978-0133460629 Chapter 13 Part 10

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11) A decrease in investment leads to ________ in aggregate demand and ________ in real

GDP.

A) an increase; an increase

B) an increase; a decrease

C) a decrease; an increase

D) a decrease; a decrease

E) no change; a decrease

Skill: Level 4: Applying models

Section: Integrative

Status: Old

AACSB: Analytical thinking

12) A deep recession hits the world economy, and real GDP in the rest of the world

decreases. In the United States,

A) aggregate supply and aggregate demand both increase, and the price level rises.

B) aggregate supply decreases while aggregate demand does not change, and the price

level rises.

C) aggregate demand decreases while aggregate supply does not change, and the price

level falls.

D) aggregate supply increases and aggregate demand decreases, so the efect on the price

level is uncertain.

E) aggregate supply and aggregate demand both decrease, and the price level rises.

Skill: Level 4: Applying models

Section: Integrative

Status: Old

AACSB: Analytical thinking

13) 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.

Skill: Level 4: Applying models

Section: Integrative

Status: Old

AACSB: Analytical thinking

14) 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

Skill: Level 4: Applying models

Section: Integrative

Status: Old

AACSB: Analytical thinking

15) 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

Skill: Level 4: Applying models

Section: Integrative

Status: Old

AACSB: Analytical thinking

16) 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

Skill: Level 4: Applying models

Section: Integrative

Status: Old

AACSB: Analytical thinking

17) 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.

Skill: Level 4: Applying models

Section: Integrative

Status: Old

AACSB: Relective thinking

18) 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

Skill: Level 4: Applying models

Section: Integrative

Status: Old

AACSB: Analytical thinking

19) 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.

Skill: Level 4: Applying models

Section: Integrative

Status: Old

AACSB: Analytical thinking

20) 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

Skill: Level 4: Applying models

Section: Integrative

Status: Old

AACSB: Analytical thinking

21) 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

Skill: Level 4: Applying models

Section: Integrative

Status: Old

AACSB: Analytical thinking

22) 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

Skill: Level 4: Applying models

Section: Integrative

Status: Old

AACSB: Analytical thinking

23) 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

Skill: Level 4: Applying models

Section: Integrative

Status: Old

AACSB: Relective thinking

24) ________ 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.

Skill: Level 4: Applying models

Section: Integrative

Status: New

AACSB: Relective thinking

25) Real GDP deinitely 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.

Skill: Level 4: Applying models

Section: Integrative

Status: Old

AACSB: Analytical thinking

13.6 Essay: Aggregate Supply

1) Name the four factors of production that determine the quantity of real GDP supplied.

Which one luctuates the most over the course of the business cycle?

Skill: Level 1: Deinition

Section: Checkpoint 13.1

Status: Old

AACSB: Written and oral communication

2) What factor changes the quantity of real GDP supplied and results in a movement along

the AS curve?

Skill: Level 1: Deinition

Section: Checkpoint 13.1

Status: Old

AACSB: Relective thinking

3) Does a rise in the price level bring a movement along the aggregate supply curve or

does it shift the aggregate supply curve?

Skill: Level 1: Deinition

Section: Checkpoint 13.1

Status: Old

AACSB: Relective thinking

4) If the money wage rate is constant and the price level increases, what happens to the

real wage rate, irms’ proits, and the aggregate quantity supplied?

Skill: Level 3: Using models

Section: Checkpoint 13.1

Status: Old

AACSB: Written and oral communication

5) 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.

Skill: Level 2: Using deinitions

Section: Checkpoint 13.1

Status: Old

AACSB: Written and oral communication

6) How does a fall in the money wage rate afect the aggregate supply curve?

Skill: Level 2: Using deinitions

Section: Checkpoint 13.1

Status: Old

AACSB: Relective thinking

7) Give examples of factors that decrease aggregate supply. Which way does the AS curve

shift?

Skill: Level 2: Using deinitions

Section: Checkpoint 13.1

Status: Old

AACSB: Written and oral communication

8) What is the efect on aggregate supply and potential GDP of an increase in the money

wage rate?

Skill: Level 2: Using deinitions

Section: Checkpoint 13.1

Status: Old

AACSB: Relective thinking

9) “Moving along the AS curve, the real wage rate is constant while moving along the

potential GDP line, the real wage rate changes.” Explain whether the previous statement is

correct or incorrect.

Skill: Level 2: Using deinitions

Section: Checkpoint 13.1

Status: Old

AACSB: Written and oral communication

10) What can lead to the shift illustrated in the igure above?

Skill: Level 3: Using models

Section: Checkpoint 13.1

Status: Old

AACSB: Analytical thinking

11) In the above igure, illustrate the efect on the AS curve from an increase in the money

price of a key resource such as oil.

Skill: Level 3: Using models

Section: Checkpoint 13.1

Status: Old

AACSB: Analytical thinking