Question 1

If aggregate demand increases in the intermediate range of the aggregate supply curve then the:

Accepted Answer

A) price level rises and real GDP falls. 
B) price level rises and real GDP rises. 
C) price level falls and real GDP falls. 
D) price level falls and real GDP rises. 
A) price level rises and real GDP falls. 
B) price level rises and real GDP rises. 
C) price level falls and real GDP falls. 
D) price level falls and real GDP rises.

Question 2

A share market boom is often accompanied by:

Accepted Answer

A) an increase in consumption. 
B) falling real GDP. 
C) falling investment. 
D) rising unemployment. 
E) a decrease in imports. 
A) an increase in consumption. 
B) falling real GDP. 
C) falling investment. 
D) rising unemployment. 
E) a decrease in imports.

Question 3

Aggregate expenditures are the sum of:

Accepted Answer

A) consumption, investment and government spending minus net exports. 
B) consumption, government spending and net exports. 
C) consumption, investment, government spending and net exports. 
D) production, investment, government spending and net exports. 
A) consumption, investment and government spending minus net exports. 
B) consumption, government spending and net exports. 
C) consumption, investment, government spending and net exports. 
D) production, investment, government spending and net exports.

Question 4

The effect of an increase in investment on real GDP will be greater,the larger the:

Accepted Answer

A) MPC. 
B) APC. 
C) MPS. 
D) APS. 
A) MPC. 
B) APC. 
C) MPS. 
D) APS.

Question 5

The classical theory that states that 'supply creates its own demand' was developed by:

Accepted Answer

A) Adam Smith. 
B) John Keynes. 
C) Jean-Baptiste Say. 
D) Richard Say. 
A) Adam Smith. 
B) John Keynes. 
C) Jean-Baptiste Say. 
D) Richard Say.

Question 6

Other factors held constant,a decrease in labour cost will shift the aggregate:

Accepted Answer

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

Question 7

A cut in government spending,a decrease in income abroad,an increase in taxes or an expectation that future consumer income will fall will all cause aggregate:

Accepted Answer

A) demand to shift outward. 
B) demand to shift inward. 
C) supply to shift outward. 
D) supply to shift inward. 
E) supply and aggregate demand to both shift equally inward. 
A) demand to shift outward. 
B) demand to shift inward. 
C) supply to shift outward. 
D) supply to shift inward. 
E) supply and aggregate demand to both shift equally inward.

Question 8

Which of the following is not a component of the aggregate demand curve?

Accepted Answer

A) Government spending (G). 
B) Investment (I). 
C) Consumption (
C) . 
D) Net exports (X-M). 
E) Saving. 
A) Government spending (G). 
B) Investment (I). 
C) Consumption (
C) . 
D) Net exports (X-M). 
E) Saving.

Question 9

If your disposable personal income increases from $30 000 to $40 000 and your savings increase from $2000 to $4000,your marginal propensity to save (MPS)is:

Accepted Answer

A) 0.2. 
B) 0.4. 
C) 0.5. 
D) 0.8. 
E) 1. 
A) 0.2. 
B) 0.4. 
C) 0.5. 
D) 0.8. 
E) 1.

Question 10

Technological progress often results in:

Accepted Answer

A) a fall in investment as firms can produce more output for fewer inputs, including capital. 
B) a rise in investment as firms try to take advantage of these improvements. 
C) no change in investment, as a rise in some investment is offset by decreases in other areas of investment. 
D) a rise in investment only if it is accompanied by a fall in the interest rate. 
A) a fall in investment as firms can produce more output for fewer inputs, including capital. 
B) a rise in investment as firms try to take advantage of these improvements. 
C) no change in investment, as a rise in some investment is offset by decreases in other areas of investment. 
D) a rise in investment only if it is accompanied by a fall in the interest rate.

Question 11

The concurrent problems of inflation and unemployment are termed:

Accepted Answer

A) depression. 
B) downturn. 
C) deflation. 
D) demand-pull deflation. 
E) stagflation. 
A) depression. 
B) downturn. 
C) deflation. 
D) demand-pull deflation. 
E) stagflation.

Question 12

Which of the following characterises the classical view of the economy?

Accepted Answer

A) The economy is inherently unstable. 
B) Prices and wages are not flexible. 
C) The economy will automatically self-correct to full employment. 
D) The economy needs government intervention to adjust to full employment. 
A) The economy is inherently unstable. 
B) Prices and wages are not flexible. 
C) The economy will automatically self-correct to full employment. 
D) The economy needs government intervention to adjust to full employment.

Question 13

The classical economists thought that the market:

Accepted Answer

A) did not exist. 
B) could self-correct. 
C) would disappear. 
D) was not important. 
A) did not exist. 
B) could self-correct. 
C) would disappear. 
D) was not important.

Question 14

The ratio of the change in GDP to an initial change in aggregate demand is the:

Accepted Answer

A) spending multiplier. 
B) permanent income rate. 
C) marginal expenditure rate. 
D) marginal propensity to consume. 
A) spending multiplier. 
B) permanent income rate. 
C) marginal expenditure rate. 
D) marginal propensity to consume.

Question 15

In the aggregate demand-output model,equilibrium occurs if:

Accepted Answer

A) aggregate demand (A
D)  is greater than GDP. 
B) aggregate demand (A
D)  is less than GDP. 
C) there is no unplanned inventory depletion or accumulation. 
D) consumption equals investment. 
A) aggregate demand (A
D)  is greater than GDP. 
B) aggregate demand (A
D)  is less than GDP. 
C) there is no unplanned inventory depletion or accumulation. 
D) consumption equals investment.

Question 16

The marginal propensity to consume (MPC)is computed as the change in:

Accepted Answer

A) consumption divided by the change in savings. 
B) consumption resulted by a given change in disposable personal income. 
C) consumption divided by the change in GDP. 
D) consumption multiplied by the change in savings. 
A) consumption divided by the change in savings. 
B) consumption resulted by a given change in disposable personal income. 
C) consumption divided by the change in GDP. 
D) consumption multiplied by the change in savings.

Question 17

The aggregate supply curve is defined as:

Accepted Answer

A) net national product. 
B) the sum of wages, rent, interest and profits. 
C) the real GDP produced at different price levels. 
D) the total dollar value of household expenditures. 
A) net national product. 
B) the sum of wages, rent, interest and profits. 
C) the real GDP produced at different price levels. 
D) the total dollar value of household expenditures.

Question 18

Along the intermediate 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.

Question 19

Exhibit 14-3 Aggregate supply and demand curves
  
-In Exhibit 14-3 which of the following is not consistent with a shift in the aggregate demand curve from AD₁ to AD₂?

Accepted Answer

A) A decrease in consumer spending. 
B) An increase in investment. 
C) An increase in government spending. 
D) An increase in net exports. 
A) A decrease in consumer spending. 
B) An increase in investment. 
C) An increase in government spending. 
D) An increase in net exports.

Question 20

Real investment spending is _____ real personal consumption.

Accepted Answer

A) equal to 
B) greater than 
C) stable compared to 
D) highly volatile compared to 
E) less thanks to 
A) equal to 
B) greater than 
C) stable compared to 
D) highly volatile compared to 
E) less thanks to

If aggregate demand increases in the intermediate range of the aggregate supply curve then the:

A share market boom is often accompanied by:

Aggregate expenditures are the sum of:

The effect of an increase in investment on real GDP will be greater,the larger the:

The classical theory that states that 'supply creates its own demand' was developed by:

Other factors held constant,a decrease in labour cost will shift the aggregate:

A cut in government spending,a decrease in income abroad,an increase in taxes or an expectation that future consumer income will fall will all cause aggregate:

Which of the following is not a component of the aggregate demand curve?

If your disposable personal income increases from $30 000 to $40 000 and your savings increase from $2000 to $4000,your marginal propensity to save (MPS)is:

Technological progress often results in:

The concurrent problems of inflation and unemployment are termed:

Which of the following characterises the classical view of the economy?

The classical economists thought that the market:

The ratio of the change in GDP to an initial change in aggregate demand is the:

In the aggregate demand-output model,equilibrium occurs if:

The marginal propensity to consume (MPC)is computed as the change in:

The aggregate supply curve is defined as:

Along the intermediate range of the aggregate supply curve,an increase in the aggregate demand curve will increase:

Exhibit 14-3 Aggregate supply and demand curves -In Exhibit 14-3 which of the following is not consistent with a shift in the aggregate demand curve from AD₁ to AD₂?

Real investment spending is _____ real personal consumption.

Thinking like an economist

Production possibilities and opportunity cost

Market demand and supply

Markets in action

Elasticity of demand and supply

Production costs

Perfect competition

Monopoly

Monopolistic competition and oligopoly

Policy issues: resource taxes and climate change

Measuring the size of the economy

Business cycles and economic growth

Inflation and unemployment

The monetary and financial system

Macroeconomic policy I: monetary policy

Macroeconomic policy II: fiscal policy

International trade and finance

Applying graphs to economics

Filters

Exam 14: A simple model of the macro economy

If aggregate demand increases in the intermediate range of the aggregate supply curve then the:

A share market boom is often accompanied by:

Aggregate expenditures are the sum of:

The effect of an increase in investment on real GDP will be greater,the larger the:

The classical theory that states that 'supply creates its own demand' was developed by:

Other factors held constant,a decrease in labour cost will shift the aggregate:

A cut in government spending,a decrease in income abroad,an increase in taxes or an expectation that future consumer income will fall will all cause aggregate:

Which of the following is not a component of the aggregate demand curve?

If your disposable personal income increases from $30 000 to $40 000 and your savings increase from $2000 to $4000,your marginal propensity to save (MPS)is:

Technological progress often results in:

The concurrent problems of inflation and unemployment are termed:

Which of the following characterises the classical view of the economy?

The classical economists thought that the market:

The ratio of the change in GDP to an initial change in aggregate demand is the:

In the aggregate demand-output model,equilibrium occurs if:

The marginal propensity to consume (MPC)is computed as the change in:

The aggregate supply curve is defined as:

Along the intermediate range of the aggregate supply curve,an increase in the aggregate demand curve will increase:

Exhibit 14-3 Aggregate supply and demand curves -In Exhibit 14-3 which of the following is not consistent with a shift in the aggregate demand curve from AD₁ to AD₂?

Real investment spending is _____ real personal consumption.

Thinking like an economist

Production possibilities and opportunity cost

Market demand and supply

Markets in action

Elasticity of demand and supply

Production costs

Perfect competition

Monopoly

Monopolistic competition and oligopoly

Policy issues: resource taxes and climate change

Measuring the size of the economy

Business cycles and economic growth

Inflation and unemployment

The monetary and financial system

Macroeconomic policy I: monetary policy

Macroeconomic policy II: fiscal policy

International trade and finance

Applying graphs to economics

Filters