final_prep

B)there is no unemployment but there is not necessarily full employment.

C)there is no unemployment and there is full employment.

D)None of the above is correct.

219) For movements along the long-run aggregate supply curve,

219) _____

A)potential GDP is dependent on the price level.

B)the price level and the money wage rate change by the same percentage.

C)the prices of goods and services change while the prices of productive resources hold steady.

D)All of the above are correct.

220)The curve labeled A in the above figure is a

A)short-run aggregate demand curve.

C)long-run aggregate supply curve.

220) _____

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

221) The short-run aggregate supply curve

221) _____

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)relates 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.

222)	Moving upward along the SAS results in a ________ in the price level and ________ in real GDP.				222)	_____
	A) fall; a decrease	B) rise; a decrease	C) rise; an	D) fall; an increase
			increase
223)	Along a short-run aggregate supply curve, a decrease in the price level means that				223)	_____

A)more output is produced as firms increase production because wages fall more than the price level falls, making it profitable to hire more workers.

B)more output is produced as consumer demand increases.

C)output does not change because firms do not change the quantity they produce.

D) less output is produced as firms decrease production.
224) A change in ________ results in a movement along the short-run aggregate supply curve but no		224) _____
shift in the short-run aggregate supply curve.
A) the money wage rate	B) the quantity of capital
C) the price level	D) technology

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

225) _____

A)is 110.

B)is below 100.

C)is above 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.

226) In the above figure, which movement illustrates the impact of a falling price level and a constant mon ey

wage	226)				____
rate?					_
	A) E to I	B) E to F	C) E to H	D) E to J
227)	In the above figure, which movement illustrates the impact of a rising price level and a constant				227)	_____
	money wage rate?
	A) E to I	B) E to F	C) E to K	D) E to G
228)	In the above figure, which movement illustrates the impact of the price level and money wage				228)	_____
	rate falling at the same rate?
	A) E to K	B) E to H	C) E to G	D) E to J
229)	Which of the following changes does NOT shift the long-run aggregate supply curve?				229)	_____
	A) a rise in number of college graduates in the labor force
	B) a fall in the price level
	C) a tax hike that reduces the capital stock
	D) a decrease in the labor force
230)	The land of Ur increases its capital stock. As a result, the long-run aggregate supply curve shifts				230)	_____
	________ 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
231)	A major technological advance shifts the				231)	_____

A)long-run aggregate supply curve rightward and the short-run aggregate supply curve leftward.

B)long-run aggregate supply curve rightward but does not shift the short-run aggregate supply curve.

C)long-run and the short-run aggregate supply curves rightward.

D)short-run aggregate supply curve rightward but does not shift the long-run aggregate supply curve.

232) In the above figure, the economy is at point A when the money wage rate and the price level	232) _____
both fall by 10 percent. Firms will be willing to supply output equal to

A)more than $12.0 trillion

B)less than $12.0 trillion

C)$12.0 trillion

D)Without more information, it is impossible to determine which of the above answers is correct.

233) In the above figure, the economy is at point A. Then the price level falls to 90 while the money	233) _____
wage rate does not change. Firms will be willing to supply output equal to

A)more than $12.0 trillion

B)$12.0 trillion

C)less than $12.0 trillion

D)Without more information, it is impossible to determine which of the above answers is correct.

234)	In the above figure, which part corresponds to a destruction of part of the nation's capital stock?				234)	_____
	A) Figure A	B) Figure B	C) Figure C	D) Figure D
235)	In the above figure, which point corresponds to an increase in technology?				235)	_____
	A) Figure A	B) Figure B	C) Figure C	D) Figure D
236)	In the above figure, which part corresponds to an increase in the money wage rate?				236)	_____
	A) Figure A	B) Figure B	C) Figure C	D) Figure D
237)	The aggregate demand curve shows				237)	_____

A)total expenditures at different levels of national income.

B)that real income is directly (positively) related to the price level.

C)the quantity of real GDP demanded at different price levels.

D)All of the above answers are correct.

238) The aggregate demand curve A) has a positive slope.

C) is horizontal.

238) _____

B) has a negative slope. D) is vertical.

239)	Other things equal, along the aggregate demand curve, a higher price level is associated with	239)	_____
	A) a decrease in the quantity of real GDP demanded.
	B) higher income levels.
	C) an increase in the quantity of real GDP demanded.
	D) a decrease in the quantity of nominal GDP demanded.
240)	The aggregate demand curve shows that, if other factors are held constant, a	240)	_____

A)higher price level results in a lower interest rate.

B)lower price level results in inflationary conditions.

C)higher price level results in an increase in the quantity of real GDP demanded.

D)higher price level results in a decrease in the quantity of real GDP demanded.

241) The quantity of real GDP demanded equals $12.4 trillion when the GDP deflator is 95. If the GDP 241) _____

deflator falls to 90, the quantity of real GDP demanded equals

A)less than $12.4 trillion.

B)$12.4 trillion.

C)more than $12.4 trillion.

D)more information is needed to determine if the quantity of real GDP demanded increases, decreases, or does not change.

242)	Which of the following changes while moving along the aggregate demand curve?		242)	_____
	A) future incomes of households	B) the amount of money in the economy
	C) future profits from investment projects	D) the price level
243)	According to the wealth effect, if real wealth decreases then people		243)	_____

A)decrease their consumption expenditure.

B)do not respond if their nominal wealth does not change.

C)increase their consumption expenditure.

D)decrease their consumption expenditure only if their nominal wealth also decreases.

244)	An individual holds $10,000 in a checking account and the price level rises significantly. Hence	244)	_____
	A) the individual's real wealth decreases but real national wealth increases.
	B) there is no change in the individual's real wealth.
	C) the individual's wealth increases.
	D) the individual's real wealth and consumption expenditure decrease.
245)	The intertemporal substitution effect refers to substitution of	245)	_____

A)goods and services produced domestically for goods and services produced in another country.

B)goods and services today for goods and services in the future.

C)goods for services.

D)goods and services for less expensive goods and services.

246) According to the intertemporal substitution effect, when the price level rises and other things		246) _____
remain the same
A) the interest rate rises.	B) the quantity of money increases.
C) government taxes rise.	D) the interest rate falls.

247) Substitution effects help explain the slope of the aggregate demand curve. One substitution	247) _____
effect refers to the

A)direct relationship between the interest rate and the real value of wealth.

B)effect on investment expenditures that result from a change in interest rates produced by a change in the price level.

C)change in wealth that results from a change in the interest rate.

D)inverse relationship between the interest rate and the price level.

248)	In the above figure, the economy is initially at point B. Then the price level falls by 10. The		248)	_____
	wealth effect will help
	A) move the economy to point C.	B) move the economy to point A.
	C) move the economy to point D.	D) keep the economy to point B.
249)	In the above figure, the economy initially is at point B. Then price level rises by 10. The wealth		249)	_____
	effect will help
	A) move the economy to point A.	B) move the economy to point D.
	C) keep the economy to point B.	D) move the economy to point C.
250)	A decrease in expected future income		250)	_____

A)decreases the aggregate quantity demanded.

B)increases the aggregate quantity demanded.

C)decreases aggregate demand.

D)increases aggregate demand.

251) A rise in the expected future inflation rate

251) _____

A)decreases the aggregate quantity demanded.

B)increases the aggregate quantity demanded.

C)decreases aggregate demand.

D)increases aggregate demand.

252)	In the above figure, the economy is initially at point B. If the government decreases transfer		252)	_____
	payments, there is
	A) a shift to AD2.	B) a movement to point A.
	C) a shift to AD1.	D) a movement to point C.
253)	In the above figure, the economy is initially at point B. If taxes increase, there is		253)	_____
	A) a movement to point A.	B) a shift to AD2.
	C) a movement to point C.	D) a shift to AD1.

254) In the above figure, if the economy is at point a, an increase in ________ will move the economy	254) _____
to ________.
A) expected future income; point d
B) expected future income; point c
C) real wealth from the fall in the price level; point b
D) real wealth from the fall in the price level; point c

255) In the above figure, if the economy is at point a, an increase in ________ will move the economy	255) _____
to ________.
A) expected future income; point b
B) expected future income; point d
C) real wealth from a fall in the price level; point d
D) real wealth; point d

256) In the above figure, the movement from point B to point A might be the result of

256) _____

A)a fall in the price level.

B)an increase in government expenditures because of a war.

C)an increase in government expenditures because of increases in education expenditures.

D)an increase in the demand for manufacturing goods because of new technology.

257)	As the price level falls, the quantity of real wealth ________ and the aggregate quantity of real		257)	_____
	GDP demanded ________.
	A) increases; increases	B) decreases; increases
	C) increases; decreases	D) decreases; decreases
258)	The AS/AD model studies the relationship between		258)	_____
	A) the price level and unemployment.	B) unemployment and real GDP.
	C) nominal GDP and inflation.	D) the price level and real GDP.
259)	Short-run macroeconomic equilibrium occurs when the quantity of real GDP demanded		259) _____
	________.
	A) equals the quantity of real GDP supplied	B) equals full-employment GDP
	C) does not equal full-employment GDP	D) equals potential GDP
260)	In the macroeconomic short-run equilibrium,		260)	_____

A)there is frictional unemployment.

B)the economy might not be at the natural unemployment. rate

C)there is structural unemployment.

D)All of the above answers are correct.

				Real GDP supplied
			Rea
			l
			GD	Sho	Lon
			P
	Pric			rt	g
			de
	e			run	run
			ma
	lev			(do	(do
			nde
	el			llar	llar
			d
				s)	s)
			(do
			llar
			s)
90		700		300	600
100		600		400	600
110		500		500	600
120		400		600	600

261) The table above gives the aggregate demand and aggregate supply schedules in Lotus Land.							261)	_____
	With no changes in aggregate demand or long-run aggregate supply, in long-run
	macroeconomic equilibrium, the price level will be ________ and real GDP will be ________.
	A) 100; $600		B) 110; $500		C) 120; $400	D) 90; $400
	Aggreg		Short-r	Long-r
			un	un
	ate
			aggreg	aggreg
	deman
			ate	ate
	d
			supply	supply
	(trillion
			(trillion	(trillion
	s of
			s of	s of
	2000
			2000	2000
	dollars)
			dollars)	dollars)
130	8		12	10
120	9		11	10
110	10		10	10
100	11		9	10
90	12		8	10
262) The data in the above table indicate that when the price level is 100,							262)	_____

A)firms have unexpectedly high inventories, so prices fall.

B)firms will plan to decrease the level of output.

C)firms have unexpectedly low inventories, so prices will rise.

D)inventories are at levels planned by firms.

263) The data in the above table indicate that when the price level is 100,	263) _____
A) inventories rise and the price level falls.
B) the economy is in a long-run macroeconomic equilibrium.
C) inventories fall and the price level rises.
D) the unemployment rate is at its equilibrium level.

264) In the figure above, in the short-run macroeconomic equilibrium,		264) _____
A) real GDP is less than potential GDP.	B) real GDP is greater than potential GDP.
C) there is no structural unemployment.	D) real GDP equals potential GDP.

265) The above figure depicts an economy with a short-run equilibrium		265) _____
A) below full employment.	B) at full employment.
C) at higher than full-employment.	D) None of the above answers are correct.