Question 1

The slope of the aggregate demand curve illustrates that as the price level rises,

Accepted Answer

A) real GDP demanded decreases. 
B) real GDP demanded increases. 
C) the aggregate demand curve shifts rightward. 
D) the aggregate demand curve shifts leftward. 
A) real GDP demanded decreases. 
B) real GDP demanded increases. 
C) the aggregate demand curve shifts rightward. 
D) the aggregate demand curve shifts leftward. A

Question 2

When the price level in the United States rises, then net exports should

Accepted Answer

A) rise and equilibrium real GDP should increase. 
B) fall and equilibrium real GDP should increase. 
C) fall and equilibrium real GDP should decrease. 
D) rise and equilibrium real GDP should decrease. 
A) rise and equilibrium real GDP should increase. 
B) fall and equilibrium real GDP should increase. 
C) fall and equilibrium real GDP should decrease. 
D) rise and equilibrium real GDP should decrease. C

Question 3

Why do booms and recessions tend to be transmitted across national borders?

Accepted Answer

The GDPs of the major economies are linked by trade.A boom in one country tends to raise its imports and hence push up exports and GDP in other countries.Similarly, a recession in one country tends to pull down GDP in other countries.Suppose a boom abroad raises GDPs in foreign countries.With rising incomes, foreigners will buy more American goods, which means that U.S.exports will increase.But an increase in our exports will, via the multiplier, raise GDP in the United States.By this mechanism, rapid economic growth abroad contributes to rapid economic growth here.The same mechanism also operates in reverse.

Question 4

In a market economy, the decisions about what to produce and how much of each good or service to produce are made by

Accepted Answer

A) government officials. 
B) economic planners. 
C) central bankers. 
D) consumers and producers. 
A) government officials. 
B) economic planners. 
C) central bankers. 
D) consumers and producers.

Question 5

Keynes focused on problems of

Accepted Answer

A) hyperinflation. 
B) budget deficits. 
C) trade deficits. 
D) unemployment and inflation. 
A) hyperinflation. 
B) budget deficits. 
C) trade deficits. 
D) unemployment and inflation.

Question 6

Coordination failures occur when

Accepted Answer

A) one party withholds valuable information in a transaction that leads to overproduction. 
B) party A would like to change his behavior if party B would change hers, and vice versa, and yet the two changes do not take place because the decisions of A and B are made independently. 
C) consumers save more of their income than the government would like. 
D) the average price of a good persists, even though the good should be priced higher than the average price. 
A) one party withholds valuable information in a transaction that leads to overproduction. 
B) party A would like to change his behavior if party B would change hers, and vice versa, and yet the two changes do not take place because the decisions of A and B are made independently. 
C) consumers save more of their income than the government would like. 
D) the average price of a good persists, even though the good should be priced higher than the average price.

Question 7

Assume that the MPC is 0.75, and investment spending rises by $25 billion.How much will real GDP change?

Accepted Answer

A) $25 billion 
B) $75 billion 
C) $100 billion 
D) $175 billion 
A) $25 billion 
B) $75 billion 
C) $100 billion 
D) $175 billion

Question 8

In the circular flow diagram, saving

Accepted Answer

A) is a leakage and investment is an injection. 
B) and investment are both injections. 
C) is an injection and investment is a leakage. 
D) and investment are both leakages. 
A) is a leakage and investment is an injection. 
B) and investment are both injections. 
C) is an injection and investment is a leakage. 
D) and investment are both leakages.

Question 9

Figure 9-3
​  
-In Figure 9-3, at $5,000 billion GDP, inventories will be

Accepted Answer

A) falling, signaling businesses to increase production. 
B) accumulating, signaling businesses to increase production. 
C) accumulating, signaling businesses to cut production. 
D) falling, signaling businesses to cut production. 
A) falling, signaling businesses to increase production. 
B) accumulating, signaling businesses to increase production. 
C) accumulating, signaling businesses to cut production. 
D) falling, signaling businesses to cut production.

Question 10

Injections to the circular flow model include saving, taxes, exports, and investment.

Accepted Answer

A) True 
 B)False

Question 11

Table 9-1   ​
-In Table 9-1, inventories are being depleted as long as output is below

Accepted Answer

A) 2,000 
B) 2,500 
C) 3,000 
D) 3,500 
A) 2,000 
B) 2,500 
C) 3,000 
D) 3,500

Question 12

In a capitalist market economy, the decision to save is made by the same people who make the major investment decisions.

Accepted Answer

A) True 
 B)False

Question 13

In a simple macroeconomic model, only one component of expenditures is allowed to change:

Accepted Answer

A) investment. 
B) consumption. 
C) net exports. 
D) government spending. 
E) transfer payments. 
A) investment. 
B) consumption. 
C) net exports. 
D) government spending. 
E) transfer payments.

Question 14

The slope of the aggregate demand curve illustrates that real GDP demanded will increase when

Accepted Answer

A) the price level rises. 
B) the price level falls. 
C) real income rises. 
D) real income falls. 
A) the price level rises. 
B) the price level falls. 
C) real income rises. 
D) real income falls.

Question 15

An expenditure schedule model with no government sector shows the relationship between

Accepted Answer

A) C and national product. 
B) C and disposable income. 
C) C + I and national income. 
D) GDP and disposable income. 
A) C and national product. 
B) C and disposable income. 
C) C + I and national income. 
D) GDP and disposable income.

Question 16

Figure 9-4
​  
-In Figure 9-4, which expenditure level will cause an inflationary gap?

Accepted Answer

A) 1 
B) 2 
C) 3 
D) There will be no inflationary gap. 
A) 1 
B) 2 
C) 3 
D) There will be no inflationary gap.

Question 17

One of the primary functions of markets could be labeled

Accepted Answer

A) stimulation. 
B) coordination. 
C) planification. 
D) decentralization. 
A) stimulation. 
B) coordination. 
C) planification. 
D) decentralization.

Question 18

An increase in the U.S.price level (foreign prices held constant) will cause a leftward shift in the aggregate demand curve.

Accepted Answer

A) True 
 B)False

Question 19

In the income-expenditure model, at equilibrium GDP

Accepted Answer

A) either unemployment or inflation may occur. 
B) inflation can occur but unemployment cannot. 
C) unemployment can occur but inflation cannot. 
D) both unemployment and inflation are impossible. 
A) either unemployment or inflation may occur. 
B) inflation can occur but unemployment cannot. 
C) unemployment can occur but inflation cannot. 
D) both unemployment and inflation are impossible.

Question 20

When inventories accumulate, unemployment rises.

Accepted Answer

A) True 
 B)False

Exam 25: Demand-Side Equilibrium: Unemployment or Inflation

The slope of the aggregate demand curve illustrates that as the price level rises,

When the price level in the United States rises, then net exports should

Why do booms and recessions tend to be transmitted across national borders?

In a market economy, the decisions about what to produce and how much of each good or service to produce are made by

Keynes focused on problems of

Coordination failures occur when

Assume that the MPC is 0.75, and investment spending rises by $25 billion.How much will real GDP change?

In the circular flow diagram, saving

Figure 9-3 ​ -In Figure 9-3, at $5,000 billion GDP, inventories will be

Injections to the circular flow model include saving, taxes, exports, and investment.

Table 9-1 ​ -In Table 9-1, inventories are being depleted as long as output is below

In a capitalist market economy, the decision to save is made by the same people who make the major investment decisions.

In a simple macroeconomic model, only one component of expenditures is allowed to change:

The slope of the aggregate demand curve illustrates that real GDP demanded will increase when

An expenditure schedule model with no government sector shows the relationship between

Figure 9-4 ​ -In Figure 9-4, which expenditure level will cause an inflationary gap?

One of the primary functions of markets could be labeled

An increase in the U.S.price level (foreign prices held constant) will cause a leftward shift in the aggregate demand curve.

In the income-expenditure model, at equilibrium GDP

When inventories accumulate, unemployment rises.

What Is Economics

The Economony: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: an Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: the Importance of Marginal Analysis

The Financial Markets and the Economy: the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

The Case for Free Markets: the Price System

Monopoly

Between Competition and Monopoly

Limiting Market Power: Antitrust and Regulation

The Shortcomings of Free Markets

The Economics of the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: the Human Inputs

Poverty, Inequality, and Discrimination

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Bringing in the Supply Side: Unemployment and Inflation

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

The Financial Crisis and the Great Recession

The Debate Over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade-Off Between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder

Exchange Rates and the Macroeconomy

Contemporary Issues in the Useconomy

Filters

Figure 9-3 -In Figure 9-3, at $5,000 billion GDP, inventories will be

Table 9-1 -In Table 9-1, inventories are being depleted as long as output is below

Figure 9-4 -In Figure 9-4, which expenditure level will cause an inflationary gap?