increase and real GDP to decrease in the short run,the economy would experience

Correct AnswerverifiedShow Answer

Figure 13-3 -Refer to Figure 13-3.Suppose the economy is at point C.If investment spending decreases in the economy,where will the eventual long-run equilibrium be?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Proponents of the real business cycle model argue that the short-run aggregate supply curve is

Correct AnswerverifiedShow Answer

Stagflation occurs when inflation ________ and GDP ________.

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

At a short-run macroeconomic equilibrium,real GDP is always equal to potential GDP.

Correct AnswerverifiedShow Answer

All of the following would be considered a positive addition to household wealth except

Correct AnswerverifiedShow Answer

Suppose the U.S.GDP growth rate is slower relative to other countries' GDP growth rates.This will

Correct AnswerverifiedShow Answer

Why does the short-run aggregate supply curve slope upward?

Correct AnswerverifiedThe short-run aggregate supply curve slo...View AnswerShow Answer

The international trade effect states that

Correct AnswerverifiedShow Answer

An increase in the price level results in a(n) ________ in the quantity of real GDP demanded because ________.

Correct AnswerverifiedShow Answer

A decrease in aggregate demand causes a decrease in ________ only in the short run,but causes a decrease in ________ in both the short run and the long run.

Correct AnswerverifiedShow Answer

An increase in the price level will

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The dynamic aggregate demand and aggregate supply model assumes that potential GDP increases over time.

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 unemployment rate in year 2?

Correct AnswerverifiedShow Answer

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Stagflation occurs when inflation and GDP .

Correct Answer
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Correct Answer
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Aggregate demand inc...
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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The short-run aggregate supply curve slo...
View Answer

Correct Answer
verified

An increase in the price level results in a(n) in the quantity of real GDP demanded because .

Correct Answer
verified

A decrease in aggregate demand causes a decrease in only in the short run,but causes a decrease in in both the short run and the long run.

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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