Question 1

When the price level falls, the total quantities of goods and services demanded:

Accepted Answer

A) decreases. 
B) stays the same. 
C) increases. 
D) increases and then decreases. 
E) decreases and then increases. 
A) decreases. 
B) stays the same. 
C) increases. 
D) increases and then decreases. 
E) decreases and then increases.

Question 2

In the aggregate demand and supply model, the:

Accepted Answer

A) vertical axis measures the average price level. 
B) horizontal axis measures real GDP. 
C) aggregate supply curve is vertical at full-employment real GDP. 
D) All of these. 
A) vertical axis measures the average price level. 
B) horizontal axis measures real GDP. 
C) aggregate supply curve is vertical at full-employment real GDP. 
D) All of these.

Question 3

How will an increase in the world price of crude oil influence the economy of an oil-importing country such as the United States?

Accepted Answer

A) Aggregate supply will decrease, leading to a decrease in real GDP. 
B) Aggregate supply will increase, leading to an increase in real GDP. 
C) Aggregate supply will increase, leading to an increase in prices and smaller GDP. 
D) A change in the price of an imported good will not affect the domestic economy of an oil-importing country. 
A) Aggregate supply will decrease, leading to a decrease in real GDP. 
B) Aggregate supply will increase, leading to an increase in real GDP. 
C) Aggregate supply will increase, leading to an increase in prices and smaller GDP. 
D) A change in the price of an imported good will not affect the domestic economy of an oil-importing country.

Question 4

The aggregate demand curve slopes downward because of the real balances, interest-rate, and net exports effects.

Accepted Answer

A) True 
 B)False

Question 5

Demand-pull inflation is caused by:

Accepted Answer

A) an increase in aggregate demand. 
B) a decrease in aggregate demand. 
C) an increase in aggregate supply. 
D) a decrease in aggregate supply. 
A) an increase in aggregate demand. 
B) a decrease in aggregate demand. 
C) an increase in aggregate supply. 
D) a decrease in aggregate supply.

Question 6

The aggregate demand curve:

Accepted Answer

A) would be little affected by a technological advancement. 
B) shifts to the right when spending decreases. 
C) shifts to the left when there is a decrease in taxes. 
D) cannot move independently of the aggregate supply curve. 
E) shifts to the right when there is an expectation that future income will fall. 
A) would be little affected by a technological advancement. 
B) shifts to the right when spending decreases. 
C) shifts to the left when there is a decrease in taxes. 
D) cannot move independently of the aggregate supply curve. 
E) shifts to the right when there is an expectation that future income will fall.

Question 7

Exhibit 10-6 Aggregate supply curve   In Exhibit 10-6, when the economy moves from a GDP of $1,000 billion to a GDP of $1,100 billion,

Accepted Answer

A) higher wages will lower the cost of producing goods. 
B) real GDP and employment both increase, but only under conditions of constant prices. 
C) real GDP increases and employment decreases, but only under conditions of price level increases. 
D) real GDP and employment both increase, but only under conditions of price level increases. 
E) the economy has reached full employment. 
A) higher wages will lower the cost of producing goods. 
B) real GDP and employment both increase, but only under conditions of constant prices. 
C) real GDP increases and employment decreases, but only under conditions of price level increases. 
D) real GDP and employment both increase, but only under conditions of price level increases. 
E) the economy has reached full employment.

Question 8

When the aggregate demand curve shifts to the right, intersecting the aggregate supply curve on its upward-sloping or vertical segment,

Accepted Answer

A) demand-pull inflation occurs. 
B) cost-push inflation occurs. 
C) stagflation occurs. 
D) deflation occurs. 
E) the shift pulls the price level down. 
A) demand-pull inflation occurs. 
B) cost-push inflation occurs. 
C) stagflation occurs. 
D) deflation occurs. 
E) the shift pulls the price level down.

Question 9

The classical economists believe that prices and wages quickly adjust to keep the economy operating at full employment.

Accepted Answer

A) True 
 B)False

Question 10

In the upward-sloping segment of the aggregate supply curve,

Accepted Answer

A) when GDP increases, the price level rises. 
B) when GDP increases, the price level does not change. 
C) when GDP decreases, the price level rises. 
D) when GDP increases, the price level falls. 
E) there is no relationship between changes in GDP and changes in the price level. 
A) when GDP increases, the price level rises. 
B) when GDP increases, the price level does not change. 
C) when GDP decreases, the price level rises. 
D) when GDP increases, the price level falls. 
E) there is no relationship between changes in GDP and changes in the price level.

Question 11

An increase in aggregate supply will cause the price level to:

Accepted Answer

A) rise and GDP to rise 
B) rise and GDP to fall. 
C) rise and the unemployment rate to fall. 
D) fall and GDP to rise. 
E) fall and the unemployment rate to rise. 
A) rise and GDP to rise 
B) rise and GDP to fall. 
C) rise and the unemployment rate to fall. 
D) fall and GDP to rise. 
E) fall and the unemployment rate to rise.

Question 12

As prices rise, people will buy fewer goods and services because:

Accepted Answer

A) the interest rate has declined. 
B) aggregate demand has increased. 
C) the purchasing power of the fixed quantity of money has declined. 
D) the income of households has increased. 
A) the interest rate has declined. 
B) aggregate demand has increased. 
C) the purchasing power of the fixed quantity of money has declined. 
D) the income of households has increased.

Question 13

In the intermediate range of the aggregate supply curve, higher aggregate demand will increase:

Accepted Answer

A) both the price level and real GDP. 
B) real GDP without raising the price level. 
C) the price level without affecting real GDP. 
D) the price level but reduce real GDP. 
A) both the price level and real GDP. 
B) real GDP without raising the price level. 
C) the price level without affecting real GDP. 
D) the price level but reduce real GDP.

Question 14

In the horizontal segment of the aggregate supply curve, when GDP:

Accepted Answer

A) increases, the price level rises. 
B) decreases, the price level falls. 
C) increases, the price level does not change. 
D) increases, the price level falls. 
E) increases, the price level first rises and then falls. 
A) increases, the price level rises. 
B) decreases, the price level falls. 
C) increases, the price level does not change. 
D) increases, the price level falls. 
E) increases, the price level first rises and then falls.

Question 15

Stagflation means a simultaneous decrease in the unemployment and inflation rates.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following will most likely increase aggregate demand?

Accepted Answer

A) A decrease in stock market prices. 
B) An increase in business investment spending. 
C) A decrease in the expected inflation rate. 
D) A decrease in real GDP. 
A) A decrease in stock market prices. 
B) An increase in business investment spending. 
C) A decrease in the expected inflation rate. 
D) A decrease in real GDP.

Question 17

Advances in technology will shift the aggregate:

Accepted Answer

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

Question 18

Aggregate supply increases when:

Accepted Answer

A) wage rates decrease while the economy's price level remains unchanged. 
B) resource availability is reduced. 
C) there are fewer workers. 
D) there is less capital and the price level remains unchanged. 
E) there are increased inflationary expectations of labor. 
A) wage rates decrease while the economy's price level remains unchanged. 
B) resource availability is reduced. 
C) there are fewer workers. 
D) there is less capital and the price level remains unchanged. 
E) there are increased inflationary expectations of labor.

Question 19

Suppose the economy is on the intermediate range of the aggregate supply curve. Which of the following would reduce both real GDP and the price level?

Accepted Answer

A) A decrease in aggregate supply. 
B) An increase in aggregate supply. 
C) A decrease in aggregate demand. 
D) An increase in aggregate demand. 
A) A decrease in aggregate supply. 
B) An increase in aggregate supply. 
C) A decrease in aggregate demand. 
D) An increase in aggregate demand.

Question 20

Which of the following is a range on the eclectic or general view of the aggregate supply curve?

Accepted Answer

A) Keynesian range. 
B) Intermediate range. 
C) Classical range. 
D) All of these. 
A) Keynesian range. 
B) Intermediate range. 
C) Classical range. 
D) All of these.

Exam 10: Aggregate Demand and Supply

When the price level falls, the total quantities of goods and services demanded:

In the aggregate demand and supply model, the:

How will an increase in the world price of crude oil influence the economy of an oil-importing country such as the United States?

The aggregate demand curve slopes downward because of the real balances, interest-rate, and net exports effects.

Demand-pull inflation is caused by:

The aggregate demand curve:

Exhibit 10-6 Aggregate supply curve In Exhibit 10-6, when the economy moves from a GDP of $1,000 billion to a GDP of $1,100 billion,

When the aggregate demand curve shifts to the right, intersecting the aggregate supply curve on its upward-sloping or vertical segment,

The classical economists believe that prices and wages quickly adjust to keep the economy operating at full employment.

In the upward-sloping segment of the aggregate supply curve,

An increase in aggregate supply will cause the price level to:

As prices rise, people will buy fewer goods and services because:

In the intermediate range of the aggregate supply curve, higher aggregate demand will increase:

In the horizontal segment of the aggregate supply curve, when GDP:

Stagflation means a simultaneous decrease in the unemployment and inflation rates.

Which of the following will most likely increase aggregate demand?

Advances in technology will shift the aggregate:

Aggregate supply increases when:

Suppose the economy is on the intermediate range of the aggregate supply curve. Which of the following would reduce both real GDP and the price level?

Which of the following is a range on the eclectic or general view of the aggregate supply curve?

Introducing the Economic Way of Thinking

Production Possibilities, Opportunity Cost, and Economic Growth

Market Demand and Supply

Markets in Action

Gross Domestic Product

Business Cycles and Unemployment

Inflation

The Keynesian Model

The Keynesian Model in Action

Fiscal Policy

The Public Sector

Federal Deficits, Surpluses, and the National Debt

Money and the Federal Reserve System

Money Creation

Monetary Policy

The Phillips Curve and Expectations Theory

International Trade and Finance

Economies in Transition

Growth and the Less-Developed Countries

Applying Graphs to Economics

Consumer Surplus, Producer Surplus, and Market Efficiency

the Self-Correcting Aggregate Demand and Supply Model

Policy Disputes Using the Self-Correcting Aggregate Demand and Supply Model

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