Question 1

An increase in expected future income will

Accepted Answer

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

Question 2

Which of the following would not shift the aggregate supply curve?

Accepted Answer

A)  an increase in labor productivity 
B)  a decline in the price of imported oil 
C)  a decline in business taxes 
D)  an increase in the price level 
A)  an increase in labor productivity 
B)  a decline in the price of imported oil 
C)  a decline in business taxes 
D)  an increase in the price level

Question 3

The aggregate expenditures schedule relates total spending with the price level, while the
aggregate demand schedule relates total demand for output with income.

Accepted Answer

A) True 
 B)False

Question 4

Accepted Answer

A)  increase in productivity. 
B)  increase in the prices of imported resources. 
C)  decrease in the prices of domestic resources. 
D)  decrease in business taxes. 
A)  increase in productivity. 
B)  increase in the prices of imported resources. 
C)  decrease in the prices of domestic resources. 
D)  decrease in business taxes.

Question 5

Which of the following effects best explains the downward slope of the aggregate demand curve?

Accepted Answer

A)  a multiplier effect 
B)  an expectations effect 
C)  a substitution effect 
D)  an interest-rate effect 
A)  a multiplier effect 
B)  an expectations effect 
C)  a substitution effect 
D)  an interest-rate effect

Question 6

Which of the following is a true statement?

Accepted Answer

A)  Firms and resource suppliers generally ﬁnd it easier to reduce prices than to raise them. 
B)  As the price level increases, interest rates will rise and therefore consumption and investment spending will also rise. 
C)  An initial increase in aggregate demand may cause a further increase in aggregate demand because higher prices mean higher incomes. 
D)  A decline in aggregate demand will primarily affect real output and employment if prices are inﬂexible downward. 
A)  Firms and resource suppliers generally ﬁnd it easier to reduce prices than to raise them. 
B)  As the price level increases, interest rates will rise and therefore consumption and investment spending will also rise. 
C)  An initial increase in aggregate demand may cause a further increase in aggregate demand because higher prices mean higher incomes. 
D)  A decline in aggregate demand will primarily affect real output and employment if prices are inﬂexible downward.

Question 7

The real-balance effect explains a shift in aggregate demand, while the wealth effect explains a
movement along the AD curve.

Accepted Answer

A) True 
 B)False

Question 8

Accepted Answer

A)  F and C, respectively. 
B)  G and B, respectively. 
C)  F and A, respectively. 
D)  E and B, respectively. 
A)  F and C, respectively. 
B)  G and B, respectively. 
C)  F and A, respectively. 
D)  E and B, respectively.

Question 9

State the two basic factors that affect net export spending. How does a change in net export
spending affect aggregate demand?

Accepted Answer

The two basic factors that affect net ex

Question 10

Other things equal, an improvement in productivity will

Accepted Answer

A)  increase the equilibrium price level. 
B)  shift the aggregate supply curve to the left. 
C)  shift the aggregate supply curve to the right. 
D)  shift the aggregate demand curve to the left. 
A)  increase the equilibrium price level. 
B)  shift the aggregate supply curve to the left. 
C)  shift the aggregate supply curve to the right. 
D)  shift the aggregate demand curve to the left.

Question 11

Accepted Answer

A)  increase in government regulation. 
B)  increase in aggregate demand. 
C)  increase in productivity. 
D)  decline in nominal wages. 
A)  increase in government regulation. 
B)  increase in aggregate demand. 
C)  increase in productivity. 
D)  decline in nominal wages.

Question 12

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

Accepted Answer

A)  shown by the Price Level and C columns of the table. 
B)  shown by the Price Level and X columns of the table. 
C)  shown by the Price Level and G columns of the table. 
D)  not shown by the data in the table. 
A)  shown by the Price Level and C columns of the table. 
B)  shown by the Price Level and X columns of the table. 
C)  shown by the Price Level and G columns of the table. 
D)  not shown by the data in the table.

Question 13

Other things equal, a decrease in the real interest rate will

Accepted Answer

A)  expand investment and shift the AD curve to the left. 
B)  expand investment and shift the AD curve to the right. 
C)  reduce investment and shift the AD curve to the left. 
D)  reduce investment and shift the AD curve to the right. 
A)  expand investment and shift the AD curve to the left. 
B)  expand investment and shift the AD curve to the right. 
C)  reduce investment and shift the AD curve to the left. 
D)  reduce investment and shift the AD curve to the right.

Question 14

Other things equal, an increase in productivity will shift the short-run aggregate supply curve
rightward.

Accepted Answer

A) True 
 B)False

Question 15

The interest-rate effect is one of the determinants of aggregate demand.

Accepted Answer

A) True 
 B)False

Question 16

If the price level decreases, then the aggregate expenditures schedule will shift. This translates into a

Accepted Answer

A)  movement down along the aggregate demand curve. 
B)  shift in aggregate demand to the right. 
C)  shift in aggregate demand to the left. 
D)  movement up along the aggregate demand curve. 
A)  movement down along the aggregate demand curve. 
B)  shift in aggregate demand to the right. 
C)  shift in aggregate demand to the left. 
D)  movement up along the aggregate demand curve.

Question 17

$$\begin{array} { | c | c | c | c | c | c | c | } 
\hline \text { Price Level } & C & I _ { g } & G & X & M & \text { Real GDP } \
\hline 128 & \$ 18 & \$ 2 & \$ 3 & \$ 1 & \$ 5 & \
\hline 125 & 20 & 4 & 3 & 2 & 4 & \
\hline 122 & 22 & 6 & 3 & 3 & 3 & \
\hline 119 & 24 & 8 & 3 & 4 & 2 & \
\hline 116 & 26 & 10 & 3 & 5 & 1 & \
\hline
\end{array}$$ In the accompanying table for a particular country, C is consumption expenditures, $$I _ { g }$$ is gross
Investment expenditures, G is government expenditures, X is exports, and M is imports. All ?gures
Are in billions of dollars. If equilibrium real GDP is $31 billion, the equilibrium price level will be

Accepted Answer

A)  128. 
B)  125. 
C)  122. 
D)  119. 
A)  128. 
B)  125. 
C)  122. 
D)  119.

Question 18

Suppose that an economy produces 2,400 units of output, employing the 60 units of input, and the price of the input is $30 per unit. All else equal, if the price of each unit of input decreased from $30
To $20, then productivity would

Accepted Answer

A)  increase from $40 to $90 and aggregate supply would decrease. 
B)  increase from $50 to $60 and aggregate supply would decrease. 
C)  increase from $60 to $70 and aggregate supply would increase. 
D)  remain unchanged but aggregate supply would increase. 
A)  increase from $40 to $90 and aggregate supply would decrease. 
B)  increase from $50 to $60 and aggregate supply would decrease. 
C)  increase from $60 to $70 and aggregate supply would increase. 
D)  remain unchanged but aggregate supply would increase.

Question 19

(Last Word) In response to the Great Recession, the federal government engaged in signiﬁcant deﬁcit-funded spending. What was the result of that spending over the ﬁrst three years?

Accepted Answer

A)  Neither economic growth nor unemployment responded as well as many economists had predicted. 
B)  Economic growth responded in accordance with predictions, but unemployment remained much higher than anticipated. 
C)  Economic growth remained sluggish, but the unemployment rate fell to predicted levels. 
D)  Both economic growth and the unemployment rate responded well, reaching the ﬁscal policy targets set by the government. 
A)  Neither economic growth nor unemployment responded as well as many economists had predicted. 
B)  Economic growth responded in accordance with predictions, but unemployment remained much higher than anticipated. 
C)  Economic growth remained sluggish, but the unemployment rate fell to predicted levels. 
D)  Both economic growth and the unemployment rate responded well, reaching the ﬁscal policy targets set by the government.

Question 20

The economy's long-run aggregate supply curve

Accepted Answer

A)  slopes upward and to the right. 
B)  is vertical. 
C)  is horizontal. 
D)  slopes downward and to the right. 
A)  slopes upward and to the right. 
B)  is vertical. 
C)  is horizontal. 
D)  slopes downward and to the right.

An increase in expected future income will

Which of the following would not shift the aggregate supply curve?

The aggregate expenditures schedule relates total spending with the price level, while the aggregate demand schedule relates total demand for output with income.

Which of the following effects best explains the downward slope of the aggregate demand curve?

Which of the following is a true statement?

The real-balance effect explains a shift in aggregate demand, while the wealth effect explains a movement along the AD curve.

State the two basic factors that affect net export spending. How does a change in net export spending affect aggregate demand?

Other things equal, an improvement in productivity will

Other things equal, a decrease in the real interest rate will

Other things equal, an increase in productivity will shift the short-run aggregate supply curve rightward.

The interest-rate effect is one of the determinants of aggregate demand.

If the price level decreases, then the aggregate expenditures schedule will shift. This translates into a

Suppose that an economy produces 2,400 units of output, employing the 60 units of input, and the price of the input is $30 per unit. All else equal, if the price of each unit of input decreased from $30 To $20, then productivity would

(Last Word) In response to the Great Recession, the federal government engaged in signiﬁcant deﬁcit-funded spending. What was the result of that spending over the ﬁrst three years?

The economy's long-run aggregate supply curve

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures Caused by Externalities Asymmetric Information

Public Goods, Public Choice, and Government Failure

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

Filters

Exam 12: Aggregate Demand and Aggregate Supply

An increase in expected future income will

Which of the following would not shift the aggregate supply curve?

The aggregate expenditures schedule relates total spending with the price level, while the aggregate demand schedule relates total demand for output with income.

Which of the following effects best explains the downward slope of the aggregate demand curve?

Which of the following is a true statement?

The real-balance effect explains a shift in aggregate demand, while the wealth effect explains a movement along the AD curve.

State the two basic factors that affect net export spending. How does a change in net export spending affect aggregate demand?

Other things equal, an improvement in productivity will

Other things equal, a decrease in the real interest rate will

Other things equal, an increase in productivity will shift the short-run aggregate supply curve rightward.

The interest-rate effect is one of the determinants of aggregate demand.

If the price level decreases, then the aggregate expenditures schedule will shift. This translates into a

Suppose that an economy produces 2,400 units of output, employing the 60 units of input, and the price of the input is $30 per unit. All else equal, if the price of each unit of input decreased from $30 To $20, then productivity would

(Last Word) In response to the Great Recession, the federal government engaged in signiﬁcant deﬁcit-funded spending. What was the result of that spending over the ﬁrst three years?

The economy's long-run aggregate supply curve

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures Caused by Externalities Asymmetric Information

Public Goods, Public Choice, and Government Failure

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

Filters