Question 1

Aggregate supply

Accepted Answer

A)  is the total amount of raw materials available in an economy. 
B)  is the overall wealth within an economy. 
C)  is the total amount of money circulating in an economy. 
D)  is the total of all planned production in an economy. 
A)  is the total amount of raw materials available in an economy. 
B)  is the overall wealth within an economy. 
C)  is the total amount of money circulating in an economy. 
D)  is the total of all planned production in an economy.

Question 2

The total of all planned production for the entire economy is known as

Accepted Answer

A)  aggregate expenditures. 
B)  aggregate demand. 
C)  aggregate supply. 
D)  aggregate inflation. 
A)  aggregate expenditures. 
B)  aggregate demand. 
C)  aggregate supply. 
D)  aggregate inflation.

Question 3

-In the above figure, if the price level is 150,

Accepted Answer

A)  total planned production exceeds total expenditures. 
B)  total expenditures exceed total planned expenditures. 
C)  total planned production equals total expenditures. 
D)  total planned production is less than total expenditures. 
A)  total planned production exceeds total expenditures. 
B)  total expenditures exceed total planned expenditures. 
C)  total planned production equals total expenditures. 
D)  total planned production is less than total expenditures.

Question 4

Supply-side inflation is caused by

Accepted Answer

A)  a decrease in aggregate supply and no change in aggregate demand. 
B)  a decrease in aggregate demand and no change in aggregate supply. 
C)  an increase in aggregate supply and no change in aggregate demand. 
D)  an increase in aggregate demand and no change in aggregate supply. 
A)  a decrease in aggregate supply and no change in aggregate demand. 
B)  a decrease in aggregate demand and no change in aggregate supply. 
C)  an increase in aggregate supply and no change in aggregate demand. 
D)  an increase in aggregate demand and no change in aggregate supply.

Question 5

The aggregate demand curve would shift to the right as a result of

Accepted Answer

A)  a drop in the price level. 
B)  tax increases. 
C)  an increase in the U.S. real interest rate. 
D)  a decrease in the amount of money in circulation. 
A)  a drop in the price level. 
B)  tax increases. 
C)  an increase in the U.S. real interest rate. 
D)  a decrease in the amount of money in circulation.

Question 6

How can a country experience economic growth and stable prices?

Accepted Answer

A country can experience economic growth

Question 7

The long run aggregate supply curve (LRAS) also represents

Accepted Answer

A)  the full-information level of output. 
B)  the full-employment level of output. 
C)  the full-adjustment level of output. 
D)  all of the above. 
A)  the full-information level of output. 
B)  the full-employment level of output. 
C)  the full-adjustment level of output. 
D)  all of the above.

Question 8

Economic growth takes place

Accepted Answer

A)  only when both aggregate demand and aggregate supply increase. 
B)  when aggregate supply increases. 
C)  when aggregate demand decreases. 
D)  only if the price level is constant or rising. 
A)  only when both aggregate demand and aggregate supply increase. 
B)  when aggregate supply increases. 
C)  when aggregate demand decreases. 
D)  only if the price level is constant or rising.

Question 9

Aggregate demand is

Accepted Answer

A)  the horizontal summation of all demand curves for a product. 
B)  the sum of all planned expenditures for the economy. 
C)  the total quantity of all goods sold in an economy in a year. 
D)  the horizontal summation of all demand curves for state, local, and federal governments and business firms. 
A)  the horizontal summation of all demand curves for a product. 
B)  the sum of all planned expenditures for the economy. 
C)  the total quantity of all goods sold in an economy in a year. 
D)  the horizontal summation of all demand curves for state, local, and federal governments and business firms.

Question 10

The curve that displays total planned real spending on goods and services at each price level by households, businesses, the government, and foreign residents is called

Accepted Answer

A)  the aggregate supply curve. 
B)  the aggregate demand curve. 
C)  the price level curve. 
D)  the employment curve. 
A)  the aggregate supply curve. 
B)  the aggregate demand curve. 
C)  the price level curve. 
D)  the employment curve.

Question 11

The U. S. has experienced inflation every year since 1959 due to

Accepted Answer

A)  a sustained decrease in aggregate demand. 
B)  a sustained increase in aggregate demand accompanied by an even larger decrease in LRAS. 
C)  a sustained decrease in aggregate supply. 
D)  a sustained increase in aggregate supply accompanied by an even larger increase in aggregate demand. 
A)  a sustained decrease in aggregate demand. 
B)  a sustained increase in aggregate demand accompanied by an even larger decrease in LRAS. 
C)  a sustained decrease in aggregate supply. 
D)  a sustained increase in aggregate supply accompanied by an even larger increase in aggregate demand.

Question 12

What is the interest rate effect of an increase in the price level?

Accepted Answer

Higher price levels indirectly increase

Question 13

A weakening in consumer confidence causes a

Accepted Answer

A)  shift of the aggregate demand curve to the right. 
B)  shift of the aggregate demand curve to the left. 
C)  movement up along the aggregate demand curve. 
D)  movement down along the aggregate demand curve. 
A)  shift of the aggregate demand curve to the right. 
B)  shift of the aggregate demand curve to the left. 
C)  movement up along the aggregate demand curve. 
D)  movement down along the aggregate demand curve.

Question 14

The aggregate demand curve

Accepted Answer

A)  is vertical at the full-employment level of output. 
B)  is horizontal at the full-employment level of output. 
C)  is downward sloping. 
D)  is upward sloping. 
A)  is vertical at the full-employment level of output. 
B)  is horizontal at the full-employment level of output. 
C)  is downward sloping. 
D)  is upward sloping.

Question 15

Another term for the real-balance effect is

Accepted Answer

A)  the substitution effect. 
B)  the wealth effect. 
C)  the indirect effect. 
D)  the interest rate effect. 
A)  the substitution effect. 
B)  the wealth effect. 
C)  the indirect effect. 
D)  the interest rate effect.

Question 16

All of the following explain the downward slope of the aggregate demand curve EXCEPT

Accepted Answer

A)  changes in the stock of real wealth held by individuals. 
B)  the effect of changing interest rates on the quantity demanded of interest-rate-sensitive goods. 
C)  the availability of foreign substitute goods. 
D)  the presence of unused production capacity and unemployment. 
A)  changes in the stock of real wealth held by individuals. 
B)  the effect of changing interest rates on the quantity demanded of interest-rate-sensitive goods. 
C)  the availability of foreign substitute goods. 
D)  the presence of unused production capacity and unemployment.

Question 17

What happens when the price level falls?

Accepted Answer

A)  Total planned real spending remains constant. 
B)  Total planned real spending increases. 
C)  Total planned real spending also falls. 
D)  Planned real spending on goods increases but planned real spending on services falls. 
A)  Total planned real spending remains constant. 
B)  Total planned real spending increases. 
C)  Total planned real spending also falls. 
D)  Planned real spending on goods increases but planned real spending on services falls.

Question 18

When a higher price level generates an increase in the interest rate that induces consumers to borrow less and buy less, this chain of events is referred to as

Accepted Answer

A)  the real-balance effect. 
B)  the interest rate effect. 
C)  the open economy effect. 
D)  the price level effect. 
A)  the real-balance effect. 
B)  the interest rate effect. 
C)  the open economy effect. 
D)  the price level effect.

Question 19

When total planned real expenditures change due to changes in the cost of borrowing that result from variations in the price level, this is known as the

Accepted Answer

A)  interest rate effect. 
B)  real-balance effect. 
C)  open economy effect. 
D)  aggregate balances effect. 
A)  interest rate effect. 
B)  real-balance effect. 
C)  open economy effect. 
D)  aggregate balances effect.

Question 20

If the price level increases, then

Accepted Answer

A)  the exchange rate will increase, causing U.S. goods to become cheaper and increasing total planned real expenditures. 
B)  imports increase but exports do not change. Therefore, there is no effect on total planned real expenditures. 
C)  foreign residents buy fewer U.S. goods, leaving more goods for U.S. residents and an increase in total planned real production by firms. 
D)  domestic goods are more expensive relative to foreign goods, which reduces total planed real expenditures. 
A)  the exchange rate will increase, causing U.S. goods to become cheaper and increasing total planned real expenditures. 
B)  imports increase but exports do not change. Therefore, there is no effect on total planned real expenditures. 
C)  foreign residents buy fewer U.S. goods, leaving more goods for U.S. residents and an increase in total planned real production by firms. 
D)  domestic goods are more expensive relative to foreign goods, which reduces total planed real expenditures.

Exam 10: Real GDP and the Price Level in the Long Run

Aggregate supply

The total of all planned production for the entire economy is known as

-In the above figure, if the price level is 150,

Supply-side inflation is caused by

The aggregate demand curve would shift to the right as a result of

How can a country experience economic growth and stable prices?

The long run aggregate supply curve (LRAS) also represents

Economic growth takes place

Aggregate demand is

The curve that displays total planned real spending on goods and services at each price level by households, businesses, the government, and foreign residents is called

The U. S. has experienced inflation every year since 1959 due to

What is the interest rate effect of an increase in the price level?

A weakening in consumer confidence causes a

The aggregate demand curve

Another term for the real-balance effect is

All of the following explain the downward slope of the aggregate demand curve EXCEPT

What happens when the price level falls?

When a higher price level generates an increase in the interest rate that induces consumers to borrow less and buy less, this chain of events is referred to as

When total planned real expenditures change due to changes in the cost of borrowing that result from variations in the price level, this is known as the

If the price level increases, then

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Measuring the Economys Performance

Global Economic Growth and Development

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money, Banking, and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Demand and Supply Elasticity

Consumer Choice

Rents, Profits, and the Financial Environment of Business

The Firm: Cost and Output Determination

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Regulation and Antitrust Policy in a Globalized Economy

The Labor Market: Demand, Supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, Poverty, and Health Care

Environmental Economics

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

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