Question 1

(Consider This)The ratchet effect is the tendency of:

Accepted Answer

A)  the price level to increase but not to decrease. 
B)  nominal GDP to increase more rapidly than real GDP. 
C)  real interest rates to fall more rapidly than nominal interest rates. 
D)  consumption to rise year after year regardless of what happens to disposable income. 
A)  the price level to increase but not to decrease. 
B)  nominal GDP to increase more rapidly than real GDP. 
C)  real interest rates to fall more rapidly than nominal interest rates. 
D)  consumption to rise year after year regardless of what happens to disposable income.

Question 2

Other things equal,a reduction in personal and business taxes can be expected to:

Accepted Answer

A)  increase aggregate demand and decrease aggregate supply. 
B)  increase both aggregate demand and aggregate supply. 
C)  decrease both aggregate demand and aggregate supply. 
D)  decrease aggregate demand and increase aggregate supply. 
A)  increase aggregate demand and decrease aggregate supply. 
B)  increase both aggregate demand and aggregate supply. 
C)  decrease both aggregate demand and aggregate supply. 
D)  decrease aggregate demand and increase aggregate supply.

Question 3

The immediate-short-run aggregate supply curve represents circumstances where:

Accepted Answer

A)  both input and output prices are fixed. 
B)  both input and output prices are flexible. 
C)  input prices are fixed,but output prices are flexible. 
D)  input prices are flexible,but output prices are fixed. 
A)  both input and output prices are fixed. 
B)  both input and output prices are flexible. 
C)  input prices are fixed,but output prices are flexible. 
D)  input prices are flexible,but output prices are fixed.

Question 4

Given a fixed upsloping AS curve,a rightward shift of the AD curve will:

Accepted Answer

A)  cause cost-push inflation. 
B)  increase real output but not the price level. 
C)  increase the price level but not real output. 
D)  increase both the price level and real output. 
A)  cause cost-push inflation. 
B)  increase real output but not the price level. 
C)  increase the price level but not real output. 
D)  increase both the price level and real output.

Question 5

Answer the question on the basis of the following table for a particular country in which C is consumption expenditures,Ig is gross investment expenditures,G is government expenditures,X is exports,and M is imports.All figures are in billions of dollars.Each question is independent of other question using the same table,unless otherwise stated. $\begin{array}{c}
\begin{array}{c}
\underline{\text {Price Level}}\
128 \
125 \
122 \
119 \
116
\end{array}
\begin{array}{c}
\underline{\text {C}} \
 \$ 18 \
20 \
22 \
24 \
26
\end{array}
\begin{array}{c}
\underline{\mathrm{I}_{\mathrm{g}} }\
 \$ 2 \
4 \
6 \
8 \
10
\end{array}
\begin{array}{c}
\underline{\text {G }}\
 \$ 3 \
3 \
3 \
3 \
3
\end{array}
\begin{array}{c}
\underline{\text {X }}\
\$ 1 \
2 \
3 \
4 \
5
\end{array}
\begin{array}{c}
\underline{\text {M}} \
 \$ 5 \
4 \
3 \
2 \
1
\end{array}
\begin{array}{c}
\underline{\text {Real GDP}} \
 \
\
\
 \
\
\end{array}
\end{array}$
 Refer to the table.If the equilibrium level of real GDP is $43 billion,its level of consumption will be:

Accepted Answer

A)  $20 billion. 
B)  $22 billion. 
C)  $24 billion. 
D)  $26 billion. 
A)  $20 billion. 
B)  $22 billion. 
C)  $24 billion. 
D)  $26 billion.

Question 6

A rightward shift in the aggregate supply curve is best explained by an increase in:

Accepted Answer

A)  business taxes. 
B)  productivity. 
C)  nominal wages. 
D)  the price of imported resources. 
A)  business taxes. 
B)  productivity. 
C)  nominal wages. 
D)  the price of imported resources.

Question 7

The foreign purchases effect suggests that an increase in the U.S.price level relative to other countries will:

Accepted Answer

A)  increase the amount of U.S.real output purchased. 
B)  increase U.S.imports and decrease U.S.exports. 
C)  increase both U.S.imports and U.S.exports. 
D)  decrease both U.S.imports and U.S.exports. 
A)  increase the amount of U.S.real output purchased. 
B)  increase U.S.imports and decrease U.S.exports. 
C)  increase both U.S.imports and U.S.exports. 
D)  decrease both U.S.imports and U.S.exports.

Question 8

An increase in input productivity will:

Accepted Answer

A)  shift the aggregate supply curve leftward. 
B)  reduce the equilibrium price level,assuming downward flexible prices. 
C)  reduce the equilibrium real output. 
D)  reduce aggregate demand. 
A)  shift the aggregate supply curve leftward. 
B)  reduce the equilibrium price level,assuming downward flexible prices. 
C)  reduce the equilibrium real output. 
D)  reduce aggregate demand.

Question 9

If investment increases by $10 billion and the economy's MPC is .8,the aggregate demand curve will shift:

Accepted Answer

A)  leftward by $50 billion at each price level. 
B)  rightward by $10 billion at each price level. 
C)  rightward by $50 billion at each price level. 
D)  leftward by $40 billion at each price level. 
A)  leftward by $50 billion at each price level. 
B)  rightward by $10 billion at each price level. 
C)  rightward by $50 billion at each price level. 
D)  leftward by $40 billion at each price level.

Question 10

Other things equal,if the U.S.dollar were to depreciate,the:

Accepted Answer

A)  aggregate demand curve would remain fixed in place. 
B)  aggregate supply curve would shift to the left. 
C)  aggregate supply curve would shift to the right. 
D)  aggregate demand curve would shift to the left. 
A)  aggregate demand curve would remain fixed in place. 
B)  aggregate supply curve would shift to the left. 
C)  aggregate supply curve would shift to the right. 
D)  aggregate demand curve would shift to the left.

Question 11

The foreign purchases effect:

Accepted Answer

A)  shifts the aggregate demand curve rightward. 
B)  shifts the aggregate demand curve leftward. 
C)  shifts the aggregate supply curve rightward. 
D)  moves the economy along a fixed aggregate demand curve. 
A)  shifts the aggregate demand curve rightward. 
B)  shifts the aggregate demand curve leftward. 
C)  shifts the aggregate supply curve rightward. 
D)  moves the economy along a fixed aggregate demand curve.

Question 12

Which of the following is incorrect?

Accepted Answer

A)  As the U.S.price level rises,U.S.goods become relatively more expensive so that U.S.exports fall and U.S.imports rise. 
B)  As the price level falls,the demand for money declines,the interest rate declines,and interest-rate-sensitive spending increases. 
C)  When the price level increases,real balances increase and businesses and households find themselves wealthier and therefore increase their spending. 
D)  Given aggregate demand,an increase in aggregate supply increases real output and,assuming downward-flexible prices,reduces the price level. 
A)  As the U.S.price level rises,U.S.goods become relatively more expensive so that U.S.exports fall and U.S.imports rise. 
B)  As the price level falls,the demand for money declines,the interest rate declines,and interest-rate-sensitive spending increases. 
C)  When the price level increases,real balances increase and businesses and households find themselves wealthier and therefore increase their spending. 
D)  Given aggregate demand,an increase in aggregate supply increases real output and,assuming downward-flexible prices,reduces the price level.

Question 13

Other things equal,an improvement in productivity will:

Accepted Answer

A)  increase the equilibrium price level. 
B)  shift the aggregate supply curve to the left. 
C)  shift the aggregate supply curve to the right. 
D)  shift the aggregate demand curve to the left. 
A)  increase the equilibrium price level. 
B)  shift the aggregate supply curve to the left. 
C)  shift the aggregate supply curve to the right. 
D)  shift the aggregate demand curve to the left.

Question 14

Answer the question on the basis of the following aggregate demand and supply schedules for a hypothetical economy: $\begin{array}{c}
\begin{array}{c}
\text {Amount of Real }\
\underline{\text {Output Demanded}}\
\$ 200 \
300 \
400 \
500 \
600
\end{array}
\begin{array}{c}
\text {Price Level}\
\underline{\text {(Index Value)}}\
300\
250\
200\
150\
100
\end{array}
\begin{array}{c}
\text {Amount of Real}\
\underline{\text {Output Supplied}}\
\$ 500 \
450 \
400 \
300 \
200
\end{array}
\end{array}$ Refer to the data.If the amount of real output demanded at each price level falls by $200,the equilibrium price level and equilibrium level of real domestic output will fall to:

Accepted Answer

A)  250 and $200,respectively. 
B)  200 and $300,respectively. 
C)  150 and $300,respectively. 
D)  150 and $200,respectively. 
A)  250 and $200,respectively. 
B)  200 and $300,respectively. 
C)  150 and $300,respectively. 
D)  150 and $200,respectively.

Question 15

A decrease in per-unit production costs will shift the aggregate supply curve leftward.

Accepted Answer

A) True 
 B)False

Question 16

Answer the question on the basis of the following information about the relationship between input quantities and real domestic output in a hypothetical economy: $\begin{array} { c c } 
\text { Input Quantity } & \text { Real Domestic Output } \
100 & 200 \
150 & 300 \
200 & 400
\end{array}$ Refer to the table.If the price of each input is $5,the per-unit cost of production in the economy is:

Accepted Answer

A)  $5. 
B)  $2.75. 
C)  $2.50. 
D)  $.40. 
A)  $5. 
B)  $2.75. 
C)  $2.50. 
D)  $.40.

Question 17

Which of the following would most likely shift the aggregate demand curve to the right?

Accepted Answer

A)  An increase in stock prices that increases consumer wealth. 
B)  Increased fear that a recession will cause workers to lose their jobs. 
C)  An increase in personal income tax rates. 
D)  A reduction in household borrowing because of tighter lending practices. 
A)  An increase in stock prices that increases consumer wealth. 
B)  Increased fear that a recession will cause workers to lose their jobs. 
C)  An increase in personal income tax rates. 
D)  A reduction in household borrowing because of tighter lending practices.

Question 18

Answer the question on the basis of the following aggregate demand and supply schedules for a hypothetical economy: $\begin{array}{c}
\begin{array}{c}
\text {Amount of Real }\
\underline{\text {Output Demanded}}\
\$ 200 \
300 \
400 \
500 \
600
\end{array}
\begin{array}{c}
\text {Price Level}\
\underline{\text {(Index Value)}}\
300\
250\
200\
150\
100
\end{array}
\begin{array}{c}
\text {Amount of Real}\
\underline{\text {Output Supplied}}\
\$ 500 \
450 \
400 \
300 \
200
\end{array}
\end{array}$ Refer to the data.If the amount of real output demanded at each price level falls by $200,this might have been caused by:

Accepted Answer

A)  an increase in net exports. 
B)  a worsening of business expectations. 
C)  an increase in consumer wealth. 
D)  a decrease in the personal income tax. 
A)  an increase in net exports. 
B)  a worsening of business expectations. 
C)  an increase in consumer wealth. 
D)  a decrease in the personal income tax.

Question 19

The fear of unwanted price wars may explain why many firms are reluctant to:

Accepted Answer

A)  reduce wages when a decline in aggregate demand occurs. 
B)  reduce prices when a decline in aggregate demand occurs. 
C)  expand production capacity when an increase in aggregate demand occurs. 
D)  provide wage increases when labor productivity rises. 
A)  reduce wages when a decline in aggregate demand occurs. 
B)  reduce prices when a decline in aggregate demand occurs. 
C)  expand production capacity when an increase in aggregate demand occurs. 
D)  provide wage increases when labor productivity rises.

Question 20

The economy's long-run AS curve assumes that wages and other resource prices:

Accepted Answer

A)  eventually rise and fall to match upward or downward changes in the price level. 
B)  are flexible upward but inflexible downward. 
C)  rise and fall more rapidly than the price level. 
D)  are relatively inflexible both upward and downward. 
A)  eventually rise and fall to match upward or downward changes in the price level. 
B)  are flexible upward but inflexible downward. 
C)  rise and fall more rapidly than the price level. 
D)  are relatively inflexible both upward and downward.

(Consider This)The ratchet effect is the tendency of:

Other things equal,a reduction in personal and business taxes can be expected to:

The immediate-short-run aggregate supply curve represents circumstances where:

Given a fixed upsloping AS curve,a rightward shift of the AD curve will:

A rightward shift in the aggregate supply curve is best explained by an increase in:

The foreign purchases effect suggests that an increase in the U.S.price level relative to other countries will:

An increase in input productivity will:

If investment increases by $10 billion and the economy's MPC is .8,the aggregate demand curve will shift:

Other things equal,if the U.S.dollar were to depreciate,the:

The foreign purchases effect:

Which of the following is incorrect?

Other things equal,an improvement in productivity will:

A decrease in per-unit production costs will shift the aggregate supply curve leftward.

Which of the following would most likely shift the aggregate demand curve to the right?

The fear of unwanted price wars may explain why many firms are reluctant to:

The economy's long-run AS curve assumes that wages and other resource prices:

Income Inequality Poverty and Discrimination

Health Care

Immigration

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

The Aggregate Expenditures Model

The Balance of Payments, Exchange Rates, and Trade Deficits

Money, Banking, and Financial Institutions

Money Creation

Interest Rates and Monetary Policy

Financial Economics

Extending the Analysis of Aggregate Supply

Current Issues in Macro Theory and Policy

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

The United States and the Global Economy

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Exam 31: Aggregate Demand and Aggregate Supply

(Consider This)The ratchet effect is the tendency of:

Other things equal,a reduction in personal and business taxes can be expected to:

The immediate-short-run aggregate supply curve represents circumstances where:

Given a fixed upsloping AS curve,a rightward shift of the AD curve will:

A rightward shift in the aggregate supply curve is best explained by an increase in:

The foreign purchases effect suggests that an increase in the U.S.price level relative to other countries will:

An increase in input productivity will:

If investment increases by $10 billion and the economy's MPC is .8,the aggregate demand curve will shift:

Other things equal,if the U.S.dollar were to depreciate,the:

The foreign purchases effect:

Which of the following is incorrect?

Other things equal,an improvement in productivity will:

A decrease in per-unit production costs will shift the aggregate supply curve leftward.

Which of the following would most likely shift the aggregate demand curve to the right?

The fear of unwanted price wars may explain why many firms are reluctant to:

The economy's long-run AS curve assumes that wages and other resource prices:

Income Inequality Poverty and Discrimination

Health Care

Immigration

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

The Aggregate Expenditures Model

The Balance of Payments, Exchange Rates, and Trade Deficits

Money, Banking, and Financial Institutions

Money Creation

Interest Rates and Monetary Policy

Financial Economics

Extending the Analysis of Aggregate Supply

Current Issues in Macro Theory and Policy

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

The United States and the Global Economy

Filters