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Macroeconomics [ch. 20]

35 Questions  I  By Emy_2
Macroeconomics [Ch. 20]
Aggregate Demand & Aggregate Supply

  
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Question Excerpt

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1.  Over the last 50 years, U.S. real GDP has grown at about 5 percent per year
A.
B.
2.  Investment is a particularly volatile component of spending across the business cycle
A.
B.
3.  An increase in price expectations shifts the long-run aggregate-supply curve to the left
A.
B.
4.  If the classical dichotomy and monetary neutrality hold in the long run, then the long-run aggregate-supply curve should be vertical
A.
B.
5.  Economists refer to fluctuations in output as the "business cycle" because movements in output are regular and predictable
A.
B.
6.  One reason aggregate demand slopes downward is the wealth effect: A decrease in the price level increases the value of money holdings and consumer spending rises. 
A.
B.
7.  If the Federal Reserve increases the money supply, the aggregate-demand curve shifts to left
A.
B.
8.  The misperceptions theory explains why the long-run aggregate-supply curve is downward sloping
A.
B.
9.  A rise in price expectations that causes wages to rise causes the short-run aggregate-supply curve to shift left
A.
B.
10.  If the economy is in a recession, the economy will adjust to long-run equilibrium on its own as wages and price expectations rise
A.
B.
11.  In the short-run, if the government cuts back spending to balance its budget, it will likely cause a recession
A.
B.
12.  The short-run effect of an increase in aggregate demand is an increase in output and an increase in the price level
A.
B.
13.  A rise in the price of oil tends to cause stagflation
A.
B.
14.  In the long-run, an increase in government spending tends to increase output and prices
A.
B.
15.  If policymakers choose to try to move the economy out of a recession, they should use their policy tools to decrease aggregate demand
A.
B.
16.  Which of the following statements about economic fluctuations is true?
A.
B.
C.
D.
E.
17.  According to the interest-rate effect, aggregate demand slopes downward (negatively) because
A.
B.
C.
D.
18.  Which of the following would not cause a shift in the long-run aggregate-supply curve?
A.
B.
C.
D.
E.
19.  Which of the following is not a reason why the aggregate-demand curve slopes downward?
A.
B.
C.
D.
E.
20.  In the model of aggregate demand and aggregate supply, the initial impact of an increase in consumer optimism is to
A.
B.
C.
D.
E.
21.  Which of the following statements is true regarding the long-run aggregate-supply curve?  The long-run aggregate-supply curve
A.
B.
C.
D.
22.  According to the wealth effect, aggregate demand slopes downward (negatively) because
A.
B.
C.
D.
23.  The natural rate of output is the amount of real GDP produced
A.
B.
C.
D.
24.  Suppose the price level falls.  Because of fixed nominal wage contracts, firms become less profitable and they cut back on production.  This is a demonstration of the
A.
B.
C.
D.
25.  Suppose the price level falls but suppliers only notice that the price of their particular product has fallen. Thinking there has been a fall in the relative price of their product, they cut back on production.  This is a demonstration of the
A.
B.
C.
D.
26.  Suppose the economy is initially in long-run equilibrium.  Then suppose there is a reduction in military spending due to the end of the Cold War.  According to the model of aggregate demand and aggregate supply, what happens to prices and output in the short run?
A.
B.
C.
D.
27.  Suppose the economy is initially in long-run equilibrium. Then suppose there is a reduction in military spending due to the end of the Cold War. According to the model of aggregate demand and aggregate supply, what happens to prices and output in the long run?
A.
B.
C.
D.
E.
28.  Suppose the economy is initially in love-run equilibrium. Then suppose there is a drought that destroys much of the wheat crop. According to the model of aggregate demand and aggregate supply, what happens to prices and output in the short run?
A.
B.
C.
D.
29.  Suppose the economy is initially in long-run equilibrium. Then suppose there is a drought that destroys much of the wheat crop. If policymakers allow the economy to adjust to long-run equilibrium on its own, according to the model of aggregate demand and aggregate supply, what happens to prices and output in the long run?
A.
B.
C.
D.
E.
30.  Stagflation occurs when the economy experiences
A.
B.
C.
D.
31.  Which of the following events shifts the short-run aggregate-supply curve to the right?
A.
B.
C.
D.
E.
32.  Suppose the economy is operating in a recession.  If policymakers wished to move output to its long-run natural rate, they should attempt to 
A.
B.
C.
D.
33.  Suppose an economy is operating in a recession.  If policymakers allow the economy to adjust to the long-run natural rate on its own,
A.
B.
C.
D.
34.  According to the model of aggregate supply and aggregate demand, in the long run, an increase in the money supply should cause
A.
B.
C.
D.
35.  Policy makers are said to "accommodate" an adverse supply shock if they
A.
B.
C.
D.
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