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Manual

Manual
Exam
Name___________________________________
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
1) The aggregate supply/aggregate demand model is used to help understand all of the following 1)
EXCEPT
A) inflation.
B) growth of potential GDP.
C) the aggregate value of stock traded in the stock market.
D) business cycle fluctuations.
Answer: C
2) The supply of real GDP is a function of 2)

A) the quantities of labor, capital and the state of technology.
B) the total expenditures of consumers, investors and government.
C) only the state of technology.
D) the sum of wages, salaries, corporate profits, rents and interest.
Answer: A
3) The quantity of real GDP supplied depends on the 3)

A) level of aggregate demand.
B) quantity of labor, the quantity of capital, and the state of technology.
C) quantity of capital, bonds, and stocks.
D) price level, the unemployment rate, and the quantity of government expenditures on goods
and services.
Answer: B
4) Which of the following variables does NOT directly influence the supply of real GDP? 4)
A) the quantity of labor B) the state of technology
C) the quantity demanded D) the quantity of capital
Answer: C
5) Aggregate supply is 5)
A) the relationship between the unemployment rate and real GDP.
B) the relationship between labor employment and the real (inflation adjusted) wage rate.
C) desired spending on output at different price levels.
D) the relationship between the quantity of real GDP and the price level.
Answer: D
6) The quantity of real GDP supplied at different price levels is reflected by the 6)
A) aggregate supply curve. B) total expenditure curve.
C) aggregate demand curve. D) real wealth curve.
Answer: A
1
7) The quantity of real GDP supplied ________ the amount of ________. 7)
A) decreases as; capital and labor input decreases
B) decreases as; capital input increases
C) increases as; labor input decreases
D) is unaffected by; technology
Answer: A
8) Aggregate supply describes the behavior of 8)

A) households. B) producers. C) government. D) foreign buyers.
Answer: B
9) An aggregate supply curve depicts the relationship between 9)

A) household expenditures and household income.
B) the price level and the aggregate quantity demanded.
C) the price level and nominal GDP.
D) the price level and the aggregate quantity supplied.
Answer: D
10) In the macroeconomic short run, 10)

A) actual real GDP may be less than or more than potential GDP.
B) actual real GDP always equals potential GDP.
C) the unemployment rate is zero.
D) the economy is always moving away from full employment.
Answer: A
11) When talking about aggregate supply, it is necessary to 11)

A) distinguish between long-run full employment and short-run full-employment.
B) distinguish between long-run aggregate supply and short-run aggregate supply.
C) focus on the short run.
D) focus on the long run.
Answer: B
12) We distinguish between the long-run aggregate supply curve and the short-run aggregate supply 12)
curve. In the long run
A) the aggregate supply curve is horizontal while in the short run it is upward sloping.
B) real GDP equals potential GDP.
C) the price level is constant but in the short run it fluctuates.
D) technology is fixed but not in the short run.
Answer: B
13) The macroeconomic long run is best defined as 13)

A) the time period sufficiently long so that real GDP has adjusted to equal potential GDP.
B) a time period of less than 1 year.
C) the time period sufficiently long so that real GDP has adjusted to exceed potential GDP.
D) a time period of more than 1 year.
Answer: A
2
14) In the macroeconomic long run, 14)
A) output always is above potential GDP.
B) there is full employment and real GDP is equal to potential GDP.
C) there is full employment with no unemployment.
D) GDP always is below potential GDP.
Answer: B
15) If the economy is at the natural unemployment rate, 15)

A) real GDP < potential GDP.
B) real GDP > potential GDP.
C) real GDP = potential GDP.
D) All of the above can occur when the economy is at the natural unemployment rate.
Answer: C
16) In the macroeconomic long run, 16)

A) real GDP equals potential GDP.
B) regardless of the price level, the economy is producing at potential GDP.
C) the economy is at full employment.
D) All of the above are correct.
Answer: D
17) At potential GDP 17)

A) unemployment is at its natural rate.
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.
Answer: A
18) In the long-run 18)

A) real GDP is equal to potential GDP.
B) the aggregate supply curve is upward sloping.
C) aggregate supply depends on the price level.
D) All of the above answers are correct.
Answer: A
19) The long-run aggregate supply (LAS) curve 19)

A) has a positive slope. B) is horizontal.
C) has a negative slope. D) is vertical.
Answer: D
20) When the labor market is in equilibrium, 20)

A) the price level equals potential prices. B) real GDP equals potential GDP.
C) the SAS curve is horizontal. D) the price level is stable.
Answer: B
21) The long-run aggregate supply curve is vertical because 21)

A) at full employment prices are stable.
B) potential GDP is independent of the price level.
C) there is no cyclical inflation.
D) the money wage rate increases faster than the price level.
Answer: B
3
22) The long-run aggregate supply curve is 22)
A) the same as the short-run aggregate supply curve.
B) horizontal at the full employment price level.
C) vertical at the full employment level of real GDP.
D) upward sloping because of the effects of price level changes on real GDP.
Answer: C
23) The long-run aggregate supply curve is 23)

A) horizontal. B) upward sloping.
C) downward sloping D) vertical.
Answer: D
24) Which of the following statements is TRUE? 24)

A) The long-run aggregate supply curve is vertical.
B) The long-run aggregate supply curve is upward sloping.
C) The short-run aggregate supply curve is vertical.
D) The long-run aggregate demand curve is upward sloping.
Answer: A
25) The long-run aggregate supply curve is ________ because along it, as prices rise, the money wage 25)
rate ________.
A) vertical; rises B) upward sloping; stays constant
C) vertical; falls D) upward sloping; falls
Answer: A
26) The long-run aggregate supply curve illustrates the 26)

A) amount of products producers offer at various prices when money wages and other resource
prices do not change.
B) relationship of prices with the level of GDP when real GDP equals potential GDP.
C) relationship of aggregate supply and aggregate demand.
D) surpluses, shortages and equilibrium level of GDP.
Answer: B
27) The long-run aggregate supply curve is the relationship between the quantity of real GDP 27)
supplied and ________ when ________.
A) the price level; real GDP equals potential GDP
B) real GDP demanded; the wage rate is constant
C) real GDP demanded; the price level does not change
D) the price level; real GDP equals nominal GDP
Answer: A
28) When the price level rises, the long-run aggregate supply curve ________. 28)
A) does not shift B) shifts leftward
C) slopes upward D) shifts rightward
Answer: A
4
29) The long-run aggregate supply curve 29)
A) is positively sloped.
B) is horizontal at the level of potential GDP.
C) is negatively sloped.
D) is vertical at the level of potential GDP.
Answer: D
30) For movements along the long-run aggregate supply curve, 30)
A) the prices of goods and services change while the prices of productive resources hold steady.
B) potential GDP is dependent on the price level.
C) the price level and the money wage rate change by the same percentage.
D) All of the above are correct.
Answer: C
31) The long-run aggregate supply curve shows the 31)

A) maximum GDP the nation will ever produce.
B) level of output for which real GDP equals nominal GDP.
C) level of real GDP associated with a constant price level.
D) full-employment level of real GDP.
Answer: D
32) Which of the following is true about the long-run aggregate supply curve? 32)
A) It is vertical at the level of potential GDP.
B) It does not shift in response to temporary changes in aggregate demand.
C) It shows the relationship between the price level and real GDP when wages and other costs
are at an equilibrium level.
D) All of the above are true.
Answer: D
33) Which of the following events will increase long-run aggregate supply? 33)
A) a decrease in expected profit B) an increase in the interest rate
C) an advance in technology D) an increase in resource prices
Answer: C
5
34) The curve labeled A in the above figure is a 34)
A) short-run aggregate demand curve. B) long-run aggregate supply curve.
C) short-run aggregate supply curve. D) long-run aggregate demand curve.
Answer: B
35) The curve labeled A in the above figure will shift rightward when 35)
A) the price level rises. B) population falls.
C) technology increases. D) the price level falls.
Answer: C
36) The short-run aggregate supply curve 36)

A) becomes vertical if there is excess production capacity within the economy.
B) shows a negative relationship between the price level and real national income holding
constant potential GDP and all resource prices.
C) shows what each producer is willing and able to produce at each level of income holding
constant potential GDP and all resource prices.
D) relates aggregate production and the price level holding constant potential GDP and all
resource prices.
Answer: D

A) is vertical. B) has a positive slope.
C) has a negative slope. D) is horizontal.
Answer: B
38) In the short run, the aggregate supply curve is 38)

A) vertical. B) downward sloping.
C) horizontal. D) upward sloping.
Answer: D
6
39) The short-run aggregate supply curve is upward sloping because in the short run the 39)
A) both the money wage rate and the price level change.
B) neither the money wage rate nor the price level can change.
C) price level changes but the money wage rate does not.
D) money wage rate changes but the price level does not.
Answer: C
40) The positive relationship between short-run aggregate supply and the price level indicates that, in 40)
the short run,
A) firms produce more output as the price level falls.
B) the money wage rate increases when moving along the short-run aggregate supply curve.
C) lower price levels are more profitable for firms.
D) firms produce more output as the price level rises.
Answer: D
41) Moving upward along the SAS results in a ________ in the price level and ________ in real GDP. 41)
A) rise; a decrease B) fall; a decrease C) fall; an increase D) rise; an increase
Answer: D
42) The short-run aggregate supply curve is upward sloping because 42)
A) a lower price level creates a wealth effect.
B) most business firms operate with long-term contracts for output but not labor.
C) money wage rates do not immediately change when the price level changes.
D) lower taxes motivate people to work more.
Answer: C

A) shifts because of changes in the price level.
B) shows the impact changes in the price level have on the quantity of real GDP when resource
prices are constant.
C) illustrates the level of potential real GDP.
D) is vertical.
Answer: B
44) In the short-run 44)

A) the price level does not change.
B) the aggregate supply curve is upward sloping.
C) the money wage rate can change.
D) real GDP is always equal to potential GDP.
Answer: B
45) Along a short-run aggregate supply curve, a decrease in the price level means that 45)
A) output does not change because firms do not change the quantity they produce.
B) more output is produced as firms increase production because wages fall more than the price
level falls, making it profitable to hire more workers.
C) less output is produced as firms decrease production.
D) more output is produced as consumer demand increases.
Answer: C
7
46) The short-run aggregate supply curve is upward sloping because 46)
A) capital is scarce.
B) potential GDP is less than real GDP when the price level falls.
C) firms need to receive higher prices to cover the higher costs of producing increasing levels of
output.
D) technology is scarce.
Answer: C
47) In the short run, firms expand their production when the price level rises because 47)
A) the higher prices allow the firm to hire more workers by offering higher wages, thereby
increasing productivity and profits.
B) each firm must keep its production up to the level of its rivals, and some firms will expand
production as the price level increases.
C) firms can increase their profits by increasing their maintenance.
D) the money wage rate remains constant so the higher prices for their product makes it
profitable for firms to expand production.
Answer: D
48) Moving along the short-run aggregate supply curve, ________. 48)
A) real GDP equals potential GDP
B) the money wage rate, the prices of other resources, and potential GDP remain constant
C) the real wage rate is constant
D) real GDP equals nominal GDP
Answer: B
49) If the money wage and other resource prices do not change when the price level rises by 10 percent, 49)
________.
A) there is movement along the short-run aggregate supply curve
B) the long-run aggregate supply curve shifts leftward
C) massive labor lay-offs occur
D) the short-run aggregate supply curve shifts leftward
Answer: A
50) A change in ________ results in a movement along the short-run aggregate supply curve but no 50)
shift in the short-run aggregate supply curve.
A) technology B) the quantity of capital
C) the price level D) the money wage rate
Answer: C
51) Which of the following does NOT shift the short-run aggregate supply curve? 51)
A) a reduction in the price of a raw material B) a change in the price level
C) a change in the money wage rate D) technological progress
Answer: B
52) Which of the following occurs while moving along a short-run aggregate supply curve? 52)
A) Neither the price level nor the money wage rate changes.
B) The price level changes and the money wage rate is constant.
C) The money wage rate and the price level change by the same percentage.
D) The money wage rate changes and the price level is constant.
Answer: B
8
53) For movements along the short-run aggregate supply curve, 53)
A) the money wage rate is constant. B) potential GDP remains constant.
C) the real wage rate changes. D) All of the above are correct.
Answer: D
54) Moving along a short-run aggregate supply curve, resource prices ________, the money rate wage 54)
________, and potential GDP ________.
A) change; does not change; does not change
B) do not change; does not change; does not change
C) do not change; changes; does not change
D) do not change; does not change; changes
Answer: B
55) A decrease in the price level accompanied by no change in the money wage rate leads to ________ 55)
movement along the ________ aggregate supply curve.
A) an upward; long-run B) an upward; short-run
C) a downward; short-run D) a downward; long-run
Answer: C
56) The SAS curve and the LAS curve 56)

A) are perpendicular to one another at potential GDP.
B) are parallel at potential GDP.
C) intersect at potential GDP.
D) None of the above answers is correct.
Answer: C
57) Suppose the price level, the money wage, and the price of all other resources rise by 10 percent. 57)
This set of changes leads to
A) an upward movement along the SAS curve.
B) a downward movement along the LAS curve.
C) a leftward shift of the LAS curve.
D) an upward movement along the LAS curve.
Answer: D
58) Suppose the price level rises and the money wage remains constant. This set of changes leads to 58)
A) a leftward shift of the SAS curve.
B) an upward movement along the LAS curve.
C) an upward movement along the SAS curve.
D) a leftward shift of the SAS curve and the LAS curve.
Answer: C
59) Which of the following statements regarding aggregate supply are correct? 59)
A) Moving along the long-run aggregate supply curve, the money wage rate changes but the
price level is constant.
B) Moving along the long-run aggregate supply curve, both the price level and the money wage
rate change by the same percentage.
C) Moving along the short-run aggregate supply curve, both the price level and the money wage
rate change by the same percentage.
D) Moving along the short-run aggregate supply curve, the money wage rate changes but the
price level is constant.
Answer: B
9
60) In the figure above, potential GDP equals 60)
A) $12.0 trillion. B) $11.5 trillion.
C) $12.5 trillion. D) None of the above answers is correct.
Answer: A
61) In the figure above, the economy is at point A when the price level rises to 120. Money wage rates 61)
and other resource prices remain constant. Firms are willing to supply output equal to
Answer: C
62) In the figure above, the economy is at point A when the price level falls to 100. Money wage rates 62)
and all other resource prices remain constant. Firms are willing to supply output equal to
Answer: A
10
63) In the above figure, the economy will be at full employment if the price level 63)
A) is below 100.
B) is above 110.
C) is 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.
Answer: C
64) In the above figure, which movement illustrates the impact of a falling price level and a constant 64)
money wage rate?
A) E to I B) E to H C) E to J D) E to F
Answer: A
11
65) In the above figure, which movement illustrates the impact of a rising price level and a constant 65)
money wage rate?
A) E to G B) E to K C) E to I D) E to F
Answer: D
66) In the above figure, which movement illustrates the impact of the price level and money wage rate 66)
falling at the same rate?
A) E to J B) E to K C) E to H D) E to G
Answer: A
67) In the above figure, which movement illustrates the impact of a constant price level and a rising 67)
money wage rate?
A) E to H B) E to F C) E to J D) E to I
Answer: A
68) Which of the following events will increase short-run aggregate supply? 68)
A) an increase in foreign income
B) an increase in resource prices
C) an advance in technology
D) an increase in the natural unemployment rate
Answer: C
69) The short-run aggregate supply curve shifts when 69)

A) the quantity of capital changes.
B) advances in technology occur.
C) the full-employment quantity of labor changes.
Answer: D
70) The SAS curve shifts if there is a change in 70)

A) nominal GDP. B) the price level. C) real GDP. D) potential GDP.
Answer: D
71) Which of the following changes does NOT shift the short-run aggregate supply curve? 71)
A) an increase in technology B) an increase in the money wage rate
C) an increase in the price level D) an increase in the quantity of capital
Answer: C
72) Which of the following changes does NOT shift the long-run aggregate supply curve? 72)
A) a tax hike that reduces the capital stock
B) a rise in number of college graduates in the labor force
C) a fall in the price level
D) a decrease in the labor force
Answer: C
73) All of the following shift the LAS curve EXCEPT 73)
A) an increase in the stock of human capital. B) technological progress.
C) a change in the capital stock. D) an increase in the money wage rate.
Answer: D
12
74) Which of the following shift the LAS curve rightward? 74)
A) a decrease in the labor force
B) a decrease in the money wage
C) an increase in the price level
D) a increase in the education level of the labor force
Answer: D
75) All of the following shift the short-run aggregate supply curve EXCEPT 75)
A) technological progress. B) a change in the money wage rate.
C) a change in the price of a raw material. D) a change in the price level.
Answer: D
76) Which of the following directly shifts the short-run aggregate supply curve? 76)
A) a change in resource prices B) a change in the price level
C) a change in aggregate demand D) all of the above
Answer: A
77) A change in which of the following shifts the short-run aggregate supply curve? 77)
A) an advance in technology
B) a change in the quantity of capital
C) a change in the money wage rate
D) All of the above shift the short-run aggregate supply curve.
Answer: D
78) Which of the following shifts the short-run aggregate supply curve? 78)
I. changes in the size of the labor force
II. changes in the money wage rate
A) I only B) II only C) both I and II D) neither I nor II
Answer: C
79) The short-run aggregate supply curve shifts leftward when the 79)
A) general level of technology advances.
B) price level increases.
C) availability of on-the-job training expands to all workers.
D) money wage rate increases.
Answer: D
80) Suppose there is a temporary increase in the price of oil. This is represented by 80)
A) a leftward shift of the SAS and the LAS curve.
B) a rightward shift of the SAS curve.
C) a leftward shift of the LAS curve.
D) a leftward shift of the SAS curve.
Answer: D
13
81) In the above figure, the short-run aggregate supply curve is SAS1 . Suppose that the price level in 81)
the economy increases. As a result there is
A) a shift to SAS0 . B) a downward movement along SAS1 .
C) an upward movement along SAS1 . D) a shift to SAS2 .
Answer: C
82) In the above figure, the short-run aggregate supply curve is SAS1 . If the level of technology in the 82)
economy increases, there is
A) a shift to SAS2 . B) an upward movement along SAS1 .
C) a shift to SAS0 . D) a downward movement along SAS1 .
Answer: A
83) In the above figure, the short-run aggregate supply curve is SAS1 . If the money wage rate 83)
increases, there is
A) an upward movement along SAS1 . B) a downward movement along SAS1 .
C) a shift to SAS2 . D) a shift to SAS0 .
Answer: D
84) In the above figure, the short-run aggregate supply curve is SAS1 . If the prices of resources fall, 84)
there is
A) a shift to SAS2 . B) a shift to SAS0 .
C) a downward movement along SAS1 . D) an upward movement along SAS1 .
Answer: A
85) A change in the full-employment quantity of labor ________ the short-run aggregate supply curve 85)
and ________ the long-run aggregate supply curve.
A) does not shift; shifts B) shifts; shifts
C) shifts; does not shift D) does not shift; does not shift
Answer: B
14
86) If the full-employment quantity of labor increases, then the 86)
A) LAS curve shifts rightward and the SAS curve does not shift.
B) SAS curve shifts rightward and the LAS curve does not shift.
C) SAS curve shifts rightward and the LAS curve does shifts leftward.
D) SAS curve shifts rightward and the LAS curve shifts rightward.
Answer: D
87) When the quantity of capital increases, then the 87)

A) SAS curve shifts rightward and the LAS curve shifts rightward.
B) LAS curve shifts rightward and the SAS curve does not shift.
C) SAS curve shifts rightward and the LAS curve does not shift.
D) SAS curve shifts rightward and the LAS curve does shifts leftward.
Answer: A
88) With an increase in the capital stock, the short-run aggregate supply curve 88)
A) shifts leftward. B) remains as it is.
C) shifts rightward. D) becomes steeper.
Answer: C
89) An increase in the amount of human capital ________ the short-run aggregate supply curve and 89)
________ the long-run aggregate supply curve.
A) shifts; shifts B) does not shift; does not shift
C) does not shift; shifts D) shifts; does not shift
Answer: A
90) A change in the capital stock ________ the short-run aggregate supply curve and ________ the 90)
long-run aggregate supply curve.
A) shifts; does not shift B) shifts; shifts
C) does not shift; does not shift D) does not shift; shifts
Answer: B
91) The land of Ur increases its capital stock. As a result, the long-run aggregate supply curve shifts 91)
________ and so does the ________ curve.
A) rightward; aggregate demand B) rightward; short-run aggregate supply
C) leftward; aggregate demand D) leftward; short-run aggregate supply
Answer: B
92) An increase in the quantity of capital shifts the ________ curve ________ and the ________ curve 92)
________.
A) AD; leftward; SAS; rightward B) AD; rightward; SAS; leftward
C) LAS; leftward; SAS; leftward D) LAS; rightward; SAS; rightward
Answer: D
15
93) A major technological advance shifts the 93)
A) short-run aggregate supply curve rightward but does not shift the long-run aggregate supply
curve.
B) long-run aggregate supply curve rightward and the short-run aggregate supply curve
leftward.
C) long-run and the short-run aggregate supply curves rightward.
D) long-run aggregate supply curve rightward but does not shift the short-run aggregate supply
curve.
Answer: C
94) Which of the following shifts both the LAS and SAS curves? 94)
A) an advance in technology
B) a simultaneous change in both the price level and the money wage rate
C) a change in the price level
D) a change in the money wage rate
Answer: A
95) A technological advance ________ the long-run aggregate supply curve and ________ the 95)
short-run aggregate supply curve.
A) shifts; shifts B) does not shift; does not shift
C) does not shift; shifts D) shifts; does not shift
Answer: A
96) Technological progress will 96)

A) shift the LAS curve rightward but will not shift the SAS curve.
B) shift both the LAS and SAS curves rightward.
C) shift the SAS curve rightward but will not shift the LAS curve.
D) not shift either the LAS or the SAS curve.
Answer: B
97) The short-run aggregate supply curve shifts because of changes in all of the following EXCEPT 97)
A) technological progress. B) the capital stock.
C) money wage rates. D) the price level.
Answer: D
98) If the money prices of resources changes, 98)

A) the SAS curve shifts.
B) the AD curve shifts.
C) the macroeconomic equilibrium is unaffected.
D) the LAS curve shifts.
Answer: A
99) If the money wage rate rises, then the 99)

A) SAS curve shifts leftward. B) LAS curve shifts leftward.
C) LAS curve shifts rightward. D) SAS curve shifts rightward.
Answer: A
100) If the money price of a resource such as oil falls, then the 100)
A) LAS curve shifts rightward. B) SAS curve shifts leftward.
C) SAS curve shifts rightward. D) LAS curve shifts leftward.
Answer: C
16
101) Suppose that the money wage in the economy increases by 8 percent. As a result the 101)
A) long-run aggregate supply will increase and the short-run aggregate supply will decrease.
B) long-run aggregate supply will decrease.
C) short-run aggregate supply will decrease.
D) long-run and the short-run aggregate supply both decrease.
Answer: C
102) A decrease in the money wage rate 102)

A) increases the short-run aggregate supply.
B) decreases the short-run aggregate supply.
C) decreases the long-run aggregate supply.
D) increases the long-run aggregate supply.
Answer: A
103) An increase in the money wage rate 103)

A) decreases the long-run aggregate supply.
B) increases the long-run aggregate supply.
C) increases the short-run aggregate supply.
D) decreases the short-run aggregate supply.
Answer: D
104) A change in the money wage rate shifts 104)

A) the LAS curve but not the SAS curve. B) the SAS curve but not the LAS curve.
C) neither the SAS nor the LAS curve. D) both the SAS and LAS curves.
Answer: B
105) An increase in the money wage rate shifts the short-run aggregate supply curve ________; an 105)
increase in technology shifts the long-run aggregate supply curve ________.
A) leftward; leftward B) rightward; leftward
C) leftward; rightward D) rightward; rightward
Answer: C
17
106) In the above figure, the economy is at point A when the money wage rate and the price level both 106)
fall by 10 percent. Firms will be willing to supply output equal to
A) $12.0 trillion
B) more than $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.
Answer: A
107) In the above figure, the economy is at point A. Then the price level falls to 90 while the money wage 107)
rate does not change. 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
correct.
Answer: B
108) In the above figure, the economy is at point A. Then the price level rises to 110 while the money 108)
wage rate remains constant. Firms will be willing to supply output equal to
A) $12.0 trillion
correct.
Answer: B
18
109) In the above figure, the economy is at point A and the money wage rate falls by 10 percent. If the 109)
price level is constant, firms will be willing to supply output equal to
A) more than $12.0 trillion
B) $12.0 trillion
correct.
Answer: A
110) In the above figure, the economy is at point A and the money wage rate rises by 10 percent. If the 110)
price level is constant, firms will be willing to supply output equal to
A) $12.0 trillion
correct.
Answer: C
111) In the above figure, B is the current long-run aggregate supply curve and E is the current short-run 111)
aggregate supply curve. If there is an increase in the full-employment quantity of labor, then the
long-run aggregate supply curve and the short-run aggregate supply curve
A) shift to C and F, respectively. B) remain B and E.
C) shift to A and D, respectively. D) shift to A and F, respectively.
Answer: A
112) In the above figure, B is the current long-run aggregate supply curve and E is the current short-run 112)
aggregate supply curve. Technological advances mean the long-run aggregate supply curve and
short-run aggregate supply curve
A) shift to C and remain E, respectively. B) shift to C and F, respectively.
C) shift to A and D, respectively. D) remain B and E.
Answer: B
19
113) In the above figure, which part corresponds to a destruction of part of the nation's capital stock? 113)
A) Figure A B) Figure B C) Figure C D) Figure D
Answer: A
114) In the above figure, which point corresponds to an increase in technology? 114)
Answer: C
115) In the above figure, which part corresponds to an increase in the money wage rate? 115)
Answer: B
116) In the above figure, which part corresponds to a fall in the money wage rate? 116)
Answer: D
117) Moving along which curve does the money wage rate and the price level change in the same 117)
proportions?
A) the SAS curve
B) the LAS curve
C) the AD curve
D) None of the above because there is no curve along which both the money wage rate and the
price level change in the same proportions.
Answer: B
20
118) Long-run aggregate supply will decrease for all of the following reasons EXCEPT 118)
A) decreased capital. B) decreased human capital.
C) reduced money wages. D) decrease in the level of full employment.
Answer: C
119) A fall in the money wage rate shifts 119)

A) both the SAS and LAS curves rightward.
B) the LAS curve rightward but leaves the SAS curve unchanged.
C) both the SAS and LAS curves leftward.
D) the SAS curve rightward but leaves the LAS curve unchanged.
Answer: D
120) An increase in the level of technology shifts 120)

A) both the SAS and LAS curves rightward.
B) both the SAS and LAS curves leftward.
C) the LAS curve rightward but leaves the SAS curve unchanged.
D) the SAS curve rightward but leaves the LAS unchanged.
Answer: A
121) The aggregate demand curve shows 121)

A) the quantity of real GDP demanded at different price levels.
B) total expenditures at different levels of national income.
C) that real income is directly (positively) related to the price level.
Answer: A
122) The AD curve shows the sum of 122)

A) consumption expenditure, investment, the price level, and real GDP.
B) the price level, employment, and real GDP.
C) consumption expenditure, investment, and real GDP.
D) consumption expenditure, investment, government expenditures on goods and services, and
net exports.
Answer: D
123) The aggregate demand curve 123)

A) is horizontal. B) is vertical.
C) has a positive slope. D) has a negative slope.
Answer: D
124) Aggregate demand is the relationship between the quantity of real GDP demanded and the 124)
________.
A) money wage rate B) price level
C) real wage rate D) nominal GDP demanded
Answer: B
125) Moving along the aggregate demand curve, a decrease in the quantity of real GDP demanded is a 125)
result of
A) an increase in income. B) an increase in the price level.
C) a decrease in income. D) a decrease in the price level.
Answer: B
21
126) When the price level increases, ________. 126)
A) aggregate demand decreases
B) real GDP remains constant
C) the quantity of real GDP demanded decreases
D) aggregate demand increases
Answer: C
127) Other things constant, the economy's aggregate demand curve shows that 127)
A) the quantity of real GDP demanded and the price level are not related.
B) any change in the price level shifts the aggregate demand curve.
C) as the price level falls, real GDP decreases.
D) the quantity of real GDP demanded decreases when the price level rises.
Answer: D
128) The aggregate demand curve shows the ________ relationship between the price level and 128)
________.
A) negative; the quantity of real GDP demanded
B) positive; the quantity of real GDP demanded
C) positive; aggregate labor demand
D) negative; aggregate labor demanded
Answer: A
129) The aggregate demand curve illustrates ________ relationship between the price level and the 129)
quantity of real GDP demanded.
A) an inverse B) a direct and proportional
C) a multiplied D) a direct but not necessarily proportional
Answer: A
130) Other things equal, along the aggregate demand curve, a higher price level is associated with 130)
A) an increase in the quantity of real GDP demanded.
B) a decrease in the quantity of nominal GDP demanded.
C) a decrease in the quantity of real GDP demanded.
D) higher income levels.
Answer: C
131) The aggregate demand curve shows that, if other factors are held constant, the higher the price 131)
level, the
A) larger consumption expenditure.
B) greater the quantity of real GDP demanded.
C) smaller the quantity of real GDP demanded.
Answer: C
132) The aggregate demand curve shows that, if other factors are held constant, a 132)
A) lower price level results in inflationary conditions.
B) higher price level results in a decrease in the quantity of real GDP demanded.
C) higher price level results in an increase in the quantity of real GDP demanded.
D) higher price level results in a lower interest rate.
Answer: B
22
133) The quantity of real GDP demanded equals $12.2 trillion when the GDP deflator is 90. If the GDP 133)
deflator rises to 95, the quantity of real GDP demanded equals
A) $12.2 trillion.
B) less than $12.2 trillion.
C) more than $12.2 trillion.
D) more information is needed to determine if the quantity of real GDP demanded increases,
decreases, or does not change.
Answer: B
134) The quantity of real GDP demanded equals $12.4 trillion when the GDP deflator is 95. If the GDP 134)
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.
Answer: C
135) Which of the following changes while moving along the aggregate demand curve? 135)
A) future profits from investment projects B) the amount of money in the economy
C) future incomes of households D) the price level
Answer: D
136) The AD curve slopes 136)

A) downward due to the wealth and substitution effects.
B) upward due to the wealth and substitution effects.
C) downward due to the wealth and price effects.
D) upward due to the price and substitution effects.
Answer: A
137) An increase in the price level creates a 137)

A) movement along the aggregate demand curve.
B) wealth effect.
C) decrease in consumption expenditures.
Answer: D
138) Your real wealth is measured as the 138)

A) amount of goods and services your wealth will buy.
B) amount of assets you have in dollar terms.
C) amount of goods you have divided by the price level.
D) amount of money you have.
Answer: A
139) As the price level falls and other things remain the same, real wealth ________ and ________. 139)
A) decreases; short-run aggregate supply decreases
B) increases; the quantity of real GDP demanded increases
C) increases; aggregate demand increases
D) decreases; the quantity of real GDP demanded decreases
Answer: B
23
140) If you are have $1,000 of money in the bank and the price level rises 5 percent, your 140)
A) money is worth less in terms of what it can purchase.
B) purchasing power has risen.
C) money is worth more in terms of what it can purchase.
D) money is worth the same in terms of what it can purchase.
Answer: A
141) According to the wealth effect, when the price level rises and other things remain the same, 141)
A) real consumption expenditure increases. B) real wealth decreases.
C) there is no change in real wealth. D) real wealth increases.
Answer: B
142) According to the wealth effect, if real wealth decreases then people 142)
A) increase their consumption expenditure.
B) decrease their consumption expenditure.
C) do not respond if their nominal wealth does not change.
D) decrease their consumption expenditure only if their nominal wealth also decreases.
Answer: B
143) An individual holds $10,000 in a checking account and the price level rises significantly. Hence 143)
A) there is no change in the individual's real wealth.
B) the individual's wealth increases.
C) the individual's real wealth decreases but real national wealth increases.
D) the individual's real wealth and consumption expenditure decrease.
Answer: D
144) If you have $1,000 in wealth and the price level increases 20 percent, then 144)
A) the $1,000 dollars will buy 20 percent more goods and services.
B) you will be able to buy fewer goods, but the real value of those goods will increase.
C) the real value of the $1,000 increases.
D) the $1,000 will buy fewer goods and services.
Answer: D
145) If you have $5,000 in wealth and the GDP deflator decreases 20 percent, then 145)
A) the $5,000 will buy fewer goods and services.
B) the $5,000 will buy more goods and services.
C) the real value of the $5,000 remains constant.
D) the real value of the $5,000 decreases.
Answer: B
146) A reason the aggregate demand curve slopes downward when the price level rises is because 146)
A) real wealth decreases. B) real wealth increases.
C) interest rates fall. D) None of the above answers is correct.
Answer: A
24
147) Which of the following helps explain why the AD curve is downward sloping? 147)
A) If consumers and businesses expect higher prices in the future, they will purchase more
today, increasing investment and consumption expenditure.
B) When the price level falls, the real value of wealth rises, so people save less and consume
more.
C) If the exchange rate falls and the price level does not change, exports increase and imports
decrease.
Answer: B
148) ________ points out that a rise in the price level decreases the value of real wealth, which then 148)
decreases consumption.
A) The interest rate effect B) The wealth effect
C) The open-economy effect D) The substitution effect
Answer: B
149) A rise in the price level changes aggregate demand because 149)
A) the real value of people's wealth decreases and so they decrease their consumption.
B) the real value of people's wealth varies directly with the price level and so does their
spending.
C) people like to spend more when prices are higher.
D) the more money people have, the more it is worth and hence the more goods and services
they demand.
Answer: A
150) One reason that the aggregate demand curve has a negative slope is because 150)
A) The premise of the question is wrong because the aggregate demand curve has a positive
slope.
B) people buy fewer goods and save more when the price level rises because their real wealth
decreases.
C) firms produce more when the price rises.
D) people earn more money when output rises.
Answer: B
151) According to the wealth effect, an increase in the price level ________ real wealth and ________ 151)
consumption expenditure.
A) increases; increases B) decreases; increases
C) decreases; decreases D) increases; decreases
Answer: C
152) The intertemporal substitution effect refers to substitution of 152)

A) goods and services for less expensive goods and services.
B) goods and services today for goods and services in the future.
C) goods for services.
D) goods and services produced domestically for goods and services produced in another
country.
Answer: B
25
153) According to the intertemporal substitution effect, when the price level rises and other things 153)
remain the same
A) government taxes rise. B) the interest rate falls.
C) the interest rate rises. D) the quantity of money increases.
Answer: C
154) Substitution effects help explain the slope of the aggregate demand curve. One substitution effect 154)
refers to the
A) effect on investment expenditures that result from a change in interest rates produced by a
change in the price level.
B) direct relationship between the interest rate and the real value of wealth.
C) change in wealth that results from a change in the interest rate.
D) inverse relationship between the interest rate and the price level.
Answer: A
155) According to the intertemporal substitution effect, a fall in the price level will 155)
A) increase the real value of wealth, which causes interest rates to increase. As a result, the
quantity of real GDP demanded decreases.
B) decrease the real value of wealth, which causes the quantity of real GDP demanded to
increase.
C) cause the interest rate to fall. As a result, investment increases and the quantity of real GDP
demanded increases.
D) lead to an increase in net exports, which causes the quantity of real GDP demanded to
increase.
Answer: C
156) According to the intertemporal substitution effect, when the price level increases, the interest rate 156)
A) is not affected.
B) rises and the quantity of real GDP demanded decreases.
C) rises and the quantity of real GDP demanded increases.
D) falls and the quantity of real GDP demanded decreases.
Answer: B
157) According to the intertemporal substitution effect, a higher price level 157)
A) makes it less costly for people to buy houses and cars.
B) increases the quantity of real GDP demanded.
C) decreases the quantity of real GDP demanded.
D) lowers the costs of building new plants and equipment.
Answer: C
158) The intertemporal substitution effect of the price level on aggregate demand 158)
A) explains why aggregate demand increases when the amount of money increases.
B) is the same as the real wealth effect.
C) is one reason that the aggregate demand curve has a positive slope.
D) is one reason that the aggregate demand curve has a negative slope.
Answer: D
26
159) One reason that the aggregate demand curve has a negative slope is that when the domestic price 159)
level rises,
A) firms produce fewer goods and services.
B) people substitute toward more imported goods and services.
C) peoples' wealth increases.
D) firms produce more goods and services.
Answer: B
160) An increase in the price level decreases net exports, thereby decreasing the amount of real goods 160)
and services purchased in the United States. This phenomenon as
A) the wealth effect. B) the barter effect.
C) the GDP effect. D) a substitution effect.
Answer: D
161) One reason that the aggregate demand curve has a negative slope is because 161)
A) the amount of money in the economy increases when the price level rises.
B) firms supply less when prices rise.
C) people buy more foreign goods when the domestic price level rises.
D) firms supply more when prices rise.
Answer: C
162) There are several reasons why the aggregate demand curve is downward sloping. Which of the 162)
following correctly describes one of these explanations?
A) A fall in the price level, holding foreign prices and the exchange rate constant, increases net
exports.
B) A rise in the price level lowers the interest rate and increases investment spending.
C) A rise in the price level raises the purchasing power wealth and increases desired
consumption.
D) A rise in the price level raises interest rates and increases investment spending.
Answer: A
163) When the prices of U.S.-produced goods rise and the price of foreign-produced goods do not 163)
change, the result is
A) an increase in exports. B) a decrease in imports.
C) no change in imports or exports. D) a decrease in exports.
Answer: D
164) When the price level in France increases while the exchange rate and the price level in the United 164)
States remain the same, the result is
A) French citizens are more likely to buy U.S.-made goods.
B) U.S. citizens are less likely to buy French-made goods.
C) U.S.-made goods become relatively cheaper compared to French-made goods.
Answer: D
27
165) A movement along the aggregate demand curve but not a shift in the aggregate demand curve is 165)
created by a
A) change in the price level.
B) change in fiscal policy.
C) change in tax rates.
D) None of the above because they all shift the aggregate demand curve.
Answer: A
166) A movement along the aggregate demand curve but not a shift in the aggregate demand curve is 166)
created by
A) a change in the quantity of money. B) an increase in government purchases.
C) a fall in the price level. D) an increase in nominal GDP.
Answer: C
167) In the above figure, the economy is initially at point B. Then the price level falls by 10. The wealth 167)
effect will help
A) move the economy to point D. B) move the economy to point C.
C) keep the economy to point B. D) move the economy to point A.
Answer: D
168) In the above figure, the economy initially is at point B. Then price level rises by 10. The wealth 168)
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.
Answer: D
169) In the above figure, the economy initially is at point C. Then the domestic price level rises by 10. A 169)
A) wealth effect would help move the economy to point B.
B) substitution effect would help move the economy to point B.
C) substitution effect would keep the economy at point C.
D) substitution effect would help move the economy to point D.
Answer: D
28
170) An increase in aggregate demand is shown by a 170)
A) leftward shift the AD curve.
B) movement downward along the AD curve.
C) rightward shift the AD curve.
D) movement upward along the AD curve.
Answer: C
171) Which of the following does NOT shift the aggregate demand curve? 171)
A) a decrease in the quantity of money
B) an increase in current foreign income
C) an increase in people's expected future incomes
D) an increase in the price level
Answer: D
172) Which of the following would NOT shift the U.S. aggregate demand curve? 172)
A) U.S. monetary and fiscal policy
B) a change in income in Canada
C) the quantity of capital in the United States
D) an expectation that inflation will be lower in the future
Answer: C
173) Which of the following changes would NOT shift the aggregate demand curve? 173)
A) a change in fiscal policy
B) a change in monetary policy
C) an increase in technology
D) a change in expectations about future income
Answer: C
174) Aggregate demand increases when 174)

A) the exchange rate rises. B) interest rates rise.
C) foreign incomes fall. D) None of the above answers is correct.
Answer: D
175) Which of the following does NOT shift the aggregate demand curve? 175)
A) an increase in investment B) a decrease in taxes
C) a decrease in the quantity of money D) an increase in the price level
Answer: D
176) A change in ________ creates a movement along the aggregate demand curve, while a change in 176)
________ shifts the aggregate demand curve.
A) the price level; government expenditures B) foreign income; the foreign exchange rate
C) expected profits; tax rates D) real wealth; human capital
Answer: A
177) Which of the following shifts the aggregate demand curve rightward? 177)
A) a decrease in consumption
B) a decrease in net exports
C) a decrease in government purchases of goods and services
D) an increase in investment expenditures
Answer: D
29
178) A decrease in consumption expenditure resulting from a decrease in expected future consumer 178)
income results in
A) a leftward shift of the aggregate demand curve.
B) a rightward shift of the aggregate demand curve.
C) an upward movement along the aggregate demand curve.
D) a downward movement along the aggregate demand curve.
Answer: A
179) If the expected future inflation rate decreases, then 179)

A) aggregate demand increases. B) aggregate demand decreases.
C) short-run aggregate supply increases. D) short-run aggregate supply decreases.
Answer: B
180) If higher inflation is expected in the future, then the 180)

A) SAS curve shifts rightward. B) LAS curve shifts rightward.
C) AD curve shifts rightward. D) None of the above answers is correct.
Answer: C
181) An increase in expected future income 181)

A) increases the aggregate quantity demanded.
B) decreases aggregate demand.
C) decreases the aggregate quantity demanded.
D) increases aggregate demand.
Answer: D
182) A decrease in expected future income 182)

Answer: B
183) A rise in the expected future inflation rate 183)

Answer: D
184) A fall in the expected future inflation rate 184)

B) increases aggregate demand.
D) decreases aggregate demand.
Answer: D
30
185) People expect their incomes will decrease next year. As a result, the ________ will shift ________. 185)
A) short-run aggregate supply curve; rightward
B) long-run aggregate supply curve; rightward
C) aggregate demand curve; leftward
D) aggregate demand curve; rightward
Answer: C
186) People expect that the El Nino effect will cause drought in Australia in coming years. If most firms 186)
expect their profits will fall during the next five years, Australia's ________ this year.
A) aggregate demand will decrease B) long-run aggregate supply will increase
C) short-run aggregate supply will increase D) aggregate demand will increase
Answer: A
187) Which of the following statements is incorrect? 187)

A) Taxes and transfer payments affect aggregate demand by changing disposable income.
B) An increase in disposable income leads to a decrease in aggregate demand.
C) Fiscal policy is the attempt to influence the economy using taxes, transfer payments, and
government expenditures.
D) Government expenditures affect aggregate demand directly because government
expenditures are a component of aggregate demand.
Answer: B
188) A decrease in government transfer payments 188)

A) increases aggregate demand.
B) decreases the aggregate quantity demanded.
C) increases the aggregate quantity demanded.
Answer: D
189) An increase in government expenditure on goods and services 189)

A) decreases the aggregate quantity demanded.
C) decreases aggregate demand.
D) increases the aggregate quantity demanded.
Answer: B
190) A decrease in government expenditure on goods and services 190)

D) decreases the aggregate quantity demanded.
Answer: B
191) Which of the following shifts the aggregate demand curve leftward? 191)
A) a decrease in government expenditures on goods and services
B) an increase in net exports of goods and services
C) an increase in consumption expenditures
D) a decrease in taxes
Answer: A
31
192) The aggregate demand curve 192)
A) shifts rightward when taxes are decreased.
B) shifts rightward when the price level increases and leftward when the price level falls.
C) does not shift, unlike market demand curves.
D) shifts rightward when foreign incomes decrease and shifts leftward when foreign incomes
increase.
Answer: A
193) If taxes are increased, the AD curve 193)

A) is not affected because a change in taxes is a nominal change not real change.
B) does not shift but there is a movement down along the curve.
C) shifts rightward and aggregate demand decreases.
D) shifts leftward and aggregate demand decreases.
Answer: D
A) a cut in personal income taxes
B) a decrease in the quantity of money and an increase in interest rates
C) a decrease in government expenditures
D) the expectation of a future loss of income
Answer: A
195) Which of the following decreases aggregate demand? 195)

A) The government increases taxes on both business and personal income.
B) Households believe that the economy is headed for good times, with higher future incomes.
C) The quantity of money in the economy increases.
D) Foreign incomes rise.
Answer: A
196) Which of the following increases aggregate demand? 196)

A) a decrease in government expenditure B) a decrease in tax rates
C) a decrease in the quantity of money D) a decrease in foreign income
Answer: B
197) Disposable income ________ when ________. 197)

A) decreases; aggregate income increases
B) increases; government expenditures decrease
C) decreases; taxes increase
D) decreases; transfer payments increase
Answer: C
198) Lower taxes 198)

A) decrease the aggregate quantity demanded.
B) decrease aggregate demand.
C) increase aggregate demand.
D) increase the aggregate quantity demanded.
Answer: C
32
199) Higher taxes 199)
A) increase the aggregate quantity demanded.
B) increase aggregate demand.
C) decrease aggregate demand.
D) decrease the aggregate quantity demanded.
Answer: C
A) an increase in the quantity of money B) an increase in the exchange rate
C) a decrease in the price level D) an increase in the tax rate
Answer: A
201) Which of the following increases aggregate demand? 201)

A) a decrease in government expenditures B) an increase in the quantity of money
C) an increase in the exchange rate D) an increase in taxes
Answer: B
202) Aggregate demand decreases when 202)

A) businesses come to expect higher profits in the future.
B) the government implements monetary policies that decrease the quantity of money.
C) incomes in foreign countries increase.
D) the government cuts taxes.
Answer: B
203) If the quantity of money increases, the 203)

A) price level rises and the AD curve does not shift.
B) AD curve does not shift and there is a movement upward along the curve.
C) AD curve shifts leftward and aggregate demand decreases.
D) AD curve shifts rightward and aggregate demand increases.
Answer: D
A) a decrease in the price level B) a decrease in transfer payments
C) a decrease in government expenditures D) an increase in the quantity money supply
Answer: D
205) The U.S. aggregate demand curve shifts leftward if 205)

A) the Federal Reserve hikes the interest rate and decreases the quantity of money.
B) the economic conditions in Europe improve so that European incomes increase.
C) there is a tax cut.
D) the exchange rate falls.
Answer: A
206) When the quantity of money in the economy increases, the 206)
A) long-run aggregate supply curve shifts leftward.
B) wealth effect is no longer operable.
C) aggregate demand curve shifts rightward.
D) aggregate demand curve does not shift but the economy moves along it.
Answer: C
33
207) An increase in the quantity of money 207)
A) decreases the aggregate quantity demanded.
B) increases the aggregate quantity demanded.
C) decreases aggregate demand.
Answer: D
208) A decrease in the quantity of money 208)

Answer: D
209) Which of the following increases aggregate demand and shifts the AD curve rightward? 209)
A) an increase in the quantity of money and a resulting fall in the interest rate
B) an increase in the exchange rate that makes imports less expensive
C) a fall in the price level
D) predictions of a recession that lead to expectations of lower future income
Answer: A
210) An example of monetary policy is an increase in ________ by the ________, which ________ 210)
aggregate demand.
A) the quantity of money; government; increases
B) the quantity of money; Federal Reserve; decreases
C) the quantity of money; Federal Reserve; increases
D) taxes; government; increases
Answer: C
211) Aggregate demand will increase if the quantity of money ________. 211)
A) increases or tax rates decrease B) or transfer payments decrease
C) remains constant or tax rates increase D) decreases or tax rates increase
Answer: A
212) The U.S. exchange rate rises. As a result, there is a 212)

A) movement along the U.S. aggregate demand curve but the curve does not shift.
B) leftward shift in the U.S. aggregate demand curve.
C) rightward shift in the U.S. aggregate demand curve.
D) rightward shift in the long-run U.S. aggregate supply curve.
Answer: B
213) When the exchange increases so that the value of the dollar rises, then the 213)
A) LAS curve shifts rightward. B) AD curve shifts leftward.
C) LAS curve shifts leftward. D) AD curve shifts rightward.
Answer: B
34
214) A rise in the exchange rate of the dollar 214)
A) decreases aggregate demand.
B) increases the aggregate quantity demanded.
C) increases aggregate demand.
D) decreases the aggregate quantity demanded.
Answer: A
215) A fall in the exchange rate of the dollar 215)

B) decreases the aggregate quantity demanded.
Answer: A
216) Suppose the value of the U.S. dollar decreases from $1.20 Canadian to $1.10 Canadian. U.S. exports 216)
will ________, U.S. imports will ________, and U.S. aggregate demand will ________.
A) increase; increase; increase B) decrease; increase; decrease
C) decrease; increase; increase D) increase; decrease; increase
Answer: D
217) A decrease in foreign incomes 217)

A) increases aggregate demand in the United States.
B) decreases the aggregate quantity demanded in the United States.
C) increases the aggregate quantity demanded in the United States.
D) decreases aggregate demand in the United States.
Answer: D
218) An increase in foreign incomes 218)

A) increases the aggregate quantity demanded in the United States.
B) increases aggregate demand in the United States.
C) decreases aggregate demand in the United States.
D) decreases the aggregate quantity demanded in the United States.
Answer: B
35
219) In the above figure, the economy is initially at point B. If the government decreases transfer 219)
payments, there is
A) a movement to point A. B) a shift to AD2 .
C) a movement to point C. D) a shift to AD1 .
Answer: B
220) In the above figure, the economy is initially at point B. If taxes increase, there is 220)
A) a shift to AD1 . B) a shift to AD2 .
C) a movement to point C. D) a movement to point A.
Answer: B
221) In the above figure, the economy is initially at point B. If the Fed decreases the quantity of money, 221)
there is
A) a shift to AD1 . B) a shift to AD2 .
C) a movement to point A. D) a movement to point C.
Answer: B
222) In the above figure, the economy is initially at point B. If the Fed increases the quantity of money, 222)
there is
A) a shift to AD2 . B) a movement to point C.
C) a movement to point A. D) a shift to AD1 .
Answer: D
36
223) In the above figure, if the economy is at point a, an increase in ________ will move the economy to 223)
________.
A) expected future income; point d
B) expected future income; point c
C) real wealth from the fall in the price level; point c
D) real wealth from the fall in the price level; point b
Answer: C
224) In the above figure, if the economy is at point a, an increase in ________ will move the economy to 224)
________.
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
Answer: A
37
225) In the above figure, the movement from point B to point A might be the result of 225)
A) an increase in the demand for manufacturing goods because of new technology.
B) an increase in government expenditures because of a war.
C) an increase in government expenditures because of increases in education expenditures.
D) a fall in the price level.
Answer: D
226) In the above figure, the movement from point A to point B might be the result of 226)
A) an increase in exports. B) a decrease in the real value of wealth.
C) a decrease in interest rates. D) an increase in the real value of wealth.
Answer: B
227) In the above figure, the shift from point C to point B might be the result of 227)
A) a decrease in government expenditures. B) a decrease in the price level.
C) an increase in the quantity of money. D) an increase in the price level.
Answer: A
38
228) The curve labeled A in the above figure is 228)
A) a production possibilities curve. B) a short-run aggregate supply curve.
C) an aggregate demand curve. D) a long-run aggregate supply curve.
Answer: C
229) In the above figure, the curve labeled A shifts rightward if 229)
A) the substitution effect occurs. B) expected future profits decrease.
C) the quantity of money decreases. D) taxes decrease.
Answer: D
230) The aggregate demand curve illustrates that, as the price level rises, 230)
A) the quantity of real GDP demanded decreases.
B) the AD curve shifts rightward.
C) the AD curve shifts leftward.
D) the quantity of real GDP demanded increases.
Answer: A
231) As the price level falls, the quantity of real wealth ________ and the aggregate quantity of real GDP 231)
demanded ________.
A) increases; decreases B) decreases; increases
C) increases; increases D) decreases; decreases
Answer: C
232) The AS/AD model studies the relationship between 232)

A) the price level and real GDP. B) nominal GDP and inflation.
C) the price level and unemployment. D) unemployment and real GDP.
Answer: A
39
233) The equilibrium level of GDP occurs at the level of GDP at which the 233)
A) aggregate quantity demanded equals the aggregate quantity supplied.
B) aggregate demand curve becomes vertical.
C) unemployment rate is zero.
Answer: A
234) By using only the aggregate demand curve, we can determine 234)
A) both the price level and quantity of real GDP.
B) only the quantity of real GDP.
C) only the price level.
D) neither the price level nor the quantity of real GDP.
Answer: D
235) In short-run macroeconomic equilibrium 235)

A) real GDP and the price level are determined by short-run aggregate supply and aggregate
demand.
B) real GDP equals potential GDP and aggregate demand determines the price level.
C) real GDP is less than potential GDP.
D) the price level is fixed and short-run aggregate supply determines real GDP.
Answer: A
236) The economy is in its short run equilibrium at the point where the 236)
A) AD curve intersects the LAS curve. B) price level is stable.
C) SAS curve intersects the LAS curve. D) AD curve intersects the SAS curve.
Answer: D
237) Short-run equilibrium occurs at the intersection of 237)

A) the SAS and LAS curves. B) the LAS and AD curves.
C) the SAS and AD curves. D) the SAS, LAS, and AD curves.
Answer: C
238) If the economy is in short run equilibrium then 238)

A) nominal GDP equals potential GDP.
B) real GDP equals potential GDP.
C) real GDP can be greater than, less than, or equal to potential GDP.
D) real GDP cannot be equal to potential GDP.
Answer: C
239) Which of the following is NOT part of the short-run macroeconomic adjustment to equilibrium 239)
when the price level is greater than the equilibrium price level?
A) There is a decrease in the money wage rate.
B) There are decreases in production and prices.
C) The quantity of real GDP demanded is less than the quantity of real GDP supplied.
D) There are unexpected increases in business inventories.
Answer: A
40
240) In the short-run, real GDP can be greater than or less than potential GDP because in the short run 240)
the
A) full-employment level of employment is fixed.
B) money wage rate is fixed.
C) price level is fixed.
D) quantity of capital is fixed.
Answer: B
241) Short-run macroeconomic equilibrium occurs when the quantity of real GDP demanded ________. 241)
A) equals potential GDP B) equals the quantity of real GDP supplied
C) does not equal full-employment GDP D) equals full-employment GDP
Answer: B
242) In the short run, the intersection of the aggregate demand and the short-run aggregate supply 242)
curves,
A) determines the equilibrium level of real GDP.
B) is a point where there is neither a surplus nor a shortage of goods.
C) determines the equilibrium price level.
Answer: D
243) A short-run macroeconomic equilibrium occurs 243)

A) when the rate at which prices of goods and services increase equals the rate at which money
wage rates increase.
B) at the intersection of the short-run aggregate supply curve and the aggregate demand curve.
C) at the intersection of the short-run aggregate supply curve and the long-run aggregate
supply curve.
D) at the intersection of the short-run aggregate supply curve, the long-run aggregate supply
curve, and the aggregate demand curve.
Answer: B
244) In the macroeconomic short-run equilibrium, 244)

A) there is frictional unemployment.
B) there is structural unemployment.
C) the economy might not be at the natural unemployment. rate
Answer: D
245) Last year in the country of Union, the price level increased and real GDP increased. Such an 245)
outcome might have occurred because short-run aggregate supply ________ and aggregate
demand ________.
A) increased; did not change B) increased; decreased
C) did not change; increased D) decreased; decreased
Answer: C
246) At long-run macroeconomic equilibrium, ________. 246)

A) real GDP is less than potential GDP but is as close as it is possible to be
B) real GDP equals potential GDP
C) a recessionary gap exists
D) an inflationary gap exists
Answer: B
41
247) If the economy is at long run equilibrium then 247)
A) real GDP can be greater than, less than, or equal to potential GDP.
B) nominal GDP equals potential GDP.
C) real GDP cannot be equal to potential GDP.
D) real GDP equals potential GDP.
Answer: D
248) Full-employment equilibrium occurs when 248)

A) potential GDP exceeds real GDP.
B) real GDP exceeds potential GDP.
C) real GDP equals potential GDP.
D) a result of an increase in long-run aggregate supply.
Answer: C
249) In long-run macroeconomic equilibrium, 249)

A) real GDP equals potential GDP.
B) real GDP and the price level are determined by short-run aggregate supply and aggregate
demand and long-run aggregate supply is irrelevant.
C) the price level is fixed and aggregate demand determines real GDP.
D) real GDP is less than potential GDP.
Answer: A
Real GDP supplied

Real GDP
Short run Long run
Price level demanded
(dollars) (dollars)
(dollars)
90 700 300 600
100 600 400 600
110 500 500 600
120 400 600 600
250) The table above gives the aggregate demand and aggregate supply schedules in Lotus Land. With 250)
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) 110; $500 B) 120; $400 C) 90; $400 D) 100; $600
Answer: D
42
Short-run Long-run
Aggregate
aggregate aggregate
Price demand
supply supply
level (trillions of 2000
(trillions of 2000 (trillions of 2000
dollars)
dollars) dollars)
130 8 12 10
120 9 11 10
110 10 10 10
100 11 9 10
90 12 8 10
251) The data in the above table indicate that when the price level is 120, 251)
A) inventories rise and the price level falls.
B) the unemployment rate is at its equilibrium level.
C) the economy is in a long-run macroeconomic equilibrium.
D) inventories fall and the price level rises.
Answer: A
A) inventories fall and the price level rises.
B) the unemployment rate is at its equilibrium level.
C) the economy is in a long-run macroeconomic equilibrium.
D) inventories rise and the price level falls.
Answer: A
A) firms have unexpectedly high inventories, so prices fall.
B) inventories are at levels planned by firms.
C) firms will plan to decrease the level of output.
D) firms have unexpectedly low inventories, so prices will rise.
Answer: D
A) firms have unexpectedly low inventories, so prices will rise.
B) firms will plan to increase the level of output.
C) firms have unexpectedly high inventories, so prices fall.
D) inventories are at levels planned by firms.
Answer: C
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255) In the above figure, curve A is the ________ curve, curve B is the ________ curve, and curve C is the 255)
________ curve.
A) long-run aggregate supply; short-run aggregate supply; aggregate demand
B) long-run aggregate supply; aggregate demand; short-run aggregate supply
C) short-run aggregate supply; long-run aggregate supply; aggregate demand
D) aggregate demand; short-run aggregate supply; long-run aggregate supply
Answer: A
256) In the figure above, in the short-run macroeconomic equilibrium, 256)

A) real GDP equals potential GDP. B) real GDP is less than potential GDP.
C) there is no structural unemployment. D) real GDP is greater than potential GDP.
Answer: B
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257) The above figure depicts an economy with a short-run equilibrium 257)
A) at higher than full-employment. B) at full employment.
C) below full employment. D) None of the above answers are correct.
Answer: B
258) In the above figure, at the price level of 140 and real GDP of 258)
A) $12 trillion, consumers will not be able to buy all the goods and services they demand.
B) $12 trillion, firms will not be able to sell all their output.
C) $4 trillion, firms will not be able to sell all their output.
D) $4 trillion, consumers will not be able to buy all the goods and services they demand.
Answer: B
45
259) Based on the figure above, short-run equilibrium occurs at the price level of 259)
A) 130 and real GDP of $8 trillion. B) 140 and real GDP of $12 trillion.
C) 120 and real GDP of $4 trillion. D) 130 and real GDP of $12 trillion.
Answer: A
260) The data in the above figure indicate that the economy will be in a long-run macroeconomic 260)
equilibrium at a price level of
A) 120. B) 130. C) 100. D) 140.
Answer: A
261) Which of the following can be said about economic growth? 261)
I. Economic growth is the result of increases in long-run aggregate supply.
II. Economic growth is the result of increases in aggregate demand.
A) I only B) II only C) I and II D) neither I or II
Answer: A
262) Economic growth is best defined as 262)

A) rightward shifts of the SAS curve. B) rightward shifts of the AD curve.
C) decreases in potential GDP. D) increases in potential GDP.
Answer: D
263) Which of the following helps determine the growth rate of potential GDP? 263)
I. capital accumulation
II. technology advances
III. the money supply
A) I and II B) I, II and III C) I D) I and III
Answer: A
264) Economic growth 264)

A) is an increase in potential GDP as the long-run aggregate supply curve shifts rightward.
B) occurs when the long-run aggregate supply curve shifts upward.
C) requires a compensating decrease in aggregate demand to offset the increase in aggregate
supply.
Answer: A
265) Over time in a growing economy, the long-run aggregate supply curve will 265)
A) shift rightward.
B) become horizontal at the long-run potential price level.
C) become increasingly steep.
D) shift leftward.
Answer: A
266) The country of Mu has continuous strong economic growth and a steady price level. This situation 266)
is most likely the result of aggregate demand growing ________ aggregate supply.
A) much faster than long-run B) much slower than long-run
C) at much the same pace as long-run D) at the same pace as short-run
Answer: C
46
267) If aggregate demand grows only slightly faster than potential GDP, then the economy will 267)
________.
A) experience economic growth with high inflation
B) be at a business-cycle peak
C) experience economic growth with low inflation
D) experience recession
Answer: C
268) Economic growth will occur and the price level will be constant when the increase in aggregate 268)
demand
A) exactly equals the increase in long-run aggregate supply.
B) is accompanied by a decrease in short-run aggregate supply.
C) is more than the increase in long-run aggregate supply.
D) is less than the increase in long-run aggregate supply.
Answer: A
269) Inflation occurs over time as a result of 269)

A) aggregate demand increasing faster than long-run aggregate supply.
B) long-run aggregate supply increasing faster than short-run aggregate supply.
C) long-run aggregate supply increasing faster than aggregate demand.
D) decreases in aggregate demand.
Answer: A
270) If the aggregate demand curve shifts ________ faster than the long-run aggregate supply curve, 270)
then ________ occurs.
A) leftward; economic growth B) rightward; inflation
C) leftward; inflation D) rightward; economic growth
Answer: B
271) When an increase in aggregate demand exceeds the increase in aggregate supply, 271)
A) real GDP decreases while nominal GDP increases.
B) the economy will experience inflation as the price level rises.
C) the price level falls while real GDP increases.
D) nominal GDP decreases and real GDP decreases.
Answer: B
272) Business cycles are the result of 272)

A) irregular shifts of both the AD and SAS curves.
B) irregular shifts of the SAS curve only.
C) regular shifts of both the AD and SAS curves.
D) regular shifts of the AD curve only.
Answer: A
273) One possible result of a decrease in aggregate demand and no change in aggregate supply is 273)
A) a recession. B) an economic expansion.
C) an increase in employment levels. D) a rise in the price level.
Answer: A
47
274) Which of the following is correct when describing business cycles? 274)
I. The economy does not grow or shrink at a steady pace.
II. Short-run aggregate supply increases at a fixed pace.
III. There are usually a few years between recessions.
A) I and II B) I and III C) II and III D) I only
Answer: B
275) The business cycle is actually a continuous series of different ________. 275)
A) nominal GDP values B) short-run macroeconomic equilibriums
C) potential GDP values D) full-employment equilibriums
Answer: B
276) Starting at full employment, a business cycle can be described by the following sequence: ________ 276)
equilibrium, ________ equilibrium, ________ equilibrium.
A) below full-employment; full-employment; below full-employment
B) below full-employment; full-employment; above full-employment
C) full-employment; below full-employment; above full-employment
D) above full-employment; below full-employment; full-employment
Answer: B
277) When real GDP exceeds potential GDP, then the economy is in 277)
A) below full-employment equilibrium. B) a trough.
C) an inflationary gap situation. D) a recessionary gap situation.
Answer: C
278) An inflationary gap is occurs when 278)

A) real GDP is less than potential GDP. B) the economy is at full employment.
C) real GDP equals potential GDP. D) real GDP exceeds potential GDP.
Answer: D
279) When the economy is at an above full-employment equilibrium, ________. 279)

A) an inflationary gap exists B) nominal GDP exceeds real GDP
C) a recessionary gap exists D) real GDP is less than potential GDP
Answer: A
280) If real GDP exceeds potential GDP, 280)

A) there can be a short-run equilibrium with a recessionary gap.
B) there is neither a long-run nor a short-run equilibrium.
C) there is a long-run and a short-run equilibrium.
D) there can be a short-run equilibrium with an inflationary gap.
Answer: D
281) An above full-employment equilibrium is 281)

A) a theoretical possibility but cannot happen in reality.
B) the period of time when prices are falling.
C) the equilibrium in which the economy is in most of the time.
D) when real GDP exceeds potential GDP.
Answer: D
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282) A recessionary gap means that short-run macroeconomic equilibrium GDP 282)
A) equals full-employment GDP.
B) is more than full-employment GDP.
C) is less than full-employment GDP.
D) may be less than, more than, or the same as full-employment GDP depending on the level of
potential GDP.
Answer: C
283) If real GDP is less than potential GDP, then the economy is ________ equilibrium. 283)
A) in long-run macroeconomic B) at an above full-employment
C) at a below full-employment D) not in short-run macroeconomic
Answer: C
284) A recessionary gap occurs when 284)

A) high rates of inflation occur.
B) nominal GDP is greater than potential GDP.
C) nominal GDP is less than potential GDP.
D) real GDP is less than potential GDP.
Answer: D
285) If aggregate demand decreases and neither short-run nor long-run aggregate supply changes, then 285)
A) there will be an inflationary gap.
B) there will be a recessionary gap.
C) in the long run, the long-run aggregate supply will decrease.
D) the price level will increase in the short-run and decrease in the long-run.
Answer: B
286) A below full-employment equilibrium 286)

A) occurs when the price level is rising very quickly.
B) occurs when real GDP is less than potential GDP.
C) occurs when real GDP exceeds potential GDP.
D) is not possible in the U.S. economy.
Answer: B
287) An economy is at full employment. Which of the following events can create a recessionary gap? 287)
A) an increase in taxes B) a decrease in the quantity of capital
C) a decrease in money wages D) an increase in foreign income
Answer: A
288) The Great Depression, in which real GDP fell and unemployment rose, can be characterized as a 288)
________.
A) long-run equilibrium B) recessionary gap
C) full-employment equilibrium D) inflationary gap
Answer: B
289) Suppose the economy is experiencing a recessionary gap. In the long run, if aggregate demand does 289)
not change the money wage rate ________, unemployment ________, and the price level ________.
A) falls; rises; falls B) rises; rises; rises C) falls; falls; falls D) rises; falls; rises
Answer: C
49
290) In the short run, the equilibrium level of real GDP 290)
A) is necessarily greater than potential GDP.
B) is necessarily equal to potential GDP.
C) is necessarily less than potential GDP.
D) could be less than, equal to, or greater than potential GDP.
Answer: D
291) An above full-employment equilibrium occurs when 291)

A) short-run aggregate supply decreases while neither aggregate demand nor long-run
aggregate supply changes.
B) the equilibrium level of real GDP is greater than potential GDP.
C) aggregate demand decreases while neither the short-run nor long-run aggregate supply
changes.
D) the equilibrium level of real GDP is less than potential GDP.
Answer: B
Real GDP supplied

Real GDP
Short run Long run
Price level demanded
(dollars) (dollars)
(dollars)
90 700 300 600
100 600 400 600
110 500 500 600
120 400 600 600
292) The table above gives the aggregate demand and aggregate supply schedules in Lotus Land. The 292)
short-run macroeconomic equilibrium is a price level of ________ and a real GDP of ________.
A) 90; $400 B) 100; $400 C) 120; $400 D) 110; $500
Answer: D
293) The table above gives the aggregate demand and aggregate supply schedules in Lotus Land. In 293)
short-run equilibrium, there is ________.
A) an inflationary gap of $100 B) a recessionary gap of $200
C) a recessionary gap of $100 D) an inflationary gap of $200
Answer: C
294) The table above gives the aggregate demand and aggregate supply schedules in Lotus Land. Lotus 294)
Land is in short-run macroeconomic equilibrium. In the long run, if aggregate demand does not
change then Lotus Land will return to full-employment as ________.
A) businesses cut their imports B) the money wage rate falls
C) the money wage rate rises D) the government cuts taxes
Answer: B
50
295) In the above figure, the inflationary gap when AD2 is the aggregate demand curve equals 295)
A) AD1 .
B) the difference between $12.5 trillion and $12.0 trillion.
C) the difference between 110 and 100.
D) LAS minus SAS at a price level of 100.
Answer: B
296) The reason that it is possible for the economy in the above figure to be at equilibrium E2 rather than 296)
at E1 is that
A) in the short run the economy can produce more than it can in a long-run situation.
B) AD always shifts rightward and never shifts leftward.
C) the economy must be in a recession.
D) in the long run there is always less than full employment.
Answer: A
51
297) The above figure illustrates 297)
A) a full-employment equilibrium.
B) an inflationary gap.
C) a recessionary gap.
D) an equilibrium at the economy's physical limits.
Answer: C
52
B) an inflationary gap.
C) an equilibrium at the economy's physical limits.
D) a recessionary gap.
Answer: A
299) An inflationary gap means that short-run macroeconomic equilibrium GDP 299)
A) is more than full-employment GDP.
B) is less than full-employment GDP.
C) equals full-employment GDP.
D) may be less than, more than, or the same as full-employment GDP depending on the level of
potential GDP.
Answer: A
53
B) an equilibrium at the economy's physical limits.
C) an inflationary gap.
D) a recessionary gap.
Answer: C
301) In the above figure, point A represents 301)

A) a full-employment equilibrium. B) an increase in aggregate demand.
C) a recessionary gap. D) an inflationary gap.
Answer: C
54
302) In the above figure, point B represents 302)
A) a decrease in aggregate demand. B) an inflationary gap.
C) a recessionary gap. D) a full-employment equilibrium.
Answer: D
303) In the above figure, point C represents 303)

A) a full-employment equilibrium. B) an inflationary gap.
C) a recessionary gap. D) a decrease in aggregate demand.
Answer: B
304) In the above figure, if the economy moves from point a to point b, 304)
A) there has been a decrease in the quantity of real GDP demanded.
B) there has been an increase in the quantity of real GDP demanded.
C) there has been a decrease in the quantity of real GDP supplied.
D) the natural unemployment rate increases.
Answer: B
55
305) In the above figure, the short-run aggregate supply curve is SAS and the aggregate demand curve 305)
is AD. A recessionary gap exists
A) if the long-run aggregate supply curve is LAS3 .
B) if the long-run aggregate supply curve is LAS1 .
C) if the long-run aggregate supply curve is LAS2 .
Answer: A
306) In the above figure, the short-run aggregate supply curve is SAS and the aggregate demand curve 306)
is AD. An inflationary gap exists
A) if the long-run aggregate supply curve is LAS1 .
B) if the long-run aggregate supply curve is LAS3 .
C) if the long-run aggregate supply curve is LAS2 .
Answer: A
56
307) In the above figure, if the economy is at point A, which of the following is true? 307)
A) The economy might be at point A as a result of a recent cut in the tax rate.
B) Money wages can be expected to fall.
C) The economy is in a recession.
D) Point A is the long-run equilibrium point.
Answer: A
308) In the above figure, if the economy is at point A, which of the following is true? 308)
A) There is an inflationary gap.
B) Point A is the long-run equilibrium point.
C) There is a recessionary gap.
D) None of the above answers are correct.
Answer: A
57
309) The above figure depicts an economy 309)
A) producing at full employment. B) with an inflationary gap.
C) with a recessionary gap. D) None of the above answers is correct.
Answer: B
310) In the above figure, the short-run equilibrium will eventually adjust to a long-run equilibrium 310)
with a
A) lower price level and larger real GDP. B) higher price level and smaller real GDP.
C) lower price level and smaller real GDP D) higher price level and larger real GDP.
Answer: B
58
311) In the above figure, the short-run equilibrium depicts an economy 311)
A) producing at full employment. B) with an inflationary gap.
C) with a recessionary gap. D) None of the above answers are correct.
Answer: C
312) In the above figure, if aggregate demand does not change the short-run equilibrium will 312)
A) eventually adjust to a long-run equilibrium with a lower price level.
B) eventually adjust to a long-run equilibrium with a higher price level.
C) will not adjust on its own.
D) None of the above answers are correct.
Answer: A
313) Suppose the economy was initially in a long-run equilibrium. Then the world economy expands so 313)
that foreign incomes rise. U.S. aggregate demand ________ and eventually the money wage rate
________.
A) increases; falls B) decreases; rises C) increases; rises D) decreases; falls
Answer: C
314) If the economy is in long run equilibrium and aggregate demand increases, then in the short run 314)
A) the price level rises and real GDP increases.
B) the price level rises and real GDP does not change.
C) real GDP increases and the price level does not change.
D) nothing happens because the economy is in long run equilibrium.
Answer: A
315) The Federal Reserve lowers interest rates. As a result, in the short run, real GDP ________ and the 315)
price level ________.
A) increases; rises B) decreases; falls C) increases; falls D) decreases; rises
Answer: A
59
316) The government increases taxes. As a result, in the short run, real GDP ________ and the price level 316)
________.
A) decreases; rises B) increases; falls C) decreases; falls D) increases; rises
Answer: C
317) In the short run, an increase in government expenditures on goods and services ________ real GDP 317)
and ________ the price level.
A) increases; falls B) decreases; falls C) increases; rises D) decreases; rises
Answer: C
318) In the short-run, a decrease in government expenditure ________ real GDP and ________ the price 318)
level.
A) decreases; increases B) increases; decreases
C) increases; increases D) decreases; decreases
Answer: D
319) In the short run, an increase in aggregate demand 319)

A) lowers the price level and increases real GDP.
B) raises the price level and increases real GDP.
C) raises the price level and decreases real GDP.
D) lowers the price level and decreases real GDP.
Answer: B
320) A lower price level combined with a decrease in real GDP occurs when the 320)
A) aggregate demand curve shifts rightward.
B) short-run aggregate supply curve shifts rightward.
C) short-run aggregate supply curve shifts leftward.
D) aggregate demand curve shifts leftward.
Answer: D
60
321) In the above figure, suppose the economy had been at point A and now is at B. What could have 321)
lead to the movement to B?
A) A tax hike.
B) Money wage rates rose.
C) Government expenditures on goods and services increased.
D) Winter storms cause factories in the north to be shut down for several weeks.
Answer: C
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322) Suppose the economy is at point B. If firms expect profits will be higher in the future, to what point 322)
might the economy's move in the short run?
A) It shifts to a point such as C.
B) It shifts to a point such as A.
C) It stays at point B.
D) None of the above answers are correct because it is the SAS curve that shifts, not the AD
curve.
Answer: A
323) Suppose the economy is at point B. If a recession in another country decreases exports, to what 323)
point might economy move in the short run?
A) It shifts to a point such as C.
B) It shifts to a point such as A.
C) It stays at point B.
D) None of the above answers are correct because it is the SAS curve that shifts, not the AD
curve.
Answer: B
62
324) The figure illustrates aggregate demand and aggregate supply in Sparta. Which of the following 324)
events will decrease Sparta's real GDP in the short run?
A) a fall in resource prices B) a decrease in taxes
C) a decrease in government expenditure D) an increase in investment
Answer: C
325) The figure above illustrates aggregate demand and aggregate supply in Sparta. Sparta's price level 325)
will rise above 100 if ________.
A) the quantity of capital increases B) the quantity of money increases
C) government expenditure decreases D) taxes increase
Answer: B
326) In a short-run macroeconomic equilibrium, potential GDP exceeds real GDP, so if aggregate 326)
demand does not change the
A) long-run aggregate supply curve will shift leftward as the money wage rate falls.
B) long-run aggregate supply curve will shift leftward as the money wage rate rises.
C) short-run aggregate supply curve will shift rightward as the money wage rate falls.
D) short-run aggregate supply curve will shift leftward as the money wage rate rises.
Answer: C
327) In a short-run macroeconomic equilibrium, real GDP exceeds potential GDP, so if aggregate 327)
demand does not change the
A) long-run aggregate supply curve will shift leftward as the money wage rate falls.
B) long-run aggregate supply curve will shift leftward as the money wage rate rises.
C) short-run aggregate supply curve will shift leftward as the money wage rate rises.
D) short-run aggregate supply curve will shift rightward as the money wage rate falls.
Answer: C
63
328) The country of Stanley is at an above-full employment equilibrium. Which of the following events 328)
will return Stanley to full-employment?
A) an increase in the quantity of money B) an increase in the money wage rate
C) an increase in government expenditures D) a decrease in the interest rate
Answer: B
329) An economy currently has a inflationary gap. An increase in the money wage rate will ________ the 329)
inflationary gap and ________ the price level.
A) decrease; increase B) increase; increase
C) increase; decrease D) decrease; decrease
Answer: A
330) Suppose the current situation is such that the price level is 120, real GDP is $13 trillion, and GDP 330)
along the long-run aggregate supply curve is $12.6 trillion. What will take place to restore the
long-run equilibrium?
A) The price level will fall until long-run aggregate supply increases to $13 trillion.
B) The price level will fall and money wage rates will rise until real GDP along the long-run
aggregate supply curve is $13 trillion.
C) Aggregate demand will increase until both short-run and long-run aggregate supply equal
$13 trillion.
D) Money wage rates will rise until real GDP is $12.6 trillion.
Answer: D
331) The long-run aggregate supply curve is vertical at $12 trillion but the short-run aggregate supply 331)
curve intersects the aggregate demand curve at $13 trillion. We know that
A) the economy is producing below full employment in the short run, and will adjust by hiring
more workers, thus decreasing unemployment.
B) adjustments will occur so that the long-run aggregate supply equals $13 trillion.
C) adjustments will occur so that the short-run aggregate supply eventually intersects the
aggregate demand curve at $12 trillion.
D) the price level is too high. The long-run equilibrium will occur with a lower price level.
Answer: C
332) In long-run macroeconomic equilibrium, 332)

A) the aggregate demand curve adjusts to the point where the long-run aggregate supply curve
and the short-run aggregate supply curve intersect.
B) the real wage rate has adjusted so that the economy is on the short-run aggregate supply
curve but not on the long-run aggregate supply curve.
C) long-run aggregate supply curve has shifted so that potential GDP equals real GDP.
Answer: D
333) If the money wage rate has fully adjusted to any changes, the economy is 333)
A) experiencing a recessionary gap.
B) experiencing an inflationary gap.
C) at its long-run macroeconomic equilibrium.
D) at a short-run macroeconomic equilibrium but not at a long-run macroeconomic equilibrium.
Answer: C
64
334) In the long-run equilibrium, a fall in the exchange rate that increases exports leads to 334)
A) an increase in the equilibrium price level, but no change in equilibrium real GDP.
B) no change in the equilibrium price level, but an increase in equilibrium real GDP.
C) an increase in the equilibrium price level and a decrease in equilibrium real GDP.
D) an increase in the equilibrium price level and an increase in equilibrium real GDP.
Answer: A
335) If the economy is in long run equilibrium and then aggregate demand increases, in the long run the 335)
increase in aggregate demand means that the
A) real GDP will be larger but the price level will be unaffected.
B) the price level will be higher and real GDP will be larger.
C) price level will be higher but real GDP will be unaffected.
D) neither the price level nor real GDP will be unaffected.
Answer: C
336) In the long-run equilibrium, an increase in the quantity of capital leads to 336)
A) a decrease in the equilibrium price level, but no change in equilibrium real GDP.
B) an increase in the equilibrium price level and an increase in equilibrium real GDP.
C) no change in the equilibrium price level, but an increase in equilibrium real GDP.
D) a decrease in the equilibrium price level and an increase in equilibrium real GDP.
Answer: D
337) In the above figure, at the point where AD equals SAS, 337)
A) the unemployment rate is zero. B) real GDP exceeds potential GDP.
C) the economy is in a recession. D) potential GDP exceeds real GDP.
Answer: B
338) In the above figure, as the economy adjusts toward equilibrium, the 338)
A) AD curve will shift rightward. B) SAS curve will shift leftward.
C) AD curve will shift leftward. D) SAS curve will shift rightward.
Answer: B
65
339) In the above figure, when the economy is in a long-run equilibrium, the price level will be 339)
A) 100. B) 90. C) 120. D) 110.
Answer: C
340) In the above figure, when the economy is in a long-run equilibrium, real GDP will be 340)
A) $9.5 trillion. B) $10.5 trillion. C) $11.0 trillion. D) $10.0 trillion.
Answer: D
Short-run Long-run
Aggregate
aggregate aggregate
Price demand
supply supply
dollars)
dollars) dollars)
140 9.0 11.5 10.0
130 9.5 11.0 10.0
120 10.0 10.5 10.0
110 10.5 10.0 10.0
100 11.0 9.5 10.0
341) The data in the above table indicate that the economy will be in a short-run macroeconomic 341)
equilibrium at a price level
A) of 110. B) between 119 and 111.
C) between 130 and 121. D) of 120.
Answer: B
342) From the data in the above table, when the economy is at its short-run equilibrium, if aggregate 342)
demand does not change, then as time passes the
A) short-run aggregate supply curve shifts rightward.
B) long-run aggregate supply curve shifts leftward.
C) long-run aggregate supply curve shifts rightward.
D) short-run aggregate supply curve shifts leftward.
Answer: D
Short-run aggregate Long-run aggregate

Aggregate demand
Price level supply (trillions of 2000supply (trillions of 2000
(trillions of 2000 dollars)
dollars) dollars)
100 11 7 10
110 10 8 10
120 9 9 10
130 8 10 10
140 7 11 10
343) Based on the data in the table above, the economy will be in short-run equilibrium at a price level 343)
of
A) 110. B) 100. C) 120. D) 90.
Answer: C
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344) Based on the data in the table above, at the short-run equilibrium 344)
A) the unemployment rate is greater than the natural unemployment rate.
B) the unemployment rate is less than the natural unemployment rate.
C) money wage rates will rise in long-run.
D) the economy is at full employment.
Answer: A
345) Based on the data in the table above, in the adjustment towards the long-run equilibrium 345)
A) the aggregate demand curve will shift leftward.
B) money wage rates will rise.
C) the short-run aggregate supply curve will shift leftward.
D) the short-run aggregate supply curve will shift rightward.
Answer: D
Short-run Long-run
Aggregate
aggregate aggregate
Price demand
supply supply
dollars)
dollars) dollars)
140 4 8 7
130 5 7 7
120 6 6 7
110 7 5 7
100 8 4 7
346) The data in the above table show that the economy will be in a short-run macroeconomic 346)
equilibrium at a price level of
A) 100. B) 120. C) 90. D) 110.
Answer: B
347) The data in the above table show that when the price level is 120, 347)
A) the unemployment rate is below its natural rate.
B) money wages rates will rise in the future.
C) the unemployment rate is above its natural rate.
D) the long-run aggregate supply curve will shift leftward in the future.
Answer: C
348) The data in the above table show that when the price level is 120, the economy 348)
A) has an inflationary gap.
B) will have falling money wage rates sometime in the future.
C) has a recessionary gap.
D) is in a long-run macroeconomic equilibrium.
Answer: C
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349) The data in the above table show that when the price level is 120, if aggregate demand does not 349)
change then the
A) money wage rate will fall in the future.
B) long-run aggregate supply curve will shift leftward.
C) short-run aggregate supply curve will shift leftward.
D) money wage rate will rise in the future.
Answer: A
350) The data in the above table show that when the price level is 120, if aggregate demand does not 350)
change then the
A) long-run aggregate supply curve will shift leftward.
B) long-run aggregate supply curve will shift rightward.
C) short-run aggregate supply curve will shift leftward.
D) short-run aggregate supply curve will shift rightward.
Answer: D
351) In the above figure, point B depicts 351)

A) a recessionary gap with real GDP less than potential GDP.
B) an inflationary gap with real GDP in excess of potential GDP.
C) a recessionary gap with real GDP in excess of potential GDP.
D) an inflationary gap with real GDP less than potential GDP.
Answer: B
352) In the above figure, real GDP at full employment is 352)

A) $12 trillion. B) between $12 and $12.5 trillion.
Answer: A
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353) In the above figure, the aggregate demand curve is AD2 , so the short-run equilibrium level of real 353)
GDP is
A) between $12 and $12.5 trillion. B) $12.5 trillion.
C) $12 trillion. D) None of the above answers is correct.
Answer: B
354) In the above figure, the shift from AD1 to AD2 might have been the result of 354)
A) an increase in the quantity of money. B) an increase in government expenditure.
C) a decrease in taxes. D) All of the above answers are correct.
Answer: D
355) Higher resource prices shift the 355)

A) short-run aggregate supply curve leftward, raising the price level and decreasing real GDP so
it is less than potential GDP.
B) short-run aggregate supply curve rightward, raising the price level and decreasing real GDP
so it is less than potential GDP.
C) long-run aggregate supply curve leftward, decreasing real GDP and increasing potential
GDP.
D) short-run aggregate supply curve leftward, raising the price level and decreasing potential
GDP.
Answer: A
356) Suppose that the economy begins at a long-run equilibrium. Which of the following raises the price 356)
level and decrease real GDP in the short run?
A) an increase in the price of oil that decreases aggregate supply
B) an increase in the stock of capital that increases aggregate supply
C) a decrease in the quantity of money
D) an increase in government expenditures
Answer: A
357) A decrease in short-run aggregate supply ________ the equilibrium price level and ________ the 357)
equilibrium quantity of real GDP.
A) increases; decreases B) decreases; decreases
C) decreases; increases D) increases; increases
Answer: A
358) In the short run, a rightward shift of the short-run aggregate supply curve ________ real GDP and 358)
________ the price level.
A) increases; lowers B) increases; raises
C) decreases; raises D) decreases; lowers
Answer: A
359) In the short run, a supply shock that shifts the short-run aggregate supply curve leftward ________ 359)
real GDP and ________ the price level.
A) decreases; lowers B) decreases; raises
C) increases; raises D) increases; lowers
Answer: B
69
360) Assume the economy is at long run equilibrium and oil prices rise. As a result, the ________ shifts 360)
________.
A) AD; rightward B) AD; leftward C) SAS; leftward D) SAS; rightward
Answer: C
361) In the short-run, a rise in the money wage rate leads to 361)
A) an increase in the price level and a decrease in real GDP.
B) an increase in the price level and an increase in real GDP.
C) no change in the price level, but an increase in real GDP.
D) an increase in the price level, but no change in real GDP.
Answer: A
362) Stagflation is the combination of 362)

A) deflation and recession. B) inflation and recession.
C) deflation with increasing real GDP. D) inflation and increasing real GDP.
Answer: B
363) The economy is initially at point A in the figure. An increase in ________ will move the economy to 363)
point ________ and then an increase in ________ will move the economy to point ________.
A) the money wage rate; B; government expenditure; C
B) the money wage rate; C; taxes; D
C) taxes; D; government expenditure; B
D) government expenditure; D; the money wage rate; B
Answer: C
70
364) In the above figure, the economy is at point A when changes occur. If the new equilibrium has a 364)
price level of 120 and real GDP of $11.0 trillion, then it must be the case that
A) aggregate demand has increased. B) aggregate supply has increased.
C) aggregate demand has decreased. D) aggregate supply has decreased.
Answer: D
A) aggregate demand has increased. B) aggregate demand has decreased.
C) aggregate supply has increased. D) aggregate supply has decreased.
Answer: C
A) aggregate supply has increased. B) aggregate demand has increased.
C) aggregate supply has decreased. D) aggregate demand has decreased.
Answer: D
367) If the actual real GDP is less than potential real GDP, the economy is 367)
A) in a below full-employment equilibrium.
B) in an above full-employment equilibrium.
C) not in macroeconomic equilibrium.
D) at full employment.
Answer: A
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Short-run Long-run
Aggregate
aggregate aggregate
Price demand
supply supply
dollars)
dollars) dollars)
100 13 9 10
105 12 10 10
110 11 11 10
115 10 13 10
368) Using the data in the above table, in the short-run macroeconomic equilibrium, the price level is 368)
________ and the level of real GDP is ________.
A) 115; $10 trillion B) 105; $10 trillion C) 110; $11 trillion D) 110; $10 trillion
Answer: C
369) Using the data in the above table, in the short-run macroeconomic equilibrium, there is 369)
A) an inflationary gap of $1 trillion. B) a recessionary gap of $1 trillion.
C) an inflationary gap of $2 trillion. D) a recessionary gap of $2 trillion.
Answer: A
370) Using the data in the above table, in the long-run macroeconomic equilibrium, the price level is 370)
________ and the level of real GDP is ________.
A) 110; $10 trillion B) 115; $10 trillion C) 105; $11 trillion D) 115; $11 trillion
Answer: B
371) ________ economists believe that the economy is self-regulating and always at full employment. 371)
A) All B) Keynesian C) Classical D) Monetarist
Answer: C
372) A classical economist believes that 372)

A) the economy is self-regulating and will normally, though not always, operate at full
employment if fiscal policy is not erratic.
B) the economy is self-regulating and will normally, though not always, operate at full
employment if monetary policy is not erratic.
C) the economy is self-regulating and always at full employment.
D) if the economy was left alone, it would rarely operate at full employment.
Answer: C
373) A Keynesian economist believes that 373)

A) the economy is self-regulating and will normally, though not always, operate at full
B) if the economy was left alone, it would rarely operate at full employment.
C) the economy is self-regulating and always at full employment.
D) the economy is self-regulating and will normally, though not always, operate at full
Answer: B
72
374) ________ economists believe that active help from fiscal and monetary policy is needed to insure 374)
that the economy is operating at full employment.
A) All B) Classical C) Keynesian D) Monetarist
Answer: C
375) ________ economists believe that the economy is self-regulating and will be at full employment as 375)
long as monetary policy is not erratic.
A) Classical B) All C) Keynesian D) Monetarist
Answer: D
376) A monetarist economist believes that 376)

A) the economy is self-regulating and always at full employment.
B) the economy is self-regulating and will normally, though not always, operate at full
C) the economy is self-regulating and will normally, though not always, operate at full
D) if the economy was left alone, it would rarely operate at full employment.
Answer: B
377) Which school of thought believes that recessions are the result of inappropriate monetary policy? 377)
A) both Keynesian and classical B) only classical
C) only Keynesian D) Monetarist
Answer: D
378) Which school of thought believes that real GDP always equals potential GDP? 378)
A) only Keynesian B) Monetarist
C) both Keynesian and classical D) only classical
Answer: D
379) Consider a BMW automobile plant. If the price of BMWs increase by 10 percent and the money 379)
wage rate and other costs ________, there will be ________.
A) increase by 10 percent; an increase in BMWs profits
B) do not change; an increase in BMW's production and profit
C) do not change; no change in production
D) increase by 10 percent; an increase in BMWs production
Answer: B
380) In Japan in 2000 the price level fell by 5 percent and nominal wage rates did not change. As a 380)
result, there was a
A) rightward shift in Japan's short-run aggregate supply curve.
B) movement down along Japan's long-run aggregate supply curve.
C) movement down along Japan's short-run aggregate supply curve.
D) movement down along Japan's short-run aggregate demand curve.
Answer: C
381) Japan's population increased by 3 percent in 2007. As a result, which of the following occurred? 381)
i. an increase in potential GDP
ii. a rightward shift in the long-run aggregate supply curve
iii. a rightward shift in the short-run aggregate supply curve.
A) i and ii only B) i, ii and iii C) ii and iii D) iii only
Answer: B
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382) In recent years, investment in Japan has increased by about 13 percent from one year to the next. 382)
As a result, we would expect
A) only Japan's long-run aggregate supply curve to shift rightward.
B) rightward shifts in both Japan's short-run aggregate supply and long-run aggregate supply
curves.
C) a leftward shift in Japan's aggregate demand curve.
D) a movement up along Japan's short-run aggregate supply curve.
Answer: B
383) According to www.oecd.org, the United States spends a larger portion of expenditures on higher 383)
education compared to any other country. Increasing the amount of higher education produces
i. rightward shifts in the U.S. long-run aggregate supply curve
ii. movements up along the U.S. aggregate demand curve
iii. increases in U.S. human capital.
A) ii and iii only B) i, ii and iii C) iii only D) i and iii only
Answer: D
384) In 2008 the money wage rate in Ireland increased by 4 percent while the price level increased by 8 384)
percent. As a result, Ireland's
A) short-run aggregate supply curve shifted leftward.
B) short-run aggregate supply curve shifted rightward.
C) short-run and long-run aggregate supply curves shifted rightward.
D) long-run aggregate supply curve shifted rightward.
Answer: B
385) If the price level in Great Britain increases from 102 to 105 (holding all else constant), real wealth 385)
________ and there is a movement ________ along Great Britain's aggregate demand curve.
A) increases; downward B) increases; upward
C) decreases; downward D) decreases; upward
Answer: D
386) The price level in India increases from 131 to 137 while its trading partners' price levels remain 386)
constant. As a result, people will buy ________ Indian-made goods and there will be a movement
________ along India's aggregate demand curve.
A) more; downward B) more; upward
C) less; upward D) less; downward
Answer: C
387) In 2008, the Bank of England increased the country's money supply and lowered its interest rate. 387)
This policy was designed to
A) encourage people to buy more goods and services.
B) shift the aggregate demand curve rightward.
C) cause a movement up along the aggregate demand curve.
D) Both A and B are correct.
Answer: D
74
388) In 2008, Japan's government approved a $1 trillion fiscal stimulus plan comprised of both tax cuts 388)
and government expenditure increases. As a result,
A) Japan's aggregate supply curve shifted leftward.
B) Japan's long-run aggregate supply curve shifted leftward.
C) Japan's aggregate demand curve shifted leftward.
D) Japan's aggregate demand curve shifted rightward.
Answer: D
389) China is one of the world's largest exporters. As the world's economies slipped into a worldwide 389)
recession in 2008, there will be a ________ China's aggregate demand curve as China's exports
________.
A) movement upward along; increase B) movement upward along; decrease
C) leftward shift of; decrease D) rightward shift of; decrease
Answer: C
390) In 2008, the dollar appreciated relative to the euro. This appreciation caused ________ and a 390)
________.
A) a movement up along the U.S. aggregate demand curve; decrease in U.S. exports to Europe
B) an increase in U.S. exports to Europe; movement up along the U.S. aggregate demand curve
C) a decrease in U.S. exports to Europe; leftward shift in the U.S. aggregate demand curve
D) a decrease in U.S. exports to Europe; a movement up along the U.S. aggregate demand curve
Answer: C
391) As world economies start to recover from the 2008 financial crisis and firms expect profits to 391)
increase,
A) the price level in the U.S. will decrease as firms increase investment.
B) both investment and aggregate demand will increase.
C) the U.S. short-run aggregate supply curve immediately will shift rightward.
D) investment will increase and there will be a movement up along the aggregate demand curve.
Answer: B
75
392) Use the figure above to answer this question. At a price level of 110, 392)
A) real GDP is greater than the aggregate quantity demanded and firms will cut production.
B) inventories will decrease.
C) real GDP is less than the aggregate quantity demanded and firms will increase production.
D) real GDP less than the aggregate quantity demanded and firms will increase prices.
Answer: A
393) Use the figure above to answer this question. At a price level of of 90, 393)
A) inventories increase and firms will increase production.
B) the aggregate quantity demanded exceeds real GDP and inventories will decrease.
C) people will be forced to cut consumption so that aggregate demand will decrease.
D) the aggregate quantity demanded exceeds real GDP, inventories increase and the price level
will rise.
Answer: B
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394) The table below shows the price level and real GDP (in rupees) for India. Suppose that potential GDP 394)
is
26,500 rupees.
Real GDP
Year Price Level (millions of
rupees)
2003 114 23,501
2004 120 25,355
2005 125 27,670
2006 131 30,366
2007 138 33,164
In 2004, India experienced

A) a rightward shift in the long-run aggregate supply curve.
B) a recessionary gap.
C) an inflationary gap.
D) an above full-employment gap.
Answer: B
395) The table below shows data for India's economy. Real GDP is measured in millions of rupees. 395)
Real GDP
Price level Real GDP demanded
supplied in the short run
a 114 23,501 35,898
b 120 25,355 32,341
c 125 27,670 27,670
d 131 30,366 18,569
e 138 33,164 15,898
If potential GDP in India is ________ million rupees, India is experiencing ________.

A) 26,500; an inflationary gap B) 30,000; a potential GDP gap
C) 26,500; a recessionary gap D) 28,500; an above full-employment gap
Answer: A
396) Economic growth in India has averaged about 8.5 percent in recent years and while inflation 396)
averaged almost 9 percent. The AS-AD model shows this process as
A) rightward shifts in the both the aggregate demand and long-run aggregate supply curves.
B) rightward shifts in the aggregate demand curve and leftward shifts in the short-run
aggregate supply curve.
C) rightward shifts in the short-run aggregate supply curve.
D) movements upward along the aggregate demand curve.
Answer: A
397) Aggregate demand in India increased in 2008. In addition, real GDP grew strongly and inflation 397)
approached 10 percent. The best explanation for this inflation is that
A) potential GDP increased, but at a slower rate than aggregate demand.
B) potential GDP decreased.
C) there was a movement up along the aggregate demand curve in 2008.
D) aggregate supply did not change.
Answer: A
77
398) The table below shows data for India's economy. Real GDP is measured in millions of rupees. Suppose398)
that
full employment occurs when real GDP is 27,000 million rupees.
Real GDP
Price level Real GDP demanded
supplied in the short run
a 114 23,501 35,898
b 120 25,355 32,341
c 125 27,670 27,670
d 131 30,366 18,569
e 138 33,164 15,898
The economy is experiencing ________ gap and firms will ________.

A) an inflationary gap; increase production
B) a recessionary gap; increase production
C) a recessionary gap; decrease money wages paid to workers
D) an inflationary gap; increase money wages paid to workers
Answer: D
399) In the first half of 2008, food and energy costs in the United States increased. At the same time, the 399)
financial crisis slowed production. As a result, economists warned that the economy would
A) experience stagflation.
B) see an increase in potential GDP.
C) see a decrease in aggregate demand and an increase in long-run aggregate supply.
D) suffer an inflationary gap.
Answer: A
400) In the first half of 2008, food and energy costs in the United States increased. At the same time, the 400)
financial crisis slowed production as firms predicted lower profits. A ________ macroeconomist
would support the use of ________.
A) Keynesian; fiscal or monetary policy to stimulate aggregate demand
B) classical; monetary policy to stimulate aggregate demand
C) Keynesian; technology to push the economy back to full employment
D) classical; taxes to push the economy back to full employment
Answer: A
401) In 2008, Japan's economy suffered as world economies slowed. If authorities in Japan followed the 401)
monetarist viewpoint, ________ to bring the economy back to full employment.
A) nothing should be done
B) aggregate supply would shift leftward
C) the money supply would be kept growing at a steady pace
D) taxes would be decreased and the money supply should be increased
Answer: C
402) In 2008, Germany passed a stimulus package of $29 billion as its economy slowed. This policy 402)
action follows the ________ to restore full employment.
A) Keynesian viewpoint that supports increases in the money supply
B) new classical viewpoint that discourages the use of expenditure by the federal government
C) monetarist viewpoint that supports increases in expenditure by the federal government
D) Keynesian viewpoint that supports increases in federal government expenditure
Answer: D
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ESSAY. Write your answer in the space provided or on a separate sheet of paper.
403) In the aggregate demand-aggregate supply framework, how does an increase in the price level affect potential
GDP?
Answer: An increase in the price level has no effect on potential GDP. Potential GDP is independent of the price
level, so increases or decreases in the price level have no effect on potential GDP.
404) How are potential GDP, full employment and the LAS curve related?
Answer: When the economy is at full employment there is no cyclical unemployment and the economy is at its
potential level of real GDP. The LAS curve is vertical at the level of potential real GDP.
405) Give examples of factors that decrease short-run aggregate supply. Which way does the SAS curve shift?
Answer: Aggregate supply decreases if potential GDP decreases. In addition, cost hikes such as a rise in the money
wage rate or the price of oil, decreases short-run aggregate supply. Whenever short-run aggregate
supply decreases, the SAS curve shifts leftward.
406) What is the difference between the long-run aggregate supply and the short-run aggregate supply curves?
Answer: The long-run aggregate supply curve, LAS, is the relationship between the price level and real GDP
when real GDP equals potential GDP. The LAS curve is vertical. Along the LAS curve, both the prices of
goods and services and the prices of resources, such as the money wage rate, change. The short-run
aggregate supply curve, SAS, is the relationship between the price level and the quantity of real GDP
supplied in the short run when the money wage rate and other resource prices are constant. The SAS
curve slopes upward. Along the SAS curve, only the price level changes; the money wage rate and other
resource prices are constant. The SAS curve shifts leftward when the money wage rate (or other costs)
rise.
407) How do changes in the money wage rate affect the LAS and SAS curves? Explain your answer.
Answer: If the money wage rate changes, the LAS curve is not affected but the SAS curve shifts. For instance, if the
money wage rate rises, the LAS curve does not change but the SAS curve shifts leftward. The difference
occurs because moving along the LAS curve both the money wage rate and price level change in the same
proportion. So in this case, a change in the money wage rate is matched by a change in the price level and
firms have no incentive to change their production of goods and services. But moving along the SAS
curve, only the price level changes. So when the money wage rate changes and the price level does not
change, firms have an incentive to change their production. For instance, if the money wage rate rises and
the price level does not change, then firms decrease their production of goods and services and the SAS
curve shifts leftward.
408) What are the factors that can shift the short-run aggregate supply curve but not the long-run aggregate supply
curve? Explain your answer.
Answer: The only factor that shifts the short-run aggregate supply curve but not the long-run aggregate supply
curve is a change in the money wage rate or the money prices of other resources. For instance, an increase
in the money wage rate shifts the SAS curve leftward, but does not shift the LAS curve.
79
409) Explain the reasons why the AD curve slopes downward.
Answer: There are two reasons why the AD curve slopes downward: the wealth effect and substitution effects.
The wealth effect points out how changes in the price level cause changes in the real value of wealth. Price
increases decrease real wealth and so people consume less in order to increase their wealth through saving. As a
result, an increase in the price level decreases the aggregate quantity of goods and services demanded.
There are two substitution effects. The first is the intertemporal substitution effect: an increase in the price
level raises the interest rate because the amount of real loans banks can make decreases. The higher
interest rate leads consumers to decrease their consumption expenditure and firms to decrease their
investment spending. The second substitution effect is the international price substitution effect: an
increase in the U.S. price level raises the price of U.S.-made goods relative to foreign-made goods. So
people and firms decrease the quantity of U.S.-made goods they purchase and increase the quantity of
foreign-made goods they purchase. So both substitution effects also lead to a rise in the price level
decreasing the aggregate quantity demanded.
410) What is the effect on the aggregate demand curve from an increase in the price level? In particular, does the
aggregate demand curve shift leftward or rightward?
Answer: When the price level increases, there is a movement along the aggregate demand curve. The quantity of
real GDP demanded decreases in response to an increase in the price level. However, the aggregate
demand curve does not shift. Factors that change aggregate demand and shift the aggregate demand
curve are changes in the interest rate, in the quantity of money, in government expenditure, in taxes, in
the exchange rate, and in real GDP in the rest of the world.
411) What are the substitution effects that affect aggregate demand?
Answer: There are two substitution effects that affect aggregate demand and help account for the negative slope of
the AD curve. First, an increase in the price level raises the interest rate, which reduces the quantity of
real GDP demanded. Second, an increase in the U.S. price level raises the price of U.S. goods relative to
foreign goods which also decreases the quantity of U.S. real GDP demanded.
412) How does the aggregate demand curve reflect an increase in aggregate demand?
Answer: A rightward shift of the aggregate demand curve reflects an increase in aggregate demand.
413) Give examples of factors that decrease aggregate demand. Which way does the aggregate demand curve shift?
Answer: Anything that decreases aggregate spending decreases aggregate demand. A rise in the interest rate, a
decrease in the quantity of money, a decrease in government expenditure, a tax hike, a rise in the
exchange rate, and a decrease in real GDP in the rest of the world all decrease aggregate demand. The
aggregate demand curve shifts leftward.
414) What are fiscal and monetary policies? Do they have an immediate effect on the AD curve or the SAS curve?
Answer: Fiscal policy is defined as changes in government spending and taxation to affect the level of economic
activity. Monetary policy consists of changing interest rates and changing the quantity of money in the
economy in order to affect the level of economic activity. Both policies have an impact on the AD curve.
415) What are the components of fiscal policy? Explain how fiscal policy affects aggregate demand.
Answer: Fiscal policy affects aggregate demand through government expenditure, transfer payments and taxes.
Because government purchases are a component of total spending, a change in government expenditure
directly changes aggregate demand. A change in transfer payments changes disposable income which, in
turn, changes consumption expenditure and aggregate demand. Finally, taxes alter disposable income
and thus impact consumption expenditure and aggregate demand.
80
416) What happens to the aggregate demand curve in the United States if the exchange rate increases so that
U.S.-made products become more expensive?
Answer: Net exports decrease so U.S. aggregate demand decreases.
417) What two variables are determined in an aggregate supply-aggregate demand figure? Is the slope of the
short-run aggregate supply curve positive or negative? Is the slope of the aggregate demand curve positive or
negative?
Answer: The aggregate supply-aggregate demand framework determines the equilibrium price level and
equilibrium real GDP. The aggregate supply curve is positively sloped, indicating that an increase in the
price level increases the aggregate quantity of goods and services supplied. The aggregate demand curve
is negatively sloped, indicating that an increase in the price level decreases the aggregate quantity of
goods and services demanded.
418) Explain the relationship of the long-run aggregate supply curve, the short-run aggregate supply curve and the
aggregate demand curve in determining a long-run and short-run macroeconomic equilibrium.
Answer: Short-run macroeconomic equilibrium occurs when the quantity of GDP demanded equals the quantity
supplied, which is where the AD and SAS curves intersect. The short-run equilibrium does not
necessarily take place at full employment. The long-run macroeconomic equilibrium occurs when real
GDP equals potential GDP. This means that the economy is on the LAS curve, where the AD and SAS
curves both intersect the LAS curve.
419) Assume the equilibrium price level is 140 and the equilibrium real GDP is $15 trillion. What happens if the
current price level equals 125?
Answer: The quantity of real GDP demanded is greater than the quantity of real GDP supplied. The price level
rises to 140 because of the excess aggregate demand and when the price level reaches 140,
macroeconomic equilibrium would be established.
420) Suppose that during 2009, the actual real GDP of Chile was 3.5 billion pesos at the same time the potential GDP
was 3.4 billion pesos. What sort of equilibrium existed in Chile?
Answer: Chile's actual real GDP exceeded its potential GDP, so Chile was in an above full-employment,
inflationary gap equilibrium.
421) What is the difference between a recessionary gap and an inflationary gap?
Answer: A recessionary gap exists when the economy is in a below full-employment equilibrium when potential
GDP exceeds real GDP. The recessionary gap is the amount by which potential GDP exceeds real GDP.
An inflationary gap occurs when the economy is in an above full-employment equilibrium when real
GDP exceeds potential GDP. In this case, the inflationary gap is the difference between real GDP and
potential GDP.
422) What happens if the economy is at its long-run equilibrium and aggregate demand increases?
Answer: The increase in aggregate demand means that the AD curve shifts rightward. Initially short-run
aggregate supply does not change, so the SAS curve remains stationary. As a result, the price level rises
and real GDP increases. The economy is an above full-employment equilibrium. Eventually, however,
the tight labor market leads to a rise in the money wage rate. When the money wage rate rises, short-run
aggregate supply decreases and the SAS curve shifts leftward. The price level rises and real GDP
decreases. In the long run, the short-run aggregate supply decreases so that real GDP returns to potential
level of GDP and the only effect is that the price level is permanently higher.
81
423) If the world economy expands so that foreign demand for U.S.-made goods increases, in the short run what will
happen to aggregate demand, the price level, and real GDP in the U.S.?
Answer: Net exports increase so U.S. aggregate demand increases. The U.S. price level and real GDP both
increase.
424) Compare the policy prescriptions of Keynesian, Classical, and Monetarist economists.
Answer: Keynesians believe that without assistance the economy would almost never be at full employment. They
prescribe activist fiscal and monetary policy to drive the economy to full employment. Classical
economists believe the economy is self-regulating and will always tend towards full employment. Their
main policy initiatives center on removing tax created disincentives for growth. Monetarists call for low
taxes and consistent money growth because Monetarists believe that recessions are the result of
fluctuations in the quantity of money.
Price level Quantity of real GDPQuantity of real GDP

(GDP deflator, demanded (trillions supplied (trillions of
2000 = 100) of 2000 dollars) 2000 dollars)
115 8.8 12.0
110 9.4 11.0
105 10.0 10.0
100 10.6 9.0
95 11.2 8.0
90 11.8 7.0
425) Based on the table above,

a) What is the equilibrium price level and real GDP?
b) If potential GDP is $11.0 trillion, what does that imply about the economy's level of employment?
c) If potential GDP is $9.0 trillion, what does that imply about the economy's level of employment?
Answer: a) The equilibrium price level is 105; the equilibrium real GDP is $10.0 trillion.
b) If potential GDP is $11.0 trillion, then the economy is at an equilibrium that is a below full-employment
equilibrium.
c) If potential GDP is $9.0 trillion, then the economy is at an equilibrium that is an above full-employment
equilibrium.
82
426) In the above figure, what is the short-run equilibrium real GDP and the short-run equilibrium price level?
Answer: The short-run equilibrium occurs where the AD curve intersects the SAS curve. So in the figure the short
run equilibrium real GDP is $10.5 trillion and the short-run equilibrium price level is 110.
TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.
427) The long-run aggregate supply curve is upward sloping. 427)

Answer: True False
428) The long-run aggregate supply curve is vertical. 428)

Answer: True False
429) The level of output when there is full employment is called actual GDP. 429)
Answer: True False
430) In the long-run, the quantity of real GDP supplied increases when the price level increases. 430)
Answer: True False
431) The short-run aggregate supply curve shows a positive relationship between the price level and 431)
real GDP.
Answer: True False
432) The SAS curve shifts if there is a change in the price level. 432)
Answer: True False
433) If there is an increase in technology, the long-run aggregate supply curve shifts rightward, but the 433)
short-run aggregate supply curve does not shift.
Answer: True False
83
434) If the money prices of resources changes, the LAS curve shifts. 434)
Answer: True False
435) If the money prices of resources changes, the SAS curve shifts. 435)
Answer: True False
436) An increase in the quantity of capital shifts both the long-run and short-run aggregate supply 436)
curves.
Answer: True False
437) If the money wage rate increases, the short-run aggregate supply curve shifts rightward. 437)
Answer: True False
438) The aggregate demand curve shows total expenditures at different levels of national income. 438)
Answer: True False
439) A movement along the aggregate demand curve but no shift in the aggregate demand curve is 439)
created by a change in the price level.
Answer: True False
440) The wealth effect points out that consumption decreases when people's real wealth decreases. 440)
Answer: True False
441) Wealth and substitution effects explain why the aggregate demand curve has a positive slope. 441)
Answer: True False
442) An increase in the quantity of money shifts the aggregate demand curve rightward. 442)
Answer: True False
443) In the short-run, real GDP can be greater than or less than potential GDP because in the short run 443)
the money wage rate is fixed.
Answer: True False
444) The level of output at which the short-run aggregate supply curve and the aggregate demand 444)
curve intersect is the full employment level of GDP.
Answer: True False
445) In the short run, a supply shock that shifts the short-run aggregate supply curve leftward raises the 445)
price level and increases real GDP.
Answer: True False
446) In the short run, a supply shock that shifts the short-run aggregate supply curve leftward raises the 446)
price level and decreases real GDP.
Answer: True False
447) Long-run macroeconomic equilibrium is achieved when the money wage rate has adjusted so that 447)
employment is such that real GDP equals potential GDP.
Answer: True False
84
448) During an above full-employment equilibrium, actual GDP is greater than potential GDP. 448)
Answer: True False
449) Fluctuations in aggregate demand and aggregate supply explain why real GDP fluctuates. 449)
Answer: True False
450) The business cycle occurs because aggregate demand and aggregate supply change at uneven rates. 450)
Answer: True False
451) The Keynesian theory of business cycle views volatile expectations of future sales and profits as the 451)
main source of economic fluctuations.
Answer: True False
452) A monetarist economist believes that if the economy was left alone, it would rarely operate at full 452)
employment.
Answer: True False
ESSAY. Write your answer in the space provided or on a separate sheet of paper.
Real GDP demanded Real GDP supplied

Price level (billions of 2000 (billions of 2000
dollars) dollars)
70 825 375
80 750 450
90 675 525
100 600 600
110 525 675
120 450 750
130 375 825
140 300 900
453) The table above shows Purpleland's economy aggregate demand and supply schedules. Purpleland's potential GDP is
$675 billion.
a) Plot the aggregate demand curve, the short-run aggregate supply curve, and the long-run aggregate supply
curve.
b) What are the short-run equilibrium real GDP and price level in Purpleland?
c) What is the long-run equilibrium real GDP?
d) Is Purpleland's short-run macroeconomic equilibrium a full-employment equilibrium, below
full-employment equilibrium, or above full-employment equilibrium? What is the recessionary gap (if any)? What is
the inflationary gap (if any)?
e) Suppose aggregate demand increases by $150 billion. Plot the new aggregate demand curve. How do real GDP and
the price level change in the short run?
f) Is Purpleland's new short-run macroeconomic equilibrium a full-employment equilibrium, below
full-employment equilibrium, or above full-employment equilibrium? What is the recessionary gap (if any)?
What is the inflationary gap (if any)?
Answer:
85
Answer:
a) See the figure above. The aggregate demand curve is AD0 .

b) A short-run macroeconomic equilibrium occurs where the aggregate demand curve, AD0 , intersects
the short-run aggregate supply curve, SAS. As the figure shows, the short-run equilibrium real GDP is
$600 billion, and the short-run equilibrium price level is 100.
c) Long-run equilibrium real GDP equals potential GDP. So the long-run equilibrium real GDP in
Purpleland is $675 billion.
d) Purpleland's short-run macroeconomic equilibrium is a below full-employment equilibrium because
the short-run equilibrium GDP is less than potential GDP. The amount by which potential GDP exceeds real
GDP is a recessionary gap, so the recessionary gap is $75 billion. An inflationary gap exists when real GDP is
above potential GDP, so there is no inflationary gap in Purpleland.
e) As the figure above shows, the aggregate demand curve shifts from AD0 to AD1 . As a result, real GDP
increases from $600 billion to $675 billion, and the price level rises from 100 to 110.
f) Purpleland's new short-run macroeconomic equilibrium is a full-employment equilibrium because the
equilibrium real GDP equals the potential GDP. When real GDP equals potential GDP, there is neither a
recessionary gap nor an inflationary gap.
Real GDP demanded Real GDP supplied

Price level
(billions of 2000 dollars) (billions of 2000 dollars)
90 450 150
100 400 250
110 350 350
120 300 450
130 250 550
454) The table above shows Yellowland's economy aggregate demand and supply schedules. Yellowland's potential GDP is
$300 billion.
a) Plot the aggregate demand curve, the short-run aggregate supply curve, and the long-run aggregate supply
curve.
b) What are the short-run equilibrium real GDP and price level in Yellowland?
c) What is the long-run equilibrium real GDP?
d) Is Yellowland's short-run macroeconomic equilibrium a full-employment equilibrium, below
full-employment equilibrium, or above full-employment equilibrium? What is the recessionary gap (if any)? What is
the inflationary gap (if any)?
86
e) Suppose aggregate supply decreases by $150 billion. Plot the new aggregate supply curve. How do real GDP and
the price level change in the short run?
f) Is Yellowland's new short-run macroeconomic equilibrium a full-employment equilibrium, below
full-employment equilibrium, or above full-employment equilibrium? What is the recessionary gap (if any)?
What is the inflationary gap (if any)?
Answer:
a) See the figure above. The short-run aggregate supply curve is SAS0 .
b) A short-run macroeconomic equilibrium occurs where the aggregate demand curve, AD, intersects
the short-run aggregate supply curve, SAS0 . As the figure shows, the short-run equilibrium real GDP is
$350 billion, and the short-run equilibrium price level is 110.
c) Long-run equilibrium real GDP equals potential GDP. So the long-run equilibrium real GDP in
Yellowland is $300 billion.
d) Yellowland's short-run macroeconomic equilibrium is an above full-employment equilibrium because
the short-run equilibrium GDP exceeds potential GDP. The amount by which real GDP exceeds potential GDP is
an inflationary gap. So the inflationary gap is $50 billion. A recessionary gap exists when real GDP is below
potential GDP. So there is no recessionary gap in Yellowland.
e) As the figure above shows, the short-run aggregate supply curve shifts from SAS0 to SAS1 . As a result,
real GDP decreases from $350 billion to $300 billion, and the price level rises from 110 to 120.
f) Yellowland's new short-run macroeconomic equilibrium is a full-employment equilibrium because
the equilibrium real GDP equals the potential GDP. When real GDP equals potential GDP, there is
neither a recessionary gap nor an inflationary gap.
87
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uskossa
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Title: Maahengen uskossa
Author: Eero Eerola
Release date: May 15, 2022 [eBook #68087]
Language: Finnish
Original publication: Finland: Arvi A. Karisto, 1911
Credits: Tapio Riikonen
*** START OF THE PROJECT GUTENBERG EBOOK

MAAHENGEN USKOSSA ***
10
MAAHENGEN USKOSSA
Kirj.
Eero Eerola
Hämeenlinnassa, Arvi A. Karisto Oy, 1911.

SISÄLLYS:
Maahengen uskossa.
Maa sekä maamies.
Olkaa maalle uskolliset, veljeni.
Metsähenki.
Metsässä.
Hautausmaa.
Puniken uni.
Mustikki.
Sepän Kaunikki.
Fiina.
Mitä Kankaanpään Malakias pääsiäisenä päätti.
Miten Heiskas-Taavetin talo nousi.
Kuosmasen kaalikset.
"Maahenki".
Seppälän Aapo.
Maahengen uskossa.
Aikana, jolloin ihmisjärjen hurjalle lennolle alkaa näyttää miltei
kaikki mahdolliselta, jolloin keksijäneron terävä huomio tunkee
kirkkaana säteenä luonnon jumalallisten voimien valtakuntaan, niin
aikana, jolloin ei ainoastaan inhimillinen aatos korkeuksia kiidä, vaan
jopa ihminen itsekin omilla luomillaan koneilla todella lentää
avaruudessa, lintuna liihoittelee ihanissa ilmoissa, aikana sellaisena
pyrkii useinkin pohja ja kivijalka unohtumaan. Ollaan kuin suuren,
hirvittävän korkean pilvenpiirtäjän katolla, tutkitaan katto, kestääkö
se, mutta onko perustus laskettu kalliolle, onko kivijalka pettämätön,
sitä tuskin kukaan enää muistaa ajatella.
Lukemattomat oudot ja hämmästyttävät keksinnöt kaikilla aloilla,

ovat viimeisinä vuosikymmeninä temmanneet elämän pyörän
entistään paljon kiivaampaan vauhtiin. Ne ovat suorastaan
mullistaneet entiset elämän tavat ja menot. Pyrkimys elämän onneen
— sitä kohtihan ihmiskunta aina on tavoittamat — ei ole enää
pyrkimystä astumaan yli oman kynnyksen, ihmisen korkeimpana
onnena ei enää ole herttaisa, kotoinen rauha, kodin tunne oman alla
orsihirren, vaan paljon näkyvämpi, paljon kouraantuntuvampi on nyt
elämän arvon mittaaja. Ja sen uuden, kovan ja häikäisevän
kaikkivaltiaan nimi on — raha. Jota enemmän sitä alkaa liikkeeseen
joutua, jota helpommaksi sen saaminen käy, sitä suuremmaksi
kasvaa halu sen tavoittamiseen, ja sitä suurempia ja mahtavampia
kansanliikkeitä ja luokkataistelulta se näyttää nostavan. Ja sen
houkutus on aiheuttanut arveluttavia muutoksia yhteiskunnassa,
varsinkin eri elinkeinojen väliseen suhteeseen. Kauppa, teollisuus ja
keinottelu riistävät työvoiman maanviljelykseltä, jossa ei irtainta
rahaa niin paljon liikutella. Niiden houkutellessa keksittiin yht'äkkiä
maatyön suunnaton raskaus ja maanviljelyksen kannattamattomuus.
Suomen suot odottavat kuivaajia, Suomen korvet kääntäjiä ja
takaavat vielä miljoonille asukkaille varman jokapäiväisen leivän. Ja
kuitenkin pakkautuu suuret joukot maatyöväestöä kaupunkeihin ja
tehdaspaikkoihin vaikertelemaan "työnpuutetta"! Ei suinkaan se
osoita ihastusta maanviljelykseen! Ei, maahenki on
sairasvuoteellaan. N.k. yleinen mielipide ei tätä sairasta suinkaan
nostanut ole, se on aina pyrkinyt katselemaan sitä herrahtavasti,
vähän niinkuin "ylhäältä päin" ja puhuttelemaan sitä niinkuin ainakin
yksinkertaista, hyväntahtoisentuhmaa "moukkaa". Eikä sen,
maahengen, omassakaan talossa kaikki kynnykset puhtaita ole, itse
maalaisväestön maataomistavassakin osassa havaitaan maatyötä
halveksivaa henkeä. Moni talonpojan poika on ollut hyvinkin herkkä
heittämään kirveen ja kuokan, ja samaten tytär lypsinkiulun, kun on
ollut vähänkin vihiä jostain muusta työstä joko omassa tai vieraassa
maassa. Se on enemmän vetänyt, vaikka se ehkä onkin ollut
ainoastaan hetkellistä ja lyhytaikaista. Se on sitten saattanut jättää
tekijänsä lakoissa ja työnseisauksissa nääntymään ja
katkeroitumaan yhteiskuntaa kohtaan. Kokonaan toisellaisissa
olosuhteissa, uuden elämän viekoittavissa pyörteissä kadotetaan
lopulta siveellinen tarmokin. Näin syntyy yhteiskunnallinen kurjuus ja
rappeutuminen.
Konelaitos ja tehdasteollisuus voi paljon siunausta tuottaa, mutta

jos elämän helpoittamisen halu syöstään sen hoidosta, ja sen
johtoon astuu ahneus ja muutamien harvojen nautinnon himo, on tuo
siunaus muuttunut kiroukseksi. Nykyaikainen tehdasmainen elämä ei
ole kestänyt vielä vuosisataa, meillä vasta muutaman
vuosikymmenen, ja kuitenkin se on kerinnyt kuluttaa jo arveluttavan
määrän menneitten aikojen perinnäistä terveyspääomaa.
Ruumiillinen heikentyminen ja henkinen rappeutuminen ovat
selvimmin havaittavissa niissä luokissa, jotka lähempänä tehtaitten
höyryjä elävät. Väsymys, elämäntuska ja tylsä välinpitämättömyys
ovat entisen työnriemun ja olemassaolon-ilon sijalla. Ihminen on
luullut luovansa vapauden aikaa alistaessaan luonnon väkevät
voimat koneitaan pyörittämään ja viritellessään kauppamaailman
sadat langat ympäri maanpallon, mutta aivan huomaamattaan on
hän itse takertunut tuon verkon silmukoitiin ja muuttunut ainoastaan
pieneksi pyöräksi tuossa suuressa koneessa.. Ja koneessa ei ole
elävätä henkeä.
Mutta yksi on, jossa iankaikkisesti elävä henki asuu, joka yhä itse
uudestisyntyy ja uutta luo. Se on maa. Jokainen solu siinä elää,
uhkuu voimaa ja luomisintoa.
Maa on mahtava pääoma; mutta se unohdetaan usein maataloutta

arvosteltaessa. Ja unohdetaan monta muuta siitä johtuvaa
pääomaa. Unohdetaan se elämänriemu ja terveys, minkä
työskentely vapaan taivaan alla tuottaa, unohdetaan nuo
maamieselämän pitkät, onnelliset puhdehetket oman pirttisen
lämpimässä, niin — unohdetaan ennen kaikkea tuo maamiehen
kultainen vapaus. Ja se on kuitenkin se vapaus, joka on meidän
kansallisenkin olemassaolomme vankin perusta. Tuolla vapaitten
vainioitten vapaissa miehissä ne puhtaimpina säilyvät isien perut:
kunnioitus omia kansallisia tapoja kohtaan ja rakkaus isäinmaahan.
Astellessaan auransa jäljessä tuntee mies, että jokaiseen mullan
hiveneen kätkeytyy isien tuskaa, jokaiseen vakoon ovat isät
pettymyksiään haudanneet, siksi älköön niitä kukaan häväisemään
tulko! Orjan leipä ei maista sille, jonka kulmaluilla vapaan
ponnistuksen ja elämän riemun kirkkaat helmet päilyvät. Onnen
tuntee ihminen ainoastaan siellä, missä hän saa tehdä luovaa työtä,
missä hän ei ole vain pelkkä kone. Raivata korpi, muokata suo
viljelyskuntoon, luoda uusi maailma uusine kasvineen entisen raa'an
maan sijalle — eikö se ole luovaa työtä? Eikö sen tekijä ole
osaltansa luoja? On, ja luojan riemu on myöskin hänen palkkansa,
maamiehen, koska tähkien keinunta välkkyy siinä, missä ennen villi
korpi nukkui hyödytöntä untaan. Tai katso kylvinpäivän aamua, kun
se kultaisena nousee! Kiuru valkean pilven alla laulaa, tulevat
leppeät tuulet suven mailta. Astua kylvinvakka harteilla silloin, tuntea
maaemon lämpimät sydänlyönnit, koska siemen maahan siunaten
putoo, eikö se suureksi ja onnelliseksi sykähytä miehen rintaa!
Sanotaan ehkä, että puhe onnesta ja onnellisuudesta on vain

kuvittelua, runoilijain ja haaveilijain unta. Sanottakoon vaan, mutta
kieltämätöntä kuitenkin on, että onnea meidän kunkin sydän täältä
elämästä etsii ja kaihoo. Ja kun elämän onnea ei mitata rahassa,
vaan sen vapauden ja tervehenkisen tasapainon mukaan, mikä
tyydyttävän aineellisen toimeentulon ohella täällä meille voi
tarjoutua, niin silloin asetetaan maatyö jälleen kunniasijalleen, silloin
maahenki jälleen terveenä nousee. Herää usko omaan voimaan,
herää palava rakkaus työhön. Ja missä rakkaudella työtä tehdään,
missä omien kätten työ helliä katseita tekijälleen heittää, missä
"hallava lantakasakin navetan ikkunalla näyttää ihanimmalta
paratiisilta, oikealta onnen kukkulalta", kuten Jukolan Juhanin
silmissä Jukolan ränsistyneet nurkat näyttivät veljesten jälleen sinne
palatessa, missä näin on, siellä onnellisina ja kirkkain katsein
kuljetaan kohti uusia keväitä, kohti yhäti uusia touontekopäiviä.
Maa sekä maamies.
Maahan, maahan!
Iske maahan, iske aurasi kärki entistä lujemmin maahan, niin

entistä ehtoisammaksi elosi elpyy!
Ne ovat halveksineet sinua, maamies, pitäneet orjana sen, joka
vapain on. Ne ovat huutaneet: kauppa ja kaupungit ja tehtaiden
piiput! — mutta ne ovat unohtaneet, että sinä olet se, joka maasta
heidän raaka-aineensa otat, ne ovat unohtaneet, että sinussa on
heidän tavaransa kiertojuoksun alku ja loppu. Ne ovat unohtaneet,
että sinusta lähtee koko elämän kiertojuoksun alku.
Ne ovat halveksineet sinua, maa-emo, nähneet sinussa vain

kovan ja kolakan raakalaisen, mutta ne eivät ole koskaan sinun
sisimpään poveesi nähdä jaksaneet. — Ne eivät ole koskaan
nähneet sinun povesi kultaisia aarteita, eivätkä koskaan alkuvoiman
väkevätä suonenlyöntiä kuulleet.
Siksi ne luulevat omien pikku koneittensa nakutuksen

maailmanvasaran lyönneiksi, siksi ne luulevat oman
muurahaishyörinänsä maailman suureksi marssiksi. Eivät ole he
merkille panneet, että jos sinä lempeästi henkäiset, maa-emo, niin
keväitten vihreä kukoistus kaikkialla nousee ja keinuu, kultaisten
tähkien seppel sinun kulmillasi kaartuu; mutta jos sinä vihassasi
vapiset, niin vuoret vaipuu, hirret harjaiset hajoaa ja tehtaitten
piipuista ei ole jälellä muuta kuin sorainen muisto. — Eivät ole he
elämän voimien alkupajaan pilkistää ymmärtäneet.
Katsokaa, katsokaa te, jotka ette sitä tunne, katsokaa maamiestä,

maa-emon poikaa, silloin koska hän aarteitansa aukoo!
Ei etsi hän niitä rautaisista kirstuista, vaan paljon vankemmat,

paljon syvemmät ovat talletuspaikat hänellä, joka elämän
takausmies on. Katsokaa, kuinka hän salvat päästää, lukot aukoo,
karhunkämmenkäsillään satojen vuosien pihkaiset kannot korvesta
kohottaa ja kuokkansa sen syvyyksiin iskee! Sitkasta se sisua kysyy,
mutta kaunis on raatajan palkkakin viimein: lainehtii laiho, korpi
kultatähkinä kohajaa. Laulaa se kiitosvirttänsä sille, joka sen keskellä
tyynenä astuu ja lempein silmin katsoo kättensä töitä. Kaunis hänen
kulkunsa on, se on mahtajan valtamarssi, juhlakulku elämän
ehtymättömien aarteitten tiellä. —
Yksi on maa-emo, jonka hartioilla kaikki lepää.
Yksi on maamies, joka elämän valtavoimia taltuttaa ja viljelee, yksi

on luoja, joka maanpoven aarteita aukoo ja etsii, uusia maailmoita
maasta luo.
Olkaa maalle uskolliset veljeni!
Olkaa uskolliset maalle, minun veljeni, uskolliset maalle koko

teidän ruumiinne ja henkenne voimin!
Kasvavat kaupungit, nousevat tehtaiden piiput. Mutta jyrkkien

muurien ahtaissa kujissa painuu ihmisen rinta ja pienenee hänen
aatostensa piiri. Ja hänen aivonsa takoo niinkuin se kone, minkä
vieressä hän terveen verevyytensä tuhlaa, takoo yksitoikkoisesti ja
kuolemankylmästi.
Kulkevat ihmiset maailman markkinoilla toinen toistansa kaahaten,

lentäen, läähättäen. Ja heidän saavutuksensa on yhäti eteenpäin
kurkoittuva ruumis sekä silmien kuumeinen kiilto.
Ja kun he väsyneinä monenkertaiset rappusensa nousevat ja

käyvät sisälle huoneisiin, joita he asunnoksensa sanovat, tuntevat he
ympärillänsä kylmän kolkkouden. Sillä niin suuri on vieraitten,
kosteitten seinien kylmyys, niin kova niiden kivi, että eivät sitä
kolkkoutta omat kotoiset esineetkään tyystin peittää taida. Niiden
takaa ja niiden läpi vilkkuu kuitenkin tuo vieras, samea silmä.
Ja mihin ei aurinko mahdu, ei sinne, ystäväni, myöskään armaat,
aurinkoiset ajatukset tietänsä löydä.
Murtuvat siellä ihmisen voimat, kuihtuu nuorikin kukkeus. Ja

niiden, jotka vapaata ilmaa ja metsien pihkantuoksua maistaa
saavat, täytyy yhä uudelleen uutta verta sinne kulutukseen lähettää.
Kaikki ne sinne hupenevat, siellä pienenevät. Sillä ihminen on aina
pieni korkeitten piippujen juurella.
Mutta suuri on se, joka suuruutensa mullasta luo, joka maalle

uskollisena pysyy.
Olkaa uskolliset maalle, ja kuin pahaa ikään karttakaa te

kaikellaisia kelmejä, jotka ketunhäntää heilutellen teitä lähestyvät
suu täynnä makeita sanoja. Kuin ruttoa ja kulkutautia te heitä
väistäkää!
Minä sanoin kulkutautia, sillä niinkuin tarttuma on se maata ja

maamiestä vaaninut tuo ilkeä rutto: maannylkemis- ja huijaustauti.
On niitä — ja niitä on paljon — jotka sinun luoksesi tulevat, rahan

turkuttavat ja talon vievät. Mutta älä luule, että he niitä maita hellien
vaalivat, joita sinä ennen hartaana astuit. Ensin lehdon raiskaavat,
metsän myövät, sitten peltojen viljan ja viimeksi sinun ahkeruutesi
merkin: mustan ruokamullan. Ja ilosta he irvistävät koska tehty on
hävityksen työ, raiskattu rakkaudella raivattu viljelys. Kaikki
ruttotautien levittäjät irvistävät ilosta aina, kun rutto johonkin
kalmanmerkkinsä viiltänyt on.
Ja toisia on, jotka vierasta kieltä solkaten sinua lähestyvät, etenkin

sinua, sinä rajaseudun sukkela mies. Sinä tunnet niiden kolikot: eivät
ne kirkkaasti kilahda, vaan niiden äänessä soi salainen uhka. Älä
tartu, älä tartu niihin lunnaihin, jos sinä isiesi maata asua ja
rakennella mielit! Etkö sinä ole huomannut, että päivä päivältä luisuu
isäinmaa sinun jalkaisi alta. Pidä varasi, ettei sinun puheesi outona
soi, ettei sinun vaatepartesi vieraaksi vaihdu ja ettet sinä itse
vieraana astu maata, minkä sinun isäisi hiki hedelmälliseksi teki ja
mitä sinä itse kerran valtiaana astuit. Ja sen tähden: älä hinnalla
millään maasta luovu, älä maallesi uskoton ole!
Katso niitä, joiden pellolla ruokamulta alati runsii, joiden aatran

kärki yhäti syvemmälle tähtää. Eivätkö he itse samalla päätään yhä
ylempänä kanna! Ne ovat niitä, jotka maan vapaan mahdin ovat
ymmärtäneet, niitä, jotka maa-emon voiman ja sen syvät
sydänlyönnit omassa povessaan tuntevat. Ne ovat niitä, jotka alati
ovat maalle uskollisina pysyneet.
Kaunis heidän osansa on, kaunis ja kallis. Ja tuon karhunrinnan

alla asuu lämpimin sydän, sillä vapaana on päivä sen päällä käynyt.
Ja noissa leveissä kämmenissä tutaan suurin kunto, mutta myöskin
lapsen hellyys.
Syvinä, hyvinä ja sydämeltä suurina he elämänsä vaeltavat, sillä

he ovat kasvatuksensa saaneet emolta koko elämän, emolta
armaimmalta: maalta.
Olkaa, oi veljeni, alati uskolliset, uskolliset maalle!
Metsähenki.
Metsähenki oli aikoinaan ollut mahtava ruhtinas. Sen valtakunnan
rajaviivaa ei vedetty punaisella eikä keltaisella liitupalasella eikä sen
vaakunamerkki sammaloitunut missään viittä syltä leveän rajakujan
neliskolkkaisessa heittokivessä. Ei. Vain laakeat kymmen- ja
satapenikulmaiset, sinisen siintävät meret sen valtakunnan
rajoittivat, ja korkealla pilvien päällä, lumihuippuisten vuorten
tutkaimilla sen vikkelimmät viestinviejät valppaina seisoivat. Mahtava
oli tämä ruhtinas, mutta varsin hyvänsuopa. Niin, totisesti seuraa
oikeata mahtavuutta myös lempeys ja hyvyys. Niinpä otti tämä
mahtava Metsähenki väkevään suojaansa myöskin valtakuntansa
heikoimmat, otti kuljeksivan Karjahengen sekä pikkaisen myyriäisen
Maahengenkin. Ja kun Metsähenki huomasi, että niistä vielä voisi
nousta mahtavat apulaiset hänelle, uhrasi se toisinaan kappaleen
omasta valtakunnastaankin, väistyi metsineen ja puineen pois
korven notkelmasta päästäen Karjahengen siihen heinää
nostattamaan, tai vetäytyi kauniilta järvenranta-rinteeltä hiukan
kauvemmaksi, jotta tuo itsepäinen poika Maahenki siinä sai ruveta
juurastamaan, kantoja ja kiviä vääntämään. Metsähenki näet itse
rakasti perinpohjin vain penikulmaisia korpia. Siellä sillä oli korkean
jättivuoren laella valtaistuimensa, joka oli verhottu karhunsammal-
taljalla, mutta sen jalkoja ja alustaa kierteli kauniit useanväriset
köynnökset ja nukkalaitteet. Ja sen sivuina nousivat tuhatvuotiset
hongat, jotka olivat harmaantuneet aina pikkuvarvasta myöten ja
jotka sen takia herättivät niin suurta arvonantoa ja kunnioitusta, ettei
kokkokaan niiden harmaaseen suojaan laskeutua hennonut.
Tällainen oli Metsähengen valtaistuin korpien keskessä, siellä se
huoletonna oljenteli ja suuren sydämensä leppeitä säveleitä lauloi.
Veipä Tuuletar sävelet metsien pimentoihin, vei jalan neljän
juokseville, ja lennättipä senkin korvaan, joka turvekattoisessa
majassaan asui ja jonka nimi oli ihminen. Vei Tuuletar leppeät laulut,
ja leppeämmäksi suli musta mieli.
Näin vieri tuhannen vuotta ja päällekin sen. Metsähenki hallitsi ja

suojasi kaikkia, ja sen apulaisina häärivät Karjahenki ja Maahenki,
vaikka ne vielä olivatkin lapsia. Ja metsien syvästä sydämestä levisi
lohduttava rauha ylitse maan piirin, Metsähengen mahtavan
valtakunnan. Levisi myös ylitse sen, joka asui turvekattoisessa
majassa ja jonka nimi oli ihminen.
Mutta sitten tapahtui odottamaton lankeemus, metsien Edeni

muuttui
Babelin raunioiksi.
Oli tuhatpäinen ilmestys maailmaan tullut, eikä kukaan tiedä, mistä

se yht'äkkiä paiskautunut oli. Muutamat luulivat sitä itse merien
tuhoisaksi Tursaaksi.
Mutta se tiedettiin pian, että sen nimi oli Tukkihuijaus.
Se tuli jauhosäkki re'essä sen luo, joka asui turvekattoisessa

majassa, ja sulavin suin supisi: "Metsäsi myö, kelohongat minulle
lupaa, — jauhot saat, kultien kulinat ja laiskan lihavan levon". —
Välähti silloin karhukeihäs nurkanpuolella, kuului painava kirous ja
sen jälkeen: "ulos, ja heti, pyhätön raiskaaja, laululehdon onnen
viejä!" Ja pois riensi Tukkihuijaus, jauhosäkki reessä.
Mutta olipa sattunut metsän ehtoisa haltija uinahtamaan ja

lakannut oli laulunsa ihana kaiku. Ja suurten nukkuessa hiipivät aina
esiin ne pienet näkymättömät pahanpeikot, jotka muuten kuopissaan
lymyävät. Nousi nyt suosta Suonakka, herätti Hallan harmaakarvan
sekä Pakkasen purevan. Ja koska torkkui metsän herttaisa haltija,
kävi Suonakka apureineen sen kimppuun, joka rakasti metsien
pyhyyttä ja asui turvekattoisessa majassa.
Murhe ja epäilys hiipi silloin ihmisen mieleen.
Ja kun Tukkihuijaus toisen kerran tuli jauhosäkki reessään, ei

karhukeihäs enää välähtänyt. Tukkihuijaus puhui ja kehui, sillä se oli
suuri suupalttu ja itserakas. Eikä ihmekään, sillä pahat kielet tiesivät,
että sen kasvattajana oli ollut Rahanhimo. Tukkihuijaus puhui, ja
ihminen kuunteli. Ja Nälkä, joka istui ovinurkassa, huuteli sisään
jauhosäkkiä.
Tukkihuijaus puhui: "Rahaa saat ilman vaivaa. Iske lujemmin

maahan, peltoon — jos isket, tai laiskana ole, sama se. Hyvin elät,
ilmaista rahaa".
Kahden vuoden päästä eivät enää honkien urut soineet, ei lehto

laulanut.
Kuului sen jälkeisenä kesänä ryteikön itkuinen rätinä siinä, missä

ennen käen kukkua kuuntelit taikkapa lahorastaan kanssa haastoit
töittesi ratoksi. Ja koska syksymmällä ilta hämyyn painui, paistoi
ympäriinsä alastoman alakuloiset kannon päät, niinkuin peikkojen
jäiset silmät.
Mutta turvekattoisessa majassa riutui torkkuvan ihmisen veltot

jäsenet.
Ja kun Nälkä sitten kymmenen vuoden päästä taas oli ilmestynyt

ovinurkkaan, ei Tukkihuijaus enää tullutkaan jauhosäkki reessä. Sillä
senkään ei juuri tee mieli kuljeksia autioita seutuja.
Ja silloin nuhtelivat Maahenki ja Karjahenki ihmistä: "Huonosti teit
— huonoksi olet itsekin tullut. Metsähengen pois ajoit kotisi
kuuluvilta. Veltto ja laiska, et meistäkään näy paljoa välittävän. Mutta
Metsähengen kokonaan pois ajoit. Miksi? Nyt näet, ilman sitä ei
sinulle onni kuitenkaan kukahda. Huonosti teit!"
— Huonosti tein, ajatteli ihminen, — ja katui. Ja ikäänkuin anteeksi

pyytäen alkoi hän nyt pientä näreikköä vaalia. Puhdisti ja perkasi. Ja
sitä tehdessään tuntui hänestä ikäänkuin laulurastas olisi kaukaa
kuiskannut: Kas se, unet rapisi, heräsitpäs, heräsitpäs, oikein teet —
onnea vaan, onnea teet!
Nytpä Maahenki ja Karjahenkikin ilomieliksi innostuivat, kun intoa

ihmisessä jälleen näkivät. Kukin parastaan koitti, ja Metsähenki
saatiin kuin saatiinkin takaisin. Ja entistä virkumpana ja
ketterämpänä se nyt palasi. Ja vaikka sen valtakunnassa näytti siellä
täällä arveluttavia oireita, ei se siitä suruihin heittäytynyt, vaan lujitti
liittonsa entisten apulaistensa kera — jotka jo olivat miehiksi
varttuneet — ja huomasi, että hän nyt vasta taitaa sentäänkin
varmemman valtaistuimen saada.
Kun ovat kolme kovaa liitossa: Metsähenki, Maahenki ja

Karjahenki, ja ihminen itse neljäntenä, niin turvekatto kohoaa, ja sen
ylitse ojentaa petäjä kuuselle kätensä: onnea vaan, vasta ehjeni
elämä!
Eikä Nälästä eikä Tukkihuijauksesta ole sen jälkeen mitään kuultu.
Metsässä.
— Vai niin sinunkin kävi. Terve tuloa vaan, terve tuloa tähän
ikuiseen lepoon, mätänemään ja maatumaan. Heittäydy siihen
poikellesi, siinä sitä on naapuri koivurukka jo monet vuodet lojunut
päälläni sekin. Näet nyt saat oppia laiskana lojumaan, aina vaan
lojumaan. Ei tuudita tuulet enää.
Korven laitaan kaatui haapa.
Se oli vanha, puoleksi lahonnut honka, joka sille kaatuvalle näin

puhui. Itse se tuo honka oli kerran siinä korpimäellään ylpeänä
seisonut, vanhan vartensa varassa pelotta ja uljaasti ympäristöään
tarkastanut ja ollut koko sen korven kasvatti-isä ja ylpeys. Mutta
tulipa kerran äkkinäinen tuulenpyörre, tempoili sinne ja taas äkkiä
nykäsi tänne, kiskaisipa parrastakin ylöspäin, niin että ne vanhat
juuret eivät enää jaksaneet otettaan kylliksi pitää, katkeilivat ja
heltisivät, ja niin se sitten korven ylpeys paiskautui ankarasti
ryskäten pitkälleen maahan pitkin korven sivua. Ja silloin vapisi ja
murehti koko korpi.
Vuosisatojen alituisesta taistelusta väsyneenä se mielellään lepäili

hiukan aikaa, mutta sitten se olisi odottanut jotain muuta. Ei ollut se
koskaan luullut olevansa niin kehno ja huomaamatta jäänyt, että
metsään mätänemään jätettäisiin. Se odotti että ihminen, tuo hänen
isäntänsä, joka kerran jo oli hänen oksiaan karsinut — mihin lie
havuksia vienyt — tulisi ja korjaisi nyt koko mahtavuuden, rungonkin.
Laittaisi kumajavan pöydän, tai edes pitkän, pitävän penkin
väsyneen matkamiehen levättäväksi. Mutta äläs vielä että tuli. Kettu
ja orava siinä nyt hänen runkoaan lepuupaikkanaan pitävät, kun
toisinaan päivää paistattavat.
Sitten se jo vaatimuksiaan alensi, odotti, että edes polttopuuksi

korjattaisiin. Ei sitäkään. Ei edes tuo torppari tullut. Olisipa se ehkes
varkain vienyt!
Siinä se sitten vähitellen alkoi unohtaa ylpeytensä ja tottua

kohtaloonsa. Ja vallankin sitten, kun siihen hänen viereensä ja
ylitsensä aina tuon tuostakin joku kovan onnen toveri tulla tupsahti ja
siihen jäi. Seura lohdutti itse kutakin ja antoi aina silloin tällöin
tilaisuuden muutaman ajatuksen vaihtoon. Niinkuin nytkin.
Hiljaa parahtaen se haapa siihen paiskautui.
Oli hetkinen osanottavaa hiljaisuutta.
— Mitäs ylhäälle kuuluu, kysäsi viimein koivu, joka vielä joskus

kaihoten muisteli niitä aikoja, jolloin pehmonen tuulenhenki painoi
lämpimän suukkosensa sen vehreille lehdille, ja linnut oksilla kilvan
kiistivät ja iloaan pitivät.
— Onhan siellä sentään elämää, ei tällaista, vastasi huokaillen

haapa.
— Jaa, jaa, älä sure ollenkaan, kaikkeen saa tottua. Olisin sitä
minäkin saattanut virassa kiivetä vaikka minkälaiseen hoviin, jos
eivät nuo ihmiset olisi niin perin laiskoja ja huomaamattomia. Tuolta
ne vaan tien varresta ottavat kaikki kasvavat vesatkin tarve- ja
yksinpä polttopuikseenkin, mutta äläs vielä, että sivummalle
poiketaan. Eivät luule jälkeentulevaisten kai metsää ja puita
tarvitsevankaan.
— Sanos muuta, naapuri, sanos muuta, pistää väliin se vanha

honka. Niin ne elävät kuin viimeisen päivän aattona. Niin,
lapsukaiset, minä sitä olen jos jotakin nähnyt. Elävältä polttaa olivat
jo kerran minutkin, jo partani käristyi niin pahasti, ettei siitä sen

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2) The supply of real GDP is a function of 2)

3) The quantity of real GDP supplied depends on the 3)

8) Aggregate supply describes the behavior of 8)

9) An aggregate supply curve depicts the relationship between 9)

10) In the macroeconomic short run, 10)

11) When talking about aggregate supply, it is necessary to 11)

13) The macroeconomic long run is best defined as 13)

15) If the economy is at the natural unemployment rate, 15)

16) In the macroeconomic long run, 16)

17) At potential GDP 17)

18) In the long-run 18)

19) The long-run aggregate supply (LAS) curve 19)

20) When the labor market is in equilibrium, 20)

21) The long-run aggregate supply curve is vertical because 21)

23) The long-run aggregate supply curve is 23)

24) Which of the following statements is TRUE? 24)

26) The long-run aggregate supply curve illustrates the 26)

31) The long-run aggregate supply curve shows the 31)

36) The short-run aggregate supply curve 36)

37) The short-run aggregate supply curve 37)

38) In the short run, the aggregate supply curve is 38)

43) The short-run aggregate supply curve 43)

44) In the short-run 44)

56) The SAS curve and the LAS curve 56)

69) The short-run aggregate supply curve shifts when 69)

70) The SAS curve shifts if there is a change in 70)

87) When the quantity of capital increases, then the 87)

96) Technological progress will 96)

98) If the money prices of resources changes, 98)

99) If the money wage rate rises, then the 99)

102) A decrease in the money wage rate 102)

103) An increase in the money wage rate 103)

104) A change in the money wage rate shifts 104)

119) A fall in the money wage rate shifts 119)

120) An increase in the level of technology shifts 120)

121) The aggregate demand curve shows 121)

122) The AD curve shows the sum of 122)

123) The aggregate demand curve 123)

136) The AD curve slopes 136)

137) An increase in the price level creates a 137)

138) Your real wealth is measured as the 138)

152) The intertemporal substitution effect refers to substitution of 152)

174) Aggregate demand increases when 174)

179) If the expected future inflation rate decreases, then 179)

180) If higher inflation is expected in the future, then the 180)

181) An increase in expected future income 181)

182) A decrease in expected future income 182)

183) A rise in the expected future inflation rate 183)

184) A fall in the expected future inflation rate 184)

187) Which of the following statements is incorrect? 187)

188) A decrease in government transfer payments 188)

189) An increase in government expenditure on goods and services 189)

190) A decrease in government expenditure on goods and services 190)

193) If taxes are increased, the AD curve 193)

197) Disposable income when . 197)

If potential GDP in India is million rupees, India is experiencing .

The economy is experiencing gap and firms will .