Deck 10: Aggregate Supply and Aggregate Demand

Question 1

When the price level rises, the long-run aggregate supply curve .

A) shifts rightward
B) does not shift
C) shifts leftward
D) slopes upward

Answer 1

B

Question 2

An aggregate supply curve depicts the relationship between

A) household expenditures and household income.
B) the price level and nominal GDP.
C) the price level and the aggregate quantity demanded.
D) the price level and the aggregate quantity supplied.

Answer 2

D

Question 3

The long-run aggregate supply curve is because along it, as prices rise, the money wage rate .

A) vertical; falls
B) upward sloping; stays constant
C) vertical; rises
D) upward sloping; falls

Answer 3

C

Question 4

Which of the following statements is TRUE?

A) The long-run aggregate demand curve is upward sloping.
B) The long-run aggregate supply curve is upward sloping.
C) The short-run aggregate supply curve is vertical.
D) The long-run aggregate supply curve is vertical.

Question 5

The long-run aggregate supply curve shows the

A) maximum GDP the nation will ever produce.
B) level of real GDP associated with a constant price level.
C) full-employment level of real GDP.
D) level of output at which real GDP equals nominal GDP.

Question 6

The quantity of real GDP supplied depends on the

A) price level, the unemployment rate, and the quantity of government expenditures on goods and services.
B) level of aggregate demand.
C) quantity of labor, the quantity of capital, and the state of technology.
D) quantity of capital, bonds, and stocks.

Question 7

In the macroeconomic long run,

A) real GDP equals potential GDP.
B) regardless of the price level, the economy is producing at potential GDP.
C) the economy is at full employment.
D) All of the above are correct.

Question 8

When the labor market is int full employment,

A) the price level is stable.
B) the price level equals potential prices.
C) real GDP equals potential GDP.
D) the SAS curve is horizontal.

Question 9

For movements along the long-run aggregate supply curve,

A) the prices of goods and services change while the prices of productive resources hold steady.
B) the price level and the money wage rate change by the same percentage.
C) potential GDP is dependent on the price level.
D) All of the above are correct.

Question 10

In the macroeconomic short run,

A) actual real GDP always equals potential GDP.
B) the unemployment rate is zero.
C) by definition, the economy is always moving away from full employment.
D) actual real GDP may be less than or more than potential GDP.

Question 11

The long-run aggregate supply curve is

A) vertical at the full employment level of real GDP.
B) horizontal at the full employment price level.
C) upward sloping because of the effects of price level changes on real GDP.
D) the same as the short-run aggregate supply curve.

Question 12

In the macroeconomic long run,

A) GDP always is below potential GDP.
B) there is full employment with no unemployment.
C) there is full employment and real GDP is equal to potential GDP.
D) output always is above potential GDP.

Question 13

The long-run aggregate supply LAS) curve

A) is horizontal.
B) has a positive slope.
C) is vertical.
D) has a negative slope.

Question 14

The supply of real GDP is a function of

A) the quantities of labor, capital and the state of technology.
B) the sum of wages, salaries, corporate profits, rents and interest.
C) the total expenditures of consumers, investors and government.
D) only the state of technology.

Question 15

The long-run aggregate supply curve is vertical because

A) potential GDP is independent of the price level.
B) there is no cyclical inflation.
C) at full employment prices are stable.
D) the money wage rate increases faster than the price level.

Question 16

We distinguish between the long-run aggregate supply curve and the short-run aggregate supply curve. In the long run

A) the aggregate supply curve is horizontal while in the short run it is upward sloping.
B) real GDP equals potential GDP.
C) the price level is constant but in the short run it fluctuates.
D) technology is fixed but not in the short run.

Question 17

The long-run aggregate supply curve illustrates the

A) surpluses, shortages and equilibrium level of GDP.
B) amount of products producers offer at various prices when money wages and other resource prices do not change.
C) relationship of the price level and real GDP when the economy is at full employment.
D) relationship of aggregate supply and aggregate demand.

Question 18

In the long-run

A) real GDP is equal to potential GDP.
B) the aggregate supply curve is upward sloping.
C) aggregate supply depends on the price level.
D) All of the above answers are correct.

Question 19

The long-run aggregate supply curve is the relationship between the quantity of real GDP supplied and when .

A) the price level; real GDP equals potential GDP
B) the price level; real GDP equals nominal GDP
C) real GDP demanded; the price level does not change
D) real GDP demanded; the wage rate is constant

Question 20

When talking about aggregate supply, it is necessary to

A) focus on the short run.
B) distinguish between long-run aggregate supply and short-run aggregate supply.
C) focus on the long run.
D) distinguish between long-run full employment and short-run full-employment.

Question 21

Which of the following is true about the long-run aggregate supply curve?

A) It does not shift in response to temporary changes in aggregate demand.
B) It is vertical at the level of potential GDP.
C) It shows the relationship between the price level and real GDP when the economy is at full employment.
D) All of the above are true.

Question 22

Moving upward along the SAS results in a in the price level and in real GDP.

A) rise; an increase
B) fall; a decrease
C) fall; an increase
D) rise; a decrease

Question 23

Which of the following events will increase long-run aggregate supply?

A) a decrease in expected profit
B) an advance in technology
C) an increase in the interest rate
D) an increase in resource prices

Question 24

The curve labeled A in the above figure will shift rightward when

A) technology increases.
B) the price level rises.
C) the price level falls.
D) population falls.

Question 25

The short-run aggregate supply curve is upward sloping because

A) money wage rates do not immediately change when the price level changes.
B) most business firms operate with long-term contracts for output but not labor.
C) a lower price level creates a wealth effect.
D) lower taxes motivate people to work more.

Question 26

The short-run aggregate supply curve is upward sloping because in the short run the

A) both the money wage rate and the price level change.
B) money wage rate changes but the price level does not.
C) neither the money wage rate nor the price level can change.
D) price level changes but the money wage rate does not.

Question 27

Moving along the short-run aggregate supply curve, .

A) the money wage rate, the prices of other resources, and potential GDP remain constant
B) real GDP equals nominal GDP
C) the real wage rate is constant
D) real GDP equals potential GDP

Question 28

A change in results in a movement along the short -run aggregate supply curve but does not shift the short-run aggregate supply curve.

A) the quantity of capital
B) technology
C) the price level
D) the money wage rate

Question 29

In the short run, firms expand their production when the price level rises because

A) firms can increase their profits by increasing their maintenance.
B) the money wage rate remains constant so the higher prices for their product makes it profitable for firms to expand production.
C) the higher prices allow the firm to hire more workers by offering higher wages, thereby increasing productivity and profits.
D) each firm must keep its production up to the level of its rivals, and some firms will expand production as the price level increases.

Question 30

Along a short-run aggregate supply curve, a decrease in the price level means that

A) output does not change because firms do not change the quantity they produce.
B) more output is produced as consumer demand increases.
C) more output is produced as firms increase production because wages fall more than the price level falls, making it profitable to hire more workers.
D) less output is produced as firms decrease production.

Question 31

The curve labeled A in the above figure is a

A) long-run aggregate supply curve.
B) short-run aggregate supply curve.
C) long-run aggregate demand curve.
D) short-run aggregate demand curve.

Question 32

Which of the following does NOT shift the short-run aggregate supply curve?

A) a change in the price level
B) a change in the money wage rate
C) a reduction in the price of a raw material
D) technological progress

Question 33

The short-run aggregate supply curve

A) illustrates the level of potential real GDP.
B) shows the impact changes in the price level have on the quantity of real GDP when resource prices are constant.
C) is vertical.
D) shifts whenever the price level changes.

Question 34

In the short-run

A) the price level does not change.
B) the aggregate supply curve is upward sloping.
C) the money wage rate can change.
D) real GDP is always equal to potential GDP.

Question 35

Which of the following occurs while moving along a short-run aggregate supply curve?

A) Neither the price level nor the money wage rate changes.
B) The money wage rate and the price level change by the same percentage.
C) The price level changes and the money wage rate is constant.
D) The money wage rate changes and the price level is constant.

Question 36

For movements along the short-run aggregate supply curve,

A) potential GDP remains constant.
B) the money wage rate is constant.
C) the real wage rate changes.
D) All of the above are correct.

Question 37

The short-run aggregate supply curve

A) shows a negative relationship between the price level and real national income holding constant potential GDP and all resource prices.
B) shows what each producer is willing and able to produce at each level of income holding constant potential GDP and all resource prices.
C) shows the relationship between aggregate production and the price level holding constant potential GDP and all resource prices.
D) becomes vertical if there is excess production capacity within the economy.

Question 38

The short-run aggregate supply curve

A) has a negative slope.
B) is vertical.
C) is horizontal.
D) has a positive slope.

Question 39

If the money wage and other resource prices do not change when the price level rises by 10 percent, .

A) the short-run aggregate supply curve shifts leftward
B) there is movement along the short-run aggregate supply curve
C) the long-run aggregate supply curve shifts leftward
D) the long-run aggregate supply curve shifts rightward

Question 40

The positive relationship between short-run aggregate supply and the price level indicates that, in the short run,

A) firms produce more output as the price level falls.
B) the money wage rate increases when moving along the short-run aggregate supply curve.
C) firms produce more output as the price level rises.
D) lower price levels are more profitable for firms.

Question 41

Suppose the price level, the money wage, and the price of all other resources rise by 10 percent. This set of changes leads to

A) an upward movement along the LAS curve.
B) an upward movement along the SAS curve.
C) a downward movement along the LAS curve.
D) a leftward shift of the LAS curve.

Question 42

The SAS curve shifts if there is a change in

A) nominal GDP.
B) potential GDP.
C) real GDP.
D) the price level.

Question 43

Which of the following changes does NOT shift the short-run aggregate supply curve?

A) an increase in the price level
B) an increase in technology
C) an increase in the money wage rate
D) an increase in the quantity of capital

Question 44

-In the figure above, potential GDP equals

A) $13.5 trillion.
B) $13.0 trillion.
C) $12.5 trillion.
D) None of the above answers is correct.

Question 45

Which of the following events will increase short-run aggregate supply?

A) an advance in technology
B) an increase in foreign income
C) an increase in resource prices
D) an increase in the natural unemployment rate

Question 46

A decrease in the price level accompanied by no change in the money wage rate leads to
Movement along the aggregate supply curve.

A) a downward; long-run
B) an upward; long-run
C) an upward; short-run
D) a downward; short-run

Question 47

All of the following shift the LAS curve EXCEPT

A) technological progress.
B) a change in the capital stock.
C) an increase in the money wage rate.
D) an increase in the stock of human capital.

Question 48

In the above figure, which movement illustrates the impact of the price level and money wage rate falling at the same rate?

A) E to H
B) E to J
C) E to G
D) E to K

Question 49

Which of the following statements regarding aggregate supply are correct?

A) Moving along the long-run aggregate supply curve, the money wage rate changes but the price level is constant.
B) Moving along the short-run aggregate supply curve, the money wage rate changes but the price level is constant.
C) Moving along the long-run aggregate supply curve, both the price level and the money wage rate change by the same percentage.
D) Moving along the short-run aggregate supply curve, both the price level and the money wage rate change by the same percentage.

Question 50

In the above figure, which movement illustrates the impact of a falling price level and a constant money wage rate?

A) E to F
B) E to J
C) E to I
D) E to H

Question 51

Suppose the price level rises and the money wage remains constant. This set of changes leads to

A) an upward movement along the LAS curve.
B) a leftward shift of the SAS curve.
C) an upward movement along the SAS curve.
D) a leftward shift of the SAS curve and the LAS curve.

Question 52

In the above figure, which movement illustrates the impact of a constant price level and a rising money wage rate?

A) E to F
B) E to I
C) E to J
D) E to H

Question 53

The short-run aggregate supply curve shifts when
i. the full-employment quantity of capital changes.
ii. technology advances.

A) neither i nor ii
B) i only
C) ii only
D) i and ii

Question 54

In the above figure, the economy will be at full employment if the price level

A) is below 100.
B) is above 110.
C) is 110.
D) All of the above are possible because the economy will be at full employment at any price level at, above, or below 110.

Question 55

-In the figure above, the economy is at point A when the price level rises to 120. Money wage rates and other resource prices remain constant. Firms are willing to supply output equal to

A) $13.5 trillion.
B) $12.5 trillion.
C) $13.0 trillion.
D) None of the above answers is correct.

Question 56

In the above figure, which movement illustrates the impact of a rising price level and a constant money wage rate?

A) E to F
B) E to I
C) E to G
D) E to K

Question 57

Moving along a short-run aggregate supply curve, resource prices , the money rate wage
, and potential GDP .

A) change; does not change; does not change
B) do not change; does not change; does not change
C) do not change; changes; does not change
D) do not change; does not change; changes

Question 58

Which of the following changes does NOT shift the long-run aggregate supply curve?

A) a tax hike that reduces the capital stock
B) a fall in the price level
C) a rise in number of college graduates in the labor force
D) a decrease in the labor force

Question 59

-In the figure above, the economy is at point A when the price level falls to 100. Money wage rates and all other resource prices remain constant. Firms are willing to supply output equal to

A) $13.5 trillion.
B) $13.0 trillion.
C) $12.5 trillion.
D) None of the above answers is correct.

Question 60

The SAS curve and the LAS curve

A) are parallel at potential GDP.
B) intersect at potential GDP.
C) are perpendicular to one another at potential GDP.
D) None of the above answers is correct.

Question 61

Which of the following directly shifts the short-run aggregate supply curve?

A) a change in resource prices
B) a change in aggregate demand
C) a change in the price level
D) all of the above

Question 62

If the full-employment quantity of labor increases, then the

A) SAS curve shifts rightward and the LAS curve does shifts leftward.
B) SAS curve shifts rightward and the LAS curve does not shift.
C) SAS curve shifts rightward and the LAS curve shifts rightward.
D) LAS curve shifts rightward and the SAS curve does not shift.

Question 63

An increase in the amount of human capital the short-run aggregate supply curve and
The long-run aggregate supply curve.

A) shifts; does not shift
B) shifts; shifts
C) does not shift; does not shift
D) does not shift; shifts

Question 64

In the above figure, the short-run aggregate supply curve is SAS₁. If the money wage rate increases, there is

A) a downward movement along SAS₁.
B) a shift to SAS₂.
C) a shift to SAS₀.
D) an upward movement along SAS₁.

Question 65

All of the following shift the short-run aggregate supply curve EXCEPT

A) a change in the money wage rate.
B) a change in the price of a raw material.
C) technological progress.
D) a change in the price level.

Question 66

Suppose there is a temporary increase in the price of oil. This is represented by

A) a leftward shift of the SAS curve.
B) a rightward shift of the SAS curve.
C) a leftward shift of the SAS and the LAS curve.
D) a leftward shift of the LAS curve.

Question 67

When the quantity of capital increases, then the

A) SAS curve shifts rightward and the LAS curve shifts rightward.
B) SAS curve shifts rightward and the LAS curve does not shift.
C) SAS curve shifts rightward and the LAS curve does shifts leftward.
D) LAS curve shifts rightward and the SAS curve does not shift.

Question 68

Which of the following shifts the short-run aggregate supply curve?
I. changes in the size of the labor force
II. changes in the money wage rate

A) II only
B) both I and II
C) neither I nor II
D) I only

Question 69

A change in the full-employment quantity of labor the short-run aggregate supply curve and the long-run aggregate supply curve.

A) shifts; does not shift
B) does not shift; does not shift
C) does not shift; shifts
D) shifts; shifts

Question 70

In the above figure, the short-run aggregate supply curve is SAS₁. Suppose that the price level in the economy increases. As a result there is

A) an upward movement along SAS₁.
B) a shift to SAS₂.
C) a downward movement along SAS₁.
D) a shift to SAS₀.

Question 71

A change in the capital stock the short-run aggregate supply curve and the long-run aggregate supply curve.

A) shifts; shifts
B) does not shift; does not shift
C) shifts; does not shift
D) does not shift; shifts

Question 72

The short-run aggregate supply curve shifts leftward when the

A) availability of on-the-job training expands to all workers.
B) money wage rate increases.
C) price level increases.
D) general level of technology advances.

Question 73

Technological progress will

A) shift the SAS curve rightward but will not shift the LAS curve.
B) shift both the LAS and SAS curves rightward.
C) not shift either the LAS or the SAS curve.
D) shift the LAS curve rightward but will not shift the SAS curve.

Question 74

The short-run aggregate supply curve shifts because of changes in all of the following EXCEPT

A) technological progress.
B) the capital stock.
C) money wage rates.
D) the price level.

Question 75

The land of Ur increases its capital stock. As a result, the long-run aggregate supply curve shifts
And so does the curve.

A) rightward; short-run aggregate supply
B) rightward; aggregate demand
C) leftward; short-run aggregate supply
D) leftward; aggregate demand

Question 76

With an increase in the capital stock, the short-run aggregate supply curve

A) shifts rightward.
B) becomes steeper.
C) shifts leftward.
D) remains as it is.

Question 77

In the above figure, the short-run aggregate supply curve is SAS₁. If technology advances, there is

A) a downward movement along SAS₁.
B) a shift to SAS₂.
C) a shift to SAS₀.
D) an upward movement along SAS₁.

Question 78

Which of the following shifts both the LAS and SAS curves?

A) a change in the money wage rate
B) a simultaneous change in both the price level and the money wage rate
C) an advance in technology
D) a change in the price level

Question 79

In the above figure, the short-run aggregate supply curve is SAS₁. If the prices of resources fall, there is

A) a shift to SAS₀.
B) an upward movement along SAS₁.
C) a downward movement along SAS₁.
D) a shift to SAS₂.

Question 80

A technological advance the long -run aggregate supply curve and the short-run aggregate supply curve.

A) does not shift; does not shift
B) does not shift; shifts
C) shifts; shifts
D) shifts; does not shift