Question 1

Economic growth in the rest of the world slows down.In the short run,one can expect output in the United States to ________ and the price level to ________.

Accepted Answer

When economic growth slows down in the rest of the world, demand for U.S. exports typically decreases, leading to a reduction in U.S. output and a downward pressure on the price level.

Question 2

Refer to the following figure to answer the following questions. -Based on the figure,which of the following would cause the short-run aggregate supply curve to shift from SRAS₁ to SRAS₂?

Accepted Answer

A fall in wages and input prices reduces production costs, allowing firms to supply more at each price level, shifting the SRAS curve to the right.

Question 3

An increase in aggregate demand is harmful because

Accepted Answer

An increase in aggregate demand can lead to higher prices for goods and services, which can be harmful to workers with sticky wages because their wages do not immediately adjust to the higher price level, reducing their real purchasing power.

Question 4

If consumers decide to save a larger percentage of their incomes,it will be

Accepted Answer

If consumers decide to save a larger percentage of their incomes, it will lead to a decrease in aggregate demand in the short run, which can be harmful by slowing down economic growth and reducing employment opportunities. However, in the long run, the increase in the amount of savings will lead to lower interest rates as banks have more deposits to lend out. This can lead to increased investment activity in the economy, which can ultimately promote growth and prosperity. Therefore, option C is the best answer.

Question 5

If the economy is in a recession caused by lower aggregate demand,then in the absence of policy action,the price level will ________,output will ________,and employment will ________ in the long run.

Accepted Answer

In the long run, prices will decrease due to lower demand, and output and employment will increase as the economy self-corrects and returns to full employment.

Question 6

An increase in ________ can be expected to shift the aggregate demand curve to the right.

Accepted Answer

An increase in expected future income will boost consumer confidence and increase their willingness to spend, leading to an increase in consumption expenditure and a shift in the aggregate demand curve to the right.

Note: Option B, the price of oil, may have mixed effects on aggregate demand as it depends on whether the economy is a net importer or exporter of oil. Options A, D, and E are incorrect as an increase in these variables would lead to a decrease in aggregate demand.

Question 7

A new government program reduces the cost of a college education at public universities by 50 percent.In the long run,this can be expected to ________ long-run aggregate supply and ________ aggregate demand.

Accepted Answer

Since the cost of a college education at public universities is reduced by 50 percent, more students will choose to attend college. This will increase the labor force and human capital, leading to an increase in long-run aggregate supply. As more students attend college, they will spend money on tuition, textbooks, living expenses, etc., causing an increase in aggregate demand. Therefore, the correct answer is (D) increase; increase.

Question 8

An increase in the price level will ________ the real value of wealth and,as a result,there will be ________ the aggregate demand curve.

Accepted Answer

An increase in the price level reduces the real value of wealth, leading to a decrease in consumption and a movement upward along the aggregate demand curve, not a shift.

Question 9

China's working-age population is expected to decline in the next 20 years.In the long run,we can expect this to

Accepted Answer

A declining working-age population can lead to a decrease in long-run aggregate supply as there are fewer workers available to produce goods and services.

Question 10

Suppose a change in health care laws increases the cost of hiring an employee.We can expect output in the short run to ________ and output in the long run to ________.

Accepted Answer

In the short run, the increase in cost of hiring an employee will lead to a decrease in output as firms will try to maintain their profits by reducing their production. However, in the long run, firms can adjust their operations, such as investing in technology or restructuring their workforce, to overcome the cost increase and increase output. Therefore, output in the long run is likely to be unaffected.

Question 11

Refer to the following figure to answer the following questions. 
-Based on the figure,a negative supply shock is best represented by a movement from

Accepted Answer

The answer of Refer to the following figure to answer...

Question 12

Which of the following would cause an increase in employment in the short run?

Accepted Answer

An increase in government spending would cause an increase in employment in the short run as the government creates jobs or contracts out work to private firms, leading to an increase in demand for labor.

Question 13

Severe winter weather makes it difficult to transport goods between locations.This can be expected to

Accepted Answer

Severe winter weather can disrupt transportation and logistics, leading to a temporary decrease in short-run aggregate supply due to increased costs and delays. However, it does not affect long-run aggregate supply, which is determined by factors like technology and resources.

Question 14

In 2013,the price of gas was $3.60 per gallon,and in 2016,the price of gas was $2.05 per gallon.Since one would be spending less on gas in 2016 than in 2013,one would have more to spend on other goods and services.All else the same,this is an example of the ________ effect.

Accepted Answer

The answer of In 2013,the price of gas was $3.60...

Question 15

An increase in investment spending can be expected to ________ interest rates and cause ________ the aggregate demand curve.

Accepted Answer

An increase in investment spending would increase the demand for loans, which would increase the interest rates. This increase in interest rates would cause a rightward shift of the aggregate demand curve, as higher interest rates make it more expensive for firms and households to borrow, reducing their consumption and investment spending.

Question 16

The table identifies annual gross domestic product (GDP)(in billions of dollars)for country X.  Based on the table,during which years(s)was country X most likely to have been in a recession?

Accepted Answer

A recession is typically defined as a significant decline in economic activity lasting more than a few months. One way to identify a recession is to look for periods of consecutive GDP declines. Based on the table, country X experienced a decline in GDP in 2009, 2012, 2014, and 2015, which suggests that it may have been in a recession during those years. Therefore, option B is the best choice as it includes all years with a decline in GDP.

Question 17

Which of the following would cause an increase in the price level in the long run?

Accepted Answer

An increase in investment can lead to an increase in output and a decrease in unemployment in the short run. However, in the long run, an increase in investment can lead to an increase in the production capacity of the economy, which can cause an increase in the price level due to a shift in the aggregate supply curve to the left. The other options are not likely to cause a long-run increase in the price level. A) an increase in the labor force may lead to an increase in output and a decrease in the price level. B) a decrease in net exports may decrease aggregate demand and cause a decrease in the price level. D) an increase in natural resources may lead to an increase in output and a decrease in the price level in the short run. E) a temporary increase in the price of oil may cause a temporary increase in the price level, but it is unlikely to have a long-run impact.

Question 18

If the current short-run equilibrium level of output is less than full-employment output,we can then expect that in the long run

Accepted Answer

The answer of If the current short-run equilibrium level of...

Question 19

A decrease in aggregate demand is harmful in the short run because ________ but not in the long run because ________.

Accepted Answer

In the short run, a decrease in aggregate demand leads to a decrease in output and employment, as firms reduce production and lay off workers to match the lower level of demand. This causes unemployment to rise. However, in the long run, wages and prices can adjust, which allows the economy to return to its natural level of output, and the negative effects of the initial decrease in aggregate demand will dissipate. The price level may fall as a result of lower aggregate demand, which would help to restore equilibrium in the long run, but this is not harmful.

Question 20

Suppose interest rates increase from 1 percent to 3 percent.In the short run,one can expect output in the United States to ________ and the price level to ________.

Accepted Answer

In the short run, an increase in interest rates typically leads to a decrease in output as borrowing costs rise, reducing investment and consumer spending. This decrease in demand can also lead to a decrease in the price level.

Quiz 26: The Aggregate Demandaggregate Supply Model

Economic growth in the rest of the world slows down.In the short run,one can expect output in the United States to and the price level to .

Refer to the following figure to answer the following questions. -Based on the figure,which of the following would cause the short-run aggregate supply curve to shift from SRAS₁ to SRAS₂?

An increase in aggregate demand is harmful because

If consumers decide to save a larger percentage of their incomes,it will be

If the economy is in a recession caused by lower aggregate demand,then in the absence of policy action,the price level will ,output will ,and employment will in the long run.

An increase in ________ can be expected to shift the aggregate demand curve to the right.

A new government program reduces the cost of a college education at public universities by 50 percent.In the long run,this can be expected to long-run aggregate supply and aggregate demand.

An increase in the price level will the real value of wealth and,as a result,there will be the aggregate demand curve.

China's working-age population is expected to decline in the next 20 years.In the long run,we can expect this to

Suppose a change in health care laws increases the cost of hiring an employee.We can expect output in the short run to and output in the long run to .

Refer to the following figure to answer the following questions. -Based on the figure,a negative supply shock is best represented by a movement from

Which of the following would cause an increase in employment in the short run?

Severe winter weather makes it difficult to transport goods between locations.This can be expected to

In 2013,the price of gas was $3.60 per gallon,and in 2016,the price of gas was $2.05 per gallon.Since one would be spending less on gas in 2016 than in 2013,one would have more to spend on other goods and services.All else the same,this is an example of the ________ effect.

An increase in investment spending can be expected to interest rates and cause the aggregate demand curve.

The table identifies annual gross domestic product (GDP) (in billions of dollars) for country X. Based on the table,during which years(s) was country X most likely to have been in a recession?

Which of the following would cause an increase in the price level in the long run?

If the current short-run equilibrium level of output is less than full-employment output,we can then expect that in the long run

A decrease in aggregate demand is harmful in the short run because but not in the long run because .

Suppose interest rates increase from 1 percent to 3 percent.In the short run,one can expect output in the United States to and the price level to .

Quiz 26: The Aggregate Demandaggregate Supply Model

Economic growth in the rest of the world slows down.In the short run,one can expect output in the United States to ________ and the price level to ________.

Refer to the following figure to answer the following questions. -Based on the figure,which of the following would cause the short-run aggregate supply curve to shift from SRAS1 to SRAS2?

An increase in aggregate demand is harmful because

If consumers decide to save a larger percentage of their incomes,it will be

If the economy is in a recession caused by lower aggregate demand,then in the absence of policy action,the price level will ________,output will ________,and employment will ________ in the long run.

An increase in ________ can be expected to shift the aggregate demand curve to the right.

A new government program reduces the cost of a college education at public universities by 50 percent.In the long run,this can be expected to ________ long-run aggregate supply and ________ aggregate demand.

An increase in the price level will ________ the real value of wealth and,as a result,there will be ________ the aggregate demand curve.

China's working-age population is expected to decline in the next 20 years.In the long run,we can expect this to

Suppose a change in health care laws increases the cost of hiring an employee.We can expect output in the short run to ________ and output in the long run to ________.

Refer to the following figure to answer the following questions. -Based on the figure,a negative supply shock is best represented by a movement from

Which of the following would cause an increase in employment in the short run?

Severe winter weather makes it difficult to transport goods between locations.This can be expected to

In 2013,the price of gas was $3.60 per gallon,and in 2016,the price of gas was $2.05 per gallon.Since one would be spending less on gas in 2016 than in 2013,one would have more to spend on other goods and services.All else the same,this is an example of the ________ effect.

An increase in investment spending can be expected to ________ interest rates and cause ________ the aggregate demand curve.

The table identifies annual gross domestic product (GDP) (in billions of dollars) for country X. Based on the table,during which years(s) was country X most likely to have been in a recession?

Which of the following would cause an increase in the price level in the long run?

If the current short-run equilibrium level of output is less than full-employment output,we can then expect that in the long run

A decrease in aggregate demand is harmful in the short run because ________ but not in the long run because ________.

Suppose interest rates increase from 1 percent to 3 percent.In the short run,one can expect output in the United States to ________ and the price level to ________.

Economic growth in the rest of the world slows down.In the short run,one can expect output in the United States to and the price level to .

Refer to the following figure to answer the following questions. -Based on the figure,which of the following would cause the short-run aggregate supply curve to shift from SRAS₁ to SRAS₂?

If the economy is in a recession caused by lower aggregate demand,then in the absence of policy action,the price level will ,output will ,and employment will in the long run.

A new government program reduces the cost of a college education at public universities by 50 percent.In the long run,this can be expected to long-run aggregate supply and aggregate demand.

An increase in the price level will the real value of wealth and,as a result,there will be the aggregate demand curve.

Suppose a change in health care laws increases the cost of hiring an employee.We can expect output in the short run to and output in the long run to .

An increase in investment spending can be expected to interest rates and cause the aggregate demand curve.

A decrease in aggregate demand is harmful in the short run because but not in the long run because .

Suppose interest rates increase from 1 percent to 3 percent.In the short run,one can expect output in the United States to and the price level to .