5 Written questions
5 Matching questions
- Why does the failure of workers and firms to accurately predict the price level result in an upwardsloping
aggregate supply curve?
a. because contracts make some wages and prices "sticky"
b. because firms are often slow to adjust wages
c. because menu costs make some prices "sticky"
d. all of the above
- If firms and workers could predict the future price level exactly, the short-run aggregate supply curve
a. downward sloping.
b. upward sloping.
d. the same as the long-run aggregate supply curve
- Which of the following government policies affects the economy through intended changes in the
money supply and interest rates?
a. fiscal policy
b. monetary policy
c. both fiscal and monetary policies
d. neither fiscal nor monetary policies
- Describe the international effect.
- What are the three reason why the other components of GDP change as the price level changes?
- a A higher price level will make U.S. goods relatively more
expensive compared to other countries' goods. This will reduce exports, increase imports,
and, therefore, reduce net exports.
- b 1. the wealth effect
2. the interest rate effect
3. the international effect
- c d. all of the above
- d d. the same as the long-run aggregate supply curve.
- e b. monetary policy
5 Multiple choice questions
- because a decrease in the price level increases the quantity of real GDP demanded
- a. the economy will move up and to the left along a stationary aggregate demand curve.
- A) High levels; a recession; accept lower
- c. a technological change
- C) GDP will be below potential GDP
5 True/False questions
If the economy adjusts through the automatic mechanism, then a decline in aggregate demand causes
a. a recession in the short run, and an increase in the price level in the long run.
b. a recession in the short run, and a decline in the price level in the long run.
c. an expansion in the short run, and a decline in the price level in the long run.
d. an expansion in the short run, and an increase in the price level in the long run. → consumption
(C), investment (I), government purchases (G), and net exports (NX)
Why does the short-run aggregate supply curve slope upward?
a. because profits rise when the prices of the goods and services firms sell rise more rapidly than the
prices they pay for inputs
b. because an increase in market price results in an increase in quantity supplied, as stated by the
law of supply
c. because, as the number of workers, machinery, equipment, and technological changes increase,
quantity supplied increases
d. all of the above → b. short-run fluctuations in real GDP and the price level.
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. → C) decrease aggregate demand.
Describe aggregate supply → shows the relationship between
the price level and the quantity of real GDP that firms are willing to produce
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 → c. a movement up and to the right along a stationary curve