Question 1

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) All of the above
F) C) and D)

Question 2

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 D)
F) C) and D)

Question 3

Stagflation usually results from

Accepted Answer

A)   a supply shock.
B)   a decrease in aggregate demand.
C)   an increase in aggregate supply.
D)   an increase in aggregate demand.E) A) and D)
F) B) and D)

Question 4

Figure 24-1 
-Refer to Figure 24-1. Ceteris paribus, a decrease 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) B) and C)
F) B) and D)

Question 5

What are sticky prices, and how can contracts make them "sticky"?

Accepted Answer

Prices or wages are said to be "sticky" ...

Question 6

Figure 24-1 
-Refer to Figure 24-1. Ceteris paribus, a decrease in the growth rate of domestic GDP relative to the growth rate of foreign GDP 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) C) and D)

Question 7

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

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) None of the above

Question 8

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

Question 9

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) B) and C)
F) All of the above

Question 10

One factor which brought on the recession of 2007-2009 was the financial crisis in 2008.

Accepted Answer

A) True 
 B)False

Question 11

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 B)
F) A) and C)

Question 12

If stricter immigration laws are imposed and many foreign workers in the United States are forced to go back to their home countries,

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)   we will move up along the long-run aggregate supply curve.
D)   we will move down along the long-run aggregate supply curve.E) B) and C)
F) B) and D)

Question 13

When the price level in the United States rises relative to the price level of other countries, ________ will rise, ________ will fall, and ________ will fall.

Accepted Answer

A)   imports; exports; net exports
B)   exports; imports; net exports
C)   net exports; exports; imports
D)   net exports; imports; exportsE) B) and C)
F) C) and D)

Question 14

When the price level falls from 135 to 120, the aggregate level of GDP supplied falls from $140 billion to $125 billion. This ________ relationship represents the ________ relationship between GDP and the price level.

Accepted Answer

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

Question 15

The long-run aggregate supply curve is vertical.

Accepted Answer

A) True 
 B)False

Question 16

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) None of the above

Question 17

A negative supply shock in the short run causes

Accepted Answer

A)   the aggregate supply curve to shift to the left.
B)   the price level to fall.
C)   unemployment to fall.
D)   equilibrium real GDP to rise.E) A) and B)
F) B) and C)

Question 18

All of the following are assumptions made by the dynamic model of aggregate demand and aggregate supply except

Accepted Answer

A)   aggregate demand and potential real GDP decrease continuously.
B)   the aggregate demand curve shifts to the right during most periods.
C)   potential real GDP increases continuously.
D)   the short-run aggregate supply curve shifts to the right except during periods when workers and firms expect higher wages.E) B) and D)
F) C) and D)

Question 19

Figure 24-1 
-Refer to Figure 24-1. Ceteris paribus, an increase in the growth rate of domestic GDP relative to the growth rate of foreign GDP 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 20

If the short-run aggregate supply increases by less than the long-run aggregate supply, then, at the short-run equilibrium,

Accepted Answer

A)   GDP will be below potential GDP.
B)   aggregate demand will increase.
C)   GDP will be above potential GDP.
D)   GDP will be equal to potential GDP.E) B) and C)
F) None of the above

Exam 24: Aggregate Demand and Aggregate Supply Analysis

What are sticky prices, and how can contracts make them "sticky"?

Correct AnswerverifiedPrices or wages are said to be "sticky" ...View AnswerShow Answer

If stricter immigration laws are imposed and many foreign workers in the United States are forced to go back to their home countries,

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

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

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

When the price level falls from 135 to 120, the aggregate level of GDP supplied falls from $140 billion to $125 billion. This ________ relationship represents the ________ relationship between GDP and the price level.

Correct AnswerverifiedShow Answer

The long-run aggregate supply curve is vertical.

Correct AnswerverifiedShow Answer

Stagflation usually results from

Correct AnswerverifiedShow Answer

Figure 24-1 -Refer to Figure 24-1. Ceteris paribus, a decrease in the growth rate of domestic GDP relative to the growth rate of foreign GDP would be represented by a movement from

Correct AnswerverifiedShow Answer

One factor which brought on the recession of 2007-2009 was the financial crisis in 2008.

Correct AnswerverifiedShow Answer

The international trade effect states that

Correct AnswerverifiedShow Answer

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

When the price level in the United States rises relative to the price level of other countries, ________ will rise, ________ will fall, and ________ will fall.

Correct AnswerverifiedShow Answer

If the short-run aggregate supply increases by less than the long-run aggregate supply, then, at the short-run equilibrium,

Correct AnswerverifiedShow Answer

All of the following are assumptions made by the dynamic model of aggregate demand and aggregate supply except

Correct AnswerverifiedShow Answer

A negative supply shock in the short run causes

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Changes in the price level

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct Answer
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Prices or wages are said to be "sticky" ...
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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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When the price level falls from 135 to 120, the aggregate level of GDP supplied falls from $140 billion to $125 billion. This relationship represents the relationship between GDP and the price level.

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When the price level in the United States rises relative to the price level of other countries, will rise, will fall, and will fall.

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