Question 1

If a positive permanent supply shock were to occur, the resulting equilibrium would occur at a _______ level of output and _______ price level.

Accepted Answer

A)   higher; higher
B)   lower; lower
C)   higher; lower
D)   lower; higherE) C) and D)
F) B) and C)

Question 2

When the long-run aggregate supply curve shifts to the right, it represents:

Accepted Answer

A)   economic growth.
B)   the economy being pushed beyond normal capacity.
C)   an unemployment rate of zero.
D)   a lower rate of inflation.E) A) and D)
F) A) and C)

Question 3

During a recession, analysts at the CBO project that the economy is operating $750 billion below potential output. Assuming the MPC is 0.6, by how much would the government have to increase spending to restore potential output?

Accepted Answer

A)   $333 billion
B)   $300 billion
C)   $250 billion
D)   $750 billionE) None of the above
F) A) and C)

Question 4

The figure shown displays various economic outcomes. 3 to AD2, the resulting price and output in the long run would be: A)  P 1 and Y 2. B)  P 3 and Y 2. C)  P 2 and Y 1. D)  P 3 and Y 1." class="answers-bank-image d-inline" rel="preload" > If the aggregate demand curve shifts from AD3 to AD2, the resulting price and output in the long run would be:

Accepted Answer

A)   P 1 and Y 2.
B)   P 3 and Y 2.
C)   P 2 and Y 1.
D)   P 3 and Y 1.E) B) and C)
F) A) and B)

Question 5

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

Accepted Answer

A)   potential output of the economy expands.
B)   economy loses productive capacity.
C)   economy experiences a supply shock.
D)   profit levels of firms increase.E) All of the above
F) B) and C)

Question 6

Which of the following events would cause a long-run supply shock?

Accepted Answer

A)   Refinery capacity in the United States drops permanently.
B)   A new pest destroys much of the alfalfa crop in a given year.
C)   The government spends less on infrastructure maintenance.
D)   Housing prices fall.E) A) and B)
F) All of the above

Question 7

When the prices of final goods and services increase more quickly than the prices of inputs:

Accepted Answer

A)   the prices of some inputs are sticky.
B)   labor costs are increasing.
C)   producers are making short-run decisions.
D)   technology is improving.E) B) and D)
F) All of the above

Question 8

An increase in the level of immigration into a nation would cause the _______ aggregate supply curve to _______.

Accepted Answer

A)   long-run; shift to the right
B)   long-run; shift to the left
C)   short-run; shift to the left
D)   long-run; remain fixedE) C) and D)
F) B) and C)

Question 9

Which of the following scenarios would likely cause the aggregate demand curve to shift to the right?

Accepted Answer

A)   Consumer confidence increases.
B)   The government issues a tax credit for small businesses.
C)   The government builds new highways.
D)   All of these would likely cause the aggregate demand curve to shift to the right.E) All of the above
F) B) and D)

Question 10

Assuming an economy starts in long-run equilibrium, if the aggregate demand curve were to shift to the left:

Accepted Answer

A)   prices in the economy would increase.
B)   output in the economy would increase.
C)   the short-run aggregate supply curve would shift to the left.
D)   the long-run effect would be a lower price level.E) All of the above
F) A) and B)

Question 11

Temporary supply shocks:

Accepted Answer

A)   affect prices only.
B)   shift the short-run aggregate supply curve.
C)   shift the aggregate demand curve.
D)   shift the long-run aggregate supply curve.E) None of the above
F) A) and B)

Question 12

What is the long-run result of government intervention in response to a recession?

Accepted Answer

A)   The same level of output at higher prices
B)   A higher level of output at higher prices
C)   A higher level of output at lower prices
D)   A lower level of output at the same pricesE) A) and C)
F) B) and C)

Question 13

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

Accepted Answer

A)   the unemployment rate decreased.
B)   faster 5G mobile technology was widely implemented.
C)   the inflation rate decreased.
D)   The long-run aggregate supply curve is fixed and does not shift.E) A) and B)
F) A) and C)

Question 14

In the short run, the aggregate supply curve reacts to:

Accepted Answer

A)   input price changes.
B)   government stimulus.
C)   an increase in consumption.
D)   changes in the price level.E) All of the above
F) A) and D)

Question 15

Which of the following is a basic factor of production that is used to produce output?

Accepted Answer

A)   Technology
B)   Labor
C)   Capital
D)   All of these are factor inputs.E) C) and D)
F) All of the above

Question 16

A drop in government spending would cause which type of shock?

Accepted Answer

A)   Long-run supply shock
B)   Short-run supply shock
C)   Demand shock
D)   Change in price levelE) A) and D)
F) None of the above

Question 17

Higher interest rates cause:

Accepted Answer

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

Question 18

When the economy is creating less output than its potential, it means:

Accepted Answer

A)   some resources are unemployed.
B)   the economy is expanding.
C)   contractionary policy needs to be enacted.
D)   the government will reduce its spending.E) B) and D)
F) B) and C)

Question 19

The quantity measure in the aggregate demand relationship is the:

Accepted Answer

A)   total quantity of goods and services demanded in the economy.
B)   total quantity of goods and services supplied in the economy.
C)   market value of the total quantity of goods and services demanded in the economy.
D)   market value of the total quantity of goods and services supplied in the economy.E) A) and D)
F) None of the above

Question 20

If the prices of goods and services increase, long-run aggregate _______ will _______.

Accepted Answer

A)   supply; increase
B)   supply; decrease
C)   supply; stay the same
D)   demand; increaseE) All of the above
F) A) and B)

Exam 12: Aggregatedemand and Aggregate Supply

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

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

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What is the long-run result of government intervention in response to a recession?

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Which of the following events would cause a long-run supply shock?

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If a positive permanent supply shock were to occur, the resulting equilibrium would occur at a _______ level of output and _______ price level.

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Which of the following is a basic factor of production that is used to produce output?

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An increase in the level of immigration into a nation would cause the _______ aggregate supply curve to _______.

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When the economy is creating less output than its potential, it means:

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When the prices of final goods and services increase more quickly than the prices of inputs:

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Higher interest rates cause:

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In the short run, the aggregate supply curve reacts to:

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If the prices of goods and services increase, long-run aggregate _______ will _______.

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The quantity measure in the aggregate demand relationship is the:

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When the long-run aggregate supply curve shifts to the right, it represents:

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The figure shown displays various economic outcomes. If the aggregate demand curve shifts from AD3 to AD2, the resulting price and output in the long run would be:

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A drop in government spending would cause which type of shock?

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During a recession, analysts at the CBO project that the economy is operating $750 billion below potential output. Assuming the MPC is 0.6, by how much would the government have to increase spending to restore potential output?

Correct AnswerverifiedShow Answer

Temporary supply shocks:

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Assuming an economy starts in long-run equilibrium, if the aggregate demand curve were to shift to the left:

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Which of the following scenarios would likely cause the aggregate demand curve to shift to the right?

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If a positive permanent supply shock were to occur, the resulting equilibrium would occur at a _ level of output and _ price level.

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An increase in the level of immigration into a nation would cause the _ aggregate supply curve to _.

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If the prices of goods and services increase, long-run aggregate _ will _.

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The figure shown displays various economic outcomes. If the aggregate demand curve shifts from AD₃ to AD₂, the resulting price and output in the long run would be:

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