Question 1

What happens in an economy when aggregate demand decreases?

Accepted Answer

A)   The price level rises, output rises, and an expansion occurs.
B)   The price level rises, output falls, and a recession occurs.
C)   The price level falls, output rises, and an expansion occurs.
D)   The price level falls, output falls, and a recession occurs.E) A) and C)
F) A) and D)

Question 2

Briefly describe the three reasons that the aggregate demand curve shows a negative relationship between the average price level and the total goods and services that are purchased.

Accepted Answer

The three reasons that the aggregate dem...

Question 3

What type of shock did the U.S. economy experience in the late 1800s as manufacturing expanded and immigration increased the size of the labor force?

Accepted Answer

A)   contractionary supply shock
B)   expansionary supply shock
C)   contractionary demand shock
D)   expansionary demand shockE) A) and C)
F) A) and D)

Question 4

How is economic growth shown on a graph of a long-run aggregate supply (LRAS)  curve?

Accepted Answer

A)   Output moves to a higher point on the LRAS curve.
B)   Output moves to a lower point on the LRAS curve.
C)   The LRAS curve shifts up.
D)   The LRAS curve shifts to the right.E) A) and B)
F) C) and D)

Question 5

In the long run, total national output:

Accepted Answer

A)   is not impacted by the price level.
B)   has a positive relationship with the price level.
C)   has a negative relationship with the price level.
D)   varies widely at a fixed, given price level.E) A) and B)
F) None of the above

Question 6

Which of the following would cause inflation?

Accepted Answer

A)   The short-run aggregate supply curve shifts leftward.
B)   The long-run aggregate supply curve shifts rightward.
C)   The aggregate demand curve shifts leftward.
D)   The short-run aggregate supply curve shifts rightward.E) A) and B)
F) A) and C)

Question 7

(Figure: SRASA)  In the figure, what will cause the shift from SRAS1 to SRAS2?
 1 to SRAS2?    A)  higher oil prices B)  lower wages C)  lower levels of government spending D)  increased personal income tax rates" class="answers-bank-image d-inline" rel="preload" >

Accepted Answer

A)   higher oil prices
B)   lower wages
C)   lower levels of government spending
D)   increased personal income tax ratesE) B) and C)
F) A) and D)

Question 8

According to the net exports effect, along a given AD curve the average price level is _____ related to net exports.

Accepted Answer

A)   inversely
B)   directly
C)   unpredictably
D)   notE) A) and D)
F) All of the above

Question 9

(Figure: Natural Rate)  What does the figure represent?

Accepted Answer

A)   long-run aggregate demand curve
B)   short-run aggregate demand curve
C)   long-run aggregate supply curve
D)   short-run aggregate supply curveE) None of the above
F) B) and D)

Question 10

Which of the following would cause a nation's aggregate demand curve to shift to the right?

Accepted Answer

A)   Reductions are made in government spending.
B)   Global economic conditions deteriorate.
C)   Higher levels of financial distress and uncertainty occur.
D)   The money supply increases.E) C) and D)
F) A) and B)

Question 11

In the short run, what type of relationship exists between the average price level and the output level in an economy?

Accepted Answer

A)   positive
B)   negative
C)   unchanging price regardless of output level
D)   it depends on whether the price level change is caused by a supply shift or a demand shiftE) All of the above
F) A) and B)

Question 12

In the context of aggregate demand, the interest rate effect means that an increase in the average price level will lead to _____ in interest rates and _____ in investment spending.

Accepted Answer

A)   an increase; a decrease
B)   an increase; an increase
C)   a decrease; a decrease
D)   a decrease; an increaseE) B) and C)
F) A) and B)

Question 13

The slope of the long-run aggregate supply curve is:

Accepted Answer

A)   upward sloping.
B)   downward sloping.
C)   vertical.
D)   horizontal.E) A) and D)
F) None of the above

Question 14

(Figure: SRAS0)  In the figure, what will NOT cause the shift from SRAS1 to SRAS2?
 1 to SRAS2?    A)  lower wages B)  higher raw material costs C)  lower productivity levels D)  All of the above could cause the shift." class="answers-bank-image d-inline" rel="preload" >

Accepted Answer

A)   lower wages
B)   higher raw material costs
C)   lower productivity levels
D)   All of the above could cause the shift.E) A) and D)
F) C) and D)

Question 15

(Figure: SRAS0)  In the figure, what will NOT cause the shift from SRAS1 to SRAS2?
 1 to SRAS2?    A)  higher wages B)  higher raw material costs C)  improved productivity levels D)  All of the above could cause the shift." class="answers-bank-image d-inline" rel="preload" >

Accepted Answer

A)   higher wages
B)   higher raw material costs
C)   improved productivity levels
D)   All of the above could cause the shift.E) All of the above
F) A) and B)

Question 16

An increase in spending has what impact in the short run and long run?

Accepted Answer

A)   Only prices are impacted in the short run, and only output is affected in the long run.
B)   Only output is impacted in the short run, and only prices are affected in the long run.
C)   Both prices and output are impacted in the short run, and only prices are affected in the long run.
D)   Both prices and output are impacted in the short run, and only output is affected in the long run.E) B) and C)
F) None of the above

Question 17

In the short run, a contractionary supply shock causes the average price level to _____ and the total output level to:

Accepted Answer

A)   fall; rise.
B)   fall; fall.
C)   rise; rise.
D)   rise; fall.E) None of the above
F) A) and D)

Question 18

(Figure: Curve 0)  What does the figure represent?

Accepted Answer

A)   aggregate demand curve
B)   demand curve
C)   aggregate supply curve
D)   supply curveE) B) and C)
F) C) and D)

Question 19

What is stagflation? Use the aggregate supply and aggregate demand model to explain why stagflation occurs.

Accepted Answer

An economy experiences stagflation when ...

Question 20

When aggregate demand declines, an economy will experience _____ in the average price level and _____ in the amount of goods and services purchased.

Accepted Answer

A)   a decrease; an increase
B)   a decrease; a decrease
C)   an increase; an increase
D)   an increase; a decreaseE) A) and B)
F) A) and C)

Exam 26: Aggregate Supply and Aggregate Demand

How is economic growth shown on a graph of a long-run aggregate supply (LRAS) curve?

Correct AnswerverifiedShow Answer

What type of shock did the U.S. economy experience in the late 1800s as manufacturing expanded and immigration increased the size of the labor force?

Correct AnswerverifiedShow Answer

(Figure: SRAS0) In the figure, what will NOT cause the shift from SRAS1 to SRAS2?

Correct AnswerverifiedShow Answer

(Figure: SRAS0) In the figure, what will NOT cause the shift from SRAS1 to SRAS2?

Correct AnswerverifiedShow Answer

When aggregate demand declines, an economy will experience _____ in the average price level and _____ in the amount of goods and services purchased.

Correct AnswerverifiedShow Answer

Which of the following would cause inflation?

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What happens in an economy when aggregate demand decreases?

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(Figure: SRASA) In the figure, what will cause the shift from SRAS1 to SRAS2?

Correct AnswerverifiedShow Answer

In the long run, total national output:

Correct AnswerverifiedShow Answer

In the short run, what type of relationship exists between the average price level and the output level in an economy?

Correct AnswerverifiedShow Answer

Which of the following would cause a nation's aggregate demand curve to shift to the right?

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An increase in spending has what impact in the short run and long run?

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According to the net exports effect, along a given AD curve the average price level is _____ related to net exports.

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(Figure: Curve 0) What does the figure represent?

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Briefly describe the three reasons that the aggregate demand curve shows a negative relationship between the average price level and the total goods and services that are purchased.

Correct AnswerverifiedThe three reasons that the aggregate dem...View AnswerShow Answer

In the context of aggregate demand, the interest rate effect means that an increase in the average price level will lead to _____ in interest rates and _____ in investment spending.

Correct AnswerverifiedShow Answer

The slope of the long-run aggregate supply curve is:

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What is stagflation? Use the aggregate supply and aggregate demand model to explain why stagflation occurs.

Correct AnswerverifiedAn economy experiences stagflation when ...View AnswerShow Answer

(Figure: Natural Rate) What does the figure represent?

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In the short run, a contractionary supply shock causes the average price level to _____ and the total output level to:

Correct AnswerverifiedShow Answer

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(Figure: SRAS0) In the figure, what will NOT cause the shift from SRAS₁ to SRAS₂?

Correct Answer
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(Figure: SRAS0) In the figure, what will NOT cause the shift from SRAS₁ to SRAS₂?

Correct Answer
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When aggregate demand declines, an economy will experience _ in the average price level and _ in the amount of goods and services purchased.

Correct Answer
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(Figure: SRASA) In the figure, what will cause the shift from SRAS₁ to SRAS₂?

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The three reasons that the aggregate dem...
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In the context of aggregate demand, the interest rate effect means that an increase in the average price level will lead to _ in interest rates and _ in investment spending.

Correct Answer
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Correct Answer
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An economy experiences stagflation when ...
View Answer

Correct Answer
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