Question 1

-In Table 9-1, inventories will be increasing as long as output is above

Accepted Answer

A) 1,000. 
B) 1,500. 
C) 2,000. 
D) 3,000. 
A) 1,000. 
B) 1,500. 
C) 2,000. 
D) 3,000.

Question 2

Why does the aggregate demand curve slope downward?

Accepted Answer

The effect of higher prices on consumer

Question 3

An expenditure schedule shows the relationship between GDP and total output.

Accepted Answer

A) True 
 B)False

Question 4

The slope of the aggregate demand curve illustrates that real GDP demanded will increase when

Accepted Answer

A) the price level rises. 
B) the price level falls. 
C) real income rises. 
D) real income falls. 
A) the price level rises. 
B) the price level falls. 
C) real income rises. 
D) real income falls.

Question 5

If the U.S.economy is experiencing falling price levels, the

Accepted Answer

A) expenditure schedule will shift downward. 
B) expenditure schedule will shift upward. 
C) slope of the expenditure schedule increases. 
D) slope of the expenditure schedule decreases. 
A) expenditure schedule will shift downward. 
B) expenditure schedule will shift upward. 
C) slope of the expenditure schedule increases. 
D) slope of the expenditure schedule decreases.

Question 6

High unemployment and high rates of inflation are examples of coordination successes.

Accepted Answer

A) True 
 B)False

Question 7

Given the slope of the aggregate demand curve, real GDP demanded will decrease when

Accepted Answer

A) real income rises. 
B) real income falls. 
C) the price level falls. 
D) the price level rises. 
A) real income rises. 
B) real income falls. 
C) the price level falls. 
D) the price level rises.

Question 8

The slope of the aggregate demand curve illustrates that as the price level rises,

Accepted Answer

A) real GDP demanded decreases. 
B) real GDP demanded increases. 
C) the aggregate demand curve shifts rightward. 
D) the aggregate demand curve shifts leftward. 
A) real GDP demanded decreases. 
B) real GDP demanded increases. 
C) the aggregate demand curve shifts rightward. 
D) the aggregate demand curve shifts leftward.

Question 9

The multiplier can be expressed as the ratio of the change in Y over the change in I.

Accepted Answer

A) True 
 B)False

Question 10

If total spending is greater than the value of output, firms will

Accepted Answer

A) cut prices. 
B) decrease production levels. 
C) tend to raise prices. 
D) see inventories rise. 
A) cut prices. 
B) decrease production levels. 
C) tend to raise prices. 
D) see inventories rise.

Question 11

Figure 9-4
  
-In Figure 9-4, if the economy faces an inflationary gap, what must happen to reach potential GDP?

Accepted Answer

A) The expenditure level must rise and/or the price level must rise. 
B) The expenditure level must rise and/or the price level must fall. 
C) The expenditure level must fall and/or the price level must fall. 
D) The expenditure level must fall and/or the price level must rise. 
A) The expenditure level must rise and/or the price level must rise. 
B) The expenditure level must rise and/or the price level must fall. 
C) The expenditure level must fall and/or the price level must fall. 
D) The expenditure level must fall and/or the price level must rise.

Question 12

Using the standard 45-degree line diagram, how does an increase in autonomous consumption effect the expenditure schedule?

Accepted Answer

A) It shifts the expenditure schedule downward. 
B) It shifts the expenditure schedule upward. 
C) It increases the slope of the expenditure schedule. 
D) It decreases the slope of the expenditure schedule. 
A) It shifts the expenditure schedule downward. 
B) It shifts the expenditure schedule upward. 
C) It increases the slope of the expenditure schedule. 
D) It decreases the slope of the expenditure schedule.

Question 13

The full employment level of GDP is sometimes referred to as "potential GDP."

Accepted Answer

A) True 
 B)False

Question 14

If savings exceeds investment at full employment, demand will fall short of total output.

Accepted Answer

A) True 
 B)False

Question 15

Figure 9-4
  
-In Figure 9-4, which expenditure level will cause an inflationary gap?

Accepted Answer

A) 1 
B) 2 
C) 3 
D) There will be no inflationary gap. 
A) 1 
B) 2 
C) 3 
D) There will be no inflationary gap.

Question 16

Figure 9-5
  
-In Figure 9-5, if the second round effect of an increase in autonomous spending of $100,000 is $75,000, then the multiplier is

Accepted Answer

A) 400,000. 
B) 6. 
C) 4. 
D) 4/5. 
A) 400,000. 
B) 6. 
C) 4. 
D) 4/5.

Question 17

The basic reason for the multiplier effect is that, when you spend money,

Accepted Answer

A) another person receives income. 
B) another person must pay for it. 
C) your money balances are reduced. 
D) your net worth decreases. 
A) another person receives income. 
B) another person must pay for it. 
C) your money balances are reduced. 
D) your net worth decreases.

Question 18

According to Baumol and Blinder, the real-world multiplier will be smaller than 1/(1 − MPC) because the 1/(1 − MPC) measure is based on

Accepted Answer

A) a model that ignores inflation associated with the expansion of income. 
B) a model that ignores taxes that tend to change as income changes. 
C) a model that ignores the effects of international trade. 
D) all of the above. 
A) a model that ignores inflation associated with the expansion of income. 
B) a model that ignores taxes that tend to change as income changes. 
C) a model that ignores the effects of international trade. 
D) all of the above.

Question 19

If inventories are being depleted, firms may respond by cutting prices.

Accepted Answer

A) True 
 B)False

Question 20

When GDP decreases, consumption spending increases.

Accepted Answer

A) True 
 B)False

Exam 26: Demand-Side Equilibrium: Unemployment or Inflation

-In Table 9-1, inventories will be increasing as long as output is above

Why does the aggregate demand curve slope downward?

An expenditure schedule shows the relationship between GDP and total output.

The slope of the aggregate demand curve illustrates that real GDP demanded will increase when

If the U.S.economy is experiencing falling price levels, the

High unemployment and high rates of inflation are examples of coordination successes.

Given the slope of the aggregate demand curve, real GDP demanded will decrease when

The slope of the aggregate demand curve illustrates that as the price level rises,

The multiplier can be expressed as the ratio of the change in Y over the change in I.

If total spending is greater than the value of output, firms will

Figure 9-4 -In Figure 9-4, if the economy faces an inflationary gap, what must happen to reach potential GDP?

Using the standard 45-degree line diagram, how does an increase in autonomous consumption effect the expenditure schedule?

The full employment level of GDP is sometimes referred to as "potential GDP."

If savings exceeds investment at full employment, demand will fall short of total output.

Figure 9-4 -In Figure 9-4, which expenditure level will cause an inflationary gap?

Figure 9-5 -In Figure 9-5, if the second round effect of an increase in autonomous spending of $100,000 is $75,000, then the multiplier is

The basic reason for the multiplier effect is that, when you spend money,

According to Baumol and Blinder, the real-world multiplier will be smaller than 1/(1 − MPC) because the 1/(1 − MPC) measure is based on

If inventories are being depleted, firms may respond by cutting prices.

When GDP decreases, consumption spending increases.

What Is Economics

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: an Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: the Importance of Marginal Analysis

Securities: Business Finance and the Economy: the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

Monopoly

Between Competition and Monopoly

Limiting Market Power: Regulation and Antitrust

The Case for Free Markets: the Price System

The Shortcomings of Free Markets

Externalities, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: the Human Inputs

Poverty, Inequality, and Discrimination

Is Useconomic Leadership Threatened

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Bringing in the Supply Side: Unemployment and Inflation

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

He Financial Crisis and the Great Recession

The Debate Over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade-Off Between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder

Exchange Rates and the Macroeconomy

Filters