Question 1

List three changes that lead to a shift of the aggregate supply curve.Discuss why each change shifts the aggregate supply curve and in which direction the curve shifts.

Accepted Answer

The answer of List three changes that lead to a...

Question 2

If the AD curve shifts rightward,then
A)both the price level and real GDP will increase.
B)the price level will increase,but no change will occur in real GDP.
C)the price level will not change,but real GDP will increase.
D)both the price level and real GDP will decrease.
E)potential GDP increases.

Accepted Answer

A rightward shift in the AD curve represents an increase in aggregate demand. This means that both the price level and real GDP will increase, as firms are selling more goods and services at higher prices.

Question 3

An economy is at a full-employment equilibrium,and then the aggregate demand curve shifts leftward.As a result,the price level ________ and real GDP ________.
A)rises;increases
B)rises;decreases
C)falls;increases
D)falls;decreases
E)falls;does not change

Accepted Answer

When the aggregate demand curve shifts leftward, it means that there is less demand for goods and services in the economy. As a result, firms will reduce production and lay off workers, leading to a decrease in real GDP. In the short run, prices may not adjust quickly enough, leading to a decrease in the price level. Therefore, the correct answer is D) falls; decreases.

Question 4

Does a rise in the price level bring a movement along the aggregate supply curve or does it shift the aggregate supply curve?

Accepted Answer

The answer of Does a rise in the price level...

Question 5

Which of the following could result in a recession?
A)a rise in the price of oil
B)an increase in investment
C)a tax cut
D)an increase in the quantity of money
E)an increase in government expenditures on goods and services

Accepted Answer

A rise in the price of oil can increase production costs, reduce consumer spending, and lead to higher inflation, potentially slowing down economic growth and leading to a recession.

Question 6

What factor changes the quantity of real GDP supplied and results in a movement along the AS curve?

Accepted Answer

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Question 7

An increase in the price of oil ________ aggregate supply,shifting the aggregate supply curve ________ and potentially bringing the ________ phase of the business cycle.
A)decreases;rightward;expansion
B)increases;rightward;recession
C)increases;rightward;expansion
D)decreases;leftward;recession
E)decreases;rightward;recession

Accepted Answer

An increase in the price of oil would increase the cost of production for firms, which would lead to a decrease in aggregate supply. This would shift the aggregate supply curve leftward. Additionally, if aggregate demand remains unchanged, the economy could enter a recessionary phase of the business cycle due to decreased output and higher unemployment.

Question 8

Give examples of factors that decrease aggregate supply.Which way does the AS curve shift?

Accepted Answer

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Question 9

An increase in government expenditure on goods and services ________ aggregate demand,shifting the aggregate demand curve ________ and potentially bringing the ________ phase of the business cycle.
A)decreases;rightward;expansion
B)increases;rightward;recession
C)decreases;leftward;recession
D)increases;rightward;expansion
E)increases;leftward;recession

Accepted Answer

An increase in government expenditure on goods and services increases aggregate demand, shifting the aggregate demand curve rightward and potentially bringing the expansion phase of the business cycle. This is because an increase in government expenditure leads to an increase in spending, which stimulates economic growth and increases demand for goods and services, leading to an expansionary phase of the business cycle.

Question 10

The government passes a law which doubles the wages of all workers.Aggregate supply will ________,and real GDP will ________,and the price level will ________.
A)increase;remain the same;increase.
B)remain the same;increase;increase.
C)increase;increase;remain the same.
D)decrease;increase;increase.
E)decrease;decrease;increase.

Accepted Answer

Doubling wages increases production costs, leading to a decrease in aggregate supply. This can reduce real GDP and increase the price level due to higher costs being passed on to consumers.

Question 11

The the government increases the level of government expenditure.If there is no change in the aggregate supply curve,then aggregate demand will ________,real GDP will ________,and the price level will ________.
A)increase;remain the same;increase
B)remain the same;increase;increase
C)increase;increase;increase
D)decrease;increase;increase
E)decrease;remain the same;decrease

Accepted Answer

An increase in government expenditure will increase aggregate demand, as it is a component of GDP. If there is no change in aggregate supply, a shift in aggregate demand will result in an increase in real GDP and an increase in the price level. Therefore, Option C is the correct answer.

Question 12

Real GDP definitely increases if
A)both the AD curve and the AS curve shift rightward.
B)both the AD curve and AS curve shift leftward.
C)the AD curve shifts leftward and the AS curve shifts rightward.
D)the AS curve shifts leftward and the AD curve does not shift.
E)potential GDP decreases so that real GDP exceeds potential GDP.

Accepted Answer

When both the AD curve and the AS curve shift rightward, it means that there is an increase in both demand and supply in the economy. This would lead to an increase in output and prices, resulting in a higher real GDP.

Question 13

If the money wage rate is constant and the price level increases,what happens to the real wage rate,firms' profits,and the aggregate quantity supplied?

Accepted Answer

The answer of If the money wage rate is constant...

Question 14

If the AD curve shifts rightward while the AS curve and potential GDP don't change,then
A)the economy will move from a peak into recession.
B)the expansion phase of the business cycle occurs.
C)there will be no change in real GDP,so the economy is at the peak of the cycle.
D)there will be no change in real GDP,so the economy is at the trough of the cycle.
E)real GDP does not change.

Accepted Answer

If the AD curve shifts rightward while the AS curve and potential GDP don't change, it means that there is an increase in aggregate demand which leads to an increase in real GDP and the price level. This is the characteristic of the expansion phase of the business cycle. Therefore, the correct answer is B.

Question 15

How does a fall in the money wage rate affect the aggregate supply curve?

Accepted Answer

The answer of How does a fall in the money...

Question 16

________ could result in a recession because it would ________.
A)A rise in the price of oil;shift the AS curve to the left.
B)An increase in investment;shift the AD curve to the right.
C)A tax cut;shift the AS curve to the left.
D)An increase in the quantity of money;shift the AS curve to the right.
E)An increase in government expenditures on goods and services;shift the AD curve to the right.

Accepted Answer

A rise in the price of oil would increase production costs for firms, leading to a decrease in aggregate supply (AS) and a leftward shift of the AS curve. This shift would lead to higher prices and lower output, potentially causing a recession. Choices B, C, D, and E could all have various effects on the economy, but are not necessarily associated with a risk of recession.

Question 17

A technological advance ________ aggregate supply,shifting the aggregate supply curve ________ and potentially bringing the ________ phase of the business cycle.
A)decreases;rightward;expansion
B)decreases;leftward recession
C)increases;rightward;expansion
D)increases;rightward;recession
E)increases;leftward;expansion

Accepted Answer

A technological advance increases productivity, thus increasing aggregate supply and shifting the aggregate supply curve rightward. This increase in supply can lead to an expansion phase of the business cycle as firms are able to produce more goods and services at lower costs.

Question 18

Name the four factors of production that determine the quantity of real GDP supplied.Which one fluctuates the most over the course of the business cycle?

Accepted Answer

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Question 19

A crisis in the Middle East drastically raises the price of petroleum.If the aggregate demand curve does not shift,then aggregate supply will ________,real GDP will ________,and the price level will ________.
A)increase;remain the same;increase
B)decrease;decrease;increase
C)increase;increase;increase
D)remain the same;increase;increase
E)decrease;remain the same;decrease

Accepted Answer

A crisis in the Middle East that raises petroleum prices increases production costs, causing the aggregate supply to decrease. This leads to a decrease in real GDP and an increase in the price level, as higher costs reduce output and raise prices.

Question 20

The global economy enters a recession,thereby decreasing the level of U.S.exports.If the aggregate supply curve does not shift,then aggregate demand will ________,real GDP will ________,and the price level will ________.
A)increase;remain the same;increase
B)remain the same;increase;increase
C)increase;increase;remain the same
D)decrease;increase;increase
E)decrease;decrease;decrease

Accepted Answer

A recession in the global economy would lead to a decrease in U.S. exports, reducing aggregate demand. With the aggregate supply curve unchanged, this decrease in aggregate demand would lead to a decrease in real GDP and a decrease in the price level.

Quiz 19: Aggregate Supply and Aggregate Demand

List three changes that lead to a shift of the aggregate supply curve.Discuss why each change shifts the aggregate supply curve and in which direction the curve shifts.

If the AD curve shifts rightward,then

An economy is at a full-employment equilibrium,and then the aggregate demand curve shifts leftward.As a result,the price level and real GDP .

Does a rise in the price level bring a movement along the aggregate supply curve or does it shift the aggregate supply curve?

Which of the following could result in a recession?

What factor changes the quantity of real GDP supplied and results in a movement along the AS curve?

An increase in the price of oil aggregate supply,shifting the aggregate supply curve and potentially bringing the phase of the business cycle.

Give examples of factors that decrease aggregate supply.Which way does the AS curve shift?

An increase in government expenditure on goods and services aggregate demand,shifting the aggregate demand curve and potentially bringing the phase of the business cycle.

The government passes a law which doubles the wages of all workers.Aggregate supply will ,and real GDP will ,and the price level will .

The the government increases the level of government expenditure.If there is no change in the aggregate supply curve,then aggregate demand will ,real GDP will ,and the price level will .

Real GDP definitely increases if

If the money wage rate is constant and the price level increases,what happens to the real wage rate,firms' profits,and the aggregate quantity supplied?

If the AD curve shifts rightward while the AS curve and potential GDP don't change,then

How does a fall in the money wage rate affect the aggregate supply curve?

could result in a recession because it would .

A technological advance aggregate supply,shifting the aggregate supply curve and potentially bringing the phase of the business cycle.

Name the four factors of production that determine the quantity of real GDP supplied.Which one fluctuates the most over the course of the business cycle?

A crisis in the Middle East drastically raises the price of petroleum.If the aggregate demand curve does not shift,then aggregate supply will ,real GDP will ,and the price level will .

The global economy enters a recession,thereby decreasing the level of U.S.exports.If the aggregate supply curve does not shift,then aggregate demand will ,real GDP will ,and the price level will .