Question 1

Along the long-run aggregate supply curve,the level of RGDP supplied ____ with increases in the price level.

Accepted Answer

A)  does not change 
B)  increases 
C)  decreases slightly 
D)  decreases dramatically 
A)  does not change 
B)  increases 
C)  decreases slightly 
D)  decreases dramatically

Question 2

If the stock market continues a steady climb upwards,this ____ consumer confidence and wealth,leading to ____ consumption,and ____ aggregate demand.

Accepted Answer

A)  increases, decreased, increased 
B)  decreases, decreased, decreased 
C)  increases, increased, increased 
D)  increases, increased, decreased 
A)  increases, decreased, increased 
B)  decreases, decreased, decreased 
C)  increases, increased, increased 
D)  increases, increased, decreased

Question 3

Discuss the assumptions of both classical economists and Keynesian economists regarding price flexibility.What do these different assumptions imply about the views of each school of thought on the need for government intervention in order to return the economy to a long-run equilibrium and full employment?

Accepted Answer

Classical economists believe that prices

Question 4

The short-run equilibrium level of real output and the price level are determined by the intersection of the aggregate demand curve and the short-run aggregate supply curve.

Accepted Answer

A) True 
 B)False

Question 5

If exports rose and imports fell,

Accepted Answer

A)  AD would decrease. 
B)  AD would increase. 
C)  AD would be unaffected. 
D)  AD could either increase or decrease. 
A)  AD would decrease. 
B)  AD would increase. 
C)  AD would be unaffected. 
D)  AD could either increase or decrease.

Question 6

Which of the following expenditures would be counted as consumption in GDP accounts?

Accepted Answer

A)  Mary buys a new computer to check her e-mail and play computer games. 
B)  Mark buys a new computer for his medical economic consulting business. 
C)  Leslie, an EPA scientist, buys a new computer for her lab at work. 
D)  Juan leases a new computer for his graphic design company. 
A)  Mary buys a new computer to check her e-mail and play computer games. 
B)  Mark buys a new computer for his medical economic consulting business. 
C)  Leslie, an EPA scientist, buys a new computer for her lab at work. 
D)  Juan leases a new computer for his graphic design company.

Question 7

The shor-run aggregate supply curve is:

Accepted Answer

A)  a schedule showing the relationship between the price level and the quantity of real GDP supplied. 
B)  typically upward sloping. 
C)  relatively flat at low levels of output. 
D)  all of the above 
A)  a schedule showing the relationship between the price level and the quantity of real GDP supplied. 
B)  typically upward sloping. 
C)  relatively flat at low levels of output. 
D)  all of the above

Question 8

An increase in investment,combined with an increase in imports,would have what effect on aggregate demand?

Accepted Answer

A)  AD would increase. 
B)  AD would decrease. 
C)  AD would stay the same. 
D)  AD could either increase or decrease, depending on which change was of a greater magnitude. 
A)  AD would increase. 
B)  AD would decrease. 
C)  AD would stay the same. 
D)  AD could either increase or decrease, depending on which change was of a greater magnitude.

Question 9

The short-run aggregate supply curve shows the relationship between ____ and ____,holding all other factors constant.

Accepted Answer

A)  a price level, the quantity of real GDP supplied 
B)  price level, the supply of real GDP 
C)  nominal GDP, the price level of real GDP 
D)  the quantity of nominal GDP supplied, the price level 
A)  a price level, the quantity of real GDP supplied 
B)  price level, the supply of real GDP 
C)  nominal GDP, the price level of real GDP 
D)  the quantity of nominal GDP supplied, the price level

Question 10

The SRAS curve is ____ with real output levels that ____.

Accepted Answer

A)  upward sloping; vary positively with the price level 
B)  upward sloping; vary negatively with the price level 
C)  vertical; are equal to the natural level of real output at all price levels 
D)  vertical; can be either greater than or less than the natural level of real output 
A)  upward sloping; vary positively with the price level 
B)  upward sloping; vary negatively with the price level 
C)  vertical; are equal to the natural level of real output at all price levels 
D)  vertical; can be either greater than or less than the natural level of real output

Question 11

The short-run aggregate supply curve is drawn with:

Accepted Answer

A)  the price level on the vertical axis and real GDP on the horizontal axis. 
B)  the price level on the vertical axis and nominal GDP on the horizontal axis. 
C)  nominal GDP on the vertical axis and real GDP on the horizontal axis. 
D)  real GDP on the horizontal axis and the rate of unemployment on the vertical axis. 
A)  the price level on the vertical axis and real GDP on the horizontal axis. 
B)  the price level on the vertical axis and nominal GDP on the horizontal axis. 
C)  nominal GDP on the vertical axis and real GDP on the horizontal axis. 
D)  real GDP on the horizontal axis and the rate of unemployment on the vertical axis.

Question 12

An increase in net exports would lead to an increase aggregate demand but would not lead to an increase in aggregate supply.

Accepted Answer

A) True 
 B)False

Question 13

Investment will decrease if business taxes ____,real interest rates ____,or if business confidence ____.

Accepted Answer

A)  increase, increase, increases 
B)  decrease, decrease, decreases 
C)  increase, increase, decreases 
D)  decrease, decrease, increases 
A)  increase, increase, increases 
B)  decrease, decrease, decreases 
C)  increase, increase, decreases 
D)  decrease, decrease, increases

Question 14

The short-run aggregate supply curve is positively sloped.Which of the following is not one of the explanations given in the text?

Accepted Answer

A)  the misperception effect 
B)  the profit effect 
C)  market effect 
D)  All of the above are explanations of the profit effect. 
A)  the misperception effect 
B)  the profit effect 
C)  market effect 
D)  All of the above are explanations of the profit effect.

Question 15

Keynesian economists believe that the economy will:

Accepted Answer

A)  return to the full-employment level of output very quickly. 
B)  return to the full-employment level of output eventually. 
C)  not return to the full-employment level of output unless the government intervenes. 
D)  not return to the full-employment level of output unless interest rates increase. 
A)  return to the full-employment level of output very quickly. 
B)  return to the full-employment level of output eventually. 
C)  not return to the full-employment level of output unless the government intervenes. 
D)  not return to the full-employment level of output unless interest rates increase.

Question 16

The long-run level of RGDP changes whenever the aggregate demand curve shifts.

Accepted Answer

A) True 
 B)False

Question 17

Discuss the impact of efficiency wages on unemployment and wage inflexibility.

Accepted Answer

Because the efficiency wage rate is grea

Question 18

Keynes believed that prices were ____ and that recessions would be relatively ____.

Accepted Answer

A)  inflexible; long 
B)  inflexible; brief 
C)  flexible; brief 
D)  flexible; long 
A)  inflexible; long 
B)  inflexible; brief 
C)  flexible; brief 
D)  flexible; long

Question 19

Ben N.Jerry prefers to keep his $10,000 retirement savings buried in the backyard.After an increase in the price level,Ben reduces the amount of goods and services he wants to purchase.Ben's rationalization,that now his retirement savings won't buy as much,is consistent with which explanation of the aggregate demand curve's negative slope?

Accepted Answer

A)  the interest rate effect 
B)  the open economy effect 
C)  the inflation effect 
D)  the wealth effect 
A)  the interest rate effect 
B)  the open economy effect 
C)  the inflation effect 
D)  the wealth effect

Question 20

Which of the following will not cause consumption,and as a result,aggregate demand,to increase?

Accepted Answer

A)  an optimistic business forecast of future income growth 
B)  a tax cut 
C)  an increase in consumer confidence 
D)  a tax increase 
A)  an optimistic business forecast of future income growth 
B)  a tax cut 
C)  an increase in consumer confidence 
D)  a tax increase

Exam 22: Aggregate Demand and Aggregate Supply

Along the long-run aggregate supply curve,the level of RGDP supplied ____ with increases in the price level.

If the stock market continues a steady climb upwards,this ____ consumer confidence and wealth,leading to ____ consumption,and ____ aggregate demand.

The short-run equilibrium level of real output and the price level are determined by the intersection of the aggregate demand curve and the short-run aggregate supply curve.

If exports rose and imports fell,

Which of the following expenditures would be counted as consumption in GDP accounts?

The shor-run aggregate supply curve is:

An increase in investment,combined with an increase in imports,would have what effect on aggregate demand?

The short-run aggregate supply curve shows the relationship between ____ and ____,holding all other factors constant.

The SRAS curve is ____ with real output levels that ____.

The short-run aggregate supply curve is drawn with:

An increase in net exports would lead to an increase aggregate demand but would not lead to an increase in aggregate supply.

Investment will decrease if business taxes ____,real interest rates ____,or if business confidence ____.

The short-run aggregate supply curve is positively sloped.Which of the following is not one of the explanations given in the text?

Keynesian economists believe that the economy will:

The long-run level of RGDP changes whenever the aggregate demand curve shifts.

Discuss the impact of efficiency wages on unemployment and wage inflexibility.

Keynes believed that prices were ____ and that recessions would be relatively ____.

Which of the following will not cause consumption,and as a result,aggregate demand,to increase?

The Role and Method of Economics

Economics: Eight Powerful Ideas

Scarcity, Trade-Offs, and Production Possibilities

Demand, Supply, and Market Equilibrium

Markets in Motion and Price Controls

Elasticities

Market Efficiency and Welfare

Market Failure

Public Finance and Public Choice

Consumer Choice Theory

The Firm: Production and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust

Monopolistic Competition and Product Differentiation

Oligopoly and Strategic Behavior

The Markets for Labor, Capital, and Land

Income, Poverty, and Health Care

Introduction to Macroeconomics: Unemployment, Inflation, and Economic Fluctuations

Measuring Economic Performance

Economic Growth in the Global Economy

Financial Markets, Saving, and Investment

The Aggregate Expenditure Model

Monetary Institutions

The Federal Reserve System and Monetary Policy

Issues in Macroeconomic Theory and Policy

International Trade

International Finance

Filters

If the stock market continues a steady climb upwards,this consumer confidence and wealth,leading to consumption,and aggregate demand.

The short-run aggregate supply curve shows the relationship between and ,holding all other factors constant.

The SRAS curve is with real output levels that .

Investment will decrease if business taxes ,real interest rates ,or if business confidence .

Keynes believed that prices were and that recessions would be relatively .