Question 1

Which of the following mechanisms helps output to return to potential after a supply shock?

Accepted Answer

A)   A change in the nominal wage
B)   Changes in business decision making strategies
C)   Changes in the capital stock
D)   The rigidity of the price level
E)   Changes in inventories.F) A) and B)
G) A) and E)

Question 2

Stagflation

Accepted Answer

A)   is caused by a negative demand shock
B)   is theoretically impossible
C)   is a long-run phenomenon
D)   was rampant during the Great Depression
E)   is the combination of rising price levels and negative GDP growthF) B) and D)
G) B) and C)

Question 3

Which of the following would shift the aggregate demand curve to the right?

Accepted Answer

A)   An increase in government purchases
B)   An increase in investment spending
C)   An open market purchase of bonds by the Fed
D)   All of the above
E)   None of the above.F) None of the above
G) B) and D)

Question 4

A movement down and to the left along the aggregate supply curve will occur when

Accepted Answer

A)   firms' average markup is stable and a decrease in real GDP causes unit costs to fall
B)   world oil prices fall,thus decreasing the price level
C)   a change in fiscal policy causes aggregate expenditure to increase
D)   firms decide to produce less than before at each price level
E)   an increase in real GDP causes the price level to fallF) A) and B)
G) A) and E)

Question 5

If the unit cost of output for a computer is $2,000 and if firms' average markup is 10 percent,what is the total cost to the consumer?

Accepted Answer

A)   $2,000
B)   $2,010
C)   $2,020
D)   $2,200
E)   $20.F) C) and D)
G) D) and E)

Question 6

A negative demand shock

Accepted Answer

A)   shifts the AD curve to the right
B)   decreases real GDP and increases the price level in the short run
C)   is the result of an increase in money demand
D)   results in a movement down and to the right along the AD curve
E)   decreases both real GDP and the price level in the short runF) A) and B)
G) All of the above

Question 7

-Refer to Figure 15-7.If the economy is currently at a price level of 120 and real GDP is $6.5 trillion,an increase in taxes will,in the short run,

Accepted Answer

A)   shift the aggregate demand curve rightward,increasing both the price level and real GDP
B)   shift the aggregate demand curve leftward,decreasing both the price level and real GDP
C)   shift the aggregate supply curve upward,increasing the price level and decreasing real GDP
D)   shift the aggregate supply curve downward,decreasing the price level and increasing real GDP
E)   have no effect on aggregate demand because of crowding outF) B) and D)
G) B) and C)

Question 8

Which of the following would happen as the wage rate gradually adjusts following a shock?

Accepted Answer

A)   Nothing will change
B)   A shift of the production possibilities frontier
C)   A shift in the short-run aggregate supply curve
D)   A shift in the aggregate demand curve
E)   A shift in the long-run aggregate supply curve.F) B) and E)
G) B) and D)

Question 9

According the AS/AD model,in the long run,expansionary monetary policy will

Accepted Answer

A)   increase both real GDP and the price level.
B)   decrease both real GDP and the price level.
C)   decrease the price level and leave real GDP unchanged.
D)   increase the price level and leave real GDP unchanged.
E)   increase real GDP and reduce the price level.F) All of the above
G) A) and B)

Question 10

Which of the following will shift the aggregate supply curve upward?

Accepted Answer

A)   A decrease in world oil prices
B)   Bad weather,which increases farmers' costs per unit of output
C)   Increases in consumer spending
D)   An increase in the price level
E)   Technological changes that improve worker productivity.F) A) and B)
G) D) and E)

Question 11

Which of the following is not an example of a demand shock?

Accepted Answer

A)   A reduction in government spending
B)   An increase in income tax rates
C)   A change in oil prices.
D)   A money supply increase.
E)   An increase in government spending.F) D) and E)
G) A) and D)

Question 12

The aggregate demand curve slopes downward for the same reason that a microeconomic demand curve slopes downward.

Accepted Answer

A) True 
 B)False

Question 13

A positive demand shock may

Accepted Answer

A)   cause an economy to operate at a point above potential GDP in the short run
B)   increase potential output
C)   be caused by relatively low employment levels
D)   cause the price level to fall
E)   be offset by falling wage ratesF) B) and D)
G) B) and E)

Question 14

Which of the following would shift the aggregate demand curve to the left?

Accepted Answer

A)   increases in government purchases,investment spending,autonomous consumption,taxes or the money supply
B)   decreases in government purchases,investment spending,autonomous consumption,or the money supply
C)   increases in government purchases,investment spending,autonomous consumption or the money supply
D)   decreases in government purchases,investment spending,autonomous consumption,taxes or an increase in the money supply
E)   only increases in government purchases.F) D) and E)
G) C) and D)

Question 15

A decrease in the price level

Accepted Answer

A)   decreases investment spending,thereby shifting the AD curve.
B)   increases investment spending,thereby shifting the AD curve.
C)   does not shift the AD curve.
D)   increases autonomous consumption spending,thereby shifting the AD curve.
E)   changes the slope of the AD curve.F) B) and C)
G) A) and E)

Question 16

After a negative demand shock,what are the expected long-run adjustments?

Accepted Answer

A)   Wages rise,price level rises,and output falls back to potential
B)   Wages fall,price level rises,and output falls back to potential
C)   Wages fall,price level falls,and output increases back to potential
D)   Wages fall,price level rises,and output increases back to potential
E)   Wages rise,price level falls,and output increases back to potential.F) A) and B)
G) B) and E)

Question 17

]Which of the following would not cause the AD curve to shift?

Accepted Answer

A)   A change in the money supply
B)   The public's expectations of a fall in the interest rate
C)   A change in aggregate expenditure caused by a change in the price level
D)   A change in fiscal policy
E)   A change in autonomous consumption spending.F) C) and E)
G) C) and D)

Question 18

In the short run,a contractionary fiscal policy would cause

Accepted Answer

A)   the AD curve to shift to the right
B)   equilibrium real GDP to decrease and the price level to increase
C)   the AS curve to shift left
D)   the economy to slide along the AD curve
E)   equilibrium GDP and the price level to fallF) D) and E)
G) A) and D)

Question 19

If the government announces a big tax cut,which of the following combinations of events would be most likely to occur?

Accepted Answer

A)   An upward shift of the aggregate expenditure line,a rightward shift of the money demand curve,and a rightward shift of the aggregate demand curve
B)   A downward shift of the aggregate expenditure line,a leftward shift of the money demand curve,and a leftward shift of the aggregate demand curve
C)   An upward shift of the aggregate expenditure line,a leftward shift of the money demand curve,and a rightward shift of the aggregate demand curve
D)   A downward shift of the aggregate expenditure line,a rightward shift of the money demand curve,and a rightward shift of the aggregate demand curve
E)   An upward shift of the aggregate expenditure line,a rightward shift of the money demand curve,and a leftward shift of the aggregate demand curve.F) All of the above
G) A) and D)

Question 20

A movement along the AD curve down and to the right is caused by

Accepted Answer

A)   a rightward shift of the money demand curve
B)   falling consumer confidence
C)   a decreasing price level
D)   expansionary open market transactions by the Fed
E)   a stable price level and increases in consumption,investment,or government spendingF) B) and C)
G) D) and E)

Exam 15: Aggregate Demand and Aggregate Supply

A positive demand shock may

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A negative demand shock

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The aggregate demand curve slopes downward for the same reason that a microeconomic demand curve slopes downward.

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According the AS/AD model,in the long run,expansionary monetary policy will

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If the unit cost of output for a computer is $2,000 and if firms' average markup is 10 percent,what is the total cost to the consumer?

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Stagflation

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]Which of the following would not cause the AD curve to shift?

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Which of the following would shift the aggregate demand curve to the right?

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-Refer to Figure 15-7.If the economy is currently at a price level of 120 and real GDP is $6.5 trillion,an increase in taxes will,in the short run,

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A movement down and to the left along the aggregate supply curve will occur when

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Which of the following will shift the aggregate supply curve upward?

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Which of the following mechanisms helps output to return to potential after a supply shock?

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Which of the following would happen as the wage rate gradually adjusts following a shock?

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Which of the following would shift the aggregate demand curve to the left?

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Which of the following is not an example of a demand shock?

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A decrease in the price level

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If the government announces a big tax cut,which of the following combinations of events would be most likely to occur?

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After a negative demand shock,what are the expected long-run adjustments?

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A movement along the AD curve down and to the right is caused by

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In the short run,a contractionary fiscal policy would cause

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