Fill in the blanks to complete the following passage regarding firms' short-run supply.A simple model of a firm describes it as an entity that buys - (for example, labor) and sells - (goods and services). A firm's input prices, which affect costs, are generally - in the short run, while a firm's output prices, which affect revenue, are -. Therefore, an increase in the short-run price level raises revenue - than costs, so firms produce more in the short run. Consequently, the SRAS curve slopes upward.
  • 1- inputs2- outputs3- sticky4- flexible5- more
  • 1- immediately2- a month after3- several years
  • Correct Answer(s)menu costssticky pricesmoney illusion
  • 1- business cycles,2- an economy's growth rate3- less4- aggregate demand-aggregate supply
Put in chronological order the events that take an economy from its original long-run equilibrium to a new long-run equilibrium.
  • 1- stock price2- aggregate3- Gradually4- Short run
  • Correct Answer(s)menu costssticky pricesmoney illusion
  • 1- immediately2- a month after3- several years
  • consumptioninvestmentnext exports
Consider the graph below. Assume that, initially, an economy has long-run aggregate supply corresponding to LRAS, short-run supply corresponding to SRAS1, and aggregate demand corresponding to ADWhere will the new equilibrium be in the long run if a virus renders a significant fraction of the nation's computers unusable for two months before a fix is found? (Do not assume that all curves shown actually come into play.)
  • LRAS
  • SRAS3
  • LRAS2
  • SRAS2
Consider the graph below, and assume that the U.S. economy initially has a short-run aggregate supply curve corresponding to SRASClick on the SRAS curve that would most plausibly result if the Federal Reserve announced a plan to increase the U.S. money supply one year from now, and citizens responded by expecting higher prices in the future.
  • LRAS2
  • SRAS2
  • LRAS
  • SRAS3
There are three reasons for the downward slope of the demand curve: the wealth effect, the interest rate effect, and the international trade effect. Match each effect with the component of aggregate demand it most closely impacts.
  • increase1- The U.S. dollar gains value against foreign currencies.2- An oil cartel raises oil prices.decrease1- American consumers expect higher income in the future.2- U.S. real estate values rise.3- Brazil experiences economic growth and increases its demand for U.S. exports.
  • investment: the interest rate effectnet exports: the international trade effectconsumption: the international trade effect
  • Increase1- The member nations of an oil cartel have internal disputes that lead to a temporary breakdown in the cartel's control of oil prices. 2- Cheap oil floods the world market. American workers expect a surge in their incomes due to upbeat media coverage of the economy.
  • Correct Answer(s)an increase in short-run aggregate supplyan increase in full-employment outpu
Suppose that a new technology, nuclear fusion, makes it much cheaper to generate power. Would this development cause a shift in the short-run aggregate supply curve (SRAS), the long-run aggregate supply curve (LRAS), both, or neither?
  • international trade effect
  • both curve shift
  • long-run aggregate supply
  • LRAS2
Which of the following would result in a decrease in U.S. aggregate demand?
  • Correct Answer(s)1- Many workers signed contracts last year assuming 1% future inflation. This year, it was revealed that current inflation is nearly 5%.2- A mysterious disease kills off half of the nation's corn crop.
  • Correct Answer(s)1-A stock market crash erodes U.S. citizens' retirement savings.2-Buyers become less optimistic about their future income.3-South American nations experience a recession.
  • Correct Answer(s)Long-run aggregate supply equals aggregate demand.Short-run aggregate supply equals aggregate demand.
  • Correct Answer(s)an increase in short-run aggregate supplyan increase in full-employment outpu
Consider the following graph. Assuming that the U.S. economy begins with an aggregate demand curve equal to AD1, click on the aggregate demand curve you would expect to see following a decrease in the value of the U.S. dollar.You read a news article reporting that a nation's real output fell while its inflation rate temporarily jumped up. From this you can conclude that the recession was likely caused by which of these scenarios?
  • AD2 - 95
  • SRAS2
  • LRAS
  • AD2
Which of these are consequences of an increase in long-run aggregate supply?
  • Correct Answer(s)Long-run aggregate supply equals aggregate demand.Short-run aggregate supply equals aggregate demand.
  • Correct Answer(s)1-A stock market crash erodes U.S. citizens' retirement savings.2-Buyers become less optimistic about their future income.3-South American nations experience a recession.
  • Correct Answer(s)1- Many workers signed contracts last year assuming 1% future inflation. This year, it was revealed that current inflation is nearly 5%.2- A mysterious disease kills off half of the nation's corn crop.
  • Correct Answer(s)an increase in short-run aggregate supplyan increase in full-employment outpu
Which of these are conditions for long-run equilibrium in the aggregate demand-aggregate supply model?
  • Correct Answer(s)menu costssticky pricesmoney illusion
  • Correct Answer(s)an increase in short-run aggregate supplyan increase in full-employment outpu
  • Correct Answer(s)1- Many workers signed contracts last year assuming 1% future inflation. This year, it was revealed that current inflation is nearly 5%.2- A mysterious disease kills off half of the nation's corn crop.
  • Correct Answer(s)Long-run aggregate supply equals aggregate demand.Short-run aggregate supply equals aggregate demand.
Consider the following graph. Assuming that the U.S. economy begins with an aggregate demand curve equal to AD1, click on the aggregate demand curve you would expect to see following a rise in the U.S. price level.
  • AD2
  • SRAS3
  • SRAS2
  • AD1
Which of the following phenomena help explain why the short-run aggregate supply curve is sloped instead of vertical?
  • Correct Answer(s)menu costssticky pricesmoney illusion
  • Correct Answer(s)Long-run aggregate supply equals aggregate demand.Short-run aggregate supply equals aggregate demand.
  • Correct Answer(s)an increase in short-run aggregate supplyan increase in full-employment outpu
  • Correct Answer(s)1- When the price level increases, the real value of wealth falls and therefore buyers want to purchase less.When the price level increases, U.S. exports become relatively more expensive for foreign buyers and they want to purchase less.3- When the price level increases, people save less, thus interest rates rise and investment falls.
A supply shock is by definition an abrupt change in supply that raises a firm's production costs.
  • Correct Answer(s)1- When the price level increases, the real value of wealth falls and therefore buyers want to purchase less.When the price level increases, U.S. exports become relatively more expensive for foreign buyers and they want to purchase less.3- When the price level increases, people save less, thus interest rates rise and investment falls.
  • 1- Foreign incomes increase: AD22- New communication technologies lower the production cost of many and the price level increase : AD13- The value of the U.S. dollar increases relative to other currencies.: AD3
  • f
  • Correct Answer(s)an increase in short-run aggregate supplyan increase in full-employment outpu
Consider the graph below, and assume that Ireland's economy initially has a short-run aggregate supply curve corresponding to SRASClick on the SRAS curve that would most plausibly result if technological improvements lowered costs of production in Ireland.
  • AD2
  • LRAS2
  • SRAS2
  • AD1
Complete the following passage concerning macroeconomics.Drag word(s) below to fill in the blank(s) in the passage.One branch of macroeconomics focuses on long-run growth and development, while the other branch focuses on -, which are fluctuations in -, typically over time periods of five years or -. One model that macroeconomists use to study these fluctuations, which are called recessions and expansions, is the - model.
  • 1- business cycles,2- an economy's growth rate3- less4- aggregate demand-aggregate supply
  • LRAS
  • 1- immediately2- a month after3- several years
  • AD2
Imagine that the U.S. economy has an initial unemployment rate equal to the natural rate of unemployment. Identify each event as a factor that will either increase or decrease unemployment in the short run.
  • Correct Answer(s)1- When the price level increases, the real value of wealth falls and therefore buyers want to purchase less.When the price level increases, U.S. exports become relatively more expensive for foreign buyers and they want to purchase less.3- When the price level increases, people save less, thus interest rates rise and investment falls.
  • 1- Y decreases, P increases: LRAS shifts to the left2- Y increases, P increases:Aggregate demand shifts to the right.3- u falls, P falls: SRAS shifts to the right.4- Y falls, P falls: Aggregate demand shifts to the left.
  • investment: the interest rate effectnet exports: the international trade effectconsumption: the international trade effect
  • increase1- The U.S. dollar gains value against foreign currencies.2- An oil cartel raises oil prices.decrease1- American consumers expect higher income in the future.2- U.S. real estate values rise.3- Brazil experiences economic growth and increases its demand for U.S. exports.
Imagine that the U.S. economy is initially operating at full-employment output (Y*). Identify each event as a factor that will either increase or decrease real GDP in the short run.
  • Increase1- The member nations of an oil cartel have internal disputes that lead to a temporary breakdown in the cartel's control of oil prices. 2- Cheap oil floods the world market. American workers expect a surge in their incomes due to upbeat media coverage of the economy.
  • 1- Y decreases, P increases: LRAS shifts to the left2- Y increases, P increases:Aggregate demand shifts to the right.3- u falls, P falls: SRAS shifts to the right.4- Y falls, P falls: Aggregate demand shifts to the left.
  • Correct Answer(s)1- When the price level increases, the real value of wealth falls and therefore buyers want to purchase less.When the price level increases, U.S. exports become relatively more expensive for foreign buyers and they want to purchase less.3- When the price level increases, people save less, thus interest rates rise and investment falls.
  • investment: the interest rate effectnet exports: the international trade effectconsumption: the international trade effect
The U.S. economy's initial aggregate demand curve is ADDrag each event to the curve that would result from it.
  • 1- Foreign incomes increase: AD22- New communication technologies lower the production cost of many and the price level increase : AD13- The value of the U.S. dollar increases relative to other currencies.: AD3
  • Correct Answer(s)1- When the price level increases, the real value of wealth falls and therefore buyers want to purchase less.When the price level increases, U.S. exports become relatively more expensive for foreign buyers and they want to purchase less.3- When the price level increases, people save less, thus interest rates rise and investment falls.
  • Correct Answer(s)1- Many workers signed contracts last year assuming 1% future inflation. This year, it was revealed that current inflation is nearly 5%.2- A mysterious disease kills off half of the nation's corn crop.
  • 1- Y decreases, P increases: LRAS shifts to the left2- Y increases, P increases:Aggregate demand shifts to the right.3- u falls, P falls: SRAS shifts to the right.4- Y falls, P falls: Aggregate demand shifts to the left.
Assume that an economy initially has a long-run aggregate supply curve corresponding to LRAS1 in the graph below. Click on the long-run aggregate supply curve that would most likely result if a new shipping method, using drone technology, made it easier to transport goods between any two locations.
  • LRAS
  • both curve shift
  • AD2
  • LRAS2
Choose the term that best completes the following statement.Drag word(s) below to fill in the blank(s) in the passage.When the U.S. price level increases, Americans increase their demand for German cars, while Germans demand fewer American cars. This is an example of the
  • u > u* : b 105u = u* : A 100
  • 1- immediately2- a month after3- several years
  • SRAS2
  • international trade effect
Fill in the blanks to complete the passage about the U.S. unemployment rate.Since 1985, the highest monthly unemployment rate in the United States was -; this happened in -. Following the recession of 1991-1992, GDP growth was generally strong, at one point exceeding 4% for four consecutive -.
  • both curve shift
  • international trade effect
  • AD2 - 95
  • 10%2009quarters
This graph illustrates an economy, initially in long-run equilibrium, which then experiences a decrease in short-run aggregate supply (from SRAS1 to SRAS2). Label the two short-run equilibria (before and after the shift) with the appropriate relation between u, the short-run equilibrium unemployment rate, and u*, the natural long-run rate.
  • a decrease in aggregate supply
  • AD2 - 95
  • u > u* : b 105u = u* : A 100
  • international trade effect
Match each of the following terms with the phrase that best describes it.
  • 1- the spending side of the economy: aggregate demand2- a measure of consumers' expectations: consumer sentiment index3- a measure of the price level: GDP deflator4- the producing side of the economy: aggregate supply
  • Correct Answer(s)1- Many workers signed contracts last year assuming 1% future inflation. This year, it was revealed that current inflation is nearly 5%.2- A mysterious disease kills off half of the nation's corn crop.
  • 1- Y decreases, P increases: LRAS shifts to the left2- Y increases, P increases:Aggregate demand shifts to the right.3- u falls, P falls: SRAS shifts to the right.4- Y falls, P falls: Aggregate demand shifts to the left.
  • Correct Answer(s)1-A stock market crash erodes U.S. citizens' retirement savings.2-Buyers become less optimistic about their future income.3-South American nations experience a recession.
Which of these scenarios would cause the U.S. short-run aggregate supply curve to shift to the left?
  • Correct Answer(s)1- Many workers signed contracts last year assuming 1% future inflation. This year, it was revealed that current inflation is nearly 5%.2- A mysterious disease kills off half of the nation's corn crop.
  • Correct Answer(s)1- When the price level increases, the real value of wealth falls and therefore buyers want to purchase less.When the price level increases, U.S. exports become relatively more expensive for foreign buyers and they want to purchase less.3- When the price level increases, people save less, thus interest rates rise and investment falls.
  • Correct Answer(s)1-A stock market crash erodes U.S. citizens' retirement savings.2-Buyers become less optimistic about their future income.3-South American nations experience a recession.
  • Correct Answer(s)an increase in short-run aggregate supplyan increase in full-employment outpu
Classify each event either as shifting the aggregate demand curve or as causing movement along the curve.
  • correct1- State governments cut their budgets for infrastructure maintenance.2- Technological advances generate wealth in a broad range of industries.
  • Correct Answer(s)Long-run aggregate supply equals aggregate demand.Short-run aggregate supply equals aggregate demand.
  • - A new law prohibitsemployers from hiringanyone under the age of 21 : first line- Oil prospectors discovera previously unknownreserve of oil in California. : third lines
  • 1- stock price2- aggregate3- Gradually4- Short run
Complete the following passage concerning the history of U.S. recessions.Since the beginning of the twentieth century, the United States has experienced - recessions. Of those, - have occurred since 1970
  • AD2
  • AD1
  • 227
  • LRAS
Whenever the long-run aggregate supply curve shifts to the right as shown, the long-run unemployment rate will decrease.
  • 227
  • AD1
  • Correct Answer(s)1- When the price level increases, the real value of wealth falls and therefore buyers want to purchase less.When the price level increases, U.S. exports become relatively more expensive for foreign buyers and they want to purchase less.3- When the price level increases, people save less, thus interest rates rise and investment falls.
  • f
Place the three components of aggregate demand in order of relative size, starting with the one representing the largest component of GDP.
  • consumption
  • Correct Answer(s)menu costssticky pricesmoney illusion
  • international trade effect
  • consumptioninvestmentnext exports
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