Question 1

Rising oil prices in the U.S. during the 1970s caused the economy's

Accepted Answer

A)  aggregate supply curve to shift to the right 
B)  aggregate supply curve to shift to the left 
C)  aggregate demand curve to become vertical 
D)  aggregate demand curve to become horizontal 
A)  aggregate supply curve to shift to the right 
B)  aggregate supply curve to shift to the left 
C)  aggregate demand curve to become vertical 
D)  aggregate demand curve to become horizontal

Question 2

According to the wealth effect, a decrease in the average price level increases the purchasing power of people's cash and checking account balances, and therefore makes people richer so they will purchase more goods and services.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following will cause the aggregate supply curve to shift to the right?

Accepted Answer

A)  increases in wages and salaries paid to employees 
B)  increases in the prices of oil and natural gas 
C)  increases in taxes for businesses 
D)  new work rules that increase the productivity of labor 
A)  increases in wages and salaries paid to employees 
B)  increases in the prices of oil and natural gas 
C)  increases in taxes for businesses 
D)  new work rules that increase the productivity of labor

Question 4

Suppose that the economy's marginal propensity to consume is 0.67. Assuming that prices are constant, a $200 million increase in investment spending would increase equilibrium real GDP by

Accepted Answer

A)  $200 million 
B)  $450 million 
C)  $525 million 
D)  $600 million 
A)  $200 million 
B)  $450 million 
C)  $525 million 
D)  $600 million

Question 5

According to Say's Law,

Accepted Answer

A)  whatever is produced would create the income necessary to purchase that production 
B)  the government should intervene in the economy to combat a recession but not inflation 
C)  downward adjustments in wages would guarantee that everyone who wanted a job will have a job 
D)  to clear the market of any excess supply, firms would be willing to accept price reductions 
A)  whatever is produced would create the income necessary to purchase that production 
B)  the government should intervene in the economy to combat a recession but not inflation 
C)  downward adjustments in wages would guarantee that everyone who wanted a job will have a job 
D)  to clear the market of any excess supply, firms would be willing to accept price reductions

Question 6

Stagflation is the result of a leftward shift in the economy's aggregate supply curve.

Accepted Answer

A) True 
 B)False

Question 7

To bring an economy out of a recession or depression, Keynes recommended that the government

Accepted Answer

A)  provide ceilings on interest rates paid by consumers and business 
B)  increase spending and make more money available for loans 
C)  increase taxes to decrease consumption and increase saving 
D)  regulate the price and output levels of major corporations 
A)  provide ceilings on interest rates paid by consumers and business 
B)  increase spending and make more money available for loans 
C)  increase taxes to decrease consumption and increase saving 
D)  regulate the price and output levels of major corporations

Question 8

Suppose that entrepreneurs develop new technologies that increase the economy's productivity. As a result, the aggregate supply curve would

Accepted Answer

A)  shift to the right 
B)  shift to the left 
C)  become horizontal 
D)  become vertical 
A)  shift to the right 
B)  shift to the left 
C)  become horizontal 
D)  become vertical

Question 9

Because of dwindling political tensions with China, the U.S. government reduces its expenditures on missiles and jet aircraft. Therefore, the

Accepted Answer

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

Question 10

Suppose that the economy's marginal propensity to save is 0.2. Assuming that prices are constant, a $30 million decrease in net exports would decrease equilibrium real GDP by

Accepted Answer

A)  $60 million 
B)  $90 million 
C)  $120 million 
D)  $150 million 
A)  $60 million 
B)  $90 million 
C)  $120 million 
D)  $150 million

Question 11

The Information Age technology revolution is causing many businesses to add new capital and improve their productivity. Focusing just on this effect on businesses, the long-run economic impact would be to

Accepted Answer

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

Question 12

Suppose that the economy's marginal propensity to consume is 0.75. Assuming that prices are constant, a $175 million decrease in government purchases of goods and services would decrease equilibrium real GDP by

Accepted Answer

A)  $500 million 
B)  $600 million 
C)  $700 million 
D)  $800 million 
A)  $500 million 
B)  $600 million 
C)  $700 million 
D)  $800 million

Question 13

An increase in aggregate demand will increase the economy's price level, but not the level of real output, if the aggregate supply curve is vertical.

Accepted Answer

A) True 
 B)False

Question 14

Keynes' analysis showed that ______ were necessary for full employment and economic growth.

Accepted Answer

A)  inflexible prices 
B)  inflexible wages 
C)  high interest rates for consumers 
D)  high levels of aggregate demand 
A)  inflexible prices 
B)  inflexible wages 
C)  high interest rates for consumers 
D)  high levels of aggregate demand

Question 15

An increase in aggregate demand results from a decrease in taxes on households.

Accepted Answer

A) True 
 B)False

Question 16

According to John Maynard Keynes, the market economy automatically adjusts to ensure the full employment of its resources.

Accepted Answer

A) True 
 B)False

Question 17

One of the causes of the Great Depression was the dramatic drop in industrial production in the mid 1920's.

Accepted Answer

A) True 
 B)False

Question 18

According to John Maynard Keynes, prices and wages are rather inflexible in a downward direction because powerful labor unions and corporations will resist wage and price reductions during an economic slump.

Accepted Answer

A) True 
 B)False

Question 19

An increase in aggregate demand will result in the greatest increase in the price level when the aggregate supply curve is

Accepted Answer

A)  horizontal 
B)  downward sloping 
C)  upward sloping 
D)  vertical 
A)  horizontal 
B)  downward sloping 
C)  upward sloping 
D)  vertical

Question 20

The formula for the multiplier is

Accepted Answer

A)  1 / MPC 
B)  1 / (1 - MP
C)  
C)  1 + MPC 
D)  1 - MPC 
A)  1 / MPC 
B)  1 / (1 - MP
C)  
C)  1 + MPC 
D)  1 - MPC

Rising oil prices in the U.S. during the 1970s caused the economy's

According to the wealth effect, a decrease in the average price level increases the purchasing power of people's cash and checking account balances, and therefore makes people richer so they will purchase more goods and services.

Which of the following will cause the aggregate supply curve to shift to the right?

Suppose that the economy's marginal propensity to consume is 0.67. Assuming that prices are constant, a $200 million increase in investment spending would increase equilibrium real GDP by

According to Say's Law,

Stagflation is the result of a leftward shift in the economy's aggregate supply curve.

To bring an economy out of a recession or depression, Keynes recommended that the government

Suppose that entrepreneurs develop new technologies that increase the economy's productivity. As a result, the aggregate supply curve would

Because of dwindling political tensions with China, the U.S. government reduces its expenditures on missiles and jet aircraft. Therefore, the

Suppose that the economy's marginal propensity to save is 0.2. Assuming that prices are constant, a $30 million decrease in net exports would decrease equilibrium real GDP by

The Information Age technology revolution is causing many businesses to add new capital and improve their productivity. Focusing just on this effect on businesses, the long-run economic impact would be to

Suppose that the economy's marginal propensity to consume is 0.75. Assuming that prices are constant, a $175 million decrease in government purchases of goods and services would decrease equilibrium real GDP by

An increase in aggregate demand will increase the economy's price level, but not the level of real output, if the aggregate supply curve is vertical.

Keynes' analysis showed that ______ were necessary for full employment and economic growth.

An increase in aggregate demand results from a decrease in taxes on households.

According to John Maynard Keynes, the market economy automatically adjusts to ensure the full employment of its resources.

One of the causes of the Great Depression was the dramatic drop in industrial production in the mid 1920's.

According to John Maynard Keynes, prices and wages are rather inflexible in a downward direction because powerful labor unions and corporations will resist wage and price reductions during an economic slump.

An increase in aggregate demand will result in the greatest increase in the price level when the aggregate supply curve is

The formula for the multiplier is

Scarcity and Choice

Market Transactions: Demand and Supply Analysis

Demand and Supply Applications

Production and the Costs of Production

Competition and Monopoly: Virtues and Vices

Imperfect Competition

Labor Markets

Government and Markets

The Mixed Economy of the United States

Gross Domestic Product and Economic Growth

The Business Cycle, Unemployment, and Inflation

Fiscal Policy and the Federal Budget

Money and the Banking System

The Federal Reserve and Monetary Policy

The United States and the Global Economy

International Finance

Economic Systems and Developing Countries

Filters

Exam 12: Macroeconomic Instability: Aggregate Demand and Aggregate Supply

Rising oil prices in the U.S. during the 1970s caused the economy's

According to the wealth effect, a decrease in the average price level increases the purchasing power of people's cash and checking account balances, and therefore makes people richer so they will purchase more goods and services.

Which of the following will cause the aggregate supply curve to shift to the right?

Suppose that the economy's marginal propensity to consume is 0.67. Assuming that prices are constant, a $200 million increase in investment spending would increase equilibrium real GDP by

According to Say's Law,

Stagflation is the result of a leftward shift in the economy's aggregate supply curve.

To bring an economy out of a recession or depression, Keynes recommended that the government

Suppose that entrepreneurs develop new technologies that increase the economy's productivity. As a result, the aggregate supply curve would

Because of dwindling political tensions with China, the U.S. government reduces its expenditures on missiles and jet aircraft. Therefore, the

Suppose that the economy's marginal propensity to save is 0.2. Assuming that prices are constant, a $30 million decrease in net exports would decrease equilibrium real GDP by

The Information Age technology revolution is causing many businesses to add new capital and improve their productivity. Focusing just on this effect on businesses, the long-run economic impact would be to

Suppose that the economy's marginal propensity to consume is 0.75. Assuming that prices are constant, a $175 million decrease in government purchases of goods and services would decrease equilibrium real GDP by

An increase in aggregate demand will increase the economy's price level, but not the level of real output, if the aggregate supply curve is vertical.

Keynes' analysis showed that ______ were necessary for full employment and economic growth.

An increase in aggregate demand results from a decrease in taxes on households.

According to John Maynard Keynes, the market economy automatically adjusts to ensure the full employment of its resources.

One of the causes of the Great Depression was the dramatic drop in industrial production in the mid 1920's.

According to John Maynard Keynes, prices and wages are rather inflexible in a downward direction because powerful labor unions and corporations will resist wage and price reductions during an economic slump.

An increase in aggregate demand will result in the greatest increase in the price level when the aggregate supply curve is

The formula for the multiplier is

Scarcity and Choice

Market Transactions: Demand and Supply Analysis

Demand and Supply Applications

Production and the Costs of Production

Competition and Monopoly: Virtues and Vices

Imperfect Competition

Labor Markets

Government and Markets

The Mixed Economy of the United States

Gross Domestic Product and Economic Growth

The Business Cycle, Unemployment, and Inflation

Fiscal Policy and the Federal Budget

Money and the Banking System

The Federal Reserve and Monetary Policy

The United States and the Global Economy

International Finance

Economic Systems and Developing Countries

Filters