Question 1

If there is currently a recessionary gap,a decrease in aggregate demand would make the recessionary gap larger.

Accepted Answer

A) True 
 B)False

Question 2

An increase in the U.S.price level will:

Accepted Answer

A)  decrease U.S. exports. 
B)  decrease U.S. imports. 
C)  increase RGDP demanded in the United States. 
D)  both (a) and (c) 
A)  decrease U.S. exports. 
B)  decrease U.S. imports. 
C)  increase RGDP demanded in the United States. 
D)  both (a) and (c)

Question 3

The aggregate demand curve portrays the relationship between price level and real GDP.What are the three reasons this relationship is a negative or inverse relationship? Provide brief illustrations of each.

Accepted Answer

The three complementary explanations for

Question 4

The LRAS 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 5

As the price level increases,the quantity of RGDP demanded ____,and when the price level decreases,the quantity of RGDP demanded in the economy ____.

Accepted Answer

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

Question 6

The interest rate effect suggests that the negative slope of the aggregate demand curve results at least in part because changes in the price level affect:

Accepted Answer

A)  domestic purchases of foreign goods. 
B)  the holdings of money by households and firms. 
C)  the real purchasing power of assets. 
D)  the level of income. 
A)  domestic purchases of foreign goods. 
B)  the holdings of money by households and firms. 
C)  the real purchasing power of assets. 
D)  the level of income.

Question 7

If,due to rising demand,the price of cotton rose 10 percent while the prices of other goods and services rose an average of 15 percent,

Accepted Answer

A)  the relative price of cotton has risen and one would expect the output of cotton to rise as a result. 
B)  the relative price of cotton has risen and one would expect the output of cotton to fall as a result. 
C)  the relative price of cotton has fallen and one would expect the output of cotton to rise as a result. 
D)  the relative price of cotton has fallen and one would expect the output of cotton to fall as a result. 
A)  the relative price of cotton has risen and one would expect the output of cotton to rise as a result. 
B)  the relative price of cotton has risen and one would expect the output of cotton to fall as a result. 
C)  the relative price of cotton has fallen and one would expect the output of cotton to rise as a result. 
D)  the relative price of cotton has fallen and one would expect the output of cotton to fall as a result.

Question 8

If there was no misperception effect,but there was a profit effect in the short run,then SRAS is ____ and LRAS is ____.

Accepted Answer

A)  upward sloping: vertical 
B)  upward sloping; upward sloping 
C)  vertical; vertical 
D)  vertical; upward sloping 
A)  upward sloping: vertical 
B)  upward sloping; upward sloping 
C)  vertical; vertical 
D)  vertical; upward sloping

Question 9

If,due to rising demand,the price of cotton rose 15 percent while the prices of other goods and services rose an average of 10 percent,

Accepted Answer

A)  the relative price of cotton has risen and one would expect the output of cotton to rise as a result. 
B)  the relative price of cotton has risen and one would expect the output of cotton to fall as a result. 
C)  the relative price of cotton has fallen and one would expect the output of cotton to rise as a result. 
D)  the relative price of cotton has fallen and one would expect the output of cotton to fall as a result. 
A)  the relative price of cotton has risen and one would expect the output of cotton to rise as a result. 
B)  the relative price of cotton has risen and one would expect the output of cotton to fall as a result. 
C)  the relative price of cotton has fallen and one would expect the output of cotton to rise as a result. 
D)  the relative price of cotton has fallen and one would expect the output of cotton to fall as a result.

Question 10

The misperception effect explanation for an upward-sloping short-run aggregate supply curve is based on:

Accepted Answer

A)  falling profit margins as the price level rises. 
B)  rising costs of production as the price level rises. 
C)  fixed wage labor contracts. 
D)  people mistaking changes in aggregate demand for changes in the demand for their goods relative to other goods and services. 
A)  falling profit margins as the price level rises. 
B)  rising costs of production as the price level rises. 
C)  fixed wage labor contracts. 
D)  people mistaking changes in aggregate demand for changes in the demand for their goods relative to other goods and services.

Question 11

Jason has been holding his retirement savings in a safe in his house.Currently the economy is experiencing a falling price level.He can conclude that:

Accepted Answer

A)  the real purchasing power of his money is remaining constant. 
B)  the real value of his savings is increasing as long as the price level is falling. 
C)  the real value of his savings is decreasing as long as the price level is falling. 
D)  none of the above are true. 
A)  the real purchasing power of his money is remaining constant. 
B)  the real value of his savings is increasing as long as the price level is falling. 
C)  the real value of his savings is decreasing as long as the price level is falling. 
D)  none of the above are true.

Question 12

____ are unexpected temporary events that can either increase or decrease the short-run aggregate supply.

Accepted Answer

A)  Profit effects 
B)  Volatilities 
C)  Supply shocks 
D)  Misperception effects 
A)  Profit effects 
B)  Volatilities 
C)  Supply shocks 
D)  Misperception effects

Question 13

Which of the following does not explain why the aggregate demand curve is negatively sloped?

Accepted Answer

A)  misperception effect 
B)  open economy effect 
C)  real wealth effect 
D)  interest rate effect 
A)  misperception effect 
B)  open economy effect 
C)  real wealth effect 
D)  interest rate effect

Question 14

In an open economy,as the price level increases,a(n)____ in demand in the quantity of domestic goods results in a(n)____ in the quantity of RGDP demanded.

Accepted Answer

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

Question 15

Ceteris paribus,which of the following would cause the aggregate demand curve to shift to the left?

Accepted Answer

A)  lower personal taxes 
B)  a rise in consumer confidence 
C)  greater stock market wealth 
D)  a reduction in transfer payments 
A)  lower personal taxes 
B)  a rise in consumer confidence 
C)  greater stock market wealth 
D)  a reduction in transfer payments

Question 16

The SRAS would be vertical if:

Accepted Answer

A)  there was no profit effect. 
B)  there was no misperception effect. 
C)  there was no profit effect or misperception effect. 
D)  under no conceivable set of circumstances. 
A)  there was no profit effect. 
B)  there was no misperception effect. 
C)  there was no profit effect or misperception effect. 
D)  under no conceivable set of circumstances.

Question 17

Which of the following will cause consumption,and as a result,aggregate demand,to shift to the right?

Accepted Answer

A)  an optimistic business forecast of future income growth 
B)  increased consumer wealth 
C)  an increase in consumer confidence 
D)  all of the above 
A)  an optimistic business forecast of future income growth 
B)  increased consumer wealth 
C)  an increase in consumer confidence 
D)  all of the above

Question 18

An unexpected increase in aggregate demand results in a decrease in real wages in the short run.

Accepted Answer

A) True 
 B)False

Question 19

What role do imports play in aggregate demand? Under which conditions will changes in imports expand aggregate demand? Reduce aggregate demand?

Accepted Answer

Global markets have become increasingly

Question 20

Aggregate demand includes:

Accepted Answer

A)  the demand for intermediate goods and final goods. 
B)  all monetary and nonmonetary transactions. 
C)  the demand for investment, including stocks, bonds, and gold. 
D)  the demand for final goods and services. 
A)  the demand for intermediate goods and final goods. 
B)  all monetary and nonmonetary transactions. 
C)  the demand for investment, including stocks, bonds, and gold. 
D)  the demand for final goods and services.

Exam 22: Aggregate Demand and Aggregate Supply

If there is currently a recessionary gap,a decrease in aggregate demand would make the recessionary gap larger.

An increase in the U.S.price level will:

The aggregate demand curve portrays the relationship between price level and real GDP.What are the three reasons this relationship is a negative or inverse relationship? Provide brief illustrations of each.

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

As the price level increases,the quantity of RGDP demanded ____,and when the price level decreases,the quantity of RGDP demanded in the economy ____.

The interest rate effect suggests that the negative slope of the aggregate demand curve results at least in part because changes in the price level affect:

If,due to rising demand,the price of cotton rose 10 percent while the prices of other goods and services rose an average of 15 percent,

If there was no misperception effect,but there was a profit effect in the short run,then SRAS is ____ and LRAS is ____.

If,due to rising demand,the price of cotton rose 15 percent while the prices of other goods and services rose an average of 10 percent,

The misperception effect explanation for an upward-sloping short-run aggregate supply curve is based on:

Jason has been holding his retirement savings in a safe in his house.Currently the economy is experiencing a falling price level.He can conclude that:

____ are unexpected temporary events that can either increase or decrease the short-run aggregate supply.

Which of the following does not explain why the aggregate demand curve is negatively sloped?

In an open economy,as the price level increases,a(n)____ in demand in the quantity of domestic goods results in a(n)____ in the quantity of RGDP demanded.

Ceteris paribus,which of the following would cause the aggregate demand curve to shift to the left?

The SRAS would be vertical if:

Which of the following will cause consumption,and as a result,aggregate demand,to shift to the right?

An unexpected increase in aggregate demand results in a decrease in real wages in the short run.

What role do imports play in aggregate demand? Under which conditions will changes in imports expand aggregate demand? Reduce aggregate demand?

Aggregate demand includes:

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

The LRAS curve is with real output levels that .

As the price level increases,the quantity of RGDP demanded ,and when the price level decreases,the quantity of RGDP demanded in the economy .

If there was no misperception effect,but there was a profit effect in the short run,then SRAS is and LRAS is .

In an open economy,as the price level increases,a(n) in demand in the quantity of domestic goods results in a(n) in the quantity of RGDP demanded.