GDP is not an accurate measure of economic well-being due to failing to account for certain production activities in the economy. Which of the following is one such reason that causes GDP to understate the true level of economic production?

a.

It includes a measure of environmental degradation in its calculation

b.

It does not record activities associated with the underground economy

c.

It does not include homemaking activities such as gardening and Do-It-Yourself home improvements

d.

It does not include the production of intermediate goods used in the production of other goods and services

Question22

The wealth effect, the interest rate effect, and the international trade effect are all contributors to which of the following outcomes?

a.

A shift of the aggregate demand curve

b.

A shift of the short-run aggregate supply curve

c.

A downward sloping aggregate demand curve

d.

An upward sloping short-run aggregate supply curve

Question23

An increase in the income tax will decrease consumption expenditures, which will lead to which of the following?

a.

An increase in aggregate demand

b.

A decrease in aggregate demand

c.

An increase in short-run aggregate supply

d.

A decrease in short-run aggregate supply

Question24

As wages are sticky in the short-run, businesses find it beneficial when the price level rises, so they supply more products and services. This causes which of the following?

a.

An upward sloping short-run aggregate supply curve

b.

An increase in hiring of labor in order to un-stick the wages

c.

An increase in the price level without a change in real GDP

d.

A decrease in profits and a shift the short-run aggregate supply curve down

Question25

Consider the below graph showing a shift of the short-run aggregate supply curve to the right. Which of the following factors could have led to the shift?

a.

An increase in the price level, causing an increase in business profitability

b.

An increase in the minimum wage, causing higher labor costs for businesses

c.

An improvement in technology causing an increase in labor and capital productivity

d.

An increase in consumer confidence causing an increase in spending in the economy

Question 26

Which of the following accurately contrasts short-run and long-run equilibrium?

a.

In short-run equilibrium, the aggregate demand curve intersects the long-run aggregate supply curve; in long-run equilibrium, the aggregate demand curve intersects the short-run aggregate supply curve

b.

In short-run equilibrium, the aggregate demand curve intersects the short-run aggregate supply curve; in the long-run equilibrium, the aggregate demand curve intersects the long-run aggregate supply curve

c.

In short-run equilibrium, the aggregate demand curve intersects the short-run aggregate supply curve; in the long-run equilibrium, the aggregate demand curve intersects the long-run aggregate expenditures curve

d.

In short-run equilibrium, the aggregate demand curve intersects the short-run aggregate supply curve; in long-run equilibrium, the aggregate demand curve intersects both the short-run and the long-run aggregate supply curves

Question28

Stagflation describes a situation with which combination of factors?

a.

Inflation and low unemployment

b.

Inflation and high unemployment

c.

Low inflation and high unemployment

d.

High inflation and low unemployment

Question29

The term "natural level of unemployment" means that the real GDP is at a level for which there is:

a.

no cyclical unemployment and the long-run aggregate supply curve is vertical

b.

no cyclical unemployment and the short-run aggregate supply curve is vertical

c.

no frictional unemployment and the long-run aggregate supply curve is vertical

d.

no structural unemployment and the long-run aggregate supply curve is vertical

Question30

Which of the following statements is true with respect to the beliefs of the different schools of thought about the shape of the aggregate supply curve?

a.

Classical economists believe that the aggregate supply curve is upward sloping, therefore, an increase in aggregate demand increases both the price level and real GDP

b.

Classical economists believe that the aggregate supply curve is vertical, therefore, an increase in aggregate demand only causes an increase in inflation and no change in real GDP

c.

Keynesian economists believe that the aggregate supply curve is horizontal, therefore, an increase in aggregate demand only causes an increase in inflation and no change in real GDP

d.

Keynesian economists believe that the aggregate supply curve is upward sloping, therefore, an increase in aggregate demand increases both the price level and real GDP