Question 1

Figure 14.2
-Refer to Figure 14.2. A movement from point d to point a could be caused by a simultaneous ________ and ________.
A) decrease in the money supply; increase in the price of oil
B) increase in the money supply; massive crop failure
C) decrease in taxes; decrease in the money supply
D) decrease in government spending; decrease in the price of oil

Accepted Answer

A movement from point d to point a on a typical aggregate demand and supply graph would indicate a decrease in aggregate demand and a decrease in aggregate supply. This could be caused by a decrease in the money supply (which would decrease aggregate demand by making less money available for spending) and an increase in the price of oil (which would decrease aggregate supply by increasing production costs).

Question 2

Recall the Application about the factors involved in causing recessions, and the causes of recessions in the United States from 1893 to 1990 to answer the following question(s).
-According to this Application, the recession of 1929 was primarily due to
A) a decrease in aggregate demand caused by the private sector.
B) a decrease in aggregate demand resulting from decreases in government spending.
C) a decrease in aggregate supply due to rising gold prices.
D) an increase in aggregate supply resulting from European bank collapses.

Accepted Answer

The application states that the recession of 1929 was primarily due to a decrease in aggregate demand caused by the private sector, specifically a decline in consumer spending and investment. This decrease in spending was a result of overproduction and overextension of credit, leading to a stock market crash and loss of confidence in the economy.

Question 3

Which one of the following statements is TRUE?
A) In the short run, the level of output is determined by demand.
B) In the long run, the level of output is determined by demand.
C) In the long run, the aggregate supply curve is horizontal.
D) Where aggregate demand and aggregate supply intersect is always the full-employment level of output.

Accepted Answer

In the short run, the level of output is indeed determined by demand, according to Keynesian economics. This is because, in the short run, prices and wages are sticky, and firms adjust their output based on the aggregate demand in the economy.

Question 4

Recall the Application about falling oil prices and their effect on the U.S. economy to answer the following question(s).
-According to this Application, lower oil prices may affect
A) aggregate demand.
B) aggregate supply.
C) both aggregate demand and aggregate supply
D) neither aggregate demand and aggregate supply

Accepted Answer

Lower oil prices can affect both aggregate demand and aggregate supply. Lower oil prices can increase aggregate demand through increased consumer spending due to lower fuel costs, as well as increased business investment due to lower energy costs. Lower oil prices can also increase aggregate supply through reduced production costs, leading to increased output and lower prices for goods and services.

Question 5

Recall the Application about the factors involved in causing recessions, and the causes of recessions in the United States from 1893 to 1990 to answer the following question(s).
-Recall the Application. Recessions can occur either when there is a(n) ________ in aggregate demand or a(n) ________ in aggregate supply.
A) increase; increase
B) increase; decrease
C) decrease; decrease
D) decrease; increase

Accepted Answer

The answer of Recall the Application about the factors involved...

Question 6

The long-run aggregate supply curve is horizontal.

Accepted Answer

The long-run aggregate supply curve is actually vertical, indicating that in the long run, changes in aggregate demand will only affect the price level and not the level of output.

Question 7

Figure 14.2
-Refer to Figure 14.2. A movement from point a to point d could be caused by a simultaneous ________ and ________.
A) increase in government spending; decrease in the price of oil
B) increase in taxes; increase in the price of oil
C) decrease in taxes; massive crop failure
D) decrease in the money supply; decrease in government spending

Accepted Answer

A movement from point a to point d in a typical aggregate demand and supply graph would indicate an increase in both aggregate demand and aggregate supply. An increase in government spending would boost aggregate demand, while a decrease in the price of oil would lower production costs, thereby increasing aggregate supply.

Question 8

A supply shock is an ________ event that shifts the aggregate ________ curve.
A) internal; supply
B) external; supply
C) internal; demand
D) external; demand

Accepted Answer

A supply shock is an external event that affects the supply of goods and services, such as a natural disaster or oil price spike. This results in a shift in the aggregate supply curve, causing changes in both output and prices. Therefore, the correct choice is B, external supply.

Question 9

If the supply of money increases, the long-run aggregate supply curve suggests that output will not change but the price level will.

Accepted Answer

The long-run aggregate supply curve is vertical, indicating that in the long run, the total output (real GDP) is determined by the economy's resources (labor, capital, etc.) and technology, not by the price level or money supply. An increase in the money supply can lead to higher prices (inflation) but does not change the economy's capacity to produce goods and services.

Question 10

Recall the Application about falling oil prices and their effect on the U.S. economy to answer the following question(s).
-According to this Application, lower oil prices should ________ aggregate ________.
A) increase; demand
B) decrease; demand
C) decrease; supply
D) not change; demand

Accepted Answer

Lower oil prices should increase aggregate demand because consumers and businesses will have more money to spend and invest. This can lead to increased economic activity and growth.

Question 11

Recall the Application about the factors involved in causing recessions, and the causes of recessions in the United States from 1893 to 1990 to answer the following question(s).
-According to this Application, the recession in 1981 was caused by
A) increasing oil prices which resulted in a decrease in aggregate supply.
B) the government cutting back on aggregate demand to reduce inflation.
C) an decrease in aggregate supply resulting from U.S. bank collapses.
D) massive immigration from Europe to the United States.

Accepted Answer

The recession in 1981 was caused by the government cutting back on aggregate demand to reduce inflation. This was done through a combination of reduced government spending and increased interest rates by the Federal Reserve.

Question 12

Recall the Application about falling oil prices and their effect on the U.S. economy to answer the following question(s).
-According to this Application, why did the recent decrease in oil prices have only a modest effect on economic growth?
A) Consumers may have saved the money that resulted from lower gasoline prices.
B) There was less incentive to produce energy and invest in new capital and equipment.
C) Government spending decreased significantly.
D) Both A and B are correct.

Accepted Answer

The decrease in oil prices had a relatively small impact on economic growth due to the combination of lower consumer spending habits and less incentive to produce energy and invest in new capital and equipment. While consumers may have saved money from the lower gasoline prices, this decrease in demand for energy investments may have offset the positive impact of increased consumer spending.

Question 13

Figure 14.2
-Refer to Figure 14.2. A movement from point c to point b could be caused by a simultaneous ________ and ________.
A) decrease in government spending; decrease in the price of oil
B) decrease in taxes; increase in the price of oil
C) increase in taxes; decrease in government spending
D) increase in government spending; increase in the money supply

Accepted Answer

The answer of  Figure 14.2
-Refer to Figure 14.2. A...

Question 14

When there is a shift the aggregate supply curve caused by factors external to a nation's economy, it is called
A) a trade imbalance.
B) government control.
C) a supply shock.
D) an economic anomaly.

Accepted Answer

A shift in aggregate supply curve caused by factors external to a nation's economy is called a supply shock. This can include events such as natural disasters, changes in global prices of resources, or sudden changes in trade policies. None of the other options provided accurately describe this situation.

Question 15

Recall the Application about the factors involved in causing recessions, and the causes of recessions in the United States from 1893 to 1990 to answer the following question(s).
-According to this Application, the recessions in 1973 and 1979 were caused by
A) supply shocks.
B) deflation.
C) foreign monetary developments.
D) arbitrage losses in the foreign exchange market.

Accepted Answer

According to the Application, the recessions in 1973 and 1979 were caused by supply shocks, specifically the oil price shocks of 1973 and 1979. This disrupted the supply chain of many industries, leading to a decrease in production and employment, and ultimately resulting in a recession.

Question 16

When there is a recession (a fall in output) and prices are increasing, and this situation is caused by adverse supply shocks, the term economists use to describe it is
A) aggregate shifts.
B) stagnation.
C) inflation.
D) stagflation.

Accepted Answer

The term economists use to describe a situation where there is a recession (a fall in output) and prices are increasing, and this situation is caused by adverse supply shocks is stagflation. This term combines the words stagnation (low growth) and inflation (rising prices). In such a situation, policymakers face a difficult choice between fighting inflation (e.g. by raising interest rates) and stimulating the economy (e.g. by lowering interest rates).

Question 17

Which of the following is an example of a supply shock?
A) a surprise increase of the money supply
B) an increase in government spending
C) a sharp increase in the price of oil
D) an increase in the price level

Accepted Answer

A supply shock is an unexpected event that disrupts the supply of goods or services in the economy. In this case, a sharp increase in the price of oil would disrupt the supply of energy and have ripple effects throughout the economy. A, B, and D do not represent supply shocks, as they do not directly impact the supply of goods and services. A surprise increase in the money supply, for example, would impact the demand for goods and services.

Question 18

Aggregate demand determines output in the short run if prices are flexible.

Accepted Answer

Aggregate demand determines output in the short run under the assumption of sticky or inflexible prices, not flexible prices. When prices are flexible, they can adjust to ensure that supply equals demand, making the economy's output determined more by factors like technology and resources rather than the current level of aggregate demand.

Question 19

Recall the Application about falling oil prices and their effect on the U.S. economy to answer the following question(s).
-According to this Application, lower oil prices will ________ the prices of gasoline and heating oil which will ________ the amount of money that consumers have to spend.
A) increase; decrease
B) increase; increase
C) decrease; decrease
D) decrease; increase

Accepted Answer

Lower oil prices will decrease the prices of gasoline and heating oil. This decrease in prices will increase the amount of money that consumers have to spend.

Question 20

Figure 14.2
-Refer to Figure 14.2. A movement from point b to point c could be caused by a simultaneous ________ and ________.
A) increase in the money supply; increase in the price of oil
B) decrease in taxes; decrease in the price of oil
C) increase in taxes; decrease in government spending
D) increase in the price of oil; massive crop failure

Accepted Answer

A movement from point b to point c on a typical aggregate demand and supply graph would indicate both inflation and a decrease in output. This could be caused by an increase in the money supply, which boosts spending and prices, and an increase in the price of oil, which would increase production costs, leading to higher prices and potentially reduced output.

Quiz 14: Aggregate Demand and Aggregate Supply

Figure 14.2 -Refer to Figure 14.2. A movement from point d to point a could be caused by a simultaneous and .

Recall the Application about the factors involved in causing recessions, and the causes of recessions in the United States from 1893 to 1990 to answer the following question(s) . -According to this Application, the recession of 1929 was primarily due to

Which one of the following statements is TRUE?

Recall the Application about falling oil prices and their effect on the U.S. economy to answer the following question(s) . -According to this Application, lower oil prices may affect

Recall the Application about the factors involved in causing recessions, and the causes of recessions in the United States from 1893 to 1990 to answer the following question(s) . -Recall the Application. Recessions can occur either when there is a(n) in aggregate demand or a(n) in aggregate supply.

The long-run aggregate supply curve is horizontal.

Figure 14.2 -Refer to Figure 14.2. A movement from point a to point d could be caused by a simultaneous and .

A supply shock is an event that shifts the aggregate curve.

If the supply of money increases, the long-run aggregate supply curve suggests that output will not change but the price level will.

Recall the Application about falling oil prices and their effect on the U.S. economy to answer the following question(s) . -According to this Application, lower oil prices should aggregate .

Recall the Application about the factors involved in causing recessions, and the causes of recessions in the United States from 1893 to 1990 to answer the following question(s) . -According to this Application, the recession in 1981 was caused by

Recall the Application about falling oil prices and their effect on the U.S. economy to answer the following question(s) . -According to this Application, why did the recent decrease in oil prices have only a modest effect on economic growth?

Figure 14.2 -Refer to Figure 14.2. A movement from point c to point b could be caused by a simultaneous and .

When there is a shift the aggregate supply curve caused by factors external to a nation's economy, it is called

Recall the Application about the factors involved in causing recessions, and the causes of recessions in the United States from 1893 to 1990 to answer the following question(s) . -According to this Application, the recessions in 1973 and 1979 were caused by

When there is a recession (a fall in output) and prices are increasing, and this situation is caused by adverse supply shocks, the term economists use to describe it is

Which of the following is an example of a supply shock?

Aggregate demand determines output in the short run if prices are flexible.

Recall the Application about falling oil prices and their effect on the U.S. economy to answer the following question(s) . -According to this Application, lower oil prices will the prices of gasoline and heating oil which will the amount of money that consumers have to spend.

Figure 14.2 -Refer to Figure 14.2. A movement from point b to point c could be caused by a simultaneous and .

Quiz 14: Aggregate Demand and Aggregate Supply

Figure 14.2 -Refer to Figure 14.2. A movement from point d to point a could be caused by a simultaneous ________ and ________.

Recall the Application about the factors involved in causing recessions, and the causes of recessions in the United States from 1893 to 1990 to answer the following question(s) . -According to this Application, the recession of 1929 was primarily due to

Which one of the following statements is TRUE?

Recall the Application about falling oil prices and their effect on the U.S. economy to answer the following question(s) . -According to this Application, lower oil prices may affect

The long-run aggregate supply curve is horizontal.

Figure 14.2 -Refer to Figure 14.2. A movement from point a to point d could be caused by a simultaneous ________ and ________.

A supply shock is an ________ event that shifts the aggregate ________ curve.

If the supply of money increases, the long-run aggregate supply curve suggests that output will not change but the price level will.

Recall the Application about falling oil prices and their effect on the U.S. economy to answer the following question(s) . -According to this Application, lower oil prices should ________ aggregate ________.

Recall the Application about the factors involved in causing recessions, and the causes of recessions in the United States from 1893 to 1990 to answer the following question(s) . -According to this Application, the recession in 1981 was caused by

Recall the Application about falling oil prices and their effect on the U.S. economy to answer the following question(s) . -According to this Application, why did the recent decrease in oil prices have only a modest effect on economic growth?

Figure 14.2 -Refer to Figure 14.2. A movement from point c to point b could be caused by a simultaneous ________ and ________.

When there is a shift the aggregate supply curve caused by factors external to a nation's economy, it is called

Recall the Application about the factors involved in causing recessions, and the causes of recessions in the United States from 1893 to 1990 to answer the following question(s) . -According to this Application, the recessions in 1973 and 1979 were caused by

When there is a recession (a fall in output) and prices are increasing, and this situation is caused by adverse supply shocks, the term economists use to describe it is

Which of the following is an example of a supply shock?

Aggregate demand determines output in the short run if prices are flexible.

Recall the Application about falling oil prices and their effect on the U.S. economy to answer the following question(s) . -According to this Application, lower oil prices will ________ the prices of gasoline and heating oil which will ________ the amount of money that consumers have to spend.

Figure 14.2 -Refer to Figure 14.2. A movement from point b to point c could be caused by a simultaneous ________ and ________.

Figure 14.2 -Refer to Figure 14.2. A movement from point d to point a could be caused by a simultaneous and .

Figure 14.2 -Refer to Figure 14.2. A movement from point a to point d could be caused by a simultaneous and .

A supply shock is an event that shifts the aggregate curve.

Recall the Application about falling oil prices and their effect on the U.S. economy to answer the following question(s) . -According to this Application, lower oil prices should aggregate .

Figure 14.2 -Refer to Figure 14.2. A movement from point c to point b could be caused by a simultaneous and .

Recall the Application about falling oil prices and their effect on the U.S. economy to answer the following question(s) . -According to this Application, lower oil prices will the prices of gasoline and heating oil which will the amount of money that consumers have to spend.

Figure 14.2 -Refer to Figure 14.2. A movement from point b to point c could be caused by a simultaneous and .