Exam Questions & Correct
Answers (Verified Detailed
Answers) A Grade.
Quiz_________________?
Which of the statements best describes why the aggregate demand curve is downward
sloping?
As a good's price increases, holding all else constant, the good's quantity demanded
decreases.
As the aggregate price level decreases, the stock of existing physical capital increases.
As the aggregate price level increases, consumer expectations about the future change.
An increase in the aggregate price level causes consumer and investment spending to fall,
because consumer purchasing power decreases and money demand increases. -
Answer✅
An increase in the aggregate price level causes consumer and investment spending to fall,
because consumer purchasing power decreases and money demand increases.
Quiz_________________?
The interest rate effect... -
Answer✅
is the change in consumer and investment spending due to changes in interest rates resulting
from changes in the aggregate price level.
1
, Quiz_________________?
For each of the scenarios, please decide whether there will be an increase, decrease, or no
change in aggregate demand.
The United States government decides to increase the federal tax rate by 4% for all earners.
The newest release of the Consumer Confidence Index shows a steady increase in
consumer confidence about the economy.
A manufacturing boom during the late 1990s has created an oversupply of tractors, a
necessary implement in agricultural production.
The Federal Reserve, the agency charged with regulating banking and monetary policy in the
United States, decides to increase the amount of money available in the economy. -
Answer✅
decreases, increases, decreases, increases
Quiz_________________?
For each of the scenarios, please decide whether there will be an increase or decrease in
short-run aggregate supply or if there will be no change.
Changes in the healthcare market cause employers to pay significantly more for health
insurance they provide employees.
The price of lumber, a commodity, rises drastically due to the effect of heavy winter
weather in the American Northwest, where much of the world's lumber is grown.
The production of a new type of blade for their combine harvesters, a tractor used to
harvest crops, has allowed wheat farmers, like Herbert, to increase productivity by 40%. -
Answer✅
decreases, decreases, increases
2
, Quiz_________________?
In the accompanying graph, illustrate the impact of an increase in the contracted nominal
wage.
How do nominal wage changes affect the economy's output at the long-run equilibrium? -
Answer✅
SRAS shift left
Nominal wages have no impact on output in the long run.
Quiz_________________?
The accompanying graph illustrates an economy in long-run equilibrium which is denoted by
point ELR.
Suppose a new technology is discovered which increases productivity. In the graph,
demonstrate how the economy moves to its new long-run equilibrium by shifting the
appropriate curves and placing point ELR at the new long-run equilibrium.
In the long run, the aggregate price level______ and real GDP (aggregate output)______. -
Answer✅
LRAS, SRAS, ELR shift right
decreases, increases
Quiz_________________?
Please match each of the characteristics to the situation with which they are most
associated. -
Answer✅
Positive demand shock:
3
, -a positive shift that leads to a higher aggregate price
-AD curve shifts right
Negative demand shock:
-a negative shift that leads to a lower aggregate price
-AD curve shifts to the left
Positive supply shock:
-a positive shift that leads to a lower aggregate price
-SRAS curve shifts to the right
Negative supply shock:
-stagflation
-a negative shift that leads to a higher aggregate price
-SRAS curve shifts to the left
Quiz_________________?
Move the short-run aggregate supply (SRAS) curve and/or the aggregate demand (AD) curve
in the accompanying graph to demonstrate a negative supply shock.
Which of the following is most associated with a negative supply shock? -
Answer✅
SRAS shifts left
Stagflation
Quiz_________________?
The accompanying graphs illustrate an initial equilibrium for the economy. Suppose that a
snowstorm destroys a large number of corn crops.
Use the graphs to show the new positions of aggregate demand (AD), short-run aggregate
supply (SRAS), and long-run aggregate supply (LRAS) in both the short-run and the long-run,
as well as the short-run (ESR) and long-run (ELR) equilibria resulting from this change. Then
answer what happens to the price level and GDP.
4
Answers (Verified Detailed
Answers) A Grade.
Quiz_________________?
Which of the statements best describes why the aggregate demand curve is downward
sloping?
As a good's price increases, holding all else constant, the good's quantity demanded
decreases.
As the aggregate price level decreases, the stock of existing physical capital increases.
As the aggregate price level increases, consumer expectations about the future change.
An increase in the aggregate price level causes consumer and investment spending to fall,
because consumer purchasing power decreases and money demand increases. -
Answer✅
An increase in the aggregate price level causes consumer and investment spending to fall,
because consumer purchasing power decreases and money demand increases.
Quiz_________________?
The interest rate effect... -
Answer✅
is the change in consumer and investment spending due to changes in interest rates resulting
from changes in the aggregate price level.
1
, Quiz_________________?
For each of the scenarios, please decide whether there will be an increase, decrease, or no
change in aggregate demand.
The United States government decides to increase the federal tax rate by 4% for all earners.
The newest release of the Consumer Confidence Index shows a steady increase in
consumer confidence about the economy.
A manufacturing boom during the late 1990s has created an oversupply of tractors, a
necessary implement in agricultural production.
The Federal Reserve, the agency charged with regulating banking and monetary policy in the
United States, decides to increase the amount of money available in the economy. -
Answer✅
decreases, increases, decreases, increases
Quiz_________________?
For each of the scenarios, please decide whether there will be an increase or decrease in
short-run aggregate supply or if there will be no change.
Changes in the healthcare market cause employers to pay significantly more for health
insurance they provide employees.
The price of lumber, a commodity, rises drastically due to the effect of heavy winter
weather in the American Northwest, where much of the world's lumber is grown.
The production of a new type of blade for their combine harvesters, a tractor used to
harvest crops, has allowed wheat farmers, like Herbert, to increase productivity by 40%. -
Answer✅
decreases, decreases, increases
2
, Quiz_________________?
In the accompanying graph, illustrate the impact of an increase in the contracted nominal
wage.
How do nominal wage changes affect the economy's output at the long-run equilibrium? -
Answer✅
SRAS shift left
Nominal wages have no impact on output in the long run.
Quiz_________________?
The accompanying graph illustrates an economy in long-run equilibrium which is denoted by
point ELR.
Suppose a new technology is discovered which increases productivity. In the graph,
demonstrate how the economy moves to its new long-run equilibrium by shifting the
appropriate curves and placing point ELR at the new long-run equilibrium.
In the long run, the aggregate price level______ and real GDP (aggregate output)______. -
Answer✅
LRAS, SRAS, ELR shift right
decreases, increases
Quiz_________________?
Please match each of the characteristics to the situation with which they are most
associated. -
Answer✅
Positive demand shock:
3
, -a positive shift that leads to a higher aggregate price
-AD curve shifts right
Negative demand shock:
-a negative shift that leads to a lower aggregate price
-AD curve shifts to the left
Positive supply shock:
-a positive shift that leads to a lower aggregate price
-SRAS curve shifts to the right
Negative supply shock:
-stagflation
-a negative shift that leads to a higher aggregate price
-SRAS curve shifts to the left
Quiz_________________?
Move the short-run aggregate supply (SRAS) curve and/or the aggregate demand (AD) curve
in the accompanying graph to demonstrate a negative supply shock.
Which of the following is most associated with a negative supply shock? -
Answer✅
SRAS shifts left
Stagflation
Quiz_________________?
The accompanying graphs illustrate an initial equilibrium for the economy. Suppose that a
snowstorm destroys a large number of corn crops.
Use the graphs to show the new positions of aggregate demand (AD), short-run aggregate
supply (SRAS), and long-run aggregate supply (LRAS) in both the short-run and the long-run,
as well as the short-run (ESR) and long-run (ELR) equilibria resulting from this change. Then
answer what happens to the price level and GDP.
4
