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5 Written questions

5 Matching questions

  1. Assume that steel is the only good produced in the economy. Which of the following would explain
    why the short-run aggregate supply curve for steel would be upward sloping?
    a. Steel demand and steel prices begin to rise rapidly, and the wages of steel workers rise as the
    demand for workers increases.
    b. Steel demand and steel prices begin to rise rapidly, but the price of coal—an input into the
    production of steel—remains fixed by contract.
    c. Steel demand and steel prices begin to rise rapidly, but foreign producers increase production
    faster than domestic producers increase production.
    d. all of the above
  2. Describe the aggregate demand curve.
  3. Spending on the war in Iraq is essentially categorized as government purchases. How do increases in spending
    on the war in Iraq affect the aggregate demand curve?
    A) They will shift the aggregate demand curve to the left.
    B) They will move the economy up along a stationary aggregate demand curve.
    C) They will move the economy down along a stationary aggregate demand curve.
    D) They will shift the aggregate demand curve to the right.
  4. If workers and firms across the economy adjust to the fact that the price level is higher than they had
    expected it to be,
    a. there will be a movement up and to the right along a stationary aggregate supply curve.
    b. there will be a movement down and to the left along a stationary aggregate supply curve.
    c. the short-run aggregate supply curve will shift to the left.
    d. the short-run aggregate supply curve will shift to the right.
  5. The wealth effect refers to the fact that
    a. when the price level falls, the real value of household wealth rises, and so will consumption.
    b. when income rises, consumption rises.
    c. when the price level falls, the nominal value of assets rises, while the real value of assets remains
    the same.
    d. all of the above
  1. a shows the relationship between the price level and the level of planned
    aggregate expenditure by households, firms, and the government
  2. b c. the short-run aggregate supply curve will shift to the left
  3. c D) They will shift the aggregate demand curve to the right
  4. d a. when the price level falls, the real value of household wealth rises, and so will consumption.
  5. e b. Steel demand and steel prices begin to rise rapidly, but the price of coal—an input into the
    production of steel—remains fixed by contract.

5 Multiple choice questions

  1. 1. shows the relationship in the short run between the price level and the quantity of real GDP supplied by
    firms
    2. slopes upward
    because workers and firms fail to predict accurately the future price level
  2. A) High levels; a recession; accept lower
  3. shows the relationship between the price level and the quantity of real GDP
    demanded by households, firms, and the government
  4. b. rise; left
  5. because a decrease in the price level increases the quantity of real GDP demanded

5 True/False questions

  1. An unexpected increase in the price of oil would be called _________ by economists.
    a. a demand shock
    b. an adverse supply shock
    c. disinflation
    d. an increase in menu costs
    B) decreases; decreases

          

  2. What is the impact of an increase in the price level on the short-run aggregate supply curve?
    a. a shift of the curve to the right
    b. a shift of the curve to the left
    c. a movement up and to the right along a stationary curve
    d. a combination of a movement along the curve and a shift of the curve
    1. shows the relationship in the short run between the price level and the quantity of real GDP supplied by
    firms
    2. slopes upward
    because workers and firms fail to predict accurately the future price level

          

  3. Which of the following factors does not cause the aggregate demand curve to shift?
    a. a change in the price level
    b. a change in government policies
    c. a change in the expectations of households and firms
    d. a change in foreign variables
    a. a fall in the price level

          

  4. A supply shock will
    a. increase the real GDP in the short-run.
    b. not change real GDP in the long-run.
    c. shift the long-run aggregate supply curve to the right.
    d. decrease both the price level and real GDP in the short-run
    b. not change real GDP in the long-run.

          

  5. Describe the long-run aggregate supply curve.1.shows the relationship in the long run between the price level and the quantity of real GDP supplied
    2. a vertical line because in the long run, real GDP is always at its
    potential level and is unaffected by the price level

          

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