Transcript Document

Chapter 10: Real GDP and the Price Level in the
Long Run
Roger LeRoy Miller
Economics Today, Sixteenth Edition
© 2012 Pearson Addison-Wesley. All rights reserved.
All of the following would shift the LRAS curve to
the right EXCEPT
A.
B.
C.
D.
an increase in the size of the labor force.
a net inflow of human capital.
an increase in the overall price level.
an improvement in technology.
Roger LeRoy Miller
Economics Today, Sixteenth Edition
© 2012 Pearson Addison-Wesley. All rights reserved.
Which of the following statements is TRUE?
A. The long-run aggregate supply curve is upward
sloping.
B. The long-run aggregate demand curve is
upward sloping.
C. The short-run aggregate supply curve is
vertical.
D. The long-run aggregate supply curve is vertical.
Roger LeRoy Miller
Economics Today, Sixteenth Edition
© 2012 Pearson Addison-Wesley. All rights reserved.
Which of these questions does aggregate demand
help us answer?
I. What determines the total amount of our output
that individuals, firms, governments and foreigners
want to buy?
II. What is the economy's long-run real Gross
Domestic Product (GDP)?
III. What determines the economy's equilibrium
price level and the rate of inflation?
A. I only
B. I and II
C. II and III
D. I and III
Roger LeRoy Miller
Economics Today, Sixteenth Edition
© 2012 Pearson Addison-Wesley. All rights reserved.
Higher interest rates tend to
A. reduce the total planned spending on goods
and services.
B. lower the costs of building new plants and
equipment.
C. increase the quantity demanded of goods and
services.
D. make it less costly for people to buy houses
and cars.
Roger LeRoy Miller
Economics Today, Sixteenth Edition
© 2012 Pearson Addison-Wesley. All rights reserved.
Which of the following would cause aggregate
demand to decrease?
A. The government increases taxes on both
business and personal income.
B. The foreign exchange value of the dollar drops.
C. The Fed increases the amount of money in
circulation.
D. Businesses and households believe that the
economy is headed for good times, so they
begin to feel increased security about their jobs.
Roger LeRoy Miller
Economics Today, Sixteenth Edition
© 2012 Pearson Addison-Wesley. All rights reserved.
A weakening in consumer confidence causes a
A. shift of the aggregate demand curve to the
right.
B. shift of the aggregate demand curve to the left.
C. movement up along the aggregate demand
curve.
D. movement down along the aggregate demand
curve.
Roger LeRoy Miller
Economics Today, Sixteenth Edition
© 2012 Pearson Addison-Wesley. All rights reserved.
An increase in the amount of money in circulation
would cause a
A. shift of the aggregate demand curve to the
right.
B. shift of the aggregate demand curve to the left.
C. movement up the aggregate demand curve.
D. movement down the aggregate demand curve.
Roger LeRoy Miller
Economics Today, Sixteenth Edition
© 2012 Pearson Addison-Wesley. All rights reserved.
Which of the following would likely result in a
decrease in aggregate demand?
A.
B.
C.
D.
tax increases
a reduction in the real interest rate
increased job and future income security
a rise in the quantity of money in circulation
Roger LeRoy Miller
Economics Today, Sixteenth Edition
© 2012 Pearson Addison-Wesley. All rights reserved.
Other things being equal, a depreciation of the dollar
A. increases aggregate demand in the United States,
and may increase aggregate supply by reducing
the prices of imported resources.
B. increases aggregate demand in the United States,
and may decrease aggregate supply by increasing
the prices of imported resources.
C. decreases aggregate demand in the United States,
and may increase aggregate supply by reducing
the prices of imported resources.
D. decreases aggregate demand in the United States,
and may decrease aggregate supply by increasing
the prices of imported resources.
Roger LeRoy Miller
Economics Today, Sixteenth Edition
© 2012 Pearson Addison-Wesley. All rights reserved.
The shape of the aggregate demand curve does
not tell us anything about how the total dollar value
of spending will ultimately be divided between
output and prices. For this we need
A. information about the standard of living in the
country.
B. information that only the Consumers' Price
Index can provide.
C. an aggregate supply curve.
D. to know how far from the origin the aggregate
demand curve is.
Roger LeRoy Miller
Economics Today, Sixteenth Edition
© 2012 Pearson Addison-Wesley. All rights reserved.
Secular deflation occurs when
A. there is no economic growth and aggregate
demand falls.
B. aggregate demand increases at the same time
there is no economic growth.
C. aggregate demand remains unchanged while
economic growth increases long-run aggregate
supply.
D. both aggregate demand and aggregate supply
are shifting left.
Roger LeRoy Miller
Economics Today, Sixteenth Edition
© 2012 Pearson Addison-Wesley. All rights reserved.
When the price level is below the level at which the
aggregate demand curve crosses the long-run
aggregate supply curve,
A. there will be no price level change.
B. there will be pressures that will lead to a shift of
either the aggregate demand or the long-run
aggregate supply curves.
C. total planned real expenditures will exceed
actual real GDP, and the price level will increase.
D. total planned real expenditure will be lower than
actual real GDP, and the price level will increase.
Roger LeRoy Miller
Economics Today, Sixteenth Edition
© 2012 Pearson Addison-Wesley. All rights reserved.
Over the last 20 years, real GDP in the U.S.
economy has increased and there has been
inflation. This indicates that
A. aggregate demand has increased while
aggregate supply has been constant.
B. aggregate demand has been constant while
aggregate supply has increased.
C. aggregate demand has increased more than
aggregate supply.
D. aggregate demand has increased less than
aggregate supply.
Roger LeRoy Miller
Economics Today, Sixteenth Edition
© 2012 Pearson Addison-Wesley. All rights reserved.
In the long run, an increase in government
spending, other things equal, generates
A.
B.
C.
D.
a higher real GDP in the long run.
a lower real GDP in the short run.
a higher price level.
both a higher real GDP and a lower price level.
Roger LeRoy Miller
Economics Today, Sixteenth Edition
© 2012 Pearson Addison-Wesley. All rights reserved.
Over the past several decades, what has been
true about price levels in the United States?
A. Inflation rates have been consistently negative.
B. The nation has experienced persistent
deflation.
C. Price levels have been very stable.
D. Inflation rates have been consistently positive.
Roger LeRoy Miller
Economics Today, Sixteenth Edition
© 2012 Pearson Addison-Wesley. All rights reserved.
Suppose that an economy is initially producing at
the full-employment level of output. Now suppose
there is a reduction in the money supply. Other
things being equal we can expect
A.
B.
C.
D.
supply-side inflation.
demand-side inflation.
cost-pull inflation.
deflation.
Roger LeRoy Miller
Economics Today, Sixteenth Edition
© 2012 Pearson Addison-Wesley. All rights reserved.
Refer to the figure below. Suppose the economy's
initial equilibrium is represented by the intersection
of LRAS1 and AD1. Suppose there is a persistent
reduction in labor force participation, which reduces
total planned production at any given price level.
The resulting change in the economy's long-run
equilibrium position would be represented by a
A.
B.
C.
D.
movement from A to C.
movement from A to B.
movement from B to C.
movement from C to A.
Roger LeRoy Miller
Economics Today, Sixteenth Edition
© 2012 Pearson Addison-Wesley. All rights reserved.
When the economy is in long-run equilibrium, the
price level adjusts so as to equate which two
values with one another?
A.
B.
C.
D.
import and export spending
the inflation rate and the unemployment rate
government spending and tax revenues
total planned real expenditures and total
planned production
Roger LeRoy Miller
Economics Today, Sixteenth Edition
© 2012 Pearson Addison-Wesley. All rights reserved.
Which of the following would unambiguously
generate inflation?
A. a decrease in aggregate demand accompanied
by an increase in aggregate supply
B. an increase in aggregate demand accompanied
by an increase in aggregate supply
C. a decrease in aggregate demand accompanied
by a decrease in aggregate supply
D. an increase in aggregate demand accompanied
by a decrease in aggregate supply
Roger LeRoy Miller
Economics Today, Sixteenth Edition
© 2012 Pearson Addison-Wesley. All rights reserved.
If long-run economic growth is not accompanied by
a change in aggregate demand, the result will be
A.
B.
C.
D.
persistent inflation.
secular deflation.
devaluation of the dollar.
appreciation of the dollar.
Roger LeRoy Miller
Economics Today, Sixteenth Edition
© 2012 Pearson Addison-Wesley. All rights reserved.