Question 1

Along the classical or vertical range of the aggregate supply curve, an increase in the aggregate demand curve will increase:

Accepted Answer

A)  both the price level and real GDP. 
B)  only real GDP. 
C)  only the price level. 
D)  real GDP and reduce the price level. 
A)  both the price level and real GDP. 
B)  only real GDP. 
C)  only the price level. 
D)  real GDP and reduce the price level. C

Question 2

In the classical range of the aggregate supply curve, greater spending for consumer and investment goods results in:

Accepted Answer

A)  stagflation. 
B)  more unemployment. 
C)  greater output. 
D)  a higher price level. 
A)  stagflation. 
B)  more unemployment. 
C)  greater output. 
D)  a higher price level. D

Question 3

Stagflation occurs when the economy experiences:

Accepted Answer

A)  low unemployment and low inflation. 
B)  high unemployment and rapid inflation. 
C)  low unemployment and rapid inflation. 
D)  high unemployment and low inflation. 
A)  low unemployment and low inflation. 
B)  high unemployment and rapid inflation. 
C)  low unemployment and rapid inflation. 
D)  high unemployment and low inflation. B

Question 4

Which of the following will increase aggregate demand in the United States?

Accepted Answer

A)  a higher price level 
B)  an increase in the real interest rate 
C)  an increase in wealth due to a substantial appreciation in the value of stocks 
D)  a decrease in real income in Japan and Western Europe 
A)  a higher price level 
B)  an increase in the real interest rate 
C)  an increase in wealth due to a substantial appreciation in the value of stocks 
D)  a decrease in real income in Japan and Western Europe

Question 5

Which of the following would cause a rightward shift in the aggregate supply curve?

Accepted Answer

A)  larger-than-expected wage increases 
B)  lower oil prices 
C)  increased investment spending 
D)  greater government regulation 
A)  larger-than-expected wage increases 
B)  lower oil prices 
C)  increased investment spending 
D)  greater government regulation

Question 6

Exhibit 10-6 Aggregate supply curve
 
In Exhibit 10-6, the economy's employment potential is fully exhausted at:

Accepted Answer

A)  GDP = $1,000 billion. 
B)  GDP = $1,100 billion. 
C)  GDP = $1,200 billion. 
D)  the employment potential is never fully exhausted. 
A)  GDP = $1,000 billion. 
B)  GDP = $1,100 billion. 
C)  GDP = $1,200 billion. 
D)  the employment potential is never fully exhausted.

Question 7

_________ inflation can be explained by an ________ shift in the aggregate _________ curve.

Accepted Answer

A)  Demand-pull, leftward, demand 
B)  Cost-push, rightward, demand 
C)  Demand-pull, leftward, supply 
D)  Cost-push, rightward, supply 
A)  Demand-pull, leftward, demand 
B)  Cost-push, rightward, demand 
C)  Demand-pull, leftward, supply 
D)  Cost-push, rightward, supply

Question 8

Which of the following correctly describes the interest-rate effect?

Accepted Answer

A)  If the price level decreases, consumer purchasing power decreases, the demand for credit rises, interest rates rise, debt-financed borrowing decreases, and real GDP demanded falls. 
B)  If the price level decreases, consumer purchasing power increases, the demand for credit rises, interest rates rise, debt-financed borrowing decreases, and real GDP demanded falls. 
C)  If the price level decreases, consumer purchasing power increases, the demand for credit falls, interest rates rise, debt-financed borrowing decreases, and real GDP demanded falls. 
D)  If the price level decreases, consumer purchasing power increases, the demand for credit falls, interest rates fall, debt-financed borrowing increases, and real GDP demanded increases. 
A)  If the price level decreases, consumer purchasing power decreases, the demand for credit rises, interest rates rise, debt-financed borrowing decreases, and real GDP demanded falls. 
B)  If the price level decreases, consumer purchasing power increases, the demand for credit rises, interest rates rise, debt-financed borrowing decreases, and real GDP demanded falls. 
C)  If the price level decreases, consumer purchasing power increases, the demand for credit falls, interest rates rise, debt-financed borrowing decreases, and real GDP demanded falls. 
D)  If the price level decreases, consumer purchasing power increases, the demand for credit falls, interest rates fall, debt-financed borrowing increases, and real GDP demanded increases.

Question 9

Other things constant, an increase in resource prices will:

Accepted Answer

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

Question 10

Exhibit 10-5 Aggregate demand curves
 
In Exhibit 10-5, which one of the following could cause the U.S. aggregate demand curve to move from AD3 to AD2?

Accepted Answer

A)  greater resource availability 
B)  nonfluctuating resource availability 
C)  a recession in Japan 
D)  an increase in government grants for AIDS awareness programs 
A)  greater resource availability 
B)  nonfluctuating resource availability 
C)  a recession in Japan 
D)  an increase in government grants for AIDS awareness programs

Question 11

When OPEC caused the price of oil to rise in the early 1970s, the:

Accepted Answer

A)  aggregate supply curve shifted to the right. 
B)  aggregate supply curve shifted to the left. 
C)  aggregate demand curve shifted to the right. 
D)  aggregate demand curve shifted to the left. 
A)  aggregate supply curve shifted to the right. 
B)  aggregate supply curve shifted to the left. 
C)  aggregate demand curve shifted to the right. 
D)  aggregate demand curve shifted to the left.

Question 12

The aggregate demand curve is downward sloping because:

Accepted Answer

A)  an increase in the price level will cause an increase in spending. 
B)  at lower price levels, real wealth decreases, causing a decrease in the quantities of goods and services demanded. 
C)  at lower price levels, interest rates decrease, causing a decrease in the quantities of goods and services demanded. 
D)  at lower price levels, exports increase, causing an increase in real GDP. 
A)  an increase in the price level will cause an increase in spending. 
B)  at lower price levels, real wealth decreases, causing a decrease in the quantities of goods and services demanded. 
C)  at lower price levels, interest rates decrease, causing a decrease in the quantities of goods and services demanded. 
D)  at lower price levels, exports increase, causing an increase in real GDP.

Question 13

Which of the following will not shift the aggregate demand curve to the left?

Accepted Answer

A)  Consumers become more optimistic about the future. 
B)  Government spending decreases. 
C)  Business optimism decreases. 
D)  Consumers become pessimistic about the future. 
A)  Consumers become more optimistic about the future. 
B)  Government spending decreases. 
C)  Business optimism decreases. 
D)  Consumers become pessimistic about the future.

Question 14

The net exports effect is the inverse relationship between net exports and the ____ of an economy.

Accepted Answer

A)  potential real GDP 
B)  chain-price deflator 
C)  price level 
D)  consumption spending 
A)  potential real GDP 
B)  chain-price deflator 
C)  price level 
D)  consumption spending

Question 15

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 16

Exhibit 10-8 Aggregate demand and supply
 
In Exhibit 10-8, if aggregate demand shifts from AD1 to AD3,

Accepted Answer

A)  real GDP will increase from $3.0 to $4.0, and the price level will increase from 100 to 140. 
B)  real GDP will increase from $3.0 to $7.0, and the price level will increase from 100 to 140. 
C)  real GDP will increase from $3.0 to $4.0, and the price level does not change. 
D)  real GDP will increase from $3.0 to $7.0, and the price level will increase from 100 to 120. 
A)  real GDP will increase from $3.0 to $4.0, and the price level will increase from 100 to 140. 
B)  real GDP will increase from $3.0 to $7.0, and the price level will increase from 100 to 140. 
C)  real GDP will increase from $3.0 to $4.0, and the price level does not change. 
D)  real GDP will increase from $3.0 to $7.0, and the price level will increase from 100 to 120.

Question 17

When moving along a market demand curve, the prices of related goods are assumed to be constant. With an aggregate demand curve,

Accepted Answer

A)  the assumption is meaningless because we are using a market basket for all goods and services. 
B)  the prices of related goods have an inverse relationship. 
C)  all goods are assumed to have the same price. 
D)  the same assumption holds true. 
A)  the assumption is meaningless because we are using a market basket for all goods and services. 
B)  the prices of related goods have an inverse relationship. 
C)  all goods are assumed to have the same price. 
D)  the same assumption holds true.

Question 18

The aggregate demand curve slopes downward indicating that:

Accepted Answer

A)  an increase in the general price level will reduce the aggregate quantity of goods and services demanded. 
B)  an increase in the general price level will increase the aggregate quantity of goods and services demanded. 
C)  a change in the interest rate will alter the aggregate quantity of goods and services demanded. 
D)  consumers substitute between domestic-made and foreign-made goods as their relative prices change. 
A)  an increase in the general price level will reduce the aggregate quantity of goods and services demanded. 
B)  an increase in the general price level will increase the aggregate quantity of goods and services demanded. 
C)  a change in the interest rate will alter the aggregate quantity of goods and services demanded. 
D)  consumers substitute between domestic-made and foreign-made goods as their relative prices change.

Question 19

According to the net exports effect, as the price level falls relative to the rest of the world,

Accepted Answer

A)  foreigners buy fewer goods. 
B)  foreigners buy more U.S. goods. 
C)  the aggregate demand curve shifts to the left. 
D)  the aggregate demand curve shifts to the right. 
A)  foreigners buy fewer goods. 
B)  foreigners buy more U.S. goods. 
C)  the aggregate demand curve shifts to the left. 
D)  the aggregate demand curve shifts to the right.

Question 20

Why does the aggregate demand (AD) curve slope downward? What could cause the AD curve to shift to the right? What impact would a rightward shift of the AD curve have on the economy?

Accepted Answer

The AD curve slopes downward because of

Exam 20: Aggregate Demand and Supply

Along the classical or vertical range of the aggregate supply curve, an increase in the aggregate demand curve will increase:

In the classical range of the aggregate supply curve, greater spending for consumer and investment goods results in:

Stagflation occurs when the economy experiences:

Which of the following will increase aggregate demand in the United States?

Which of the following would cause a rightward shift in the aggregate supply curve?

Exhibit 10-6 Aggregate supply curve In Exhibit 10-6, the economy's employment potential is fully exhausted at:

_________ inflation can be explained by an ________ shift in the aggregate _________ curve.

Which of the following correctly describes the interest-rate effect?

Other things constant, an increase in resource prices will:

Exhibit 10-5 Aggregate demand curves In Exhibit 10-5, which one of the following could cause the U.S. aggregate demand curve to move from AD3 to AD2?

When OPEC caused the price of oil to rise in the early 1970s, the:

The aggregate demand curve is downward sloping because:

Which of the following will not shift the aggregate demand curve to the left?

The net exports effect is the inverse relationship between net exports and the ____ of an economy.

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

Exhibit 10-8 Aggregate demand and supply In Exhibit 10-8, if aggregate demand shifts from AD1 to AD3,

When moving along a market demand curve, the prices of related goods are assumed to be constant. With an aggregate demand curve,

The aggregate demand curve slopes downward indicating that:

According to the net exports effect, as the price level falls relative to the rest of the world,

Why does the aggregate demand (AD) curve slope downward? What could cause the AD curve to shift to the right? What impact would a rightward shift of the AD curve have on the economy?

Introducing the Economic Way of Thinking

Production Possibilities Opportunity Cost and Economic Growth

Market Demand and Supply

Markets in Action

Price Elasticity of Demand and Supply

Consumer Choice Theory

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets

Income Distribution Poverty and Discrimination

Antitrust and Regulation

Environmental Economics

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

Understanding Direct and Inverse Relationships between Variables

Filters

_ inflation can be explained by an shift in the aggregate _ curve.

Exhibit 10-5 Aggregate demand curves In Exhibit 10-5, which one of the following could cause the U.S. aggregate demand curve to move from AD₃ to AD₂?

Exhibit 10-8 Aggregate demand and supply In Exhibit 10-8, if aggregate demand shifts from AD₁ to AD₃,