ECON 110 QUIZ 10 QUESTIONS AND
CORRECT ANSWERS
The combination of a strong U.S. dollar and weak growth overseas might result in lower U.S. exports
because ✅✅CORRECT ANSW-U.S. exports become more expensive for foreign buyers while
income, and purchasing power, in other countries is rising only slowly.
The result of a strong dollar will be ✅✅CORRECT ANSW-a leftward shift of the U.S. aggregate
demand curve because it reduces exports, a spending component of aggregate demand.
"An increase in aggregate supply causes a shift from SRAS1 to SRAS2. Because this shift in the
aggregate supply curve results in a lower price level, consumption, investment, and net exports will
increase. This change causes the aggregate demand curve to shift to the right from ADl to AD2. We
know that real GDP will increase, but we can't be sure whether the price level will rise or fall because
that depends on whether the aggregate supply curve or the aggregate demand curve has shifted
farther to the right. I assume that aggregate supply shifts out farther than aggregate demand, so I
show the final price level, P3, as being lower than the initial price level, P1
Which of the following is a correct statement about the student's analysis? ✅✅CORRECT ANSW-
The student is incorrect because the aggregate demand curve does not shift because of the price
level change.
The long-run aggregate supply curve is vertical because in the long run, ✅✅CORRECT ANSW-
changes in the price level do not affect potential GDP, as potential GDP depends on the size of the
labor force, capital stock, and technology.
increases in households' expectations of their future incomes will make the aggregate demand curve
shift _______ ✅✅CORRECT ANSW-to the right
a. A decrease in the expected future price level
b. Workers and firms adjust to having previously underestimated the price level
c. A positive technological change occurs ✅✅CORRECT ANSW-3
, 2
1
In the diagram to the right, moving from point A to point B is called a ______ the AD curve.
Moving from point A to point C is referred to as a ______ the AD curve ✅✅CORRECT ANSW-
movement along; shift in
A movement from point A to point B on AD1 could be the result of a ✅✅CORRECT ANSW-change
in the price level.
A movement from point A to point C could be the result of a ✅✅CORRECT ANSW-change in the
expectations of households.
What relationship is shown by the aggregate demand curve?
The aggregate demand curve shows the relationship between ✅✅CORRECT ANSW-the price level
and the quantity of real GDP demanded by households, firms, and the government.
What relationship is shown by the aggregate supply curve?
The short run aggregate supply curve shows the relationship in the short run between
✅✅CORRECT ANSW-the price level and the quantity of real GDP supplied by firms.
A technological change will cause the long-run aggregate supply curve to ✅✅CORRECT ANSW-
shift to the right
The short-run aggregate supply curve slopes upward because of all of the following reasons except
✅✅CORRECT ANSW-in the short run, an unexpected change in the price of an important resource
can change the cost to firms.
CORRECT ANSWERS
The combination of a strong U.S. dollar and weak growth overseas might result in lower U.S. exports
because ✅✅CORRECT ANSW-U.S. exports become more expensive for foreign buyers while
income, and purchasing power, in other countries is rising only slowly.
The result of a strong dollar will be ✅✅CORRECT ANSW-a leftward shift of the U.S. aggregate
demand curve because it reduces exports, a spending component of aggregate demand.
"An increase in aggregate supply causes a shift from SRAS1 to SRAS2. Because this shift in the
aggregate supply curve results in a lower price level, consumption, investment, and net exports will
increase. This change causes the aggregate demand curve to shift to the right from ADl to AD2. We
know that real GDP will increase, but we can't be sure whether the price level will rise or fall because
that depends on whether the aggregate supply curve or the aggregate demand curve has shifted
farther to the right. I assume that aggregate supply shifts out farther than aggregate demand, so I
show the final price level, P3, as being lower than the initial price level, P1
Which of the following is a correct statement about the student's analysis? ✅✅CORRECT ANSW-
The student is incorrect because the aggregate demand curve does not shift because of the price
level change.
The long-run aggregate supply curve is vertical because in the long run, ✅✅CORRECT ANSW-
changes in the price level do not affect potential GDP, as potential GDP depends on the size of the
labor force, capital stock, and technology.
increases in households' expectations of their future incomes will make the aggregate demand curve
shift _______ ✅✅CORRECT ANSW-to the right
a. A decrease in the expected future price level
b. Workers and firms adjust to having previously underestimated the price level
c. A positive technological change occurs ✅✅CORRECT ANSW-3
, 2
1
In the diagram to the right, moving from point A to point B is called a ______ the AD curve.
Moving from point A to point C is referred to as a ______ the AD curve ✅✅CORRECT ANSW-
movement along; shift in
A movement from point A to point B on AD1 could be the result of a ✅✅CORRECT ANSW-change
in the price level.
A movement from point A to point C could be the result of a ✅✅CORRECT ANSW-change in the
expectations of households.
What relationship is shown by the aggregate demand curve?
The aggregate demand curve shows the relationship between ✅✅CORRECT ANSW-the price level
and the quantity of real GDP demanded by households, firms, and the government.
What relationship is shown by the aggregate supply curve?
The short run aggregate supply curve shows the relationship in the short run between
✅✅CORRECT ANSW-the price level and the quantity of real GDP supplied by firms.
A technological change will cause the long-run aggregate supply curve to ✅✅CORRECT ANSW-
shift to the right
The short-run aggregate supply curve slopes upward because of all of the following reasons except
✅✅CORRECT ANSW-in the short run, an unexpected change in the price of an important resource
can change the cost to firms.
