Question 1

During the period that many call the Great Recession:

Accepted Answer

A)   GDP fell.
B)   unemployment rose.
C)   there was a sharp decrease in consumer spending.
D)   All of these are true.E) A) and D)
F) B) and C)

Question 2

If a change in the U.S. price level caused U.S. imports to increase, it must be true that the price level:

Accepted Answer

A)   increased.
B)   decreased.
C)   became elastic.
D)   became negative.E) A) and B)
F) A) and C)

Question 3

A decrease in consumer confidence will cause a:

Accepted Answer

A)   movement downward along the aggregate demand curve.
B)   shift in aggregate demand to the right.
C)   shift in aggregate demand to the left.
D)   movement upward along the aggregate demand curve.E) A) and D)
F) A) and C)

Question 4

The effect of a shift in the aggregate demand curve due to an increase in consumer confidence will be:

Accepted Answer

A)   an increase in both prices and output in the short run.
B)   a decrease in prices only in the long run; output will remain the same.
C)   a decrease in both prices and output in the short run.
D)   an increase in output only in the long run; prices will remain the same.E) B) and C)
F) C) and D)

Question 5

In the long run aggregate:

Accepted Answer

A)   demand is fixed.
B)   supply is fixed.
C)   demand tends to shift to the right.
D)   supply tends to shift to the left.E) All of the above
F) A) and B)

Question 6

There is a negative relationship between the price level and which components of GDP?

Accepted Answer

A)   C, I, and G
B)   I, G, and NX
C)   C, G, and NX
D)   C, I, and NXE) None of the above
F) B) and D)

Question 7

In general, it is easier to:

Accepted Answer

A)   adjust final prices rather than input prices.
B)   adjust input prices rather than final prices.
C)   change wage rates for employees than other input prices.
D)   change input prices than output level.E) None of the above
F) C) and D)

Question 8

The long-run aggregate supply curve is:

Accepted Answer

A)   downward sloping.
B)   horizontal.
C)   vertical.
D)   upward sloping.E) A) and B)
F) A) and C)

Question 9

Which of the following would likely cause aggregate demand to shift to the left?

Accepted Answer

A)   Higher interest rates discouraging borrowing
B)   Higher tariffs on all imports into the United States
C)   Greater consumer confidence about the future
D)   All of these would likely cause aggregate demand to shift to the left.E) A) and B)
F) C) and D)

Question 10

The wealth effect explains the:

Accepted Answer

A)   downward-sloping aggregate demand curve.
B)   upward-sloping aggregate demand curve.
C)   downward-sloping aggregate supply curve.
D)   upward-sloping aggregate supply curve.E) B) and C)
F) A) and B)

Question 11

An increase in the costs of production will cause the:

Accepted Answer

A)   short-run aggregate supply curve to shift to the right.
B)   aggregate demand curve to shift to the right.
C)   short-run aggregate supply curve to shift to the left.
D)   long-run aggregate supply curve to shift to the left.E) None of the above
F) C) and D)

Question 12

The long run result of the government responding to a negative supply side shock with increased spending will be a:

Accepted Answer

A)   faster recovery, but it will cause even greater inflation.
B)   slower recovery, if they misjudge their own spending.
C)   faster recovery at a lower price level than allowing short-run aggregate supply to adjust on its own.
D)   slower recovery, but it will cause inflation to be lower than if they did nothing.E) B) and C)
F) A) and D)

Question 13

When the economy fluctuates around its long-run aggregate supply:

Accepted Answer

A)   it is called the business cycle.
B)   the economy is in a state of chaos.
C)   the value of currency becomes unstable.
D)   we must be in a recession.E) A) and B)
F) C) and D)

Question 14

Using Figure 1 above, if the aggregate demand curve shifts from AD2 to AD3 the result in the long run would be:

Accepted Answer

A)   P1 and Y2.
B)   P2 and Y2.
C)   P1 and Y1.
D)   P4 and Y2.E) A) and D)
F) B) and D)

Question 15

If U.S. prices increase relative to the rest of the world, we would expect imports:

Accepted Answer

A)   to increase and exports to fall.
B)   to decrease and exports to increase.
C)   as well as exports to increase.
D)   as well as exports to decrease.E) A) and B)
F) None of the above

Question 16

An asset-price bubble is caused by:

Accepted Answer

A)   people buying assets because they believed prices would keep going up and they'd be able to sell for a profit.
B)   fads that make owning a certain asset fashionable.
C)   severe inflation within a short period of time.
D)   the increase in the value of durable goods when the economy is experiencing low inflation.E) A) and B)
F) A) and C)

Question 17

In macroeconomics, the long run is determined by:

Accepted Answer

A)   how long it takes for prices of inputs to adjust through the whole economy.
B)   how long it takes for firms to vary all input quantities.
C)   the longest contract length of a business.
D)   how long it takes for output decisions to adjust to changes in economic conditions.E) B) and C)
F) A) and B)

Question 18

Which three macroeconomic variables together best describe the health of the economy?

Accepted Answer

A)   Output, GDP, and inflation
B)   Output, inflation, and prices
C)   GDP, unemployment, and employment
D)   Output, prices, and employmentE) B) and D)
F) A) and B)

Question 19

The relationship between the price level and net exports is:

Accepted Answer

A)   negative.
B)   positive.
C)   perfectly correlated.
D)   uncorrelated.E) B) and D)
F) A) and C)

Question 20

The relationship between the overall price level in the economy and total production by firms is shown in the:

Accepted Answer

A)   aggregate demand curve.
B)   aggregate supply curve.
C)   inflation rate.
D)   business cycle.E) A) and C)
F) None of the above

Exam 12: Aggregate Demand and Aggregate Supply

The relationship between the overall price level in the economy and total production by firms is shown in the:

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The relationship between the price level and net exports is:

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The wealth effect explains the:

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During the period that many call the Great Recession:

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A decrease in consumer confidence will cause a:

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The effect of a shift in the aggregate demand curve due to an increase in consumer confidence will be:

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In macroeconomics, the long run is determined by:

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When the economy fluctuates around its long-run aggregate supply:

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Which of the following would likely cause aggregate demand to shift to the left?

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In the long run aggregate:

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The long-run aggregate supply curve is:

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Using Figure 1 above, if the aggregate demand curve shifts from AD2 to AD3 the result in the long run would be:

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If a change in the U.S. price level caused U.S. imports to increase, it must be true that the price level:

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Which three macroeconomic variables together best describe the health of the economy?

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In general, it is easier to:

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An asset-price bubble is caused by:

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An increase in the costs of production will cause the:

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If U.S. prices increase relative to the rest of the world, we would expect imports:

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There is a negative relationship between the price level and which components of GDP?

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The long run result of the government responding to a negative supply side shock with increased spending will be a:

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