Question 1

The government might increase its spending to end a recession because:

Accepted Answer

A)   allowing the short-run aggregate supply to adjust since back to the long-run can take a long time.
B)   the economy experiences lower prices at the long-run equilibrium.
C)   the economy enjoys a higher level of output in the long run.
D)   None of these justify why the government might change its spending to end a recession.E) A) and B)
F) C) and D)

Question 2

If a hurricane were to wipe out the majority of the eastern seaboard in the United States, it would likely cause a:

Accepted Answer

A)   short-run supply shock.
B)   long-run supply shock.
C)   short-run demand shock.
D)   long-run demand shock.E) C) and D)
F) A) and B)

Question 3

As the U.S. price level increases, expenditures by which of the following will remain unaffected?

Accepted Answer

A)   Consumers
B)   Businesses
C)   Government
D)   The rest of the worldE) A) and B)
F) A) and C)

Question 4

A decrease in the price of oil 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) A) and B)
F) A) and C)

Question 5

Higher interest rates motivate:

Accepted Answer

A)   firms to invest less in new factories and working capital.
B)   firms to invest more in new factories and working capital.
C)   individuals to spend more on consumption goods.
D)   individuals to spend more on capital goods.E) C) and D)
F) A) and C)

Question 6

When the housing bubble popped, the effect of the negative demand side shock and the negative supply side shock were the same on:

Accepted Answer

A)   output, causing it to definitely decrease.
B)   output, causing it to definitely increase.
C)   prices, causing them to definitely rise.
D)   prices, causing them to definitely fall.E) All of the above
F) B) and C)

Question 7

There is a general overall __________ relationship between the price level and ____________.

Accepted Answer

A)   negative; aggregate expenditures
B)   positive; aggregate expenditures from the government
C)   negative; nominal expenditures from the government
D)   positive; nominal expenditures from householdsE) A) and D)
F) A) and B)

Question 8

When the economy is producing at a quantity greater than its long-run aggregate supply:

Accepted Answer

A)   it is pushing some of its resources to operate beyond capacity.
B)   the economy is experiencing greater economic growth.
C)   it causes a bubble to form in one of its major sectors.
D)   we are experiencing a recession.E) B) and C)
F) All of the above

Question 9

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

Accepted Answer

A)   imports to increase and net exports to increase.
B)   exports to decrease and net exports to decrease.
C)   imports to increase and net exports to increase
D)   exports to decrease and net exports to increase.E) A) and D)
F) B) and C)

Question 10

A reduction in the amount of farmable land inside a nation would cause the:

Accepted Answer

A)   long-run aggregate supply curve to shift to the right.
B)   long-run aggregate supply curve to shift to the left.
C)   short-run aggregate supply curve to shift to the right.
D)   aggregate demand curve to shift to the right.E) A) and B)
F) A) and C)

Question 11

The equilibrium of aggregate supply and aggregate demand represents the:

Accepted Answer

A)   overall state of the national economy.
B)   total of all goods and services produced in the major sectors of the economy.
C)   general price level of the economy with respect to goods and services households purchase.
D)   All of these are true.E) B) and C)
F) A) and B)

Question 12

In the long run, changes in prices of goods and services paid by consumers have no effect on:

Accepted Answer

A)   the macroeconomy.
B)   aggregate supply.
C)   aggregate demand.
D)   All of these are true.E) All of the above
F) A) and D)

Question 13

Because the prices of final goods and services tend to increase more quickly than the prices of inputs, the short run aggregate supply curve is:

Accepted Answer

A)   upward sloping.
B)   downward sloping.
C)   perfectly elastic.
D)   perfectly inelastic.E) A) and B)
F) A) and C)

Question 14

When people buy assets simply because they believe the assets will appreciate and can be sold for a profit, it may cause:

Accepted Answer

A)   a recession.
B)   unemployment.
C)   inflation.
D)   an asset-price bubble.E) B) and D)
F) A) and D)

Question 15

If a hurricane were to wipe out the majority of the eastern seaboard in the United States:

Accepted Answer

A)   only the long-run aggregate supply curve would shift left.
B)   the long-run and short-run aggregate supply curves would both shift left.
C)   only the short-run aggregate supply curve would shift left.
D)   neither the short-run nor long-run aggregate supply curves would be affected.E) A) and B)
F) A) and C)

Question 16

One reason stagflation is difficult to recover from is because:

Accepted Answer

A)   wages are sticky downward.
B)   input prices increase with output prices.
C)   less output requires less inputs to be hired.
D)   prices tend to adjust more quickly downward than upward.E) None of the above
F) B) and C)

Question 17

Stagflation refers to a situation in which the economy is experiencing:

Accepted Answer

A)   high economic growth and high inflation.
B)   low economic growth and low inflation.
C)   high economic growth and low inflation.
D)   low economic growth and high inflation.E) None of the above
F) A) and D)

Question 18

A situation in which output decreases while prices increase is often referred to as:

Accepted Answer

A)   stagflation.
B)   inflation.
C)   negative economic growth.
D)   a recession.E) A) and B)
F) A) and C)

Exam 12: Aggregate Demand and Aggregate Supply

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

Correct Answer
verified

A decrease in the price of oil will cause the:

Correct Answer
verified

One reason stagflation is difficult to recover from is because:

Correct Answer
verified

The equilibrium of aggregate supply and aggregate demand represents the:

Correct Answer
verified

As the U.S. price level increases, expenditures by which of the following will remain unaffected?

Correct Answer
verified

If a hurricane were to wipe out the majority of the eastern seaboard in the United States, it would likely cause a:

Correct Answer
verified

In the long run, changes in prices of goods and services paid by consumers have no effect on:

Correct Answer
verified

The government might increase its spending to end a recession because:

Correct Answer
verified

Because the prices of final goods and services tend to increase more quickly than the prices of inputs, the short run aggregate supply curve is:

Correct Answer
verified

Higher interest rates motivate:

Correct Answer
verified

A reduction in the amount of farmable land inside a nation would cause the:

Correct Answer
verified

When people buy assets simply because they believe the assets will appreciate and can be sold for a profit, it may cause:

Correct Answer
verified

When the economy is producing at a quantity greater than its long-run aggregate supply:

Correct Answer
verified

If a hurricane were to wipe out the majority of the eastern seaboard in the United States:

Correct Answer
verified

When the housing bubble popped, the effect of the negative demand side shock and the negative supply side shock were the same on:

Correct Answer
verified

A situation in which output decreases while prices increase is often referred to as:

Correct Answer
verified

Stagflation refers to a situation in which the economy is experiencing:

Correct Answer
verified

There is a general overall relationship between the price level and __.

Correct Answer
verified

Exam 12: Aggregate Demand and Aggregate Supply

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

Correct AnswerverifiedShow Answer

A decrease in the price of oil will cause the:

Correct AnswerverifiedShow Answer

One reason stagflation is difficult to recover from is because:

Correct AnswerverifiedShow Answer

The equilibrium of aggregate supply and aggregate demand represents the:

Correct AnswerverifiedShow Answer

As the U.S. price level increases, expenditures by which of the following will remain unaffected?

Correct AnswerverifiedShow Answer

If a hurricane were to wipe out the majority of the eastern seaboard in the United States, it would likely cause a:

Correct AnswerverifiedShow Answer

In the long run, changes in prices of goods and services paid by consumers have no effect on:

Correct AnswerverifiedShow Answer

The government might increase its spending to end a recession because:

Correct AnswerverifiedShow Answer

Because the prices of final goods and services tend to increase more quickly than the prices of inputs, the short run aggregate supply curve is:

Correct AnswerverifiedShow Answer

Higher interest rates motivate:

Correct AnswerverifiedShow Answer

A reduction in the amount of farmable land inside a nation would cause the:

Correct AnswerverifiedShow Answer

When people buy assets simply because they believe the assets will appreciate and can be sold for a profit, it may cause:

Correct AnswerverifiedShow Answer

When the economy is producing at a quantity greater than its long-run aggregate supply:

Correct AnswerverifiedShow Answer

If a hurricane were to wipe out the majority of the eastern seaboard in the United States:

Correct AnswerverifiedShow Answer

When the housing bubble popped, the effect of the negative demand side shock and the negative supply side shock were the same on:

Correct AnswerverifiedShow Answer

A situation in which output decreases while prices increase is often referred to as:

Correct AnswerverifiedShow Answer

Stagflation refers to a situation in which the economy is experiencing:

Correct AnswerverifiedShow Answer

There is a general overall __________ relationship between the price level and ____________.

Correct AnswerverifiedShow Answer

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There is a general overall relationship between the price level and __.

Correct Answer
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