question
13. Which of the following does NOT shift the short
- run aggregate supply curve?
A) a change in the money wage ra
te
B) technological progress
C) a reduction in the price of a raw material
D) a change in the price level
- run aggregate supply curve?
A) a change in the money wage ra
te
B) technological progress
C) a reduction in the price of a raw material
D) a change in the price level
answer
D
question
The aggregate supply/aggregate demand model is used to help understand all of the following
EXCEPT
A) inflation.
B) business cycle fluctuations.
C) the aggregate value of stock traded in the stock market.
D) growth
of potential GDP.
EXCEPT
A) inflation.
B) business cycle fluctuations.
C) the aggregate value of stock traded in the stock market.
D) growth
of potential GDP.
answer
C
question
An aggregate supply curve depicts the relationship between
A) the price level and nominal GDP.
B) household expenditures and household income.
C) the price level and the aggregate quantity supplied.
D) the price level and the aggregate quantity demanded.
A) the price level and nominal GDP.
B) household expenditures and household income.
C) the price level and the aggregate quantity supplied.
D) the price level and the aggregate quantity demanded.
answer
C
question
in the macroeconomic short run,
A) actual real GDP may be less than or more than potential GDP.
B) the unemployment rate is zero.
C) the economy is always moving away from full employment.
D) actual real GDP alwa
ys equals potential GDP.
A) actual real GDP may be less than or more than potential GDP.
B) the unemployment rate is zero.
C) the economy is always moving away from full employment.
D) actual real GDP alwa
ys equals potential GDP.
answer
A
question
we distinguish between the long - run aggregate supply curve and the short - run aggregate supply curve. In the long run
A) technology is fixed but not in the short run.
B) the price level is constant but in the short run it fluctu
ates.
C) the aggregate supply curve is horizontal while in the short run it is upward sloping.
D) real GDP equals potential GDP.
A) technology is fixed but not in the short run.
B) the price level is constant but in the short run it fluctu
ates.
C) the aggregate supply curve is horizontal while in the short run it is upward sloping.
D) real GDP equals potential GDP.
answer
D
question
The macroeconomic long run is best defined as
A) a time period of more than 1 year.
B) the time period sufficiently long so that real GDP has adjusted to equal potential GDP.
C) the time period sufficiently long so that real GDP has adjusted to exceed potential GDP.
D) a time period of less than 1 year.
A) a time period of more than 1 year.
B) the time period sufficiently long so that real GDP has adjusted to equal potential GDP.
C) the time period sufficiently long so that real GDP has adjusted to exceed potential GDP.
D) a time period of less than 1 year.
answer
B
question
In the macroeconomic long run,
A) GDP
always is below potential GDP.
B) there is full employment with no unemployment.
C) output always is above potential GDP.
D) there is full employment and real GDP is equal to potential GDP.
A) GDP
always is below potential GDP.
B) there is full employment with no unemployment.
C) output always is above potential GDP.
D) there is full employment and real GDP is equal to potential GDP.
answer
D
question
7. If the economy is at the natural unemployment rate,
A) real GDP > potential GDP.
B) real GDP < potential GDP.
C) real GDP = potential GDP.
D) All of the above can occur when the economy is at the natural unemployment rate.
A) real GDP > potential GDP.
B) real GDP < potential GDP.
C) real GDP = potential GDP.
D) All of the above can occur when the economy is at the natural unemployment rate.
answer
C
question
8. At potential GDP
A) there is no unemployment but there is not necessarily full e
mployment.
B) there is no unemployment and there is full employment.
C) unemployment is at its natural rate.
D) None of the above is correct.
A) there is no unemployment but there is not necessarily full e
mployment.
B) there is no unemployment and there is full employment.
C) unemployment is at its natural rate.
D) None of the above is correct.
answer
C
question
9. The long -run aggregate supply curve is vertical because
A) at full employment prices are stable.
B) there is n
o cyclical inflation.
C) potential GDP is independent of the price level.
D) the money wage rate increases faster than the price level
A) at full employment prices are stable.
B) there is n
o cyclical inflation.
C) potential GDP is independent of the price level.
D) the money wage rate increases faster than the price level
answer
C
question
10. An inflationary gap is occurs when
A) real GDP is less than potential GDP.
B) real GDP exceeds potential GDP.
C) real GDP equals potential GDP.
D) the economy is at full employment.
A) real GDP is less than potential GDP.
B) real GDP exceeds potential GDP.
C) real GDP equals potential GDP.
D) the economy is at full employment.
answer
B
question
11. Which of the following events will increase long
-
run aggregate supply?
A) an increase in the interest rate
B) an increase in resource prices
C) a decrease in expected profit
D
) an advance in technology
-
run aggregate supply?
A) an increase in the interest rate
B) an increase in resource prices
C) a decrease in expected profit
D
) an advance in technology
answer
D
question
12. The positive relationship between short - run aggregate supply and the price level indicates that, in the short run
A) firms produce more output as the price level falls.
B) firms produce more output as the price level rises.
C) the money wage rate increases when moving along the short-run aggregate supply curve.
D) lower price levels are more profitable for firms.
A) firms produce more output as the price level falls.
B) firms produce more output as the price level rises.
C) the money wage rate increases when moving along the short-run aggregate supply curve.
D) lower price levels are more profitable for firms.
answer
B
question
14. The AD curve shows the sum of
A) the price level, employment, and real GDP.
B) consumption expenditure, investment, and real GDP.
C) consumpti
on expenditure, investment, government expenditures on goods and services, and net
exports.
D) consumption expenditure, investment, the price level, and real GDP.
A) the price level, employment, and real GDP.
B) consumption expenditure, investment, and real GDP.
C) consumpti
on expenditure, investment, government expenditures on goods and services, and net
exports.
D) consumption expenditure, investment, the price level, and real GDP.
answer
C
question
15. Your real wealth is measured as the
A) amount of assets you have in dollar terms.
B)
amount of money you have.
C) amount of goods and services your wealth will buy.
D) amount of goods you have divided by the price level.
A) amount of assets you have in dollar terms.
B)
amount of money you have.
C) amount of goods and services your wealth will buy.
D) amount of goods you have divided by the price level.
answer
C
question
16. According to the wealth effect, when the price level rises and other things remain the same,
A) real wealth increas
es.
B) there is no change in real wealth.
C) real wealth decreases.
D) real consumption expenditure increases.
A) real wealth increas
es.
B) there is no change in real wealth.
C) real wealth decreases.
D) real consumption expenditure increases.
answer
C
question
17. According to the wealth effect, if real wealth decreases then people
A) decrease their consumption expenditure.
B) increase their consumpti
on expenditure.
C) do not respond if their nominal wealth does not change.
D) decrease their consumption expenditure only if their nominal wealth also decreases.
A) decrease their consumption expenditure.
B) increase their consumpti
on expenditure.
C) do not respond if their nominal wealth does not change.
D) decrease their consumption expenditure only if their nominal wealth also decreases.
answer
A
question
18. Which of the following helps explain why the AD curve is downward sloping?
A) If the
exchange rate falls and the price level does not change, exports increase and imports decrease.
B) When the price level falls, the real value of wealth rises, so people save less and consume more.
C) If consumers and businesses expect higher prices in the
future, they will purchase more today,
increasing investment and consumption expenditure.
D) None of the above answers is coRRECT
A) If the
exchange rate falls and the price level does not change, exports increase and imports decrease.
B) When the price level falls, the real value of wealth rises, so people save less and consume more.
C) If consumers and businesses expect higher prices in the
future, they will purchase more today,
increasing investment and consumption expenditure.
D) None of the above answers is coRRECT
answer
B
question
19. Aggregate demand increases when
A) foreign incomes fall.
B) interest rates rise.
C) the exchange rate rises.
D) None of the above answers is correct.
A) foreign incomes fall.
B) interest rates rise.
C) the exchange rate rises.
D) None of the above answers is correct.
answer
D
question
20. Which of the following shifts the aggregate demand curve rightward?
A) a decrease in consumption
B) an increase in investment expenditures
C) a decrease in net exports
D) a decrease in government purchases of goods and services
A) a decrease in consumption
B) an increase in investment expenditures
C) a decrease in net exports
D) a decrease in government purchases of goods and services
answer
B
question
21. An increase in expected future income
A) increases aggregate demand.
B) increases the aggregate quantity demanded.
C) decreases the aggregate quantity demanded.
D) decreases aggregate demand.
A) increases aggregate demand.
B) increases the aggregate quantity demanded.
C) decreases the aggregate quantity demanded.
D) decreases aggregate demand.
answer
A
question
22. Higher taxes
A) increase aggregate demand.
B) increase the aggregate quantity demanded.
C) decrease the aggregate quantity demanded.
D) decrease aggregate demand.
A) increase aggregate demand.
B) increase the aggregate quantity demanded.
C) decrease the aggregate quantity demanded.
D) decrease aggregate demand.
answer
D
question
23. The U.S. aggregate demand curve shifts leftward if
A) the economic conditions in Europe improve so that European incomes increase.
B) there is a tax cut.
C) the Federal Reserve hikes the interest rate and decreases the quantity of money.
D) the exchange rate falls.
A) the economic conditions in Europe improve so that European incomes increase.
B) there is a tax cut.
C) the Federal Reserve hikes the interest rate and decreases the quantity of money.
D) the exchange rate falls.
answer
C
question
24. A decrease in foreign incomes
A) increases aggregate demand in the United States.
B) increases the aggregate quantity demanded in the United States.
C) decreases the aggregate quantity demanded in the United States.
D) decreases aggregate demand in the United States.
A) increases aggregate demand in the United States.
B) increases the aggregate quantity demanded in the United States.
C) decreases the aggregate quantity demanded in the United States.
D) decreases aggregate demand in the United States.
answer
D
question
25. In short-run macroeconomic equilibrium
A) real GDP equals potential GDP and aggregate demand determines the price level.
B) the price level is fixed and short-
run aggregate supply determines real GDP.
C) real GDP and the price level are determined by short-run aggregate supply and aggregate demand.
D) real GDP is less than potential GDP.
A) real GDP equals potential GDP and aggregate demand determines the price level.
B) the price level is fixed and short-
run aggregate supply determines real GDP.
C) real GDP and the price level are determined by short-run aggregate supply and aggregate demand.
D) real GDP is less than potential GDP.
answer
C
question
26. Over time in a growing economy, the long-run aggregate supply curve will
A) become horizontal at the long-run potential price level.
B) shift rightward.
C) shift leftward.
D) become increasingly steep.
A) become horizontal at the long-run potential price level.
B) shift rightward.
C) shift leftward.
D) become increasingly steep.
answer
B
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