Question 1

Why does the short-run aggregate supply curve shift to the right in the long run, following a decrease in aggregate demand?

Accepted Answer

A)   Workers and firms adjust their expectations of wages and prices downward and they accept lower wages and prices.
B)   Workers and firms adjust their expectations of wages and prices downward and they push for higher wages and prices.
C)   Workers and firms adjust their expectations of wages and prices upward and they push for higher wages and prices.
D)   Workers and firms adjust their expectations of wages and prices upward and they accept lower wages and prices.E) None of the above
F) All of the above

Question 2

The long-run aggregate supply curve shows the relationship between the ________ and ________.

Accepted Answer

A)   inflation rate; quantity of real GDP demanded
B)   real interest rate; quantity of real GDP supplied
C)   nominal interest rate; quantity of real GDP supplied
D)   price level; quantity of real GDP suppliedE) B) and C)
F) None of the above

Question 3

The invention of the cotton gin ushered in the Industrial Revolution and began a long period of technological innovation. What did this technological change do the short-run supply curve?

Accepted Answer

A)   It shifted the short-run aggregate supply curve to the left.
B)   It shifted the short-run aggregate supply curve to the right.
C)   It moved the economy up along a stationary short-run aggregate supply curve.
D)   It moved the economy down along a stationary short-run aggregate supply curve.E) B) and D)
F) A) and B)

Question 4

Suppose the economy is at full employment and firms become more optimistic about the future profitability of new investment. Which of the following will happen in the short run?

Accepted Answer

A)   Output will decline.
B)   Prices will decline.
C)   Unemployment will decline.
D)   The aggregate demand curve will shift to the left.E) A) and D)
F) A) and B)

Question 5

If aggregate demand just decreased, which of the following may have caused the decrease?

Accepted Answer

A)   a decrease in exports
B)   a decrease in the interest rate
C)   a decrease in the price level
D)   a decrease in importsE) A) and B)
F) All of the above

Question 6

Figure 24-2 1 to SRAS2. B)  SRAS2 to SRAS1. C)  point A to point B. D)  point B to point A." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 24-2. Ceteris paribus, a decrease in the capital stock would be represented by a movement from

Accepted Answer

A)   SRAS1 to SRAS2.
B)   SRAS2 to SRAS1.
C)   point A to point B.
D)   point B to point A.E) B) and D)
F) None of the above

Question 7

An increase in disposable income will shift the aggregate demand curve to the right.

Accepted Answer

A) True 
 B)False

Question 8

In 2005, Hurricane Katrina destroyed oil and natural gas refining capacity in the Gulf of Mexico which subsequently drove up natural gas, gasoline, and heating oil prices. Three years later, once the refining capacity was restored, these prices came back down. The restoration of refining capacity should

Accepted Answer

A)   shift the short-run aggregate supply curve to the left.
B)   shift the short-run aggregate supply curve to the right.
C)   move the economy up along a stationary short-run aggregate supply curve.
D)   move the economy down along a stationary short-run aggregate supply curve.E) A) and D)
F) A) and C)

Question 9

Explain how each of the following events would affect the aggregate demand curve.
a. Lower interest rates
b. A decrease in net exports
c. A decrease in the price level
d. Slower income growth in other countries
e. A decrease in imports

Accepted Answer

a. Lower interest rates would increase i...

Question 10

An increase in aggregate demand results in a(n)  ________ in the ________.

Accepted Answer

A)   recession; long run
B)   expansion; long run
C)   expansion; short run
D)   recession; short runE) A) and C)
F) B) and D) C

Question 11

A rapid increase in the price of oil will tend to

Accepted Answer

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

Question 12

On the long-run aggregate supply curve

Accepted Answer

A)   an increase in the price level increases the aggregate quantity of GDP supplied.
B)   an increase in the price level reduces the aggregate quantity of GDP supplied.
C)   an increase in the price level has no effect on the aggregate quantity of GDP supplied.
D)   an increase in the price level increases the level of potential GDP.E) B) and C)
F) A) and C)

Question 13

If workers leave a country to seek out better opportunities in another country, then this will

Accepted Answer

A)   shift the short-run aggregate supply curve of the original country to the left.
B)   shift the short-run aggregate supply curve of the original country to the right.
C)   move the original economy up along a stationary short-run aggregate supply curve.
D)   move the original economy down along a stationary short-run aggregate supply curve.E) None of the above
F) B) and D)

Question 14

Starting from long-run equilibrium, use the basic aggregate demand and aggregate supply diagram to show what happens in both the long run and the short run when there is an increase in wealth.

Accepted Answer

<img  loading="lazy" src="/assets/images/blured-textbook.svg" class="d-inline m-1" alt="blured image" width="139" height="30"> Before the increase in demand, the econ...

Question 15

On average, in the recessions since 1950, it has taken ________ for employment to return to its cyclical peak.

Accepted Answer

A)   about 6 months
B)   about 1 year
C)   about 18 months
D)   almost 2.5 yearsE) All of the above
F) A) and B)

Question 16

The long-run aggregate supply curve will shift to the right if

Accepted Answer

A)   the economy experiences technological change.
B)   there is a decrease in population.
C)   the economy experiences high levels of inflation.
D)   net exports decrease.E) B) and D)
F) All of the above

Question 17

Hurricane Katrina resulted in a decline in oil production infrastructure along the gulf coast. As a result there was an unexpected decline in oil and natural gas supplies in 2005. Suppose that this caused an increase in the price level and a decline in real GDP in 2006. Also assume that potential real GDP continued to grow due to other factors. You can assume the aggregate demand curve did not change. Show the macroeconomic equilibrium for 2005 and 2006 using the dynamic aggregate supply and aggregate demand model.

Accepted Answer

The economy began at the point (Y₁, P₁) o...

Question 18

Which of the following is one reason for the decline in aggregate demand that led to the recession of 2007-2009?

Accepted Answer

A)   falling oil prices
B)   an increase in net exports
C)   the end of the housing bubble
D)   a decline in government spendingE) B) and C)
F) C) and D)

Question 19

If firms and workers could predict the future price level exactly, the short-run aggregate supply curve would be

Accepted Answer

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

Question 20

Lower personal income taxes

Accepted Answer

A)   increase aggregate demand.
B)   decrease disposable income.
C)   decrease aggregate demand.
D)   increase transfer payments.E) A) and B)
F) A) and D)

Exam 24: Aggregate Demand and Aggregate Supply Analysis

Why does the short-run aggregate supply curve shift to the right in the long run, following a decrease in aggregate demand?

Correct Answer
verified

The long-run aggregate supply curve shows the relationship between the and .

Correct Answer
verified

The invention of the cotton gin ushered in the Industrial Revolution and began a long period of technological innovation. What did this technological change do the short-run supply curve?

Correct Answer
verified

Suppose the economy is at full employment and firms become more optimistic about the future profitability of new investment. Which of the following will happen in the short run?

Correct Answer
verified

If aggregate demand just decreased, which of the following may have caused the decrease?

Correct Answer
verified

Figure 24-2 -Refer to Figure 24-2. Ceteris paribus, a decrease in the capital stock would be represented by a movement from

Correct Answer
verified

An increase in disposable income will shift the aggregate demand curve to the right.

Correct Answer
verified

Correct Answer
verified

Explain how each of the following events would affect the aggregate demand curve. a. Lower interest rates b. A decrease in net exports c. A decrease in the price level d. Slower income growth in other countries e. A decrease in imports

Correct Answer
verified
a. Lower interest rates would increase i...
View Answer

An increase in aggregate demand results in a(n) in the .

Correct Answer
verified
C

A rapid increase in the price of oil will tend to

Correct Answer
verified
A

On the long-run aggregate supply curve

Correct Answer
verified

If workers leave a country to seek out better opportunities in another country, then this will

Correct Answer
verified

Starting from long-run equilibrium, use the basic aggregate demand and aggregate supply diagram to show what happens in both the long run and the short run when there is an increase in wealth.

Correct Answer
verified
Before the increase in demand, the econ...
View Answer

On average, in the recessions since 1950, it has taken ________ for employment to return to its cyclical peak.

Correct Answer
verified

The long-run aggregate supply curve will shift to the right if

Correct Answer
verified

Correct Answer
verified
The economy began at the point (Y₁, P₁) o...
View Answer

Which of the following is one reason for the decline in aggregate demand that led to the recession of 2007-2009?

Correct Answer
verified

If firms and workers could predict the future price level exactly, the short-run aggregate supply curve would be

Correct Answer
verified
D

Lower personal income taxes

Correct Answer
verified

Exam 24: Aggregate Demand and Aggregate Supply Analysis

Why does the short-run aggregate supply curve shift to the right in the long run, following a decrease in aggregate demand?

Correct AnswerverifiedShow Answer

The long-run aggregate supply curve shows the relationship between the ________ and ________.

Correct AnswerverifiedShow Answer

The invention of the cotton gin ushered in the Industrial Revolution and began a long period of technological innovation. What did this technological change do the short-run supply curve?

Correct AnswerverifiedShow Answer

Suppose the economy is at full employment and firms become more optimistic about the future profitability of new investment. Which of the following will happen in the short run?

Correct AnswerverifiedShow Answer

If aggregate demand just decreased, which of the following may have caused the decrease?

Correct AnswerverifiedShow Answer

Figure 24-2 -Refer to Figure 24-2. Ceteris paribus, a decrease in the capital stock would be represented by a movement from

Correct AnswerverifiedShow Answer

An increase in disposable income will shift the aggregate demand curve to the right.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Explain how each of the following events would affect the aggregate demand curve. a. Lower interest rates b. A decrease in net exports c. A decrease in the price level d. Slower income growth in other countries e. A decrease in imports

Correct Answerverifieda. Lower interest rates would increase i...View AnswerShow Answer

An increase in aggregate demand results in a(n) ________ in the ________.

Correct AnswerverifiedC

A rapid increase in the price of oil will tend to

Correct AnswerverifiedA

On the long-run aggregate supply curve

Correct AnswerverifiedShow Answer

If workers leave a country to seek out better opportunities in another country, then this will

Correct AnswerverifiedShow Answer

Starting from long-run equilibrium, use the basic aggregate demand and aggregate supply diagram to show what happens in both the long run and the short run when there is an increase in wealth.

Correct Answerverified Before the increase in demand, the econ...View AnswerShow Answer

On average, in the recessions since 1950, it has taken ________ for employment to return to its cyclical peak.

Correct AnswerverifiedShow Answer

The long-run aggregate supply curve will shift to the right if

Correct AnswerverifiedShow Answer

Correct Answerverified The economy began at the point (Y1, P1) o...View AnswerShow Answer

Which of the following is one reason for the decline in aggregate demand that led to the recession of 2007-2009?

Correct AnswerverifiedShow Answer

If firms and workers could predict the future price level exactly, the short-run aggregate supply curve would be

Correct AnswerverifiedD

Lower personal income taxes

Correct AnswerverifiedShow Answer

Correct Answer
verified

The long-run aggregate supply curve shows the relationship between the and .

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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a. Lower interest rates would increase i...
View Answer

An increase in aggregate demand results in a(n) in the .

Correct Answer
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C

Correct Answer
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A

Correct Answer
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Correct Answer
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Correct Answer
verified
Before the increase in demand, the econ...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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The economy began at the point (Y₁, P₁) o...
View Answer

Correct Answer
verified

Correct Answer
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D

Correct Answer
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