Question 1

In the long-run, the aggregate supply curve normally is downward-sloping.

Accepted Answer

A) True 
 B)False

Question 2

The slope of the aggregate supply curve becomes steeper, the faster the costs of production adjust to prices and the smaller the amount of excess capacity in the economy.

Accepted Answer

A) True 
 B)False

Question 3

If foreign income falls, there will be _____.

Accepted Answer

A)  an increase in foreign spending 
B)  a rise in domestic aggregate demand 
C)  no change in either domestic net exports or aggregate demand 
D)  a decline in the domestic price level 
E)  a decrease in domestic aggregate demand 
A)  an increase in foreign spending 
B)  a rise in domestic aggregate demand 
C)  no change in either domestic net exports or aggregate demand 
D)  a decline in the domestic price level 
E)  a decrease in domestic aggregate demand

Question 4

What happens to aggregate supply when production costs adjust completely to price increases?

Accepted Answer

A)  Both equilibrium output and prices increase 
B)  Only prices rise; equilibrium output remains fixed 
C)  Only equilibrium output rises; equilibrium prices remain fixed 
D)  Equilibrium output falls while prices rise 
E)  Both equilibrium output and prices remain fixed 
A)  Both equilibrium output and prices increase 
B)  Only prices rise; equilibrium output remains fixed 
C)  Only equilibrium output rises; equilibrium prices remain fixed 
D)  Equilibrium output falls while prices rise 
E)  Both equilibrium output and prices remain fixed

Question 5

Identify the correct statement.

Accepted Answer

A)  As domestic income rises, imports rise and net exports fall. 
B)  As foreign income rises, net exports fall. 
C)  As domestic income falls, imports rise and net exports fall. 
D)  As domestic income rises, imports fall and net exports rise. 
E)  As foreign income falls, net exports rise. 
A)  As domestic income rises, imports rise and net exports fall. 
B)  As foreign income rises, net exports fall. 
C)  As domestic income falls, imports rise and net exports fall. 
D)  As domestic income rises, imports fall and net exports rise. 
E)  As foreign income falls, net exports rise.

Question 6

A higher domestic price level lowers aggregate expenditures and, therefore, shifts the aggregate demand curve to the left.

Accepted Answer

A) True 
 B)False

Question 7

Each of the panels given below represents the short-run equilibrium in the U.S. economy. The Aggregate Demand and Aggregate Supply curves in each panel responds to various economic changes.?Figure 8.1
  
-Refer to Figure 8.1. Which of the graphs in the figure best describes the impact of an effective oil embargo that raises the price of gasoline?

Accepted Answer

A)  Panel A 
B)  Panel B 
C)  Panel C 
D)  Panel D 
E)  Panel E 
A)  Panel A 
B)  Panel B 
C)  Panel C 
D)  Panel D 
E)  Panel E

Question 8

The wealth effect, the interest rate effect, and the international trade effect account for the:

Accepted Answer

A)  positive slope of the short-run aggregate supply curve. 
B)  the shape of the long-run aggregate supply curve. 
C)  positive slope of the aggregate demand curve. 
D)  negative slope of the aggregate demand curve. 
E)  negative slope of the short-run aggregate supply curve. 
A)  positive slope of the short-run aggregate supply curve. 
B)  the shape of the long-run aggregate supply curve. 
C)  positive slope of the aggregate demand curve. 
D)  negative slope of the aggregate demand curve. 
E)  negative slope of the short-run aggregate supply curve.

Question 9

Which of the following is true of cost-push inflation?

Accepted Answer

A)  Cost-push inflation is associated with an economic expansion. 
B)  Cost-push inflation is rarely experienced in developed economies. 
C)  Cost-push inflation is caused by a decrease in aggregate supply. 
D)  Cost-push inflation is identical to demand-pull inflation. 
E)  Cost-push inflation is the result of increased consumer spending. 
A)  Cost-push inflation is associated with an economic expansion. 
B)  Cost-push inflation is rarely experienced in developed economies. 
C)  Cost-push inflation is caused by a decrease in aggregate supply. 
D)  Cost-push inflation is identical to demand-pull inflation. 
E)  Cost-push inflation is the result of increased consumer spending.

Question 10

The AD curve will shift to the right if:

Accepted Answer

A)  people become pessimistic about the future of the economy. 
B)  there is a decrease in foreign income. 
C)  the government decreases spending. 
D)  the domestic price level decreases. 
E)  the foreign price level increases. 
A)  people become pessimistic about the future of the economy. 
B)  there is a decrease in foreign income. 
C)  the government decreases spending. 
D)  the domestic price level decreases. 
E)  the foreign price level increases.

Question 11

The degree to which _____ declines during a recession or increases during an expansion depends on the amount by which the AD and/or AS curves shift.

Accepted Answer

A)  real GDP 
B)  government tax revenue 
C)  the money supply 
D)  real interest rate 
E)  the consumer price index 
A)  real GDP 
B)  government tax revenue 
C)  the money supply 
D)  real interest rate 
E)  the consumer price index

Question 12

Business cycles are linked to the interaction between:

Accepted Answer

A)  the foreign exchange rate and the balance of payments account. 
B)  the aggregate demand and aggregate supply curves. 
C)  the demand and supply curves for a particular good. 
D)  the substitution and the wealth effect. 
E)  the long-run aggregate supply curve and the aggregate resource curve. 
A)  the foreign exchange rate and the balance of payments account. 
B)  the aggregate demand and aggregate supply curves. 
C)  the demand and supply curves for a particular good. 
D)  the substitution and the wealth effect. 
E)  the long-run aggregate supply curve and the aggregate resource curve.

Question 13

A simultaneous increase in both unemployment and inflation is most likely to be the result of a(n):

Accepted Answer

A)  increase in long-run aggregate supply. 
B)  increase in short-run aggregate supply. 
C)  decrease in the aggregate demand. 
D)  simultaneous outward shift of the aggregate demand and supply curves. 
E)  decrease in the short-run aggregate supply. 
A)  increase in long-run aggregate supply. 
B)  increase in short-run aggregate supply. 
C)  decrease in the aggregate demand. 
D)  simultaneous outward shift of the aggregate demand and supply curves. 
E)  decrease in the short-run aggregate supply.

Question 14

Which of the following illustrates an optimistic expectation of the people about the economy?

Accepted Answer

A)  A movement to the right along the aggregate demand curve 
B)  A rightward shift of the aggregate demand curve 
C)  A leftward shift of the aggregate demand curve 
D)  A movement to the left along the aggregate demand curve 
E)  A flatter slope of the aggregate demand curve 
A)  A movement to the right along the aggregate demand curve 
B)  A rightward shift of the aggregate demand curve 
C)  A leftward shift of the aggregate demand curve 
D)  A movement to the left along the aggregate demand curve 
E)  A flatter slope of the aggregate demand curve

Question 15

The figure given below represents the equilibrium real GDP and price level in the aggregate demand and aggregate supply model.?Figure 8.3
  
-Consider Figure 8.3. Which of the following is most likely to have led to the movement from point B to point E?

Accepted Answer

A)  Declining net exports 
B)  Increased investment spending 
C)  A decline in the domestic price level 
D)  An improvement in the quality of labor 
E)  An increase in the real wage rates 
A)  Declining net exports 
B)  Increased investment spending 
C)  A decline in the domestic price level 
D)  An improvement in the quality of labor 
E)  An increase in the real wage rates

Question 16

Suppose a representative household holds a bond that is expected to pay a real return of $100 one year from now. However, over the next year, the inflation rate rises 15 percent more than was originally anticipated. As a consequence:

Accepted Answer

A)  the real value of household wealth will increase. 
B)  consumption spending will increase, and aggregate demand will rise. 
C)  the purchasing power of money will rise. 
D)  savings will fall and aggregate expenditures will rise. 
E)  the aggregate expenditure in the economy will decrease. 
A)  the real value of household wealth will increase. 
B)  consumption spending will increase, and aggregate demand will rise. 
C)  the purchasing power of money will rise. 
D)  savings will fall and aggregate expenditures will rise. 
E)  the aggregate expenditure in the economy will decrease.

Question 17

A change in foreign demand does not affect aggregate demand.

Accepted Answer

A) True 
 B)False

Question 18

The figure given below represents the equilibrium real GDP and price level in the aggregate demand and aggregate supply model.?Figure 8.3
  
-Refer to Figure 8.3. Movement from point B to point D could be initiated by:

Accepted Answer

A)  a stock market crash that undermines consumer confidence. 
B)  a tax code changes that improve investor expectations. 
C)  a national emergency that increases government spending. 
D)  a higher net exports because of economic expansion in European countries. 
E)  a technological advancement. 
A)  a stock market crash that undermines consumer confidence. 
B)  a tax code changes that improve investor expectations. 
C)  a national emergency that increases government spending. 
D)  a higher net exports because of economic expansion in European countries. 
E)  a technological advancement.

Question 19

A rightward shift in the aggregate supply curve with no change in the aggregate demand curve signals an economic expansion.

Accepted Answer

A) True 
 B)False

Question 20

A demand-pull inflation is caused by an increase in the demand for output. Therefore, economists say that this type of inflation is actually good for the economy.

Accepted Answer

A) True 
 B)False

In the long-run, the aggregate supply curve normally is downward-sloping.

The slope of the aggregate supply curve becomes steeper, the faster the costs of production adjust to prices and the smaller the amount of excess capacity in the economy.

If foreign income falls, there will be _____.

What happens to aggregate supply when production costs adjust completely to price increases?

Identify the correct statement.

A higher domestic price level lowers aggregate expenditures and, therefore, shifts the aggregate demand curve to the left.

The wealth effect, the interest rate effect, and the international trade effect account for the:

Which of the following is true of cost-push inflation?

The AD curve will shift to the right if:

The degree to which _____ declines during a recession or increases during an expansion depends on the amount by which the AD and/or AS curves shift.

Business cycles are linked to the interaction between:

A simultaneous increase in both unemployment and inflation is most likely to be the result of a(n):

Which of the following illustrates an optimistic expectation of the people about the economy?

The figure given below represents the equilibrium real GDP and price level in the aggregate demand and aggregate supply model.?Figure 8.3 -Consider Figure 8.3. Which of the following is most likely to have led to the movement from point B to point E?

Suppose a representative household holds a bond that is expected to pay a real return of $100 one year from now. However, over the next year, the inflation rate rises 15 percent more than was originally anticipated. As a consequence:

A change in foreign demand does not affect aggregate demand.

The figure given below represents the equilibrium real GDP and price level in the aggregate demand and aggregate supply model.?Figure 8.3 -Refer to Figure 8.3. Movement from point B to point D could be initiated by:

A rightward shift in the aggregate supply curve with no change in the aggregate demand curve signals an economic expansion.

A demand-pull inflation is caused by an increase in the demand for output. Therefore, economists say that this type of inflation is actually good for the economy.

The Wealth of Nations: Ownership and Economic Freedom

Scarcity and Opportunity Costs

The Market and Price System

The Aggregate Economy

National Income Accounting

An Introduction to the Foreign Exchapterange Market and the Balance of Payments

Unemployment and Inflation

Aggregate Expenditures

Income and Expenditures Equilibrium

Fiscal Policy

Money and Banking

Monetary Policy

Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

Economic Growth

Development Economics

Globalization

World Trade Equilibrium

International Trade Restrictions

Exchapterange Rates and Financial Links Between Countries

Filters

Exam 8: Macroeconomic Equilibrium: Aggregate Demand and Supply

In the long-run, the aggregate supply curve normally is downward-sloping.

The slope of the aggregate supply curve becomes steeper, the faster the costs of production adjust to prices and the smaller the amount of excess capacity in the economy.

If foreign income falls, there will be _____.

What happens to aggregate supply when production costs adjust completely to price increases?

Identify the correct statement.

A higher domestic price level lowers aggregate expenditures and, therefore, shifts the aggregate demand curve to the left.

The wealth effect, the interest rate effect, and the international trade effect account for the:

Which of the following is true of cost-push inflation?

The AD curve will shift to the right if:

The degree to which _____ declines during a recession or increases during an expansion depends on the amount by which the AD and/or AS curves shift.

Business cycles are linked to the interaction between:

A simultaneous increase in both unemployment and inflation is most likely to be the result of a(n):

Which of the following illustrates an optimistic expectation of the people about the economy?

The figure given below represents the equilibrium real GDP and price level in the aggregate demand and aggregate supply model.?Figure 8.3 -Consider Figure 8.3. Which of the following is most likely to have led to the movement from point B to point E?

Suppose a representative household holds a bond that is expected to pay a real return of $100 one year from now. However, over the next year, the inflation rate rises 15 percent more than was originally anticipated. As a consequence:

A change in foreign demand does not affect aggregate demand.

The figure given below represents the equilibrium real GDP and price level in the aggregate demand and aggregate supply model.?Figure 8.3 -Refer to Figure 8.3. Movement from point B to point D could be initiated by:

A rightward shift in the aggregate supply curve with no change in the aggregate demand curve signals an economic expansion.

A demand-pull inflation is caused by an increase in the demand for output. Therefore, economists say that this type of inflation is actually good for the economy.

The Wealth of Nations: Ownership and Economic Freedom

Scarcity and Opportunity Costs

The Market and Price System

The Aggregate Economy

National Income Accounting

An Introduction to the Foreign Exchapterange Market and the Balance of Payments

Unemployment and Inflation

Aggregate Expenditures

Income and Expenditures Equilibrium

Fiscal Policy

Money and Banking

Monetary Policy

Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

Economic Growth

Development Economics

Globalization

World Trade Equilibrium

International Trade Restrictions

Exchapterange Rates and Financial Links Between Countries

Filters