Question 1

A decrease in consumption at a given price level

Accepted Answer

A)   shifts the AD curve to the right.
B)   shifts the AD curve to the left.
C)   causes an upward movement along the existing AD curve.
D)   causes a downward movement along the existing AD curve.
E)   none of the above.

Question 2

A decrease in the price level

Accepted Answer

A)   shifts the SRAS curve to the right.
B)   shifts the SRAS curve to the left.
C)   causes an upward movement along the existing SRAS curve.
D)   causes a downward movement along the existing SRAS curve.
E)   none of the above

Question 3

Exhibit 8-2
 
-Refer to Exhibit 8-2.Based on the given change,what word (rises or falls) should go in blank (7) and blank (8) ,respectively,to summarize the resulting impact on short run equilibrium?

Accepted Answer

A)   rises;rises
B)   falls;falls
C)   rises;falls
D)   falls;rises

Question 4

Explain why the short-run aggregate supply curve (SRAS)is upward sloping,while the long-run aggregate supply (LRAS)curve is a vertical line.

Accepted Answer

The SRAS curve slopes upward because of ...

Question 5

Define the term subprime loan.Give a brief history of how the incidence of subprime mortgage loans changed between 1995 and 2003,and explain the factors that contributed to a number of subprime borrowers being unable to repay their loans in recent years.

Accepted Answer

The term subprime loan refers to a loan ...

Question 6

In the short run,a decrease in wage rates,ceteris paribus,shifts the

Accepted Answer

A)   AD curve to the right,causing equilibrium price level to rise and equilibrium Real GDP to increase.
B)   AD curve to the left,causing equilibrium price level to fall and equilibrium Real GDP to decrease.
C)   SRAS curve to the right,causing equilibrium price level to fall and equilibrium Real GDP to increase.
D)   SRAS curve to the left,causing equilibrium price level to rise and equilibrium Real GDP to decrease.

Question 7

An increase in the price level

Accepted Answer

A)   shifts the AD curve to the right.
B)   shifts the AD curve to the left.
C)   causes an upward movement along the existing AD curve.
D)   causes a downward movement along the existing AD curve.
E)   a and c

Question 8

Suppose that C = $700,I = $200,G = $200,NX = $100,and that the money supply is equal to $400.Based upon these assumptions,velocity is equal to ________________.If consumption and velocity both rise beyond their initial levels,then it follows that another component of spending ___________ necessarily fall.

Accepted Answer

A)   3;must
B)   3;does not
C)   4;must
D)   4;does not

Question 9

Exhibit 8-3 1 would have been the result of A)  a decrease in the price level. B)  an increase in the price level. C)  an increase in foreign real national income. D)  a decrease in foreign real national income." class="answers-bank-image d-inline" rel="preload" >
-Refer to Exhibit 8-3.A movement from point B to point A on AD1 would have been the result of

Accepted Answer

A)   a decrease in the price level.
B)   an increase in the price level.
C)   an increase in foreign real national income.
D)   a decrease in foreign real national income.

Question 10

The interest rate effect,the real balance effect,and the international trade effect all result from a change in the price level.

Accepted Answer

A) True 
 B)False

Question 11

Suppose the following: (1) the wage rises, (2) the interest rate rises, (3) any change in AD is greater than any change in SRAS.Based on this information,in the short run Real GDP will __________ and the price level will __________.

Accepted Answer

A)   rise;rise
B)   fall;rise
C)   fall;fall
D)   rise;fall

Question 12

Unusually good weather that improves crop production and a major oil discovery are both examples of a beneficial supply shock.

Accepted Answer

A) True 
 B)False

Question 13

If the price level remains constant but the wage rate increases,then there will be __________ in production and the SRAS curve will shift __________.

Accepted Answer

A)   an increase;rightward
B)   a decrease;rightward
C)   an increase;leftward
D)   a decrease;leftward

Question 14

Starting from short-run equilibrium,the following occurs: individuals expect higher (future) incomes and wage rates rise.What is the effect on the price level and Real GDP in the short run?

Accepted Answer

A)   The price level rises and Real GDP rises.
B)   The price level falls and Real GDP falls.
C)   The price level rises,but the effect on Real GDP cannot be determined.
D)   Real GDP rises,but the effect on the price level cannot be determined.
E)   Real GDP falls,but the effect on the price level cannot be determined.

Question 15

The expectation of higher future income is a

Accepted Answer

A)   rightward shifter of the AD curve.
B)   leftward shifter of the AD curve.
C)   reason for moving up along a given AD curve.
D)   reason for moving down along a given AD curve.

Question 16

An economic policy initiative results in the AD curve shifting to the right.As a result,

Accepted Answer

A)   the price level will rise.
B)   the price level will stay constant.
C)   the price level will fall.
D)   Real GDP will rise in the short run.
E)   a and d

Question 17

The nominal wage is $40 an hour and the price level as measured by a price index is 2.00.If the nominal wage falls to $30 and the price index declines to 1.50,according to the worker misperception explanation of the upward-sloping SRAS curve,workers will initially perceive the

Accepted Answer

A)   real wage as something greater than $20.
B)   real wage as something less than $20.
C)   real wage as $20.
D)   nominal wage as something more than $30.
E)   nominal wage as something less than $30.

Question 18

Exhibit 8-1 
-Refer to Exhibit 8-1.If we assume that Real GDP and the unemployment rate are inversely related,which of the points on this graph is most likely representative of the highest unemployment rate?

Accepted Answer

A)   A
B)   B
C)   C
D)   D

Question 19

If labor productivity rises at the same time that there is a beneficial supply shock,what is the effect on short-run aggregate supply (SRAS) ?

Accepted Answer

A)   SRAS rises.
B)   SRAS falls.
C)   SRAS remains constant.
D)   SRAS may rise,fall,or remain constant.

Question 20

An appreciation of the U.S.dollar tends to __________ U.S.net exports and shift the U.S.AD curve to the __________.

Accepted Answer

A)   raise;right
B)   raise;left
C)   lower;right
D)   lower;left

Exam 8: Aggregate Demand and Aggregate Supply

An increase in the price level

Correct AnswerverifiedShow Answer

Suppose the following: (1) the wage rises, (2) the interest rate rises, (3) any change in AD is greater than any change in SRAS.Based on this information,in the short run Real GDP will __________ and the price level will __________.

Correct AnswerverifiedShow Answer

Exhibit 8-1 -Refer to Exhibit 8-1.If we assume that Real GDP and the unemployment rate are inversely related,which of the points on this graph is most likely representative of the highest unemployment rate?

Correct AnswerverifiedShow Answer

The interest rate effect,the real balance effect,and the international trade effect all result from a change in the price level.

Correct AnswerverifiedShow Answer

Exhibit 8-2 -Refer to Exhibit 8-2.Based on the given change,what word (rises or falls) should go in blank (7) and blank (8) ,respectively,to summarize the resulting impact on short run equilibrium?

Correct AnswerverifiedShow Answer

If the price level remains constant but the wage rate increases,then there will be __________ in production and the SRAS curve will shift __________.

Correct AnswerverifiedShow Answer

A decrease in the price level

Correct AnswerverifiedShow Answer

Unusually good weather that improves crop production and a major oil discovery are both examples of a beneficial supply shock.

Correct AnswerverifiedShow Answer

The nominal wage is $40 an hour and the price level as measured by a price index is 2.00.If the nominal wage falls to $30 and the price index declines to 1.50,according to the worker misperception explanation of the upward-sloping SRAS curve,workers will initially perceive the

Correct AnswerverifiedShow Answer

Exhibit 8-3 -Refer to Exhibit 8-3.A movement from point B to point A on AD1 would have been the result of

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

An economic policy initiative results in the AD curve shifting to the right.As a result,

Correct AnswerverifiedShow Answer

The expectation of higher future income is a

Correct AnswerverifiedShow Answer

Starting from short-run equilibrium,the following occurs: individuals expect higher (future) incomes and wage rates rise.What is the effect on the price level and Real GDP in the short run?

Correct AnswerverifiedShow Answer

Define the term subprime loan.Give a brief history of how the incidence of subprime mortgage loans changed between 1995 and 2003,and explain the factors that contributed to a number of subprime borrowers being unable to repay their loans in recent years.

Correct AnswerverifiedThe term subprime loan refers to a loan ...View AnswerShow Answer

Explain why the short-run aggregate supply curve (SRAS)is upward sloping,while the long-run aggregate supply (LRAS)curve is a vertical line.

Correct AnswerverifiedThe SRAS curve slopes upward because of ...View AnswerShow Answer

An appreciation of the U.S.dollar tends to __________ U.S.net exports and shift the U.S.AD curve to the __________.

Correct AnswerverifiedShow Answer

A decrease in consumption at a given price level

Correct AnswerverifiedShow Answer

If labor productivity rises at the same time that there is a beneficial supply shock,what is the effect on short-run aggregate supply (SRAS) ?

Correct AnswerverifiedShow Answer

In the short run,a decrease in wage rates,ceteris paribus,shifts the

Correct AnswerverifiedShow Answer

Correct Answer
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Suppose the following: (1) the wage rises, (2) the interest rate rises, (3) any change in AD is greater than any change in SRAS.Based on this information,in the short run Real GDP will and the price level will .

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If the price level remains constant but the wage rate increases,then there will be in production and the SRAS curve will shift .

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Exhibit 8-3 -Refer to Exhibit 8-3.A movement from point B to point A on AD₁ would have been the result of

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The term subprime loan refers to a loan ...
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The SRAS curve slopes upward because of ...
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An appreciation of the U.S.dollar tends to U.S.net exports and shift the U.S.AD curve to the .

Correct Answer
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