Question 1

Which of the following will not tend to happen if the U.S.dollar depreciates against the euro?

Accepted Answer

A) Europeans will find U.S.goods become less expensive in euro terms. 
B) Americans will find European goods become more expensive in dollar terms. 
C) Many Americans will switch and buy domestic goods instead of imports from Europe. 
D) Many Europeans will switch and buy their own products instead of imports from the U.S. 
A) Europeans will find U.S.goods become less expensive in euro terms. 
B) Americans will find European goods become more expensive in dollar terms. 
C) Many Americans will switch and buy domestic goods instead of imports from Europe. 
D) Many Europeans will switch and buy their own products instead of imports from the U.S.

Question 2

The real-balances effect indicates that

Accepted Answer

A) an increase in the price level will increase the demand for money, increase interest rates, and reduce consumption and investment spending. 
B) a lower price level will decrease the real value of many financial assets and therefore reduce spending. 
C) a higher price level will increase the real value of many financial assets and therefore increase spending. 
D) a higher price level will decrease the real value of many financial assets and therefore reduce spending. 
A) an increase in the price level will increase the demand for money, increase interest rates, and reduce consumption and investment spending. 
B) a lower price level will decrease the real value of many financial assets and therefore reduce spending. 
C) a higher price level will increase the real value of many financial assets and therefore increase spending. 
D) a higher price level will decrease the real value of many financial assets and therefore reduce spending.

Question 3

An increase in personal income taxes would shift AD to the

Accepted Answer

A) right because C will increase. 
B) left because C will decrease. 
C) right because G will increase. 
D) left because G will decrease. 
A) right because C will increase. 
B) left because C will decrease. 
C) right because G will increase. 
D) left because G will decrease.

Question 4

If Congress passed new laws significantly increasing the regulation of business, this action would tend to

Accepted Answer

A) increase per-unit production costs and shift the aggregate supply curve to the left. 
B) increase per-unit production costs and shift the aggregate supply curve to the right. 
C) increase per-unit production costs and shift the aggregate demand curve to the left. 
D) decrease per-unit production costs and shift the aggregate supply curve to the left 
A) increase per-unit production costs and shift the aggregate supply curve to the left. 
B) increase per-unit production costs and shift the aggregate supply curve to the right. 
C) increase per-unit production costs and shift the aggregate demand curve to the left. 
D) decrease per-unit production costs and shift the aggregate supply curve to the left

Question 5

If aggregate demand increases and aggregate supply decreases, the price level

Accepted Answer

A) will decrease, but real output may increase, decrease, or remain unchanged. 
B) will increase, but real output may increase, decrease, or remain unchanged. 
C) and real output will both increase. 
D) and real output will both decrease. 
A) will decrease, but real output may increase, decrease, or remain unchanged. 
B) will increase, but real output may increase, decrease, or remain unchanged. 
C) and real output will both increase. 
D) and real output will both decrease.

Question 6

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

Accepted Answer

A) Productivity has increased. 
B) Input prices have increased. 
C) There has been an increase in government spending. 
D) Government regulations have been reduced. 
A) Productivity has increased. 
B) Input prices have increased. 
C) There has been an increase in government spending. 
D) Government regulations have been reduced.

Question 7

Graphically, cost-push inflation is shown as a

Accepted Answer

A) leftward shift of the AD curve. 
B) rightward shift of the AS curve. 
C) leftward shift of the AS curve. 
D) rightward shift of the AD curve. 
A) leftward shift of the AD curve. 
B) rightward shift of the AS curve. 
C) leftward shift of the AS curve. 
D) rightward shift of the AD curve.

Question 8

The so-called ratchet effect refers to the characteristic in the economy where product prices, wages, and per-unit production cost are flexible when

Accepted Answer

A) AD decreases but not when AD increases. 
B) AD increases but not when AD decreases. 
C) AS increases but not when AS decreases. 
D) AD shifts but not when AS shifts. 
A) AD decreases but not when AD increases. 
B) AD increases but not when AD decreases. 
C) AS increases but not when AS decreases. 
D) AD shifts but not when AS shifts.

Question 9

If personal taxes were decreased and resource productivity increased simultaneously, the equilibrium

Accepted Answer

A) output would necessarily rise. 
B) output would necessarily fall. 
C) price level would necessarily fall. 
D) price level would necessarily rise. 
A) output would necessarily rise. 
B) output would necessarily fall. 
C) price level would necessarily fall. 
D) price level would necessarily rise.

Question 10

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.All else being equal, if the price of each input increased from $4 to $6, productivity would

Accepted Answer

A) fall from 2 to 3. 
B) fall from 0.50 to 0.33. 
C) rise from 1 to 2. 
D) remain unchanged. 
A) fall from 2 to 3. 
B) fall from 0.50 to 0.33. 
C) rise from 1 to 2. 
D) remain unchanged.

Question 11

A decrease in business taxes will tend to

Accepted Answer

A) increase aggregate demand but not change aggregate supply. 
B) increase aggregate supply but not change aggregate demand. 
C) increase aggregate demand and increase aggregate supply. 
D) decrease aggregate supply and decrease aggregate demand. 
A) increase aggregate demand but not change aggregate supply. 
B) increase aggregate supply but not change aggregate demand. 
C) increase aggregate demand and increase aggregate supply. 
D) decrease aggregate supply and decrease aggregate demand.

Question 12

An increase in aggregate expenditures resulting from some factor other than a change in the price level is equivalent to

Accepted Answer

A) a rightward shift of the aggregate demand curve in the AD-AS model. 
B) a leftward shift of the aggregate demand curve in the AD-AS model. 
C) a movement downward along a fixed aggregate demand curve in the AD-AS model. 
D) a decrease in aggregate supply in the AD-AS model. 
A) a rightward shift of the aggregate demand curve in the AD-AS model. 
B) a leftward shift of the aggregate demand curve in the AD-AS model. 
C) a movement downward along a fixed aggregate demand curve in the AD-AS model. 
D) a decrease in aggregate supply in the AD-AS model.

Question 13

Efficiency wages are

Accepted Answer

A) above-market wages that bring forth so much added work effort that per-unit production costs are lower than at market wages. 
B) wage payments necessary to compensate workers for unpleasant or risky work conditions. 
C) usually less than market wages. 
D) relevant to macroeconomics because they explain rightward shifts in aggregate demand. 
A) above-market wages that bring forth so much added work effort that per-unit production costs are lower than at market wages. 
B) wage payments necessary to compensate workers for unpleasant or risky work conditions. 
C) usually less than market wages. 
D) relevant to macroeconomics because they explain rightward shifts in aggregate demand.

Question 14

An increase in business excise taxes will shift the aggregate supply curve leftward.Topic: Changes in Aggregate Supply

Accepted Answer

A) True 
 B)False

Question 15

The long-run aggregate supply curve is upward sloping.

Accepted Answer

A) True 
 B)False

Question 16

A fall in the prices of inputs will shift the aggregate

Accepted Answer

A) demand curve leftward. 
B) demand curve rightward. 
C) supply curve rightward. 
D) supply curve leftwarD. 
A) demand curve leftward. 
B) demand curve rightward. 
C) supply curve rightward. 
D) supply curve leftwarD.

Question 17

The aggregate demand curve shows the

Accepted Answer

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.Topic: Aggregate Demand 
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.Topic: Aggregate Demand

Question 18

Collective bargaining agreements that prohibit wage cuts for the duration of the contract contribute to

Accepted Answer

A) a wealth effect. 
B) a multiplier effect. 
C) an increase in aggregate supply. 
D) a price level that is inflexible downward.Difficulty: 02 Medium 
A) a wealth effect. 
B) a multiplier effect. 
C) an increase in aggregate supply. 
D) a price level that is inflexible downward.Difficulty: 02 Medium

Question 19

When aggregate demand declines, the price level may remain constant, at least for a time, because

Accepted Answer

A) firms individually may fear that their price cut may set off a price war. 
B) menu costs rise. 
C) price cuts tend to increase efficiency wages. 
D) product markets are highly competitive. 
A) firms individually may fear that their price cut may set off a price war. 
B) menu costs rise. 
C) price cuts tend to increase efficiency wages. 
D) product markets are highly competitive.

Question 20

The aggregate supply curve

Accepted Answer

A) is explained by the interest rate, real-balances, and foreign purchases effects. 
B) gets steeper as the economy moves from the top of the curve to the bottom of the curve. 
C) shows the various amounts of real output that businesses will produce at each price level. 
D) is downsloping because real purchasing power increases as the price level falls. 
A) is explained by the interest rate, real-balances, and foreign purchases effects. 
B) gets steeper as the economy moves from the top of the curve to the bottom of the curve. 
C) shows the various amounts of real output that businesses will produce at each price level. 
D) is downsloping because real purchasing power increases as the price level falls.

Exam 32: Aggregate Demand and Aggregate Supply

Which of the following will not tend to happen if the U.S.dollar depreciates against the euro?

The real-balances effect indicates that

An increase in personal income taxes would shift AD to the

If Congress passed new laws significantly increasing the regulation of business, this action would tend to

If aggregate demand increases and aggregate supply decreases, the price level

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

Graphically, cost-push inflation is shown as a

The so-called ratchet effect refers to the characteristic in the economy where product prices, wages, and per-unit production cost are flexible when

If personal taxes were decreased and resource productivity increased simultaneously, the equilibrium

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.All else being equal, if the price of each input increased from $4 to $6, productivity would

A decrease in business taxes will tend to

An increase in aggregate expenditures resulting from some factor other than a change in the price level is equivalent to

Efficiency wages are

An increase in business excise taxes will shift the aggregate supply curve leftward.Topic: Changes in Aggregate Supply

The long-run aggregate supply curve is upward sloping.

A fall in the prices of inputs will shift the aggregate

The aggregate demand curve shows the

Collective bargaining agreements that prohibit wage cuts for the duration of the contract contribute to

When aggregate demand declines, the price level may remain constant, at least for a time, because

The aggregate supply curve

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Governments Role and Government Failure

Elasticity

Utility Maximization

Behavioral Economics

Businesses and the Costs of Production

Pure Competition in the Short Run

Pure Competition in the Long Run

Pure Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Technology, Rd, and Efficiency

The Demand for Resources

Wage Determination

Rent, Interest, and Profit

Natural Resource and Energy Economics

Public Finance: Expenditures and Taxes

Antitrust Policy and Regulation

Agriculture: Economics and Policy

Income Inequality, Poverty, and Discrimination

Health Care

Immigration

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

The Aggregate Expenditures Model

Fiscal Policy, Deficits, and Debt

Money, Banking, and Financial Institutions

Money Creation

Interest Rates and Monetary Policy

Financial Economics

Extending the Analysis of Aggregate Supply

Current Issues in Macro Theory and Policy

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

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