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2) The task of identifying and dating business cycle phases and turning points is performed by
A) a private organization, the National Bureau of Economic Research.
B) a public organization, the Bureau of Labor Statistics.
C) a private organization, the Conference Board.
D) a public institution, the Commerce Department.
E) the Federal Reserve.
Answer: A
Topic: Business cycle
Skill: Level 1: Definition
Objective: Checkpoint 29.1
Author: DMC
1142
1143
5) Based on the figure above, in which quarter or quarters did a recession occur?
A) between 2000, 2nd quarter to 2001, 2nd quarter and also between 2002, 2nd quarter to
the end of the figure
B) in 2001, 2nd quarter
C) between 2001, 2nd quarter to 2002, 2nd quarter
D) in 2002, 2nd quarter
E) after 2002, 2nd quarter
Answer: C
Topic: Business cycle
Skill: Level 2: Using definitions
Objective: Checkpoint 29.1
Author: NAU
6) Based on the figure above, in which quarter or quarters did an expansion occur?
A) between 2000, 2nd quarter to 2001, 2nd quarter and also between 2002, 2nd quarter to
the end of the figure
B) in 2001, 2nd quarter
C) between 2001, 2nd quarter to 2002, 2nd quarter
D) in 2002, 2nd quarter
E) there are no expansions illustrated in the figure
Answer: A
Topic: Business cycle
Skill: Level 2: Using definitions
Objective: Checkpoint 29.1
Author: NAU
1144
7) Based on the figure above, in which quarter or quarters did a trough occur?
A) between 2000, 2nd quarter to 2001, 2nd quarter and also between 2002, 2nd quarter to
the end of the figure
B) in 2001, 2nd quarter
C) between 2001, 2nd quarter to 2002, 2nd quarter
D) in 2002, 2nd quarter
E) there are no troughs illustrated in the figure
Answer: D
Topic: Business cycle
Skill: Level 2: Using definitions
Objective: Checkpoint 29.1
Author: NAU
8) Based on the figure above, in which quarter or quarters did a peak occur?
A) between 2000, 2nd quarter to 2001, 2nd quarter and also between 2002, 2nd quarter to
the end of the figure
B) in 2001, 2nd quarter
C) between 2001, 2nd quarter to 2002, 2nd quarter
D) in 2002, 2nd quarter
E) there are no peaks illustrated in the figure
Answer: B
Topic: Business cycle
Skill: Level 2: Using definitions
Objective: Checkpoint 29.1
Author: NAU
10) In a recession
A) real GDP is equal to potential GDP.
B) potential GDP decreases.
C) there is no relationship between real GDP and potential GDP.
D) real GDP moves from above to below potential GDP.
E) potential GDP moves from above to below real GDP.
Answer: D
Topic: Business cycle
Skill: Level 2: Using definitions
Objective: Checkpoint 29.1
Author: TPS
12) When real GDP is above its trend, resources are ____ and when real GDP is below trend,
resources are ____.
A) underused; overused
B) unemployed; fully employed
C) contracted; expanded
D) overused; underused
E) fully employed; underused
Answer: D
Topic: Business cycle
Skill: Level 2: Using definitions
Objective: Checkpoint 29.1
Author: DMC
1145
1146
13) In order to be classified as a recession, a contraction of general economic activity must last
at least
A) one year.
B) six months.
C) one period.
D) one quarter.
E) None of the above because recessions do not have a minimum length.
Answer: B
Topic: Business cycle, recession
Skill: Level 1: Definition
Objective: Checkpoint 29.1
Author: DMC
14) How long must a downturn in real GDP last before it is considered a recession?
A) one month
B) 3 months
C) six months
D) one year
E) two years
Answer: C
Topic: Business cycle, recession
Skill: Level 1: Definition
Objective: Checkpoint 29.1
Author: TPS
18) The NBER has dated business cycles in the United States back to about
A) 1930.
B) 1850.
C) 1800.
D) 1700.
E) 1965.
Answer: B
Topic: Business cycle, history
Skill: Level 1: Definition
Objective: Checkpoint 29.1
Author: NAU
1147
1148
19) Since 1854, the average length of a recession in the United States is
A) 3 to 4 years.
B) 56 months.
C) 146 days.
D) 18 months.
E) 6 months.
Answer: D
Topic: Business cycle, history
Skill: Level 1: Definition
Objective: Checkpoint 29.1
Author: DMC
20) In the United States since 1854, the average length of a recession is about
A) 2 months.
B) 18 months.
C) 48 months.
D) 90 months.
E) 6 months.
Answer: B
Topic: Business cycle, history
Skill: Level 1: Definition
Objective: Checkpoint 29.1
Author: NAU
21) In the United States since 1854, the average length of an expansion is about
A) 6 months.
B) 3 years.
C) 6 years.
D) 12 years.
E) 1 year.
Answer: B
Topic: Business cycle, history
Skill: Level 1: Definition
Objective: Checkpoint 29.1
Author: NAU
22) Since 1854, the average length of an expansion in the United States is
A) 35 months.
B) 5 months.
C) 146 days.
D) 8 years.
E) 14 months.
Answer: A
Topic: Business cycle, history
Skill: Level 1: Definition
Objective: Checkpoint 29.1
Author: DMC
23) In the United States, the ____ part of the business cycle has lasted the longest on the
average.
A) recession
B) trough
C) expansion
D) peak
E) high-trend
Answer: C
Topic: Business cycle, history
Skill: Level 2: Using definitions
Objective: Checkpoint 29.1
Author: TPS
1149
1150
25) The longest expansion in U.S. history took place throughout most of the
A) 1880s.
B) 1930s.
C) 1970s.
D) 1990s.
E) 2000s.
Answer: D
Topic: U.S. recent business cycle
Skill: Level 1: Definition
Objective: Checkpoint 29.1
Author: NAU
28) A standard definition of recession is a decrease in real GDP that lasts for at least two
A) years.
B) quarters.
C) months.
D) weeks.
E) reference periods.
Answer: B
Topic: Business cycle, recession
Skill: Level 1: Definition
Objective: Checkpoint 29.1
Author: STUDY GUIDE
29) Which organization or agency identifies and dates business cycle phases in the United
States?
A) Bureau of Economic Analysis
B) Department of Commerce
C) National Bureau of Economic Research
D) Federal Reserve System
E) Bureau of the Treasury
Answer: C
Topic: Business cycle, NBER
Skill: Level 1: Definition
Objective: Checkpoint 29.1
Author: STUDY GUIDE
1151
1152
2) Potential GDP
A) increases as the price level increases because firms supply more goods and services.
B) decreases as the price level increases because people demand fewer goods and
services.
C) might either increase or decrease as the price level increases, depending on whether
aggregate demand increases or decreases.
D) is independent of the price level.
E) never changes.
Answer: D
Topic: Potential GDP
Skill: Level 1: Definition
Objective: Checkpoint 29.2
Author: NAU
4) A rise in the price level produces a ____ the potential GDP line.
A) rightward shift of
B) movement downward along
C) leftward shift of
D) movement upward along
E) neither a shift of the potential GDP line nor a movement along
Answer: D
Topic: Potential GDP
Skill: Level 2: Using definitions
Objective: Checkpoint 29.2
Author: DMC
1153
1154
6) Moving along the potential GDP line, when the price level changes, the
i. real wage rate stays at the full-employment equilibrium level.
ii. money wage rate changes by the same percentage.
iii. money prices of non-labor resources change by the same percentage.
A) i only.
B) ii only.
C) iii only.
D) i and ii.
E) i, ii, and iii.
Answer: E
Topic: Potential GDP
Skill: Level 1: Definition
Objective: Checkpoint 29.2
Author: TPS
8) The slope of the aggregate supply curve shows that, all else the same, the
A) quantity of real GDP supplied increases as the price level increases.
B) quantity of real GDP supplied decreases as the price level increases.
C) quantity of real GDP supplied remains constant as the price level increases.
D) price level remains constant as real GDP increases.
E) price level remains constant as potential GDP increases.
Answer: A
Topic: Aggregate supply
Skill: Level 1: Definition
Objective: Checkpoint 29.2
Author: NAU
10) The ____ the ____ is the quantity of real GDP supplied.
A) lower the price level; greater
B) higher the price level; greater
C) greater the demand for labor; smaller
D) lower the supply of labor; greater
E) lower aggregate demand; greater
Answer: B
Topic: Aggregate supply
Skill: Level 1: Definition
Objective: Checkpoint 29.2
Author: DMC
11) The slope of the aggregate supply curve shows that the ____ the price level, the
A) higher; greater is the quantity of real GDP supplied.
B) higher; smaller is the quantity of real GDP supplied.
C) lower; greater is the quantity of real GDP supplied.
D) higher; is the quantity of potential GDP supplied.
E) lower; is the quantity of potential GDP supplied.
Answer: A
Topic: Aggregate supply
Skill: Level 1: Definition
Objective: Checkpoint 29.2
Author: DMC
1155
1156
12) Because there is a ____ relationship between the price level and the quantity of real GDP
supplied, the aggregate supply curve is ____ curve.
A) negative; an upward-sloping
B) positive; a downward-sloping
C) positive; an upward-sloping
D) negative; a downward-sloping
E) positive; a vertical
Answer: C
Topic: Aggregate supply curve
Skill: Level 1: Definition
Objective: Checkpoint 29.2
Author: DMC
13) If the money wage rate does not change, a decrease in the price level will ____ the real wage
rate and ____ firms' profit.
A) raise; decrease
B) raise; increase
C) lower; decrease
D) lower; increase
E) lower; not change
Answer: A
Topic: Aggregate supply, wage rate
Skill: Level 1: Definition
Objective: Checkpoint 29.2
Author: NAU
15) Along the aggregate supply curve, the quantity of real GDP supplied increases when the
price level rises because
A) profits decrease.
B) the real wage rate falls.
C) the real wage rate rises.
D) the real wage rate and profits both fall.
E) the demand for the goods and services increases.
Answer: B
Topic: Aggregate supply, wage rate
Skill: Level 1: Definition
Objective: Checkpoint 29.2
Author: NAU
1157
1158
18) ____ increases the quantity of real GDP supplied and is shown as a movement along the AS
curve.
A) A decrease in the quantity of money
B) A decrease in consumption expenditure
C) A fall in the expected rate of profit
D) A rise in the price level
E) An increase in potential GDP
Answer: D
Topic: Aggregate supply curve
Skill: Level 2: Using definitions
Objective: Checkpoint 29.2
Author: TPS
19) A change in the price level brings a ____ the aggregate supply curve, NOT a ____ the
aggregate supply curve.
A) shift in; movement along
B) vertical displacement of; change in the slope of
C) movement along; shift in
D) change in the slope of; horizontal displacement of
E) shift in; change in the slope of
Answer: C
Topic: Aggregate supply, price level
Skill: Level 1: Definition
Objective: Checkpoint 29.2
Author: DMC
20) A rise in the price level produces a ____ the aggregate supply curve.
A) rightward shift of
B) movement downward along
C) leftward shift of
D) movement upward along
E) rightward shift of the aggregate supply curve and a movement downward along
Answer: D
Topic: Aggregate supply, price level
Skill: Level 1: Definition
Objective: Checkpoint 29.2
Author: DMC
21) A fall in the price level produces a ____ the aggregate supply curve.
A) rightward shift of
B) movement downward along
C) leftward shift of
D) movement upward along
E) rightward shift of the aggregate supply curve and a movement downward along
Answer: B
Topic: Aggregate supply, price level
Skill: Level 1: Definition
Objective: Checkpoint 29.2
Author: DMC
23) The aggregate supply curve slopes ____ because a ____ in the price level brings a ____ in
the real wage rate.
A) upward; rise; rise
B) downward; fall; rise
C) upward; rise; fall
D) upward; fall; fall
E) downward; rise; rise
Answer: C
Topic: Aggregate supply, price level
Skill: Level 2: Using definitions
Objective: Checkpoint 29.2
Author: DMC
1159
1160
24) It is profitable to hire more labor if the price level ____ and the money wage rate ____.
A) rises; falls
B) falls; rises
C) falls; does not change
D) does not change; rises
E) rises; rises by the same percentage
Answer: A
Topic: Aggregate supply, price level
Skill: Level 2: Using definitions
Objective: Checkpoint 29.2
Author: TPS
25) A fall in the price level brings a ____ in the real wage rate that ____ profits and can lead to
____.
A) rise; reduces; firms going out of business
B) rise; reduces; new firms entering business
C) fall; increases; firms going out of business
D) rise; increases; new firms entering business
E) fall; decreases; new firms entering business
Answer: A
Topic: Aggregate supply, price level
Skill: Level 2: Using definitions
Objective: Checkpoint 29.2
Author: DMC
26) A fall in the price level brings a ____ in the real wage rate that ____ profits and can lead to
____.
A) rise; reduces; firms restarting production
B) rise; reduces; firms temporarily shutting down
C) fall; increases; firms temporarily shutting down
D) rise; increases; firms restarting production
E) rise; increases; firms temporarily shutting down
Answer: B
Topic: Aggregate supply, price level
Skill: Level 2: Using definitions
Objective: Checkpoint 29.2
Author: DMC
1161
27) If the price level falls and the money wage rate does not change, some firms ____ and there
is ____.
A) shut down; a leftward shift of the aggregate supply curve
B) start up; a rightward shift of the aggregate supply curve
C) shut down; a decrease in the quantity of real GDP supplied
D) shut down; a decrease in potential GDP
E) start up; an increase in potential GDP
Answer: C
Topic: Aggregate supply, price level
Skill: Level 2: Using definitions
Objective: Checkpoint 29.2
Author: MR
28) A rise in the price level brings a ____ in the real wage rate that ____ profits and can lead to
____ production.
A) rise; reduces; decreasing
B) rise; reduces; increasing
C) fall; increases; increasing
D) rise; increases; decreasing
E) fall; decreases; decreasing
Answer: C
Topic: Aggregate supply, price level
Skill: Level 2: Using definitions
Objective: Checkpoint 29.2
Author: DMC
29) When the price level rises and the money wage rate does not change,
A) the quantity of real GDP supplied increases as more businesses start up and potential
GDP does not change.
B) the quantity of real GDP supplied decreases as more businesses fail and potential GDP
does not change.
C) profits fall and more businesses fail.
D) existing businesses do not change their level of output.
E) the quantity of potential GDP increases because the quantity of real GDP supplied
increases.
Answer: A
Topic: Aggregate supply, price level
Skill: Level 2: Using definitions
Objective: Checkpoint 29.2
Author: NAU
1162
30) Changes in which of the following shifts the aggregate supply curve?
i. the price level.
ii. the money wage rate.
iii. potential GDP.
A) i only.
B) ii only.
C) iii only.
D) ii and iii.
E) i, ii, and iii.
Answer: D
Topic: Changes in aggregate supply
Skill: Level 2: Using definitions
Objective: Checkpoint 29.2
Author: DMC
34) A fall in the money wage rate ____ aggregate supply and ____.
A) decreases; shifts the AS curve rightward
B) increases; shifts the AS curve leftward
C) increases; shifts the AS curve rightward
D) decreases; shifts the AS curve leftward
E) does not change; does not shift the AS curve.
Answer: C
Topic: Changes in aggregate supply, money wage rate
Skill: Level 2: Using definitions
Objective: Checkpoint 29.2
Author: DMC
1163
1164
37) Which of the following shifts the aggregate supply curve leftward?
A) a decrease in potential GDP
B) a fall in the money wage rate
C) a decrease in the price level
D) a fall in the real wage rate
E) an increase in potential GDP
Answer: A
Topic: Changes in aggregate supply, potential GDP
Skill: Level 2: Using definitions
Objective: Checkpoint 29.2
Author: NAU
38) A technological advance ____ potential GDP, ____ aggregate supply, and shifts the
aggregate supply curve ____.
A) increases; increases; leftward
B) decreases; decreases; leftward
C) increases; increases; rightward
D) decreases; increases; rightward
E) increases; decreases; leftward
Answer: C
Topic: Changes in aggregate supply, potential GDP
Skill: Level 2: Using definitions
Objective: Checkpoint 29.2
Author: DMC
1165
1166
42) When potential GDP increases the potential GDP line ____ and the aggregate supply curve
____.
A) shifts rightward; shifts rightward
B) shifts rightward; shifts leftward
C) shifts leftward; shifts rightward
D) shifts leftward; shifts leftward
E) shifts rightward; does not shift
Answer: A
Topic: Changes in aggregate supply, technology
Skill: Level 2: Using definitions
Objective: Checkpoint 29.2
Author: NAU
43) Moving along the potential GDP line, the money wage rate changes by the same percentage
as the price level so that the real wage rate
A) increases.
B) decreases.
C) stays at the full-employment equilibrium level.
D) might either increase or decrease.
E) stays the same, though not necessarily at the full-employment equilibrium level.
Answer: C
Topic: Potential GDP
Skill: Level 2: Using definitions
Objective: Checkpoint 29.2
Author: STUDY GUIDE
46) As the price level rises relative to costs and the real wage rate falls, profits ____ and the
number of firms in business ____.
A) increase; increases
B) increase; decreases
C) decrease; increases
D) decrease; decreases
E) do not change; do not change
Answer: A
Topic: Aggregate supply, price level
Skill: Level 2: Using definitions
Objective: Checkpoint 29.2
Author: STUDY GUIDE
1167
1168
2) Which of the following produces a movement along the aggregate demand curve and does
not shift the aggregate demand curve?
A) a change in foreign incomes
B) a change in the price level
C) a change in monetary policy
D) a change in expectations about the future
E) a change in government expenditures on goods and services
Answer: B
Topic: Aggregate demand curve
Skill: Level 1: Definition
Objective: Checkpoint 29.3
Author: NAU
1169
3) A change in the price level brings a ____ the aggregate demand curve.
i. shift in
ii. change in the slope of
iii. movement along
A) i only.
B) ii only.
C) iii only.
D) i and iii.
E) i and ii.
Answer: C
Topic: Changes in the price level
Skill: Level 1: Definition
Objective: Checkpoint 29.3
Author: MR
4) A fall in the price level produces a ____ the aggregate demand curve.
A) rightward shift of
B) movement downward along
C) leftward shift of
D) movement upward along
E) change in the slope of
Answer: B
Topic: Changes in the price level
Skill: Level 1: Definition
Objective: Checkpoint 29.3
Author: DMC
5) A rise in the U.S. price level brings a ____ in the price of U.S. exports relative to imports that
____ exports of U.S. goods, bringing a ____ in the quantity of U.S. real GDP demanded.
A) rise; decreases; decrease
B) fall; decreases ; decrease
C) fall; increases ; increase
D) rise; increases ; increase
E) rise; increases; decrease
Answer: A
Topic: Relative price of domestic and foreign goods
Skill: Level 2: Using definitions
Objective: Checkpoint 29.3
Author: DMC
1170
6) A rise in the price level brings a ____ in the buying power of money that ____ consumption
expenditures and causes the quantity of real GDP demanded to ____.
A) rise; decreases; decrease
B) fall; decreases; decrease
C) fall; increases; increase
D) rise; increases; increase
E) fall; decreases; increases
Answer: B
Topic: Buying power of money
Skill: Level 2: Using definitions
Objective: Checkpoint 29.3
Author: DMC
7) When the price level increases there is ____ movement along the aggregate demand curve
because the buying power of money ____.
A) an upward; decreases
B) a downward; decreases
C) an upward; increases
D) a downward; increases
E) no; does not change
Answer: A
Topic: Buying power of money
Skill: Level 2: Using definitions
Objective: Checkpoint 29.3
Author: NAU
8) In the short run, a rise in the price level brings a ____ in the real interest rate that ____
investment, bringing ____ in the quantity of real GDP demanded.
A) rise; decreases; a decrease
B) fall; decreases ; a decrease
C) fall; increases ; an increase
D) rise; increases ; an increase
E) rise; decreases; an increase
Answer: A
Topic: Real interest rate
Skill: Level 2: Using definitions
Objective: Checkpoint 29.3
Author: DMC
9) The aggregate demand curve shifts when any of the following factors change EXCEPT
A) foreign income.
B) the price level.
C) monetary policy.
D) expectations about the future.
E) fiscal policy
Answer: B
Topic: Changes in aggregate demand
Skill: Level 1: Definition
Objective: Checkpoint 29.3
Author: DMC
10) Which of the following does NOT shift the aggregate demand curve?
A) a change in the money wage
B) a change in expectations about the future
C) a change in monetary policy
D) a change in fiscal policy
E) a change in foreign income
Answer: A
Topic: Changes in aggregate demand
Skill: Level 1: Definition
Objective: Checkpoint 29.3
Author: NAU
1171
1172
12) Which of the following shifts the aggregate demand curve rightward?
A) a decrease in expected future income
B) a decrease in the price level
C) a tax cut
D) a decrease in the quantity of money
E) a decrease in government expenditures on goods and services
Answer: C
Topic: Changes in aggregate demand, fiscal policy
Skill: Level 2: Using definitions
Objective: Checkpoint 29.3
Author: NAU
14) A tax cut ____ aggregate demand and shifts the aggregate demand curve ____.
A) increases; rightward
B) increases; leftward
C) decreases; rightward
D) decreases; leftward
E) does not change; rightward
Answer: A
Topic: Changes in aggregate demand, fiscal policy
Skill: Level 2: Using definitions
Objective: Checkpoint 29.3
Author: DMC
1173
16) An increase in the quantity of money ____ aggregate demand and ____.
A) increases; shifts the aggregate demand curve rightward
B) increases; shifts the aggregate demand curve leftward
C) decreases; shifts the aggregate demand curve rightward
D) decreases; shifts the aggregate demand curve leftward
E) increases; rotates the aggregate demand curve so it is steeper
Answer: A
Topic: Changes in aggregate demand, quantity of money
Skill: Level 2: Using definitions
Objective: Checkpoint 29.3
Author: DMC
17) A decrease in foreign income ____ exports of U.S.-made goods, so aggregate demand ____
and the aggregate demand curve shifts ____.
A) increases; increases; rightward
B) decreases; decreases; leftward
C) decreases; increases; rightward
D) increases; increases; leftward
E) decreases; decreases; rightward
Answer: B
Topic: Changes in aggregate demand, foreign income
Skill: Level 2: Using definitions
Objective: Checkpoint 29.3
Author: DMC
1174
18) Suppose the exchange rate in the year 2005 was 4 yuan per dollar and in 2006 the exchange
rate fell to 3 yuan per dollar. If the price of a Chinese sweater was 120 yuan in both years,
the new dollar price in 2006 would be ____ and imports of Chinese sweaters would ____.
A) $40; increase
B) $30; decrease
C) $40; decrease
D) $30; increase
E) $40; stay the same because the price stayed the same at 120 yuan
Answer: C
Topic: Changes in aggregate demand, foreign exchange rate
Skill: Level 3: Using models
Objective: Checkpoint 29.3
Author: NAU
19) Because of the existence of the aggregate demand multiplier, a $10 billion change in
expenditure
A) shifts the aggregate demand curve by more than exceeds $10 billion.
B) shifts the aggregate demand curve by $10 billion.
C) shifts the aggregate demand curve by less than $10 billion.
D) changes the slope of the aggregate demand curve so it is less steep.
E) changes the slope of the aggregate demand curve so it is steeper.
Answer: A
Topic: Aggregate demand multiplier
Skill: Level 2: Using definitions
Objective: Checkpoint 29.3
Author: DMC
20) If investment spending increases by $1 million, then the aggregate demand curve shifts
A) rightward by $1 million.
B) rightward by more than $1 million.
C) rightward by less than $1 million.
D) leftward by more than $1 million.
E) leftward by less than $1 million.
Answer: B
Topic: Aggregate demand multiplier
Skill: Level 2: Using definitions
Objective: Checkpoint 29.3
Author: NAU
21) When the price level rises there is a ____ the aggregate demand curve.
A) rightward shift of
B) movement down along
C) leftward shift of
D) movement up along
E) rotation of
Answer: D
Topic: Changes in the price level
Skill: Level 1: Definition
Objective: Checkpoint 29.3
Author: STUDY GUIDE
23) When the price level rises, the real interest rate ____ and the quantity of real GDP
demanded ____.
A) rises; increases
B) rises; decreases
C) falls; increases
D) falls; decreases
E) does not change; does not change
Answer: B
Topic: Real interest rate
Skill: Level 2: Using definitions
Objective: Checkpoint 29.3
Author: STUDY GUIDE
1175
1176
24) A change in any of the following factors EXCEPT ____ shifts the aggregate demand curve.
A) expectations about the future
B) the money wage rate
C) monetary and fiscal policy
D) foreign income
E) the foreign exchange rate
Answer: B
Topic: Changes in aggregate demand
Skill: Level 2: Using definitions
Objective: Checkpoint 29.3
Author: STUDY GUIDE
25) Which of the following shifts the aggregate demand curve leftward?
A) a decrease in government expenditures on goods and services
B) an increase in the price level
C) a tax cut
D) an increase in foreign income
E) a decrease in the price level
Answer: A
Topic: Changes in aggregate demand, expectations
Skill: Level 2: Using definitions
Objective: Checkpoint 29.3
Author: STUDY GUIDE
26) When investment increases, the ____ in aggregate demand is ____ the change in investment.
A) increase; greater than
B) increase; smaller than
C) increase; the same as
D) decrease; the same as
E) decrease; greater than
Answer: A
Topic: Aggregate demand multiplier
Skill: Level 2: Using definitions
Objective: Checkpoint 29.3
Author: STUDY GUIDE
1177
1178
5) If the quantity of real GDP demanded is less than the quantity of real GDP supplied, then
A) the economy must be producing at potential GDP.
B) the price level falls and firms decrease production.
C) the price level falls and firms increase production.
D) the price level rises to restore the macroeconomic equilibrium
E) aggregate demand changes to restore the equilibrium.
Answer: B
Topic: Macroeconomic equilibrium
Skill: Level 2: Using definitions
Objective: Checkpoint 29.4
Author: TPS
6) If the quantity of real GDP demanded is greater than the quantity of real GDP supplied,
then
A) the economy must be producing at potential GDP.
B) the price level falls and firms decrease production.
C) the price level rises and firms increase production.
D) the price level falls to restore the macroeconomic equilibrium
E) aggregate demand changes to restore equilibrium.
Answer: C
Topic: Macroeconomic equilibrium
Skill: Level 2: Using definitions
Objective: Checkpoint 29.4
Author: TPS
1179
7) If the equilibrium price level is 135 but the actual price level is 150, then
A) firms increase their production because they are able to sell their output at a higher
than expected price.
B) the quantity of real GDP demanded is less than the quantity of real GDP supplied.
C) the quantity of real GDP demanded is greater than the quantity of real GDP supplied.
D) aggregate demand will increase to restore equilibrium.
E) aggregate demand will decrease to restore equilibrium.
Answer: B
Topic: Macroeconomic equilibrium
Skill: Level 4: Applying models
Objective: Checkpoint 29.4
Author: TPS
8) If the equilibrium price level is 135 but the actual price level is 120, then
A) firms decrease their production because they cannot sell the output they produce.
B) the quantity of real GDP demanded is less than the quantity of real GDP supplied.
C) the quantity of real GDP demanded is greater than the quantity of real GDP supplied.
D) aggregate demand will increase to restore equilibrium.
E) aggregate demand will decrease to restore equilibrium.
Answer: C
Topic: Macroeconomic equilibrium
Skill: Level 4: Applying models
Objective: Checkpoint 29.4
Author: TPS
1180
10) 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
Answer: C
Topic: Aggregate supply fluctuations
Skill: Level 2: Using definitions
Objective: Checkpoint 29.4
Author: DMC
11) 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
Answer: D
Topic: Aggregate supply fluctuations
Skill: Level 2: Using definitions
Objective: Checkpoint 29.4
Author: DMC
1181
15) Starting from a situation of full employment, an increase in aggregate demand will ____ the
price level, leading to ____
A) raise; an inflationary gap
B) lower; a recessionary gap
C) raise; a recessionary gap
D) lower; an inflationary gap
E) not change; potential GDP increasing.
Answer: A
Topic: Inflationary gap
Skill: Level 2: Using definitions
Objective: Checkpoint 29.4
Author: DMC
1182
17) Starting from a situation of full employment, a decrease in aggregate demand ____ the price
level, leading to ____.
A) raises; an inflationary gap
B) lowers; a recessionary gap
C) raises; a recessionary gap
D) lowers; an inflationary gap
E) does not change; a decrease in potential GDP
Answer: B
Topic: Recessionary gap
Skill: Level 2: Using definitions
Objective: Checkpoint 29.4
Author: DMC
Price level
(GDP deflator)
150
140
130
120
110
1183
Potential GDP
Real GDP supplied
Real GDP demanded
(billions of 2000 dollars) (billions of 2000 dollars) (billions of 2000 dollars)
25
34
16
25
31
19
25
28
22
25
25
25
25
23
28
18) The table above gives data for the nation of Pearl, a small island in the South Pacific. The
economy is at full employment when real GDP is
A) $25 billion.
B) $28 billion.
C) $22 billion.
D) $31 billion.
E) $34 billion.
Answer: A
Topic: Equilibrium AD and AS
Skill: Level 3: Using models
Objective: Checkpoint 29.4
Author: DMC
19) The table above gives data for the nation of Pearl, a small island in the South Pacific. When
the economy is at full employment the price level is
A) 130.
B) 120.
C) 110.
D) 140.
E) 150.
Answer: B
Topic: Equilibrium AD and AS
Skill: Level 3: Using models
Objective: Checkpoint 29.4
Author: DMC
1184
20) The table above gives data for the nation of Pearl, a small island in the South Pacific. If a
supply shock decreases the quantity of real GDP supplied by $6 billion at each price level,
the new equilibrium real GDP is
A) $16 billion.
B) $19 billion.
C) $22 billion.
D) $23 billion.
E) $17 billion.
Answer: C
Topic: Equilibrium AD and AS
Skill: Level 3: Using models
Objective: Checkpoint 29.4
Author: DMC
21) The table above gives data for the nation of Pearl, a small island in the South Pacific. If
aggregate demand increases so that the quantity of real GDP demanded is $6 billion more
at each price level, the new equilibrium real GDP is
A) $34 billion.
B) $31 billion.
C) $28 billion.
D) $25 billion.
E) $23 billion.
Answer: C
Topic: Equilibrium AD and AS
Skill: Level 3: Using models
Objective: Checkpoint 29.4
Author: DMC
22) According to the figure above, which point or points correspond to full employment?
A) only point a
B) only point b
C) only point c
D) points a and b
E) points a, b, and c
Answer: D
Topic: Adjustment to full employment
Skill: Level 3: Using models
Objective: Checkpoint 29.4
Author: NAU
1185
1186
24) If the quantity of real GDP supplied equals the quantity of real GDP demanded, then
A) nominal GDP must equal real GDP.
B) real GDP must equal potential GDP.
C) real GDP must be greater than potential GDP.
D) real GDP might be greater than, equal to, or less than potential GDP.
E) real GDP must be less than potential GDP.
Answer: D
Topic: Macroeconomic equilibrium
Skill: Level 1: Definition
Objective: Checkpoint 29.4
Author: STUDY GUIDE
25) An increase in investment ____ aggregate demand, the aggregate demand curve shifts ____
and the economy is in the ____ phase of the business cycle.
A) decreases; rightward; expansion
B) increases; rightward; expansion
C) decreases; leftward; recession
D) increases; rightward; recession
E) increases; leftward; recession
Answer: B
Topic: Aggregate demand fluctuations
Skill: Level 2: Using definitions
Objective: Checkpoint 29.4
Author: STUDY GUIDE
1187
27) Stagflation is a combination of ____ real GDP and a ____ price level.
A) increasing; rising
B) increasing; falling
C) decreasing; rising
D) decreasing; falling
E) no change in; rising
Answer: C
Topic: Stagflation
Skill: Level 1: Definition
Objective: Checkpoint 29.4
Author: STUDY GUIDE