Question 1

The net export effect is caused by:

Accepted Answer

A) the negative relationship between the price level and the exports minus imports. 
B) the positive relationship between the price level and the exports minus imports. 
C) the negative relationship between the price level and the exports. 
D) the negative relationship between the price level and the exports plus imports. 
A) the negative relationship between the price level and the exports minus imports. 
B) the positive relationship between the price level and the exports minus imports. 
C) the negative relationship between the price level and the exports. 
D) the negative relationship between the price level and the exports plus imports.

Question 2

A decrease in aggregate supply will tend to cause the price level to:

Accepted Answer

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

Question 3

The interest-rate effect predicts that higher prices:

Accepted Answer

A) make it more expensive to borrow, leading to higher interest rates and less investment. 
B) make people worse off by reducing the value of their wealth, leading them to save more and spend less. 
C) decrease borrowing, leading to higher interest rates and less investment. 
D) decrease borrowing, leading to lower interest rates and more investment. 
E) increase borrowing, leading to higher interest rates and less investment. 
A) make it more expensive to borrow, leading to higher interest rates and less investment. 
B) make people worse off by reducing the value of their wealth, leading them to save more and spend less. 
C) decrease borrowing, leading to higher interest rates and less investment. 
D) decrease borrowing, leading to lower interest rates and more investment. 
E) increase borrowing, leading to higher interest rates and less investment.

Question 4

Exhibit 14-2 Aggregate demand and supply
  
-In Exhibit 14-2,if aggregate demand shifts from AD₂ to AD₁,real GDP will:

Accepted Answer

A) not change and the price level will not change. 
B) fall from $7 to $4 and the price level will not change. 
C) fall from $4 to $3 and the price level will not change. 
D) fall from $4 to $3 and the price level will fall from 120 to 100. 
E) fall from $4 to $3 and the price level will fall from 170 to 100. 
A) not change and the price level will not change. 
B) fall from $7 to $4 and the price level will not change. 
C) fall from $4 to $3 and the price level will not change. 
D) fall from $4 to $3 and the price level will fall from 120 to 100. 
E) fall from $4 to $3 and the price level will fall from 170 to 100.

Question 5

According to the Keynesian model:

Accepted Answer

A) the equilibrium is found by equating the output produced to aggregate demand. 
B) the equilibrium is found by equating the inventories to aggregate demand. 
C) the equilibrium is found by equating the investment to aggregate demand. 
D) the equilibrium is found by equating the output produced to aggregate supply. 
A) the equilibrium is found by equating the output produced to aggregate demand. 
B) the equilibrium is found by equating the inventories to aggregate demand. 
C) the equilibrium is found by equating the investment to aggregate demand. 
D) the equilibrium is found by equating the output produced to aggregate supply.

Question 6

The pre-Keynesian or classical economic theory predicted that in the long run the economy would experience:

Accepted Answer

A) long periods of high unemployment. 
B) rising rates of inflation. 
C) only temporary periods of high unemployment. 
D) idle factors of production. 
A) long periods of high unemployment. 
B) rising rates of inflation. 
C) only temporary periods of high unemployment. 
D) idle factors of production.

Question 7

The aggregate demand curve:

Accepted Answer

A) shows the level of real GDP purchased in the economy at different possible price levels during a period of time. 
B) shows the level of real GDP produced in the economy at different possible price levels during a period of time. 
C) shifts to the left whenever there is an increase in aggregate expenditures. 
D) slopes upward and shifts to the left whenever there is an increase in aggregate expenditures. 
A) shows the level of real GDP purchased in the economy at different possible price levels during a period of time. 
B) shows the level of real GDP produced in the economy at different possible price levels during a period of time. 
C) shifts to the left whenever there is an increase in aggregate expenditures. 
D) slopes upward and shifts to the left whenever there is an increase in aggregate expenditures.

Question 8

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 labour. 
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 labour.

Question 9

Along the Keynesian 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 10

A large decrease in Australia's share market index may cause:

Accepted Answer

A) an increase in consumption to compensate. 
B) an increase in investment to compensate. 
C) a decrease in consumption. 
D) a large increase in economic growth. 
A) an increase in consumption to compensate. 
B) an increase in investment to compensate. 
C) a decrease in consumption. 
D) a large increase in economic growth.

Question 11

Classical economists believed that:

Accepted Answer

A) the forces of market supply will alone achieve equilibrium. 
B) a long continuing prosperity is impossible. 
C) a long continuing depression is impossible. 
D) the forces of market demand will alone achieve equilibrium. 
A) the forces of market supply will alone achieve equilibrium. 
B) a long continuing prosperity is impossible. 
C) a long continuing depression is impossible. 
D) the forces of market demand will alone achieve equilibrium.

Question 12

The aggregate supply curve relating the price level to real GDP has three distinguishing segments.Which one of the following indicates the segments?

Accepted Answer

A) The horizontal segment reflects increasing pressure on the price level as firms bid for resources. The upward-sloping segment reflects the availability of unused resources. The vertical segment reflects the full employment of all resources. 
B) The horizontal segment reflects the availability of unused resources. The upward-sloping segment reflects the full employment of all resources. The vertical segment reflects increasing pressure on the price level as firms bid for resources. 
C) The horizontal segment reflects the full employment of all resources. The upward-sloping segment reflects increasing pressure on the price level as firms bid for resources. The vertical segment reflects the availability of unused resources. 
D) The horizontal segment reflects the availability of unused resources. The downward-sloping segment reflects decreasing pressure on the price level as firms bid for resources. The vertical segment reflects the full employment of all resources. 
E) The horizontal segment reflects the availability of unused resources. The upward-sloping segment reflects increasing pressure on the price level as firms bid for resources. The vertical segment reflects the full employment of all resources. 
A) The horizontal segment reflects increasing pressure on the price level as firms bid for resources. The upward-sloping segment reflects the availability of unused resources. The vertical segment reflects the full employment of all resources. 
B) The horizontal segment reflects the availability of unused resources. The upward-sloping segment reflects the full employment of all resources. The vertical segment reflects increasing pressure on the price level as firms bid for resources. 
C) The horizontal segment reflects the full employment of all resources. The upward-sloping segment reflects increasing pressure on the price level as firms bid for resources. The vertical segment reflects the availability of unused resources. 
D) The horizontal segment reflects the availability of unused resources. The downward-sloping segment reflects decreasing pressure on the price level as firms bid for resources. The vertical segment reflects the full employment of all resources. 
E) The horizontal segment reflects the availability of unused resources. The upward-sloping segment reflects increasing pressure on the price level as firms bid for resources. The vertical segment reflects the full employment of all resources.

Question 13

In the aggregate demand and aggregate supply model:

Accepted Answer

A) the factors that cause the demand curves in both models to slope downward are the same. 
B) the factors that cause the supply curves in both models to slope upward are the same. 
C) the upward-sloping aggregate demand curve intersects the downward-sloping aggregate supply curve to determine the economy's price level and GDP. 
D) the upward-sloping aggregate supply curve intersects the downward-sloping aggregate demand curve to determine the economy's price level and GDP. 
E) the price level never changes, even with shifts in aggregate demand and aggregate supply. 
A) the factors that cause the demand curves in both models to slope downward are the same. 
B) the factors that cause the supply curves in both models to slope upward are the same. 
C) the upward-sloping aggregate demand curve intersects the downward-sloping aggregate supply curve to determine the economy's price level and GDP. 
D) the upward-sloping aggregate supply curve intersects the downward-sloping aggregate demand curve to determine the economy's price level and GDP. 
E) the price level never changes, even with shifts in aggregate demand and aggregate supply.

Question 14

The aggregate supply curve will shift to the right when the:

Accepted Answer

A) amount of labour in the society decreases. 
B) capital stock of the society shrinks. 
C) amount of natural resources in the society gets smaller. 
D) amount of labour in the society increases. 
E) price level in the economy rises. 
A) amount of labour in the society decreases. 
B) capital stock of the society shrinks. 
C) amount of natural resources in the society gets smaller. 
D) amount of labour in the society increases. 
E) price level in the economy rises.

Question 15

Which of the following are the components of the aggregate demand curve?

Accepted Answer

A) Government spending (G) and Investment (I). 
B) Saving. 
C) Consumption excluding exports. 
D) Only total imports. 
A) Government spending (G) and Investment (I). 
B) Saving. 
C) Consumption excluding exports. 
D) Only total imports.

Question 16

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 17

The consumption function:

Accepted Answer

A) is the relationship between consumption and disposable income. 
B) shows how consumption is determined by changes in the level of disposable income. 
C) is an aggregate expenditure. 
D) is a sum of individual demand curves. 
A) is the relationship between consumption and disposable income. 
B) shows how consumption is determined by changes in the level of disposable income. 
C) is an aggregate expenditure. 
D) is a sum of individual demand curves.

Question 18

Exhibit 14-3 Aggregate supply and demand curves
  
-As the aggregate demand curve shifts from AD₁ to AD₂ in Exhibit 14-3,the economy experiences:

Accepted Answer

A) cost-push inflation. 
B) demand-pull inflation. 
C) wage-push inflation. 
D) hyperinflation. 
A) cost-push inflation. 
B) demand-pull inflation. 
C) wage-push inflation. 
D) hyperinflation.

Question 19

Which of the following is not a reason for the downward slope of an aggregate demand curve?

Accepted Answer

A) Real balance effect. 
B) Real interest-rate effect. 
C) Net exports effect. 
D) Effect of changes in the composition of inputs for aggregate production function. 
A) Real balance effect. 
B) Real interest-rate effect. 
C) Net exports effect. 
D) Effect of changes in the composition of inputs for aggregate production function.

Question 20

An increase in the price level caused by a rightward shift of the aggregate demand curve is called:

Accepted Answer

A) cost-push inflation. 
B) supply-shock inflation. 
C) demand-shock inflation. 
D) demand-pull inflation. 
E) demand-push inflation. 
A) cost-push inflation. 
B) supply-shock inflation. 
C) demand-shock inflation. 
D) demand-pull inflation. 
E) demand-push inflation.

The net export effect is caused by:

A decrease in aggregate supply will tend to cause the price level to:

The interest-rate effect predicts that higher prices:

Exhibit 14-2 Aggregate demand and supply -In Exhibit 14-2,if aggregate demand shifts from AD₂ to AD₁,real GDP will:

According to the Keynesian model:

The pre-Keynesian or classical economic theory predicted that in the long run the economy would experience:

The aggregate demand curve:

Aggregate supply increases when:

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

A large decrease in Australia's share market index may cause:

Classical economists believed that:

The aggregate supply curve relating the price level to real GDP has three distinguishing segments.Which one of the following indicates the segments?

In the aggregate demand and aggregate supply model:

The aggregate supply curve will shift to the right when the:

Which of the following are the components of the aggregate demand curve?

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?

The consumption function:

Exhibit 14-3 Aggregate supply and demand curves -As the aggregate demand curve shifts from AD₁ to AD₂ in Exhibit 14-3,the economy experiences:

Which of the following is not a reason for the downward slope of an aggregate demand curve?

An increase in the price level caused by a rightward shift of the aggregate demand curve is called:

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

The net export effect is caused by:

A decrease in aggregate supply will tend to cause the price level to:

The interest-rate effect predicts that higher prices:

Exhibit 14-2 Aggregate demand and supply -In Exhibit 14-2,if aggregate demand shifts from AD₂ to AD₁,real GDP will:

According to the Keynesian model:

The pre-Keynesian or classical economic theory predicted that in the long run the economy would experience:

The aggregate demand curve:

Aggregate supply increases when:

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

A large decrease in Australia's share market index may cause:

Classical economists believed that:

The aggregate supply curve relating the price level to real GDP has three distinguishing segments.Which one of the following indicates the segments?

In the aggregate demand and aggregate supply model:

The aggregate supply curve will shift to the right when the:

Which of the following are the components of the aggregate demand curve?

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?

The consumption function:

Exhibit 14-3 Aggregate supply and demand curves -As the aggregate demand curve shifts from AD₁ to AD₂ in Exhibit 14-3,the economy experiences:

Which of the following is not a reason for the downward slope of an aggregate demand curve?

An increase in the price level caused by a rightward shift of the aggregate demand curve is called:

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