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5 Written Questions

5 Matching Questions

  1. Stagflation is often a result of
    A) a decrease in aggregate demand.
    B) an increase in aggregate demand.
    C) a negative supply shock.
    D) an increase in aggregate supply.
  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
  3. 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
  4. 7. Higher personal income taxes
    A) increase aggregate demand.
    B) increase disposable income.
    C) decrease aggregate demand.
    D) both b and c.
  5. What are the three reason why the other components of GDP change as the price level changes?
  1. a C) decrease aggregate demand.
  2. b C) a negative supply shock
  3. c 1. the wealth effect
    2. the interest rate effect
    3. the international effect
  4. d c. a movement up and to the right along a stationary curve
  5. e a. when the price level falls, the real value of household wealth rises, and so will consumption.

5 Multiple Choice Questions

  1. C) GDP will be below potential GDP
  2. b. not change real GDP in the long-run.
  3. 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.
  4. shows the relationship between
    the price level and the quantity of real GDP that firms are willing to produce
  5. A) Workers and firms adjust their expectations of wages and prices downward and they accept lower wages
    and prices

5 True/False Questions

  1. Potential GDP is also referred to as
    A) balanced-budget GDP
    B) realized GDP
    C) full-employment GDP
    D) politico-economic GDP
    D) potential GDP.

          

  2. Describe aggregate demand.shows the relationship between the price level and the level of planned
    aggregate expenditure by households, firms, and the government

          

  3. What are the three factors that cause the AD curve to shift?consumption
    (C), investment (I), government purchases (G), and net exports (NX)

          

  4. 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 change in the price level

          

  5. Describe the long-run aggregate supply curve.shows the relationship between the price level and the level of planned
    aggregate expenditure by households, firms, and the government

          

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