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 Real Domestic Output  Demanded (in Billions)   Price Level (Index Value)   Real Domestic Output  Supplied (in Billions)  $3,000350$9,0004,0003008,0005,0002507,0006,0002006,0007,0001505,0008,0001004,000\begin{array} { | c | c | c | } \hline \begin{array} { c } \text { Real Domestic Output } \\\text { Demanded (in Billions) }\end{array} & \text { Price Level (Index Value) } & \begin{array} { c } \text { Real Domestic Output } \\\text { Supplied (in Billions) }\end{array} \\\hline \$ 3,000 & 350 & \$ 9,000 \\\hline 4,000 & 300 & 8,000 \\\hline 5,000 & 250 & 7,000 \\\hline 6,000 & 200 & 6,000 \\\hline 7,000 & 150 & 5,000 \\\hline 8,000 & 100 & 4,000 \\\hline\end{array} The accompanying table shows the aggregate demand and aggregate supply schedules for a hypothetical economy. At the price level of 150, there will be a general


A) surplus in the economy, and output supplied will decrease as the price level falls.
B) shortage in the economy, and output demanded will decrease as the price level rises.
C) surplus in the economy, and output supplied will increase as the price level rises.
D) shortage in the economy, and output demanded will increase as the price level falls.

E) None of the above
F) B) and C)

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Which combination of factors would most likely increase aggregate demand?


A) an increase in household indebtedness and a decrease in net exports
B) an increase in consumer wealth and a decrease in interest rates
C) an increase in personal taxes and a decrease in government spending
D) an increase in business taxes and a decrease in profit expectations

E) A) and C)
F) A) and B)

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When deriving the aggregate demand (AD) curve from the aggregate expenditures model, an increase in U.S. product prices would cause an increase in


A) the value of household wealth and lower consumption expenditures.
B) interest rates and lower investment expenditures.
C) exports and imports.
D) U.S. resource prices and an increase in aggregate supply.

E) None of the above
F) A) and B)

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A) aggregate demand is AD A D _ { 1 } B) the equilibrium price level is P _ { 1 } . C) producers will supply output level Q _ { 1 } D) the equilibrium price level is P _ { 2 }


A) aggregate demand is AD AD1A D _ { 1 }
B) the equilibrium price level is P1.P _ { 1 } .
C) producers will supply output level Q1Q _ { 1 }
D) the equilibrium price level is P2P _ { 2 }

E) A) and B)
F) B) and C)

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A) shift of the AD curve in A. B) shift of the AS curve in B. C) move from point a to point b in B. D) move from point a to point c in C.


A) shift of the AD curve in A.
B) shift of the AS curve in B.
C) move from point a to point b in B.
D) move from point a to point c in C.

E) None of the above
F) A) and C)

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A) a cut in personal and business taxes B) an increase in the value of the dollar relative to other currencies C) a shrinkage in the value of stocks and other financial assets D) an increase in real interest rates


A) a cut in personal and business taxes
B) an increase in the value of the dollar relative to other currencies
C) a shrinkage in the value of stocks and other financial assets
D) an increase in real interest rates

E) B) and D)
F) B) and C)

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A) be caused by a shift in the aggregate supply curve from A \mathrm { AS } _ { 1 } \text { to } \mathrm { AS } _ { 2 } B) be caused by a shift in the aggregate supply curve from A \mathrm { AS } _ { 1 } \text { to } \mathrm { AS } _ { 3 } C) result in a movement along the aggregate demand curve from e _ { 1 } \text { to } e _ { 2 } D) result in a movement along the aggregate demand curve from e _ { 3 } \text { to } e _ { 1 } \text {. }


A) be caused by a shift in the aggregate supply curve from A AS1 to AS2\mathrm { AS } _ { 1 } \text { to } \mathrm { AS } _ { 2 }
B) be caused by a shift in the aggregate supply curve from A AS1 to AS3\mathrm { AS } _ { 1 } \text { to } \mathrm { AS } _ { 3 }
C) result in a movement along the aggregate demand curve from e1 to e2e _ { 1 } \text { to } e _ { 2 }
D) result in a movement along the aggregate demand curve from e3 to e1. e _ { 3 } \text { to } e _ { 1 } \text {. }

E) None of the above
F) A) and B)

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If the price level increases, then the aggregate expenditures schedule will shift down and the aggregate demand curve will shift to the left.

A) True
B) False

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The intersection of the aggregate demand and aggregate supply curves determines the


A) productivity level in the economy.
B) shape of the aggregate demand curve.
C) per-unit cost of production in the economy.
D) equilibrium level of real domestic output and prices.

E) None of the above
F) C) and D)

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The economy experiences an increase in the price level and an increase in real domestic output. Which is a likely explanation?


A) Interest rates have increased.
B) Business taxes have increased.
C) Wage rates have fallen.
D) Net exports have increased.

E) None of the above
F) B) and C)

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A decline in investment will shift the AD curve to the


A) left by a multiple of the change in investment.
B) left by the same amount as the change in investment.
C) right by the same amount as the change in investment.
D) right by a multiple of the change in investment.

E) A) and B)
F) C) and D)

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Given a fixed upsloping AS curve, a rightward shift of the AD curve will


A) cause cost-push inflation.
B) increase real output but not the price level.
C) increase the price level but not real output.
D) increase both the price level and real output.

E) C) and D)
F) B) and D)

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The aggregate supply curve (short run) is upsloping because


A) wages and other resource prices match changes in the price level.
B) the price level is flexible upward but inflexible downward.
C) per-unit production costs rise as the economy moves toward and beyond its full- employment real output.
D) wages and other resource prices are flexible upward but inflexible downward.

E) C) and D)
F) A) and C)

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An economy's aggregate demand curve shifts leftward or rightward by more than changes in initial spending because of the


A) net export effect.
B) wealth effect.
C) real-balances effect.
D) multiplier effect.

E) A) and B)
F) B) and D)

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 Price Level CIgGXM Real GDP 128$18$2$3$1$51252043241222263331192483421162610351\begin{array} { | c | c | c | c | c | c | c | } \hline \text { Price Level } & C & I _ { g } & G & X & M & \text { Real GDP } \\\hline 128 & \$ 18 & \$ 2 & \$ 3 & \$ 1 & \$ 5 & \\\hline 125 & 20 & 4 & 3 & 2 & 4 & \\\hline 122 & 22 & 6 & 3 & 3 & 3 & \\\hline 119 & 24 & 8 & 3 & 4 & 2 & \\\hline 116 & 26 & 10 & 3 & 5 & 1 & \\\hline\end{array} In the accompanying table for a particular country, C is consumption expenditures, IgI _ { g } is gross Investment expenditures, G is government expenditures, X is exports, and M is imports. All ?gures Are in billions of dollars. The interest-rate effect of changes in the price level is shown by columns


A) Price Level and G on the table.
B) X and M on the table.
C) Price Level and IgI _ { g } on the table.
D) C and G on the table.

E) B) and D)
F) B) and C)

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The aggregate demand curve shows the


A) inverse relationship between the price level and the quantity of real GDP purchased.
B) direct relationship between the price level and the quantity of real GDP produced.
C) inverse relationship between interest rates and the quantity of real GDP produced.
D) direct relationship between real-balances and the quantity of real GDP purchased.

E) A) and D)
F) None of the above

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Which would most likely increase aggregate supply?


A) an increase in the prices of imported products
B) an increase in productivity
C) a decrease in business subsidies
D) a decrease in personal income taxes

E) A) and D)
F) None of the above

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Suppose that an economy produces 300 units of output, employing 50 units of input, and the price of the input is $9 per unit. The level of productivity and the per-unit cost of production are


A) 1.50 and $6.00, respectively.
B) 6 and $1.50, respectively.
C) 5 and $6.00, respectively.
D) 5 and $1.50, respectively.

E) A) and B)
F) C) and D)

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A) a movement from A to C along aggregate demand curve AD A D _ { 1 } B) a movement from C to A along aggregate demand curve AD A D _ { 1 } \text {. } C) a shift of aggregate demand from AD A D _ { 1 } \text { to } A D _ { 2 } \text {. } D) a shift of aggregate demand from AD A D _ { 2 } \text { to } A D _ { 1 } \text {. }


A) a movement from A to C along aggregate demand curve AD AD1A D _ { 1 }
B) a movement from C to A along aggregate demand curve AD AD1. A D _ { 1 } \text {. }
C) a shift of aggregate demand from AD AD1 to AD2. A D _ { 1 } \text { to } A D _ { 2 } \text {. }
D) a shift of aggregate demand from AD AD2 to AD1. A D _ { 2 } \text { to } A D _ { 1 } \text {. }

E) B) and C)
F) B) and D)

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The determinants of aggregate demand


A) explain why the aggregate demand curve is downsloping.
B) explain shifts in the aggregate demand curve.
C) demonstrate why real output and the price level are inversely related.
D) include input prices and resource productivity.

E) A) and B)
F) All of the above

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