question

When the price level falls, the real value of household wealth rises

answer

Which of the following best describes the wealth effect?

question

imports, exports, net exports

answer

When the price level in the U.S. rises relative to the price level of other countries, _______ will rise, _____ will fall, and ______ will fall

question

This will shift the aggregate demand curve to the left

answer

The impact of Hurricane Katrina on consumers in the economy was to make them very pessimistic about their future incomes. How does this increased pessimism affect the aggregate demand curve?

question

Decrease, Decrease

answer

Last week, six Swedish kronor could purchase one U.S. dollar. This week, it takes eight Swedish kronor to purchase one U.S. dollar. This change in the value of the dollar will ________ exports from the U.S. to Sweden and ________ U.S. aggregate demand.

question

Shift the U.S aggregate demand curve to the right

answer

Suppose the U.S. GDP growth rate is slower relative to other countriesʹ GDP growth rates. This will

question

an increase in price level has no effect on the aggregate quantity of GDP supplied

answer

On the long run aggregate supply curve,

question

positive; final goods and services; inputs

answer

The short run aggregate supply curve has a(n) ________ slope because as prices of ________ rise, prices of ________ rise more slowly.

question

short run aggregate supply will shift to the left as wages increase.

answer

Workers and firms both expect that prices will be 3% higher next year than they are this year. As a result,

question

increase; decrease to its initial value

answer

Assume that the economy is initially in a long run equilibrium. There is then an increase in investment. As a result, real GDP will ________ in the short run, and ________ in the long run.

question

Real GDP; the price level

answer

An increase in aggregate demand causes an increase in ________ only in the short run, but causes an increase in ________ in both the short run and the long run. (Assume that there is no monetary or fiscal policy in place.)

question

the rightward shift in short run aggregate supply that occurs in response to a recession

answer

Which of the following is an example of the automatic mechanism through which the economy adjusts to long run equilibrium?

question

More than one of the above is correct

answer

Suppose the economy is at a short run equilibrium GDP that lies beyond potential GDP. Which of the following will occur because of the automatic mechanism adjusting the economy back to potential GDP?

question

C

answer

Refer to Figure 12‐1. Suppose the economy is at point A. If investment spending increases in the economy, where will the eventual long run equilibrium be? (Assume that there is no monetary or fiscal policy pursued by the government.)

question

B

answer

Refer to Figure 12‐1. At which of the labeled points (A, B, C, and D) is unemployment the highest?

question

C;A

answer

Refer to Figure 12‐1. Suppose the economy is at point D. The automatic mechanism will take the economy to point ____, while contractionary policy (either monetary or fiscal) will take the economy to point ____.

question

inflation rises and GDP falls

answer

Stagflation occurs when

question

it will rise

answer

Refer to Figure 12‐2. Given the economy is at point A in year 1, What will happen to the unemployment rate in year 2?

question

An increase in the price level raises the interest rate and reduces investment spending.

answer

Which of the following best describes the ʺinterest rate effectʺ concerning the AD curve?

question

the growth rate of U.S. GDP is slower than the growth rate of GDP in other countries.

answer

U.S net exports rise when

question

Decrease; increase

answer

Last week, six Swedish kronor could purchase one U.S. dollar. This week, four Swedish kronor can purchase one U.S. dollar. This change in the value of the dollar will ________ exports from the U.S. to Sweden and ________ U.S. aggregate demand.

question

An increase in interest rates

answer

Which of the following will shift aggregate demand to the left, ceteris paribus?

question

SRAS;left

answer

When wages increase the ________ curve shifts to the __________.

question

Short-run aggregate supply will shift to the left

answer

Suppose the economy is at a short run equilibrium GDP that lies beyond potential GDP. Which of the following will occur because of the automatic mechanism adjusting the economy back to potential GDP?

question

SRAS must have decreased.

answer

Consider the mythical economy of ʺNelsonvilleʺ. Suppose that, in 2009, real GDP was $14 trillion and the price level was 150. In 2010, real GDP $13 trillion and the price level was 160. What must have happened in Nelsonville? (Assume that Nelsonville is always in a short-run equilibrium.)

question

firms produce more in the short run when the price level increases

answer

The ʺsticky wage theoryʺ helps us understand why

question

D;C

answer

Suppose the economy is at point A. If there is an increase in consumer confidence, then the economy will move to point _____ in the short run, and point ____ in the long run. (Assume that there is no monetary or fiscal policy pursued by the government.)

question

The automatic mechanism will cause the AD curve to shift to the right

answer

Refer to Figure 12‐1. Suppose the economy is at point B. Which of the following statements is FALSE?

question

A;B

answer

Refer to Figure 12‐1. Which of the following movements results in stagflation?

question

D

answer

Refer to Figure 12‐1. At which of the labeled points (A, B, C, and D) is unemployment the lowest?

question

It shows the real level of potential GDP

answer

Which of the following is true of the LRAS curve?

question

10%

answer

Refer to Figure 12‐2. In the figure above, LRAS1 and SRAS1 denote LRAS and SRAS in year 1, while LRAS2 and SRAS2 denote LRAS and SRAS in year 2. Given the economy is at point A in year 1, what is the growth rate in potential GDP between year 1 and year 2?

question

It will rise

answer

Refer to Figure 12‐2. Given the economy is at point A in year 1, What will happen to the unemployment rate between year 1 and year 2?

question

will rise and the price level might rise, fall, or stay the same.

answer

Suppose the economy is in long-run equilibrium. If there is an increase in the nation's capital stock as well as an increase in optimism about future business conditions, then we would expect that in the short run, real GDP

question

the value of the U.S. dollar decreases relative to other currencies.

answer

U.S. net exports rise when

question

An increase in wealth in the economy

answer

If aggregate demand just increased (shifted to the right), which of the following may have caused the increase?

question

positive;final goods and services;inputs

answer

The short run aggregate supply curve has a(n) ________ slope because as prices of ________ rise, prices of ________ rise more slowly.

question

A

answer

Refer to Figure 12‐1. Suppose the economy is at point C. If consumption spending decreases in the economy, where will the eventual long run equilibrium be? (Assume that there is no monetary or fiscal policy pursued by the government.)

question

Unemployment is above its natural rate

answer

Refer to Figure 12‐1. Which of the following is FALSE if the economy is at point D?

question

Prices will increase

answer

Suppose the economy is at a short run equilibrium GDP that lies beyond potential GDP. Which of the following will occur because of the automatic mechanism adjusting the economy back to potential GDP?

question

B;A

answer

Refer to Figure 12‐1. Suppose the economy is at point A. If there is an unexpected increase in oil prices, then the economy will move to point _____ in the short run, and point ____ in the long run. (Assume that there is no monetary or fiscal policy pursued by the government.)

question

Faster than; rises

answer

Refer to Figure 12‐2. In the figure above, LRAS1 and SRAS1 denote LRAS and SRAS in year 1, while LRAS2 and SRAS2 denote LRAS and SRAS in year 2. As we move from year 1 to year 2, potential GDP grows _________ actual GDP, so unemployment _______.

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