Question 1

The introduction of the power loom during the Industrial Revolution caused:

Accepted Answer

A)   economic growth.
B)   the long-run aggregate supply curve to shift to the right.
C)   an increase in the potential output of the economy.
D)   All of these are true.E) None of the above
F) A) and B)

Question 2

Something that would cause the long-run aggregate supply curve to shift to the right would be:

Accepted Answer

A)   technological advance.
B)   discovery of a new oil reserve.
C)   increase in the growth rate of the labor force.
D)   All of these would shift the long-run aggregate supply curve to the right.E) A) and B)
F) A) and C)

Question 3

When the economy is operating at a point where aggregate demand equals long-run aggregate supply, it must be true that:

Accepted Answer

A)   aggregate demand also equals short-run aggregate supply.
B)   the economy is in long-run equilibrium.
C)   prices and expected prices are the same.
D)   All of these are true.E) A) and C)
F) All of the above

Question 4

When the long-run aggregate supply curve shifts right, it represents:

Accepted Answer

A)   economic growth.
B)   pushing our economy beyond normal capacity.
C)   an unemployment rate of zero.
D)   negative inflation.E) None of the above
F) A) and B)

Question 5

The quantity measure in the aggregate demand relationship is the:

Accepted Answer

A)   total quantity of goods and services demanded in the economy.
B)   total quantity of goods and services supplied in the economy.
C)   market value of the total quantity of goods and services demanded in the economy.
D)   market value of the total quantity of goods and services supplied in the economy.E) C) and D)
F) B) and C)

Question 6

When comparing tax and spending policy by the government, in general we note that the tax policy multiplier effect relative to the spending multiplier should be:

Accepted Answer

A)   larger.
B)   smaller.
C)   equivalent.
D)   not comparable.E) None of the above
F) C) and D)

Question 7

The aggregate demand curve:

Accepted Answer

A)   shows the relationship between the overall price level and the level of total demand.
B)   shows the price level on the horizontal axis and output on the vertical axis.
C)   is upward-sloping, which is counter to the individual demand curve.
D)   shows the relationship between the price of goods and services and the level of totaldemand.E) C) and D)
F) B) and D)

Question 8

In the macroeconomic model of aggregate supply and aggregate demand:

Accepted Answer

A)   price is the overall price level.
B)   quantity represents GDP.
C)   price is calculated as a weighted average of the prices of all goods and services.
D)   All of these are true.E) A) and B)
F) A) and D)

Question 9

Fluctuations around the long-run aggregate supply curve are:

Accepted Answer

A)   called the business cycle.
B)   experienced as expansions, recessions, and recoveries.
C)   normal for an economy.
D)   All of these are true.E) A) and B)
F) B) and C)

Question 10

The long-run aggregate supply curve:

Accepted Answer

A)   is affected by the price level.
B)   never moves.
C)   shifts right when the economy experiences economic growth.
D)   shifts left when the economy experiences economic growth.E) B) and C)
F) A) and C)

Question 11

Falling output, in the short run, could be due to:

Accepted Answer

A)   a reduction in aggregate demand.
B)   an increase in short-run aggregate supply.
C)   an increase in long-run aggregate supply.
D)   an increase in aggregate demand.E) A) and B)
F) None of the above

Question 12

If government spending were to increase we expect that the aggregate demand curve will:

Accepted Answer

A)   shift straight down.
B)   shift to the right.
C)   remain unchanged but the economy will move down along the curve to a higher quantity.
D)   remain unchanged but the economy will move down along the curve to a lower quantity.E) None of the above
F) A) and B)

Question 13

Using Figure 1 above, if the aggregate demand curve shifts from AD1 to AD2 the result in the short run would be:

Accepted Answer

A)   P1 and Y2.
B)   P3 and Y1.
C)   P2 and Y3.
D)   P2 and Y2.E) None of the above
F) All of the above

Question 14

If the aggregate demand curve shifts to the left in the short run then the long-run equilibrium will be at a:

Accepted Answer

A)   higher price level and higher level of output.
B)   higher price level and lower level of output.
C)   lower price level and same level of output.
D)   lower price level and lower level of output.E) All of the above
F) A) and B)

Question 15

Assuming an economy starts in long-run equilibrium, if the aggregate demand curve were to decrease:

Accepted Answer

A)   prices in the economy would increase.
B)   output in the economy would increase.
C)   the short-run aggregate supply curve would shift left.
D)   the long-run effect would be a lower price level.E) B) and D)
F) B) and C)

Question 16

Lower interest rates motivate:

Accepted Answer

A)   firms to invest less in new factories and working capital.
B)   firms to invest more in new factories and working capital.
C)   individuals to spend less on consumption goods.
D)   individuals to spend less on capital goods.E) B) and C)
F) A) and C)

Question 17

The long-run aggregate supply curve represents the level of output possible if the economy:

Accepted Answer

A)   is operating at full capacity.
B)   is operating at an unemployment rate of zero.
C)   has a zero inflation rate.
D)   has no structural unemployment.E) A) and B)
F) All of the above

Question 18

If a positive permanent supply shock were to occur, the resulting equilibrium would be a:

Accepted Answer

A)   higher level of output and prices.
B)   lower level of output and prices.
C)   higher level of output at lower prices.
D)   lower level of output at higher prices.E) All of the above
F) A) and C)

Question 19

When the government considers whether it should change its spending in response to a recession, it must weigh the tradeoff between ____________ and ________________.

Accepted Answer

A)   faster recovery time; inflation
B)   less output; higher prices
C)   more output; lower prices
D)   faster recovery time; lower pricesE) None of the above
F) C) and D)

Question 20

Some call the Great Recession the:

Accepted Answer

A)   period when the economy does not grow for four consecutive quarters.
B)   recession that began in 2007 due to the decline in consumer spending when the housing bubble burst.
C)   period of high inflation that took place in the early 1970s.
D)   period of economic stagnation that took place in the early 1990s.E) B) and D)
F) A) and C)

Exam 12: Aggregate Demand and Aggregate Supply

The long-run aggregate supply curve:

Correct AnswerverifiedShow Answer

Fluctuations around the long-run aggregate supply curve are:

Correct AnswerverifiedShow Answer

The quantity measure in the aggregate demand relationship is the:

Correct AnswerverifiedShow Answer

When the economy is operating at a point where aggregate demand equals long-run aggregate supply, it must be true that:

Correct AnswerverifiedShow Answer

Falling output, in the short run, could be due to:

Correct AnswerverifiedShow Answer

In the macroeconomic model of aggregate supply and aggregate demand:

Correct AnswerverifiedShow Answer

When the government considers whether it should change its spending in response to a recession, it must weigh the tradeoff between ____________ and ________________.

Correct AnswerverifiedShow Answer

Lower interest rates motivate:

Correct AnswerverifiedShow Answer

Assuming an economy starts in long-run equilibrium, if the aggregate demand curve were to decrease:

Correct AnswerverifiedShow Answer

When comparing tax and spending policy by the government, in general we note that the tax policy multiplier effect relative to the spending multiplier should be:

Correct AnswerverifiedShow Answer

Some call the Great Recession the:

Correct AnswerverifiedShow Answer

If the aggregate demand curve shifts to the left in the short run then the long-run equilibrium will be at a:

Correct AnswerverifiedShow Answer

The long-run aggregate supply curve represents the level of output possible if the economy:

Correct AnswerverifiedShow Answer

Using Figure 1 above, if the aggregate demand curve shifts from AD1 to AD2 the result in the short run would be:

Correct AnswerverifiedShow Answer

The introduction of the power loom during the Industrial Revolution caused:

Correct AnswerverifiedShow Answer

Something that would cause the long-run aggregate supply curve to shift to the right would be:

Correct AnswerverifiedShow Answer

If government spending were to increase we expect that the aggregate demand curve will:

Correct AnswerverifiedShow Answer

The aggregate demand curve:

Correct AnswerverifiedShow Answer

If a positive permanent supply shock were to occur, the resulting equilibrium would be a:

Correct AnswerverifiedShow Answer

When the long-run aggregate supply curve shifts right, it represents:

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

When the government considers whether it should change its spending in response to a recession, it must weigh the tradeoff between and ____.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified