ECON-252 EXAM 2 QUESTIONS AND ANSWERS
What factors affect the Long-Run Aggregate Supply curve? - Answer -s.P.E.N.T -
savings, productivity, education, numnber of resources, and technology
Quiz answers:
Total Factor Productivity
Labor
Human Capital
Physical Capital
Technology
An increase in the price level causes a _______ the Aggregate Demand curve. -
Answer -movement up along
What factors affect the Aggregate Demand curve? - Answer -Consumption,
Investments, Government Purchases, Imports, and Exports
Which of the following would shift aggregate demand to the left? Choose all that apply.
A) Increasing consumer confidence.
B) Increasing imports.
C) Increasing taxes.
D) Increasing exports. - Answer -B) Increasing imports.
C) Increasing taxes.
A decrease in consumer spending causes the _____ curve to shift to the ____. -
Answer -Aggregate Demand, Left
An increase in capital accumulation causes the price level to _____ in the long run and
potential real GDP to ________. - Answer -Decrease, Increase
Which of the following causes the price level to increase in the long run and real
potential GDP to decrease? A(n)
A) decrease in the labor-force participation rate.
B) increase in household taxes.
C) increase in productivity.
D) decrease in interest rates. - Answer -A) decrease in the labor-force participation
rate.
What would be the effect of a hurricane that damages buildings and roadways in the
Gulf Coast? LRAS _________ . AD _________ . The price level _______ . GDP
_________. - Answer -Shifts left, does not change, increases, decreases
, Using the AD-LRAS model, a decrease in capital accumulation and a decrease in
business taxes causes the Long-Run Aggregate Supply curve to ___________ and the
Aggregate Demand curve to _________, respectively. - Answer -Shift left, Shift right
One explanation for rigid (sticky) prices according to Keynes and others is
flexible wages.
long-term labor contracts.
inflation.
government intervention. - Answer -long-term labor contracts.
What is the shape of the short run aggregate supply for the AD-AS model used in
class?
Upward sloping curve
Horizontal line
Downward sloping curve
Vertical line - Answer -Upward sloping curve
Using the AD/AS model, what would be an explanation for observing an increased price
level and a decreased real GDP?
the money supply has decreased.
wages have increased.
the money supply has increased.
productivity has increased. - Answer -wages have increased.
In the AD/AS model, what happens if businesses expect higher future profits while
inflationary expectations decrease simultaneously? Choose all that apply.
Real GDP decreases.
The price level may increase, decrease or remain unchanged.
The price level decreases.
Real GDP increases.
Real GDP may increase, decrease or remain unchanged.
The price level increases. - Answer -The price level may increase, decrease or remain
unchanged.
Real GDP increases.
Assume the economy begins with potential real GDP = $13.7 trillion, while actual real
GDP = $14 trillion and the Price Level (GDP Deflator) = 210 in the AD/AS model. A year
later the Price Level = 212 and actual real GDP = $14.1. Based on their relative effects
on the AD/AS model, which of the following scenarios best explains this new outcome?
The effect of a(n)
increase in oil prices is MORE than the effect of negative business expectations.
What factors affect the Long-Run Aggregate Supply curve? - Answer -s.P.E.N.T -
savings, productivity, education, numnber of resources, and technology
Quiz answers:
Total Factor Productivity
Labor
Human Capital
Physical Capital
Technology
An increase in the price level causes a _______ the Aggregate Demand curve. -
Answer -movement up along
What factors affect the Aggregate Demand curve? - Answer -Consumption,
Investments, Government Purchases, Imports, and Exports
Which of the following would shift aggregate demand to the left? Choose all that apply.
A) Increasing consumer confidence.
B) Increasing imports.
C) Increasing taxes.
D) Increasing exports. - Answer -B) Increasing imports.
C) Increasing taxes.
A decrease in consumer spending causes the _____ curve to shift to the ____. -
Answer -Aggregate Demand, Left
An increase in capital accumulation causes the price level to _____ in the long run and
potential real GDP to ________. - Answer -Decrease, Increase
Which of the following causes the price level to increase in the long run and real
potential GDP to decrease? A(n)
A) decrease in the labor-force participation rate.
B) increase in household taxes.
C) increase in productivity.
D) decrease in interest rates. - Answer -A) decrease in the labor-force participation
rate.
What would be the effect of a hurricane that damages buildings and roadways in the
Gulf Coast? LRAS _________ . AD _________ . The price level _______ . GDP
_________. - Answer -Shifts left, does not change, increases, decreases
, Using the AD-LRAS model, a decrease in capital accumulation and a decrease in
business taxes causes the Long-Run Aggregate Supply curve to ___________ and the
Aggregate Demand curve to _________, respectively. - Answer -Shift left, Shift right
One explanation for rigid (sticky) prices according to Keynes and others is
flexible wages.
long-term labor contracts.
inflation.
government intervention. - Answer -long-term labor contracts.
What is the shape of the short run aggregate supply for the AD-AS model used in
class?
Upward sloping curve
Horizontal line
Downward sloping curve
Vertical line - Answer -Upward sloping curve
Using the AD/AS model, what would be an explanation for observing an increased price
level and a decreased real GDP?
the money supply has decreased.
wages have increased.
the money supply has increased.
productivity has increased. - Answer -wages have increased.
In the AD/AS model, what happens if businesses expect higher future profits while
inflationary expectations decrease simultaneously? Choose all that apply.
Real GDP decreases.
The price level may increase, decrease or remain unchanged.
The price level decreases.
Real GDP increases.
Real GDP may increase, decrease or remain unchanged.
The price level increases. - Answer -The price level may increase, decrease or remain
unchanged.
Real GDP increases.
Assume the economy begins with potential real GDP = $13.7 trillion, while actual real
GDP = $14 trillion and the Price Level (GDP Deflator) = 210 in the AD/AS model. A year
later the Price Level = 212 and actual real GDP = $14.1. Based on their relative effects
on the AD/AS model, which of the following scenarios best explains this new outcome?
The effect of a(n)
increase in oil prices is MORE than the effect of negative business expectations.
