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Macroeconomics,10e(Parkin)Chapter10AggregateSupplyandAggregateDemand68)Intheabovefigure,theshort-runaggregatesupplycurveisSASandtheaggregatedemandcurveisAD.AninflationarygapexistsA)ifthelong-runaggregatesupplycurveisLAS1.B)ifthelong-runaggregatesupplycurveisLAS2.C)ifthelong-runaggregatesupplycurveisLAS3.D)Alloftheaboveanswersarecorrect.Answer:ATopic:InflationaryGapSkill:AnalyticalQuestionhistory:Previousedition,Chapter10AACSB:AnalyticalSkills69)Intheabovefigure,iftheeconomyisatpointA,whichofthefollowingistrue?A)PointAisthelong-runequilibriumpoint.B)Theeconomyisinarecession.C)Moneywagescanbeexpectedtofall.D)Theeconomymightbeat(yī)pointAasaresultofarecentcutinthetaxrate.Answer:DTopic:Short-RunMacroeconomicEquilibriumSkill:ConceptualQuestionhistory:Previousedition,Chapter10AACSB:AnalyticalSkills

70)Intheabovefigure,iftheeconomyisatpointA,whichofthefollowingistrue?A)Thereisarecessionarygap.B)Thereisaninflationarygap.C)PointAisthelong-runequilibriumpoint.D)Noneoftheaboveanswersarecorrect.Answer:BTopic:InflationaryGapSkill:ConceptualQuestionhistory:Previousedition,Chapter10AACSB:AnalyticalSkills71)TheabovefiguredepictsaneconomyA)withaninflationarygap.B)witharecessionarygap.C)producingat(yī)fullemployment.D)Noneoftheaboveanswersiscorrect.Answer:ATopic:InflationaryGapSkill:AnalyticalQuestionhistory:Previousedition,Chapter10AACSB:AnalyticalSkills?72)Intheabovefigure,theshort-runequilibriumwilleventuallyadjusttoalong-runequilibriumwithaA)lowerpricelevelandsmallerrealGDPB)higherpricelevelandlargerrealGDP.C)higherpricelevelandsmallerrealGDP.D)lowerpricelevelandlargerrealGDP.Answer:CTopic:Long-RunMacroeconomicEquilibriumSkill:AnalyticalQuestionhistory:Previousedition,Chapter10AACSB:AnalyticalSkills73)TheabovefigureillustratesA)arecessionarygap.B)afull-employmentequilibrium.C)aninflationarygap.D)anequilibriumattheeconomy'sphysicallimits.Answer:ATopic:RecessionaryGapSkill:AnalyticalQuestionhistory:Previousedition,Chapter10AACSB:AnalyticalSkills?74)Intheabovefigure,ifaggregatedemanddoesnotchangetheshort-runequilibriumwillA)eventuallyadjusttoalong-runequilibriumwithahigherpricelevel.B)willnotadjustonitsown.C)eventuallyadjusttoalong-runequilibriumwithalowerpricelevel.D)Noneoftheaboveanswersarecorrect.Answer:CTopic:Long-RunMacroeconomicEquilibriumSkill:AnalyticalQuestionhistory:Previousedition,Chapter10AACSB:AnalyticalSkills75)Supposetheeconomywasinitiallyinalong-runequilibrium.Thentheworldeconomyexpandssothatforeignincomesrise.U.S.aggregatedemand________andeventuallythemoneywagerate________.A)increases;risesB)increases;fallsC)decreases;risesD)decreases;fallsAnswer:ATopic:Fluctuat(yī)ionsinAggregateDemandSkill:AnalyticalQuestionhistory:Previousedition,Chapter10AACSB:ReflectiveThinking76)Iftheeconomyisinlongrunequilibriumandaggregatedemandincreases,thenintheshortrunA)nothinghappensbecausetheeconomyisinlongrunequilibrium.B)thepricelevelrisesandrealGDPdoesnotchange.C)realGDPincreasesandthepriceleveldoesnotchange.D)thepricelevelrisesandrealGDPincreases.Answer:DTopic:FluctuationsinAggregateDemandSkill:ConceptualQuestionhistory:Previousedition,Chapter10AACSB:ReflectiveThinking77)TheFederalReservelowersinterestrates.Asaresult,intheshortrun,realGDP________andthepricelevel________.A)increases;risesB)increases;fallsC)decreases;risesD)decreases;fallsAnswer:ATopic:FluctuationsinAggregateDemandSkill:ConceptualQuestionhistory:Previousedition,Chapter10AACSB:ReflectiveThinking78)Thegovernmentincreasestaxes.Asaresult,intheshortrun,realGDP________andthepricelevel________.A)increases;risesB)decreases;fallsC)decreases;risesD)increases;fallsAnswer:BTopic:FluctuationsinAggregateDemandSkill:ConceptualQuestionhistory:Previousedition,Chapter10AACSB:ReflectiveThinking79)Intheshortrun,anincreaseingovernmentexpenditureongoodsandservices________realGDPand________thepricelevel.A)increases;risesB)increases;fallsC)decreases;risesD)decreases;fallsAnswer:ATopic:FluctuationsinA(yù)ggregateDemandSkill:ConceptualQuestionhistory:Previousedition,Chapter10AACSB:ReflectiveThinking80)Intheshort-run,adecreaseingovernmentexpenditure________realGDPand________thepricelevel.A)increases;increasesB)increases;decreasesC)decreases;increasesD)decreases;decreasesAnswer:DTopic:FluctuationsinAggregateDemandSkill:ConceptualQuestionhistory:Previousedition,Chapter10AACSB:ReflectiveThinking81)Intheshortrun,anincreaseinaggregatedemandA)lowersthepricelevelanddecreasesrealGDP.B)lowersthepricelevelandincreasesrealGDP.C)raisesthepricelevelandincreasesrealGDP.D)raisesthepricelevelanddecreasesrealGDP.Answer:CTopic:FluctuationsinA(yù)ggregateDemandSkill:ConceptualQuestionhistory:Previousedition,Chapter10AACSB:ReflectiveThinking82)AlowerpricelevelcombinedwithadecreaseinrealGDPoccurswhentheA)short-runaggregatesupplycurveshiftsrightward.B)short-runaggregatesupplycurveshiftsleftward.C)aggregatedemandcurveshiftsrightward.D)aggregat(yī)edemandcurveshiftsleftward.Answer:DTopic:FluctuationsinAggregateDemandSkill:ConceptualQuestionhistory:Previousedition,Chapter10AACSB:ReflectiveThinking83)Intheabovefigure,supposetheeconomyhadbeenat(yī)pointAandnowisatB.WhatcouldhaveleadtothemovementtoB?A)Ataxhike.B)Governmentexpendituresongoodsandservicesincreased.C)Winterstormscausefactoriesinthenorthtobeshutdownforseveralweeks.D)Moneywageratesrose.Answer:BTopic:Fluctuat(yī)ionsinAggregateDemandSkill:AnalyticalQuestionhistory:Previousedition,Chapter10AACSB:AnalyticalSkills84)SupposetheeconomyisatpointB.Iffirmsexpectprofitswillbehigherinthefuture,towhatpointmighttheeconomy'smoveintheshortrun?A)ItstaysatpointB.B)ItshiftstoapointsuchasA.C)ItshiftstoapointsuchasC.D)NoneoftheaboveanswersarecorrectbecauseitistheSAScurvethat(yī)shifts,nottheADcurve.Answer:CTopic:FluctuationsinA(yù)ggregat(yī)eDemandSkill:AnalyticalQuestionhistory:Previousedition,Chapter10AACSB:AnalyticalSkills85)Supposetheeconomyisat(yī)pointB.Ifarecessioninanothercountrydecreasesexports,towhatpointmighteconomymoveintheshortrun?A)ItstaysatpointB.B)ItshiftstoapointsuchasA.C)ItshiftstoapointsuchasC.D)NoneoftheaboveanswersarecorrectbecauseitistheSAScurvethatshifts,nottheADcurve.Answer:BTopic:FluctuationsinAggregateDemandSkill:AnalyticalQuestionhistory:Previousedition,Chapter10AACSB:AnalyticalSkills86)ThefigureillustratesaggregatedemandandaggregatesupplyinSparta.WhichofthefollowingeventswilldecreaseSparta'srealGDPintheshortrun?A)adecreaseintaxesB)afallinresourcepricesC)adecreaseingovernmentexpenditureD)anincreaseininvestmentAnswer:CTopic:Fluctuat(yī)ionsinAggregateDemandSkill:ConceptualQuestionhistory:Previousedition,Chapter10AACSB:AnalyticalSkills87)ThefigureaboveillustratesaggregatedemandandaggregatesupplyinSparta.Sparta'spricelevelwillriseabove100if________.A)governmentexpendituredecreasesB)thequantityofmoneyincreasesC)thequantityofcapitalincreasesD)taxesincreaseAnswer:BTopic:FluctuationsinAggregateDemandSkill:ConceptualQuestionhistory:Previousedition,Chapter10AACSB:AnalyticalSkills

88)Inashort-runmacroeconomicequilibrium,potentialGDPexceedsrealGDP.Ifaggregat(yī)edemanddoesnotchange,thentheA)short-runaggregatesupplycurvewillshiftrightwardasthemoneywageratefalls.B)short-runaggregatesupplycurvewillshiftleftwardasthemoneywageraterises.C)long-runaggregatesupplycurvewillshiftleftwardasthemoneywageraterises.D)long-runaggregatesupplycurvewillshiftleftwardasthemoneywagerat(yī)efalls.Answer:ATopic:MovementtotheLong-RunEquilibriumSkill:ConceptualQuestionhistory:Modified10theditionA(yù)ACSB:ReflectiveThinking89)Inashort-runmacroeconomicequilibrium,realGDPexceedspotentialGDP.Ifaggregatedemanddoesnotchange,thentheA)short-runaggregatesupplycurvewillshiftrightwardasthemoneywageratefalls.B)short-runaggregatesupplycurvewillshiftleftwardasthemoneywageraterises.C)long-runaggregatesupplycurvewillshiftleftwardasthemoneywagerat(yī)erises.D)long-runaggregatesupplycurvewillshiftleftwardasthemoneywageratefalls.Answer:BTopic:MovementtotheLong-RunEquilibriumSkill:ConceptualQuestionhistory:Modified10theditionA(yù)ACSB:ReflectiveThinking90)ThecountryofStanleyisatanabove-fullemploymentequilibrium.WhichofthefollowingeventswillreturnStanleytofull-employment?A)anincreaseingovernmentexpendituresB)adecreaseintheinterestrateC)anincreaseinthemoneywagerat(yī)eD)anincreaseinthequantityofmoneyAnswer:CTopic:MovementtotheLong-RunEquilibriumSkill:ConceptualQuestionhistory:Previousedition,Chapter10AACSB:ReflectiveThinking91)Aneconomycurrentlyhasainflationarygap.Anincreaseinthemoneywageratewill________theinflat(yī)ionarygapand________thepricelevel.A)decrease;decreaseB)increase;increaseC)increase;decreaseD)decrease;increaseAnswer:DTopic:MovementtotheLong-RunEquilibriumSkill:ConceptualQuestionhistory:Previousedition,Chapter10AACSB:ReflectiveThinking92)Supposethecurrentsituationissuchthatthepricelevelis120,realGDPis$13trillion,andGDPalongthelong-runaggregatesupplycurveis$12.6trillion.Whatwilltakeplacetorestorethelong-runequilibrium?A)Thepricelevelwillfalluntillong-runaggregatesupplyincreasesto$13trillion.B)ThepricelevelwillfallandmoneywagerateswillriseuntilrealGDPalongthelong-runaggregat(yī)esupplycurveis$13trillion.C)MoneywagerateswillriseuntilrealGDPis$12.6trillion.D)Aggregat(yī)edemandwillincreaseuntilbothshort-runandlong-runaggregatesupplyequal$13trillion.Answer:CTopic:MovementtotheLong-RunEquilibriumSkill:ConceptualQuestionhistory:Previousedition,Chapter10AACSB:ReflectiveThinking93)Thelong-runaggregatesupplycurveisverticalat$12trillionbuttheshort-runaggregatesupplycurveintersectstheaggregatedemandcurveat$13trillion.WeknowthatA)theeconomyisproducingbelowfullemploymentintheshortrun,andwilladjustbyhiringmoreworkers,thusdecreasingunemployment.B)thepricelevelistoohigh.Thelong-runequilibriumwilloccurwithalowerpricelevel.C)adjustmentswilloccursothatthelong-runaggregatesupplyequals$13trillion.D)adjustmentswilloccursothattheshort-runaggregatesupplyeventuallyintersectstheaggregat(yī)edemandcurveat$12trillion.Answer:DTopic:MovementtotheLong-RunEquilibriumSkill:ConceptualQuestionhistory:Previousedition,Chapter10AACSB:ReflectiveThinking94)Inlong-runmacroeconomicequilibrium,theA)realwageratehasadjustedsothattheeconomyisontheshort-runaggregat(yī)esupplycurvebutnotonthelong-runaggregatesupplycurve.B)long-runaggregatesupplycurvehasshiftedsothatpotentialGDPequalsrealGDP.C)aggregatedemandcurveadjuststothepointwherethelong-runaggregatesupplycurveandtheshor

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