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

The net exports effect is the ____ relationship between net exports and the price level of an economy.

Accepted Answer

A)  inverse 
B)  independent 
C)  direct 
D)  linear 
A)  inverse 
B)  independent 
C)  direct 
D)  linear

Question 3

The effect of an increase in aggregate supply is a(n):

Accepted Answer

A)  increase in the general level of prices and a decrease in real output. 
B)  increase in the general level of prices and an increase in real output. 
C)  decrease in the general level of prices and a decrease in real output. 
D)  decrease in the general level of prices and an increase in real output. 
A)  increase in the general level of prices and a decrease in real output. 
B)  increase in the general level of prices and an increase in real output. 
C)  decrease in the general level of prices and a decrease in real output. 
D)  decrease in the general level of prices and an increase in real output.

Question 4

A rightward shift in the aggregate demand curve can be caused by an increase in:

Accepted Answer

A)  the price level. 
B)  business investment spending. 
C)  taxes. 
D)  production costs. 
A)  the price level. 
B)  business investment spending. 
C)  taxes. 
D)  production costs.

Question 5

Given aggregate demand,a decrease in aggregate supply creates:

Accepted Answer

A)  a higher price level and a higher GDP level. 
B)  a lower price level and a higher GDP level. 
C)  cost-push inflation. 
D)  demand-pull inflation. 
A)  a higher price level and a higher GDP level. 
B)  a lower price level and a higher GDP level. 
C)  cost-push inflation. 
D)  demand-pull inflation.

Question 6

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

Accepted Answer

A)  Real balances effect 
B)  Interest-rate effect 
C)  Net exports effect 
D)  Government spending effect 
A)  Real balances effect 
B)  Interest-rate effect 
C)  Net exports effect 
D)  Government spending effect

Question 7

Advances in technology will shift the aggregate:

Accepted Answer

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

Question 8

The aggregate demand curve indicates the relationship between:

Accepted Answer

A)  the real wage rate and the quality of resources demanded by producers of goods and services. 
B)  the interest rate and the amount of loanable funds demanded by borrowers. 
C)  the natural rate of unemployment and the demand for goods and services when the economy is in long-run equilibrium. 
D)  the general price level and the aggregate quantity of goods and services demanded. 
A)  the real wage rate and the quality of resources demanded by producers of goods and services. 
B)  the interest rate and the amount of loanable funds demanded by borrowers. 
C)  the natural rate of unemployment and the demand for goods and services when the economy is in long-run equilibrium. 
D)  the general price level and the aggregate quantity of goods and services demanded.

Question 9

Exhibit 14-2 Aggregate supply and demand curves
  
-A shift in the aggregate supply curve in Exhibit 14-2 from AS₁ to AS₂ would be caused by a(n):

Accepted Answer

A)  decrease in input prices. 
B)  increase in input prices. 
C)  increase in real GDP. 
D)  decrease in real output. 
A)  decrease in input prices. 
B)  increase in input prices. 
C)  increase in real GDP. 
D)  decrease in real output.

Question 10

In the upward-sloping segment of the aggregate supply curve,

Accepted Answer

A)  increases in output are linked to decreases in the price level. 
B)  increasing prices drag down resource costs. 
C)  producers can hire more workers without having to raise the wage rate. 
D)  the economy can increase aggregate supply without prices going up. 
E)  firms are willing to pay higher wages to get more labor. 
A)  increases in output are linked to decreases in the price level. 
B)  increasing prices drag down resource costs. 
C)  producers can hire more workers without having to raise the wage rate. 
D)  the economy can increase aggregate supply without prices going up. 
E)  firms are willing to pay higher wages to get more labor.

Question 11

The real balances effect occurs because a higher price level will reduce the real value of people's:

Accepted Answer

A)  financial assets. 
B)  wages. 
C)  unpaid debt. 
D)  physical investments. 
A)  financial assets. 
B)  wages. 
C)  unpaid debt. 
D)  physical investments.

Question 12

To illustrate the classical argument that "supply creates its own demand," the aggregate supply curve should be drawn:

Accepted Answer

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

Question 13

In the aggregate demand and supply model,the:

Accepted Answer

A)  aggregate supply curve is horizontal at full-employment real GDP. 
B)  vertical axis measures real GDP. 
C)  vertical axis measures the average price level. 
D)  All of the above. 
E)  None of the above. 
A)  aggregate supply curve is horizontal at full-employment real GDP. 
B)  vertical axis measures real GDP. 
C)  vertical axis measures the average price level. 
D)  All of the above. 
E)  None of the above.

Question 14

Which of the following would cause a rightward shift in the aggregate supply curve?

Accepted Answer

A)  Larger-than-expected wage increases. 
B)  Lower oil prices. 
C)  Increased investment spending. 
D)  Greater government regulation. 
A)  Larger-than-expected wage increases. 
B)  Lower oil prices. 
C)  Increased investment spending. 
D)  Greater government regulation.

Question 15

If aggregate demand equals aggregate supply,macroeconomic equilibrium exists.

Accepted Answer

A) True 
 B)False

Question 16

____ inflation can be explained by an ____ shift in the aggregate ____ curve.

Accepted Answer

A)  Demand-pull, outward, demand 
B)  Cost-push, outward, supply 
C)  Demand-pull, outward, supply, 
D)  Cost-push, outward, supply. 
A)  Demand-pull, outward, demand 
B)  Cost-push, outward, supply 
C)  Demand-pull, outward, supply, 
D)  Cost-push, outward, supply.

Question 17

According to the interest rate effect,as the price level:

Accepted Answer

A)  rises, people feel poorer and buy less. 
B)  rises, United States products become more expensive and foreigners buy less U.S. goods. 
C)  rises, interest rates fall, and people buy less. 
D)  rises, interest rates rise, and people buy less. 
E)  falls, interest rates fall, and people buy less. 
A)  rises, people feel poorer and buy less. 
B)  rises, United States products become more expensive and foreigners buy less U.S. goods. 
C)  rises, interest rates fall, and people buy less. 
D)  rises, interest rates rise, and people buy less. 
E)  falls, interest rates fall, and people buy less.

Question 18

When price level in the United States rises,

Accepted Answer

A)  there is a increased demand for borrowed money. 
B)  producers' demand for new machinery increases, contributing to an increase in aggregate demand. 
C)  Americans tend to buy more foreign goods and services. 
D)  the French, Canadians, and Japanese would find our exports more attractive. 
E)  to replenish the value of your real wealth, you would save less and consume more. 
A)  there is a increased demand for borrowed money. 
B)  producers' demand for new machinery increases, contributing to an increase in aggregate demand. 
C)  Americans tend to buy more foreign goods and services. 
D)  the French, Canadians, and Japanese would find our exports more attractive. 
E)  to replenish the value of your real wealth, you would save less and consume more.

Question 19

The aggregate demand curve:

Accepted Answer

A)  would be little affected by a technological advancement. 
B)  shifts to the right when spending decreases. 
C)  shifts to the left when there is a decrease in taxes. 
D)  cannot move independently of the aggregate supply curve. 
E)  shifts to the right when there is an expectation that future income will fall. 
A)  would be little affected by a technological advancement. 
B)  shifts to the right when spending decreases. 
C)  shifts to the left when there is a decrease in taxes. 
D)  cannot move independently of the aggregate supply curve. 
E)  shifts to the right when there is an expectation that future income will fall.

Question 20

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.

Exam 14: Aggregate Demand and Supply

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

The net exports effect is the ____ relationship between net exports and the price level of an economy.

The effect of an increase in aggregate supply is a(n):

A rightward shift in the aggregate demand curve can be caused by an increase in:

Given aggregate demand,a decrease in aggregate supply creates:

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

Advances in technology will shift the aggregate:

The aggregate demand curve indicates the relationship between:

Exhibit 14-2 Aggregate supply and demand curves -A shift in the aggregate supply curve in Exhibit 14-2 from AS₁ to AS₂ would be caused by a(n):

In the upward-sloping segment of the aggregate supply curve,

The real balances effect occurs because a higher price level will reduce the real value of people's:

To illustrate the classical argument that "supply creates its own demand," the aggregate supply curve should be drawn:

In the aggregate demand and supply model,the:

Which of the following would cause a rightward shift in the aggregate supply curve?

If aggregate demand equals aggregate supply,macroeconomic equilibrium exists.

____ inflation can be explained by an ____ shift in the aggregate ____ curve.

According to the interest rate effect,as the price level:

When price level in the United States rises,

The aggregate demand curve:

In the aggregate demand and aggregate supply model,

Introducing the Economic Way of Thinking

A: Appendix: Applying Graphs to Economics

Production Possibilities,Opportunity Cost,and Economic Growth

Part 1: Market Demand and Supply

Part 2: Market Demand and Supply

Markets in Action

Price Elasticity of Demand

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets and Income Distribution

Gross Domestic Product

Business Cycles and Unemployment

Inflation

A: Appendix: The Self-Correcting Aggregate Demand and Supply Model

Fiscal Policy

The Public Sector

Federal Deficits,Surpluses,and the National Debt

Money and the Federal Reserve System

Money Creation

Monetary Policy

A: Appendix: Policy Disputes Using the Self-Correcting Aggregate Demand and Supply Model

International Trade and Finance

Economies in Transition

Growth and the Less-Developed Countries

Filters

inflation can be explained by an shift in the aggregate curve.