ECON 1110 EXAM 2 QUESTIONS WITH ACCURATE
ANSWERS A+ GRADED
The aggregate demand curves slopes downward to the right indicating that - ANSWER
an increase in the price level leads to a decrease in the quantity of real GDP demanded.
Ceteris paribus, a decline in the domestic price level causes - ANSWER an increase in
exports, a decrease in imports and an increase in the quantity of real GDP. AND an
increase in the purchasing power of a given money income.
Will increase aggregate demand - ANSWER an increase in household wealth, an increase
in expected future business sales and profits and a decrease in personal and business
income taxes.
Will NOT increase aggregate demand - ANSWER a decrease in foreign real national
income.
Ceteris paribus, an increase in aggregate demand when short-run aggregate supply is
upward sloping causes the price level to ___, real output to __, and the unemployment
rate to ___. - ANSWER increase; increase; decrease
An upward sloping short-run aggregate supply curve models the - ANSWER direct
relationship between the price level and the quantity of real GDP supplied.
, Higher wages and input prices lead to - ANSWER increases in the cost of production and
a decrease in short-run aggregate supply
When the equilibrium (actual) level of real GDP is less than the natural level of real GDP,
then - ANSWER a recessionary gap exists and the unemployment rate is greater than the
natural rate.
In a self-correcting economy, inflationary gaps are eliminated by - ANSWER higher
wages and input prices leading to an increase in costs of production which decreases
SRAS.
A laissez-faire policy with respect to the marcoeconomy is associated with the - ANSWER
Classical view that the economy is self-correcting
The long-run aggregate supply curve (LRAS) curve is - ANSWER vertical at the economy's
natural level of real GDP.
In the Classical model - ANSWER flexible wages ensure that labor shortages and
surpluses (unemployment) will be temporary.
Say's Law can be summarized as - ANSWER supply creates its own demand
The significance of Say's Law is that, if it holds true, government policy makers -
ANSWER do not have to implement policies designed to increase aggregate demand for
the economy to move towards equilibrium at natural real GDP.
ANSWERS A+ GRADED
The aggregate demand curves slopes downward to the right indicating that - ANSWER
an increase in the price level leads to a decrease in the quantity of real GDP demanded.
Ceteris paribus, a decline in the domestic price level causes - ANSWER an increase in
exports, a decrease in imports and an increase in the quantity of real GDP. AND an
increase in the purchasing power of a given money income.
Will increase aggregate demand - ANSWER an increase in household wealth, an increase
in expected future business sales and profits and a decrease in personal and business
income taxes.
Will NOT increase aggregate demand - ANSWER a decrease in foreign real national
income.
Ceteris paribus, an increase in aggregate demand when short-run aggregate supply is
upward sloping causes the price level to ___, real output to __, and the unemployment
rate to ___. - ANSWER increase; increase; decrease
An upward sloping short-run aggregate supply curve models the - ANSWER direct
relationship between the price level and the quantity of real GDP supplied.
, Higher wages and input prices lead to - ANSWER increases in the cost of production and
a decrease in short-run aggregate supply
When the equilibrium (actual) level of real GDP is less than the natural level of real GDP,
then - ANSWER a recessionary gap exists and the unemployment rate is greater than the
natural rate.
In a self-correcting economy, inflationary gaps are eliminated by - ANSWER higher
wages and input prices leading to an increase in costs of production which decreases
SRAS.
A laissez-faire policy with respect to the marcoeconomy is associated with the - ANSWER
Classical view that the economy is self-correcting
The long-run aggregate supply curve (LRAS) curve is - ANSWER vertical at the economy's
natural level of real GDP.
In the Classical model - ANSWER flexible wages ensure that labor shortages and
surpluses (unemployment) will be temporary.
Say's Law can be summarized as - ANSWER supply creates its own demand
The significance of Say's Law is that, if it holds true, government policy makers -
ANSWER do not have to implement policies designed to increase aggregate demand for
the economy to move towards equilibrium at natural real GDP.
