1. (Points: 1) Most economists use the aggregate demand and aggregate supply model primarily to analyze 1.

short-run fluctuations in the economy. 2. the effects of macroeconomic policy on the prices of individual goods. 3. the long-run effects of international trade policies. 4. long-run fluctuations in the economy. 5. productivity and economic growth. Save Answer 2. (Points: 1)

Which of the following is correct?

1. Short run fluctuations in economic activity happen only in developing countries. 2. During economic contractions most firms experience rising sales. 3. Recessions come at regular intervals and are easy to predict. 4. When real GDP falls, the rate of unemployment falls. 5. When real GDP falls, the rate of unemployment rises. Save Answer 3. (Points: 1)

During a recession the economy experiences

1. falling employment and income. 2. rising income and falling employment. 3. rising employment and income. 4. rising employment and falling income. 5. falling unemployment and rising income. Save Answer 4.

3 percent 3. the price level on the vertical axis. Which pair of GDP growth rates and unemployment rates is realistic? 1. 4 percent 2. 3. S. 5 percent. 5 percent.(Points: 1) Below are pairs of GDP growth rates and unemployment rates. the price level on the horizontal axis. 4. The price level can be measured by real GDP. 1 percent 5. 3 percent. The price level can be measured by real GDP. 7 percent 4. (Points: 1) The aggregate demand and aggregate supply graph has 1. The price level can be measured by the GDP deflator. -2 percent. 5. the price level on the vertical axis. 5 percent Save Answer 5. The price level can be measured by the GDP deflator. the price level on the horizontal axis. Economists would be shocked to see most of these pairs in the U. . 2. The price level can be measured by nominal GDP. the price level on the vertical axis. Save Answer 6. -1 percent.

the quantity of goods households.(Points: 1) Aggregate demand includes 1. and customers abroad want to buy. and the government want to buy. only the quantity of goods and services households and firms want to buy. firms. 5. only the quantity of goods and services households want to buy. the government want to buy. Refer to Figure 33-1. firms. If the economy starts at A and there is a fall in aggregate demand. only the quantity of goods and services households. 4. the economy moves . 2. the government. (Points: 1) Figure 33-1 Consider the exhibit below for the following questions. 3. firms. the quantity of goods and services households. Save Answer 7.

5.1. a falling price level and a rising level of output. to B in the long run. the price level falls and real GDP rises. to C in the long run. Save Answer 10. 4. 5. 2. 5. the price level rises and real GDP falls. both the price level and real GDP rise. to either A or C in the long run. Save Answer 8. back to A in the long run. both the price level and real GDP fall. 4. a rising price level and a rising level of output. (Points: 1) Refer to Stock Market Boom 2014. a falling price level and a falling level of output. 3. Starting from point B and assuming that aggregate demand is held constant. a falling price level and a rising level of unemployment. to D in the long run. . in the long run the economy is likely to experience 1. 2. In the short run what happens to the price level and real GDP? 1. the price level falls and real GDP remains the same. 2. a rising price level and a falling level of output. 3. 4. Save Answer 9. 3. (Points: 1) Refer to Figure 33-2.

aggregate demand shifts left. aggregate demand shifts right. long-run aggregate supply left. 2. In the long run. 3. 2. aggregate supply shifts right. perhaps because of improved international relations and increased confidence in policy makers. 5.(Points: 1) Refer to Stock Market Boom 2014. 4. short-run aggregate supply right. long-run aggregate supply right. aggregate supply shifts left. Which curve shifts and in which direction? 1. Save Answer 12.. 4. Refer to Optimism. short-run aggregate supply left. people become more optimistic about the future and stay this way for some time. Save Answer 11. 5. (Points: 1) Optimism Imagine that the economy is in long-run equilibrium. aggregate supply shifts left and aggregate demand shifts left. short-run aggregate supply right and long-run aggregate supply right. . Then. the change in price expectations created by the stock market boom shifts 1. 3.

2. . The expected price level falls. Save Answer 13. Bargains are struck for lower prices. The expected price level rises. Bargains are struck for higher wages. 4. 5. 5. Bargains are struck for higher wages. both price and real GDP are higher 3. the price level is higher and real GDP is the same. both price and real GDP are lower. 3. (Points: 1) Refer to Optimism. The expected price level falls. Bargains are struck for lower wages. How is the new long-run equilibrium different from the original one? 1.(Points: 1) Refer to Optimism. The expected price level rises. Save Answer 14. What happens to the expected price level and what’s the result for wage bargaining? 1. the price level is higher and real GDP is lower. Bargains are struck for lower wages. The expected price level falls. 2. 4. the price level is the same and GDP is higher.

people become pessimistic regarding the future and retain that level of pessimism for some time. Refer to Pessimism. 4. long-run aggregate supply left. . 3. In the short run what happens to the price level and real GDP? 1. 5. international tensions. The price level rises and real GDP falls. The price level falls and real GDP rises. 2. short-run aggregate supply left. (Points: 1) Pessimism Suppose the economy is in long-run equilibrium. In the long run. Refer to Pessimism. Both the price level and real GDP rise.(Points: 1) Pessimism Suppose the economy is in long-run equilibrium. long-run aggregate supply right. and loss of confidence in policymakers. Then because of corporate scandal. 4. Then because of corporate scandal. the change in price expectations created by pessimism shifts 1. Save Answer 15. 3. 5. short-run aggregate supply right. Both the price level and real GDP fall. international tensions. The price level rises and real GDP remains the same. and loss of confidence in policymakers. 2. short-run aggregate supply left and long-run aggregate supply left. Save Answer 16. people become pessimistic regarding the future and retain that level of pessimism for some time.

and droughts.. 4. the aggregate demand curve shifts to the right. tax increases. 5. 5. raise real output and leave the price level unchanged. (Points: 1) result from An increase in the price level and a reduction in output would 1. raise both real output and the price level. (Points: 1) When production costs rise. the short-run aggregate supply curve shifts to the right. 2. 5.(Points: 1) to The long-run effect of an increase in government spending is 1. 4. declining government expenditures. raise the price level and leave real output unchanged. Save Answer 17. lower the price level and raise real output. floods. the aggregate demand curve shifts to the left. 3. 1. 3. tax rebates. a fall in stock prices. . 4. 3. the short-run aggregate supply curve shifts to the left. Save Answer 18. 2. the long-run aggregate supply curve shifts to the right. raise real output and lower the price level. natural disasters such as hurricanes. 2. Save Answer 19.

short-run aggregate supply shifts right 4. 5. aggregate demand shifts left 2. or stay the same. and real GDP might rise.(Points: 1) Which of the following would cause stagflation? 1. short-run aggregate supply shifts left 3. then in the short run 1. 3. fall. Save Answer 21. . real GDP will rise and the price level might rise. and real GDP might rise. real GDP will fall and the price level might rise. (Points: 1) Suppose that the economy is at long-run equilibrium. If there is a sharp decline in the stock market combined with a significant increase in immigration of skilled workers. fall. or stay the same. long-run aggregate supply shifts right Save Answer 20. fall. and real GDP will fall. fall. the price level will fall. 4. the price level will rise. or stay the same. aggregate demand shifts right 5. the price level will fall. 2. or stay the same.

fall. 4. Save Answer 23. . increase aggregate demand. or stay the same. fall. increase aggregate supply.(Points: 1) Suppose the economy is in long-run equilibrium. long-run aggregate supply shifted right. 5. aggregate demand shifted right 4. 3. (Points: 1) Which of the following alone can explain the change in the price level and output during World War II? 1. In the short-run 1. real GDP will rise and the price level might rise. 3. or stay the same. aggregate demand shifted left 5. (Points: 1) Keynes believed that economies experiencing high unemployment should adopt policies to 1. real GDP will fall and the price level might rise. and real GDP might rise. and real GDP might rise. Concerns about pollution cause the government to significantly restrict the production of electricity. Save Answer 24. 2. At the same time. or stay the same. the value of the dollar falls. the price level will fall. Save Answer 22. fall. short-run aggregate supply shifted right 2. reduce government expenditures. the price level will rise. the price level will fall. reduce the money supply. 4. fall. short-run aggregate supply shifted left 3. and real GDP will fall. 2. or stay the same.

indicates that Y1 is the natural rate of output. indicates that Y2 is the natural rate of output. To be consistent with what happened to the price level and output. It would have to shifted left by more than aggregate supply. 4. 5. 2. 5. is consistent with the idea that point A represents a long-run equilibrium but not a short-run equilibrium when the relevant short-run aggregate-supply curve is AS1. . 3. Save Answer 25. 3. what would have had to happen to aggregate demand? 1. (Points: 1) Refer to Figure 33-2. It would have to shifted right by less than aggregate supply. It would have to shifted right by more than aggregate supply. 2. It would have to shifted left by less than aggregate supply. 4. It would have to shifted right by an amount equal to the aggregate supply shift. indicates that Y1 + Y2 is the natural rate of output. is inconsistent with the concept of monetary neutrality.(Points: 1) Suppose that during the Great Depression long-run aggregate supply shifted left. The appearance of the long-run aggregate-supply (LRAS) curve 1.

floods. (Points: 1) Which of the following would cause stagflation? 1. tax rebates. Save Answer 18. 5. the aggregate demand curve shifts to the right. 4.. the aggregate demand curve shifts to the left. 3. aggregate demand shifts left . the long-run aggregate supply curve shifts to the right. 3. 2. and droughts. 2. the short-run aggregate supply curve shifts to the left. declining government expenditures. 5. the short-run aggregate supply curve shifts to the right. natural disasters such as hurricanes. a fall in stock prices.1. tax increases. (Points: 1) result from An increase in the price level and a reduction in output would 1. Save Answer 19. 4.

long-run aggregate supply shifts right Save Answer 20. fall. the price level will rise. 2. If there is a sharp decline in the stock market combined with a significant increase in immigration of skilled workers. or stay the same. short-run aggregate supply shifts right 4. and real GDP will fall. 3. and real GDP might rise. or stay the same. real GDP will fall and the price level might rise. the price level will fall. the price level will fall. real GDP will rise and the price level might rise. 5. fall. and real GDP might rise. fall. or stay the same. then in the short run 1.2. short-run aggregate supply shifts left 3. fall. Save Answer . (Points: 1) Suppose that the economy is at long-run equilibrium. aggregate demand shifts right 5. or stay the same. 4.

(Points: 1) Keynes believed that economies experiencing high unemployment should adopt policies to 1. 5. and real GDP might rise. and real GDP might rise. real GDP will fall and the price level might rise. Save Answer 22. or stay the same. At the same time. 4.21. the price level will fall. or stay the same. increase aggregate supply. real GDP will rise and the price level might rise. 3. the value of the dollar falls. and real GDP will fall. (Points: 1) Suppose the economy is in long-run equilibrium. the price level will rise. 2. fall. fall. or stay the same. fall. fall. Concerns about pollution cause the government to significantly restrict the production of electricity. . In the short-run 1. or stay the same. the price level will fall.

It would have to shifted left by less than aggregate supply. reduce government expenditures. (Points: 1) Suppose that during the Great Depression long-run aggregate supply shifted left. increase aggregate demand. aggregate demand shifted left 5. (Points: 1) Which of the following alone can explain the change in the price level and output during World War II? 1. 3. To be consistent with what happened to the price level and output. Save Answer 23. Save Answer 24. 4. It would have to shifted right by less than aggregate supply. 2. short-run aggregate supply shifted right 2. what would have had to happen to aggregate demand? 1. short-run aggregate supply shifted left 3. reduce the money supply.2. 3. long-run aggregate supply shifted right. It would have to shifted right by an amount equal to the aggregate supply shift. . aggregate demand shifted right 4.

It would have to shifted left by more than aggregate supply. 5. 3. indicates that Y1 + Y2 is the natural rate of output. (Points: 1) Refer to Figure 33-2. indicates that Y2 is the natural rate of output. is consistent with the idea that point A represents a long-run equilibrium but not a short-run equilibrium when the relevant short-run aggregate-supply curve is AS1. The appearance of the long-run aggregate-supply (LRAS) curve 1. 4. is inconsistent with the concept of monetary neutrality. It would have to shifted right by more than aggregate supply. 2. 5. indicates that Y1 is the natural rate of output. Save Answer 25.4. .

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