Question 1

An increase in imports (independently of a change in our price level) will increase both aggregate supply and aggregate demand.

Accepted Answer

A) True 
 B)False

Question 2

The passage of new legislation requiring more extensive government regulation of business will most likely:

Accepted Answer

A)   increase aggregate demand.
B)   increase aggregate supply.
C)   decrease aggregate demand.
D)   decrease aggregate supply.E) C) and D)
F) A) and B)

Question 3

A decrease in government spending will cause a(n) :

Accepted Answer

A)   increase in the quantity of real domestic output demanded.
B)   decrease in the quantity of real domestic output demanded.
C)   decrease in aggregate demand.
D)   increase in aggregate demand.E) A) and D)
F) None of the above

Question 4

If the current price level was such that the aggregate quantity demanded exceeded the aggregate quantity supplied, we would expect:

Accepted Answer

A)   inflation to occur.
B)   the aggregate demand curve to shift rightward.
C)   the aggregate demand curve to shift leftward.
D)   the ratchet effect to be applicable.E) A) and B)
F) B) and C)

Question 5

An economy is employing 2 units of capital, 5 units of raw materials, and 8 units of labour to produce its total output of 640 units. Each unit of capital costs $10, each unit of raw materials, $4, and each unit of labour, $3.
-Refer to the above information. If the per unit price of raw materials rises from $4 to $8 and all else remains constant, the per unit cost of production will rise by about:

Accepted Answer

A)   100 percent.
B)   50 percent.
C)   40 percent.
D)   30 percent.E) A) and B)
F) C) and D)

Question 6

2 and that the economy initially is operating at its full-employment level of output Qf. In terms of this diagram, the long-run aggregate supply curve: A)  is AS2. B)  is a vertical line extending from Qf upward through e, b, and d. C)  may be either AS1, AS2, or AS3 depending on whether the price level is P1, P2, or P3. D)  is a horizontal line extending from P2 rightward through f, b, and g." class="answers-bank-image d-inline" rel="preload" >
-Refer to the above diagram. Assume that nominal wages initially are set on the basis of the price level P2 and that the economy initially is operating at its full-employment level of output Qf. In terms of this diagram, the long-run aggregate supply curve:

Accepted Answer

A)   is AS2.
B)   is a vertical line extending from Qf upward through e, b, and d.
C)   may be either AS1, AS2, or AS3 depending on whether the price level is P1, P2, or P3.
D)   is a horizontal line extending from P2 rightward through f, b, and g.E) A) and C)
F) None of the above

Question 7

The interest-rate effect suggests that:

Accepted Answer

A)   a decrease in the supply of money will increase interest rates and reduce interest-sensitive consumption and investment spending.
B)   an increase in the price level will increase the demand for money, reduce interest rates, and decrease consumption and investment spending.
C)   an increase in the price level will increase the demand for money, increase interest rates, and decrease consumption and investment spending.
D)   an increase in the price level will decrease the demand for money, reduce interest rates, and increase consumption and investment spending.E) A) and C)
F) All of the above

Question 8

Suppose that real domestic output in an economy is 20 units, the quantity of inputs is 10, and the price of each input is $4.
-Refer to the information above, the level of productivity is:

Accepted Answer

A)   20.
B)   10.
C)   5.
D)   2.E) None of the above
F) All of the above

Question 9

-Which of the above diagrams best portrays the effects of declines in the prices of imported resources?

Accepted Answer

A)   A
B)   B
C)   C
D)   DE) A) and C)
F) B) and D)

Question 10

Refer to the diagram below. Which of the following would shift the aggregate demand curve from AD2 to AD1? 2 to AD1?   A)  a decline in personal income tax rates B)  an increase in the international value of the dollar C)  an increase in government spending D)  an upward revision of profit expectations on investment projects" class="answers-bank-image d-inline" rel="preload" >

Accepted Answer

A)   a decline in personal income tax rates
B)   an increase in the international value of the dollar
C)   an increase in government spending
D)   an upward revision of profit expectations on investment projectsE) B) and D)
F) A) and C)

Question 11

Other things equal, if the international value of the dollar were to depreciate, the:

Accepted Answer

A)   aggregate demand curve would remain fixed in place.
B)   aggregate supply curve would shift to the left.
C)   aggregate supply curve would shift to the right.
D)   aggregate demand curve would shift to the left.E) All of the above
F) A) and D)

Question 12

The shape of the aggregate demand curve is explained by the:

Accepted Answer

A)   interest rate, real balances, and foreign trade effects.
B)   rate of inflation and the natural rate of unemployment.
C)   policies to stabilize prices and reduce unemployment.
D)   ratchet effect.E) All of the above
F) A) and B)

Question 13

1 and the price level decreases from P1, this change will: A)  be caused by a shift in the aggregate supply curve from AS1 to AS2. B)  be caused by a shift in the aggregate supply curve from AS1 to AS3. C)  result in a movement along the aggregate demand curve from e1 to e2. D)  result in a movement along the aggregate demand curve from e3 to e1." class="answers-bank-image d-inline" rel="preload" >
-Refer to the above diagram. When output increases from Q1 and the price level decreases from P1, this change will:

Accepted Answer

A)   be caused by a shift in the aggregate supply curve from AS1 to AS2.
B)   be caused by a shift in the aggregate supply curve from AS1 to AS3.
C)   result in a movement along the aggregate demand curve from e1 to e2.
D)   result in a movement along the aggregate demand curve from e3 to e1.E) All of the above
F) None of the above

Question 14

Which effect best explains the downward slope of the aggregate demand curve?

Accepted Answer

A)   a multiplier effect
B)   an income effect
C)   a substitution effect
D)   an interest rate effectE) A) and B)
F) All of the above

Question 15

A decrease in consumer spending can be expected to shift the:

Accepted Answer

A)   aggregate expenditures curve downward and the aggregate demand curve leftward.
B)   aggregate expenditures curve upward and the aggregate demand curve leftward.
C)   aggregate expenditures curve downward and the aggregate demand curve rightward.
D)   aggregate expenditures curve upward and the aggregate demand curve rightward.E) B) and D)
F) All of the above

Question 16

In the late 1990s and early 2000s:

Accepted Answer

A)   both AD and AS increased
B)   inflation was relatively high.
C)   AD increased but AS decreased.
D)   AD decreased but AS increased.E) None of the above
F) A) and B)

Question 17

2 and that the economy initially is operating at its full-employment level of output Qf. In the long run, demand-pull inflation could best be shown as: A)  a move from b to c on AS2. B)  a move from b to f to d. C)  a change of aggregate supply from AS2 to AS1. D)  a move from b to d." class="answers-bank-image d-inline" rel="preload" >
-Refer to the above diagram. Assume that nominal wages initially are set on the basis of the price level P2 and that the economy initially is operating at its full-employment level of output Qf. In the long run, demand-pull inflation could best be shown as:

Accepted Answer

A)   a move from b to c on AS2.
B)   a move from b to f to d.
C)   a change of aggregate supply from AS2 to AS1.
D)   a move from b to d.E) None of the above
F) B) and C)

Question 18

The short run aggregate supply curve:

Accepted Answer

A)   shows the various amounts of real output which businesses will produce at each price level.
B)   is downward sloping because real purchasing power increases as the price level falls.
C)   contains a vertical range where real output is variable and the price level is constant.
D)   is explained by the interest rate, wealth, and foreign trade effects.E) A) and D)
F) B) and C)

Question 19

A decrease in interest rates caused by a change in the price level would cause a(n) :

Accepted Answer

A)   decrease in aggregate demand.
B)   increase in aggregate demand.
C)   decrease in the quantity of real domestic output demanded.
D)   increase in the quantity of real domestic output demanded.E) None of the above
F) A) and C)

Question 20

If there is a decrease in the price level, then it will increase aggregate expenditures and this change is equivalent to a(n) :

Accepted Answer

A)   increase in aggregate supply.
B)   increase in aggregate demand.
C)   decrease in aggregate demand.
D)   movement along an aggregate demand curve.E) None of the above
F) A) and B)

Exam 10: Aggregate Demand and Aggregate Supply

A decrease in government spending will cause a(n) :

Correct Answer
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The shape of the aggregate demand curve is explained by the:

Correct Answer
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Other things equal, if the international value of the dollar were to depreciate, the:

Correct Answer
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-Refer to the above diagram. Assume that nominal wages initially are set on the basis of the price level P₂ and that the economy initially is operating at its full-employment level of output Q_f. In terms of this diagram, the long-run aggregate supply curve:

Correct Answer
verified

An increase in imports (independently of a change in our price level) will increase both aggregate supply and aggregate demand.

Correct Answer
verified

The interest-rate effect suggests that:

Correct Answer
verified

If the current price level was such that the aggregate quantity demanded exceeded the aggregate quantity supplied, we would expect:

Correct Answer
verified

Suppose that real domestic output in an economy is 20 units, the quantity of inputs is 10, and the price of each input is $4. -Refer to the information above, the level of productivity is:

Correct Answer
verified

Correct Answer
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-Which of the above diagrams best portrays the effects of declines in the prices of imported resources?

Correct Answer
verified

If there is a decrease in the price level, then it will increase aggregate expenditures and this change is equivalent to a(n) :

Correct Answer
verified

The short run aggregate supply curve:

Correct Answer
verified

The passage of new legislation requiring more extensive government regulation of business will most likely:

Correct Answer
verified

-Refer to the above diagram. Assume that nominal wages initially are set on the basis of the price level P₂ and that the economy initially is operating at its full-employment level of output Q_f. In the long run, demand-pull inflation could best be shown as:

Correct Answer
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Which effect best explains the downward slope of the aggregate demand curve?

Correct Answer
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Refer to the diagram below. Which of the following would shift the aggregate demand curve from AD₂ to AD₁?

Correct Answer
verified

A decrease in consumer spending can be expected to shift the:

Correct Answer
verified

In the late 1990s and early 2000s:

Correct Answer
verified

-Refer to the above diagram. When output increases from Q₁ and the price level decreases from P₁, this change will:

Correct Answer
verified

A decrease in interest rates caused by a change in the price level would cause a(n) :

Correct Answer
verified

Exam 10: Aggregate Demand and Aggregate Supply

A decrease in government spending will cause a(n) :

Correct AnswerverifiedShow Answer

The shape of the aggregate demand curve is explained by the:

Correct AnswerverifiedShow Answer

Other things equal, if the international value of the dollar were to depreciate, the:

Correct AnswerverifiedShow Answer

-Refer to the above diagram. Assume that nominal wages initially are set on the basis of the price level P2 and that the economy initially is operating at its full-employment level of output Qf. In terms of this diagram, the long-run aggregate supply curve:

Correct AnswerverifiedShow Answer

An increase in imports (independently of a change in our price level) will increase both aggregate supply and aggregate demand.

Correct AnswerverifiedShow Answer

The interest-rate effect suggests that:

Correct AnswerverifiedShow Answer

If the current price level was such that the aggregate quantity demanded exceeded the aggregate quantity supplied, we would expect:

Correct AnswerverifiedShow Answer

Suppose that real domestic output in an economy is 20 units, the quantity of inputs is 10, and the price of each input is $4. -Refer to the information above, the level of productivity is:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

-Which of the above diagrams best portrays the effects of declines in the prices of imported resources?

Correct AnswerverifiedShow Answer

If there is a decrease in the price level, then it will increase aggregate expenditures and this change is equivalent to a(n) :

Correct AnswerverifiedShow Answer

The short run aggregate supply curve:

Correct AnswerverifiedShow Answer

The passage of new legislation requiring more extensive government regulation of business will most likely:

Correct AnswerverifiedShow Answer

-Refer to the above diagram. Assume that nominal wages initially are set on the basis of the price level P2 and that the economy initially is operating at its full-employment level of output Qf. In the long run, demand-pull inflation could best be shown as:

Correct AnswerverifiedShow Answer

Which effect best explains the downward slope of the aggregate demand curve?

Correct AnswerverifiedShow Answer

Refer to the diagram below. Which of the following would shift the aggregate demand curve from AD2 to AD1?

Correct AnswerverifiedShow Answer

A decrease in consumer spending can be expected to shift the:

Correct AnswerverifiedShow Answer

In the late 1990s and early 2000s:

Correct AnswerverifiedShow Answer

-Refer to the above diagram. When output increases from Q1 and the price level decreases from P1, this change will:

Correct AnswerverifiedShow Answer

A decrease in interest rates caused by a change in the price level would cause a(n) :

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

-Refer to the above diagram. Assume that nominal wages initially are set on the basis of the price level P₂ and that the economy initially is operating at its full-employment level of output Q_f. In terms of this diagram, the long-run aggregate supply curve:

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified

-Refer to the above diagram. Assume that nominal wages initially are set on the basis of the price level P₂ and that the economy initially is operating at its full-employment level of output Q_f. In the long run, demand-pull inflation could best be shown as:

Correct Answer
verified

Correct Answer
verified

Refer to the diagram below. Which of the following would shift the aggregate demand curve from AD₂ to AD₁?

Correct Answer
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Correct Answer
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Correct Answer
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-Refer to the above diagram. When output increases from Q₁ and the price level decreases from P₁, this change will:

Correct Answer
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Correct Answer
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