(Combined) Chapter 13-17 Quiz macro,
Practice Final Econ, Macro Exam 2 (HW
7), Econ Test 2, MACRO MIDTERM,
Macroeconomics Exam 1, Quiz 7,
Economics Chapter 16, Chapter 5,
14,15,16 (Mid-Term), Chapter 12 Macro
Review Questions, Economics
Homework, Macro Test 2, All With
Complete Verified Solutions 2023/2024
The basic aggregate demand and aggregate supply curve model helps explain
________ fluctuations in real GDP and the price level.
Short term
Which of the following is one explanation as to why the aggregate demand curve
slopes downward?
Decreases in the price level raise real wealth and increase consumption spending.
How do lower taxes affect aggregate demand?
They increase disposable income, consumption, and aggregate demand.
If aggregate demand just decreased, which of the following may have caused the
decrease?
a decrease in exports
Suppose the U.S. GDP growth rate is slower relative to other countries' GDP
growth rates. This will
shift the aggregate demand curve to the right.
When the price level in the United States falls relative to the price level of other
countries, ________ will fall, ________ will rise, and ________ will rise.
imports; exports; net exports
Hurricane Katrina destroyed oil and natural gas refining capacity in the Gulf of
Mexico. This subsequently drove up natural gas, gasoline, and heating oil prices.
As a result, this should
shift the short-run aggregate supply curve to the left.
Ceteris paribus, an increase in workers and firms adjusting to having previously
underestimated the price level would be represented by a movement from
SRAS2 to SRAS1.
On the long-run aggregate supply curve,
a decrease in the price level has no effect on the aggregate quantity of GDP supplied.
If the economy receives an influx of new workers from immigration,
,the long-run aggregate supply curve will shift to the right.
Suppose a developing country experiences a reduction in machinery and capital
equipment as foreign entrepreneurs decrease the amount of investment in the
economy. As a result,
the long-run aggregate supply curve will shift to the left.
Changes in the price level
do not affect the level of aggregate supply in the long run.
Suppose the economy is at point A. If investment spending increases in the
economy, where will the eventual long-run equilibrium be?
c
The automatic mechanism ________ the price level in the case of ________ and
________ the price level in the case of ________.
lowers; recession; raises; expansion
Stagflation occurs when
inflation rises and GDP falls.
Which of the points in the above graph are possible short-run equilibria but not
long-run equilibria? Assume that Y1 represents potential GDP.
B and D
An increase in aggregate demand in the economy will have what effect on
macroeconomic equilibrium in the long run?
The price level will rise, and the level of GDP will be unaffected.
Which of the following correctly describes the automatic mechanism through
which the economy adjusts to long-run equilibrium?
the rightward shift of the short-run aggregate supply curve that occurs after a recession
Given the economy is at point A in year 1, what is the difference between the
actual growth rate in GDP in year 2 and the potential growth rate in GDP in year
2?
2.7%
Which of the following could explain why there is an increase in potential GDP
but the equilibrium level of GDP falls?
AD did not shift and SRAS shifted to the left.
Gretchen expects the price level to rise from 104 this year to 108 next year, and
she is able to incorporate these expectations into her wage contract. If the price
level rises to 106 next year instead of 108, which of the following will occur?
Gretchen's real wage will rise.
If changes in inflation are higher than expected,
the short-run Phillips curve will be negatively sloped.
Which of the following best explains the negative slope of the short-run Phillips
curve?
Weak growth in aggregate demand keeps the economy below potential GDP, so
unemployment rises but inflation falls.
The long-run aggregate supply curve is ________, while the long-run Phillips
curve is ________.
vertical; also vertical
The natural rate of unemployment equals
structural plus frictional unemployment.
,If aggregate demand just increased, which of the following may have caused the
increase?
an increase in government purchases
Ceteris paribus, an increase in the growth rate of domestic GDP relative to the
growth rate of foreign GDP would be represented by a movement from
AD2 to AD1.
Which of the following would not be considered a positive addition to household
wealth?
a credit card balance
According to the "wealth effect," when the ________ falls, the ________ rises.
price level; the real value of household wealth
Ceteris paribus, a decrease in the growth rate of domestic GDP relative to the
growth rate of foreign GDP would be represented by a movement from
AD1 to AD2.
Higher personal income taxes
decrease aggregate demand.
Ceteris paribus, an increase in workers and firms adjusting to having previously
overestimated the price level would be represented by a movement from
SRAS1 to SRAS2.
The level of long-run aggregate supply is affected by all of the following except
changes in the price level.
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?
It shifted the short-run aggregate supply curve to the right.
If workers leave a country to seek out better opportunities in another country,
then this will
shift the short-run aggregate supply curve of the original country to the left.
If potential GDP is equal to $600 billion, what does the long-run aggregate supply
curve look like?
It is a vertical line at $600 billion of GDP.
Changes in ________ do not affect the level of aggregate supply in the long run.
The price level
In the long run,
unemployment is at its natural rate.
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?
Unemployment will decline.
Most economists agree that an automatic mechanism brings the economy back
to potential GDP in the long run. In mid-2011, two years after the recession of
2007-2009 had ended, real GDP in the United States
remained more than 7 percent below potential GDP.
A decrease in aggregate demand in the economy will have what effect on
macroeconomic equilibrium in the long run?
The price level will fall, and the level of GDP will be unaffected.
, If rapid increases in oil prices caused price levels to increase and real GDP to
decrease in the short run, the economy would experience
stagflation.
Forecasts made by White House economists and economists at the
Congressional Budget Office in 2011 projected that real GDP
would not return to potential GDP until 2016.
During 2008, oil price increases
did not shift the short-run aggregate supply curve as far to the left as similar increases
had 30 years earlier.
Which of the following could explain why there is an increase in potential GDP
but the equilibrium level of GDP does not rise?
SRAS and AD do not shift.
What is a "structural" relationship?
a relationship that depends on the basic behavior of consumers and firms and remains
unchanged over long periods
If actual inflation is greater than expected inflation, what is the relationship
between the actual real wage and the expected real wage?
The actual real wage will be lower than the expected real wage.
If actual inflation is less than expected inflation, actual real wages will be
________ expected real wages and unemployment will ________.
greater than; rise
Suppose the economy is at point A in the figure above. Which of the following is
true?
Actual inflation and expected inflation are the same.
An increase in the expected inflation rate will
shift the short-run Phillips curve to the right.
Lower personal income taxes
increase aggregatCeteris paribus, a decrease in interest rates would be represented by
a movement frome demand.
Ceteris paribus, an increase in the value of the domestic currency relative to
foreign currencies would be represented by a movement from
a credit card balance.
An increase in the price level results in a(n) ________ in the quantity of real GDP
demanded because ________.
decrease; a higher price level reduces consumption, investment, and net exports.
All of the following would be considered a positive addition to household wealth
except
a credit card balance.
Ceteris paribus, a decrease in interest rates would be represented by a movement
from
AD1 to AD2
A decrease in the price level will
move the economy down along a stationary aggregate demand curve.
Hurricane Katrina destroyed oil and natural gas refining capacity in the Gulf of
Mexico which subsequently drove up natural gas, gasoline, and heating oil
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