Question 1

When aggregate demand declines,the price level may remain constant,at least for a time,because:

Accepted Answer

A)  firms individually may fear that their price cut may set off a price war. 
B)  menu costs rise. 
C)  price cuts tend to increase efficiency wages. 
D)  product markets are highly competitive. 
A)  firms individually may fear that their price cut may set off a price war. 
B)  menu costs rise. 
C)  price cuts tend to increase efficiency wages. 
D)  product markets are highly competitive.

Question 2

Suppose that real domestic output in an economy is 20 units,the quantity of inputs is 10,and the price of each input is $4.Answer the following question on the basis of this information. Refer to the information.All else being equal,if the price of each input increased from $4 to $6,productivity would:

Accepted Answer

A)  fall from 2 to 3. 
B)  fall from .50 to .33. 
C)  rise from 1 to 2. 
D)  remain unchanged. 
A)  fall from 2 to 3. 
B)  fall from .50 to .33. 
C)  rise from 1 to 2. 
D)  remain unchanged.

Question 3

Per-unit production cost is:

Accepted Answer

A)  real output divided by inputs. 
B)  total input cost divided by units of output. 
C)  units of output divided by total input cost. 
D)  a determinant of aggregate demand. 
A)  real output divided by inputs. 
B)  total input cost divided by units of output. 
C)  units of output divided by total input cost. 
D)  a determinant of aggregate demand.

Question 4

Which of the following would most likely reduce aggregate demand (shift the AD curve to the left)?

Accepted Answer

A)  A reduced amount of excess capacity. 
B)  Increased government spending on military equipment. 
C)  An appreciation of the U.S.dollar. 
D)  Increased consumer optimism regarding future economic conditions. 
A)  A reduced amount of excess capacity. 
B)  Increased government spending on military equipment. 
C)  An appreciation of the U.S.dollar. 
D)  Increased consumer optimism regarding future economic conditions.

Question 5

Productivity measures:

Accepted Answer

A)  real output per unit of input. 
B)  per-unit production costs. 
C)  the changes in real wealth caused by price level changes. 
D)  the amount of capital goods used per worker. 
A)  real output per unit of input. 
B)  per-unit production costs. 
C)  the changes in real wealth caused by price level changes. 
D)  the amount of capital goods used per worker.

Question 6

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.The interest-rate effect of changes in the price level is shown by columns:

Accepted Answer

A)  (1)and (4)of the table. 
B)  (5)and (6)of the table. 
C)  (1)and (3)of the table. 
D)  (2)and (4)of the table. 
A)  (1)and (4)of the table. 
B)  (5)and (6)of the table. 
C)  (1)and (3)of the table. 
D)  (2)and (4)of the table.

Question 7

Suppose that nominal wages fall and productivity rises in a particular economy.Other things equal,the aggregate:

Accepted Answer

A)  demand curve will shift leftward. 
B)  supply curve will shift rightward. 
C)  supply curve will shift leftward. 
D)  expenditures curve will shift downward. 
A)  demand curve will shift leftward. 
B)  supply curve will shift rightward. 
C)  supply curve will shift leftward. 
D)  expenditures curve will shift downward.

Question 8

The real-balances effect indicates that:

Accepted Answer

A)  an increase in the price level will increase the demand for money,increase interest rates,and reduce consumption and investment spending. 
B)  a lower price level will decrease the real value of many financial assets and therefore reduce spending. 
C)  a higher price level will increase the real value of many financial assets and therefore increase spending. 
D)  a higher price level will decrease the real value of many financial assets and therefore reduce spending. 
A)  an increase in the price level will increase the demand for money,increase interest rates,and reduce consumption and investment spending. 
B)  a lower price level will decrease the real value of many financial assets and therefore reduce spending. 
C)  a higher price level will increase the real value of many financial assets and therefore increase spending. 
D)  a higher price level will decrease the real value of many financial assets and therefore reduce spending.

Question 9

Answer the question on the basis of the following information.An economy is employing 2 units of capital,5 units of raw materials,and 8 units of labor to produce its total output of 640 units.Each unit of capital costs $10;each unit of raw materials,$4;and each unit of labor,$3. Refer to the information.The per-unit cost of production in this economy is:

Accepted Answer

A)  $0.05. 
B)  $0.10. 
C)  $0.50. 
D)  $1.00. 
A)  $0.05. 
B)  $0.10. 
C)  $0.50. 
D)  $1.00.

Question 10

Cost-push inflation is depicted as a rightward shift of the aggregate demand curve along an upsloping aggregate supply curve.

Accepted Answer

A) True 
 B)False

Question 11

In deriving the aggregate demand curve from the aggregate expenditures model,we note that:

Accepted Answer

A)  the real-balances effect is irrelevant to both models. 
B)  a change in the price level will have no impact on the aggregate expenditures schedule. 
C)  an increase (decrease)in the price level shifts the aggregate expenditures schedule upward (downward). 
D)  an increase (decrease)in the price level shifts the aggregate expenditures schedule downward (upward). 
A)  the real-balances effect is irrelevant to both models. 
B)  a change in the price level will have no impact on the aggregate expenditures schedule. 
C)  an increase (decrease)in the price level shifts the aggregate expenditures schedule upward (downward). 
D)  an increase (decrease)in the price level shifts the aggregate expenditures schedule downward (upward).

Question 12

Other things equal,an increase in productivity will shift the short-run aggregate supply curve rightward.

Accepted Answer

A) True 
 B)False

Question 13

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.The equilibrium price level will be:

Accepted Answer

A)  150. 
B)  200. 
C)  250. 
D)  300. 
A)  150. 
B)  200. 
C)  250. 
D)  300.

Question 14

When aggregate demand declines,many firms may reduce employment rather than wages because wage reductions may:

Accepted Answer

A)  reduce per-unit production costs. 
B)  reduce worker morale and work effort,and thus lower productivity. 
C)  increase the firms' cost of raising financial capital. 
D)  reduce the demands for their products. 
A)  reduce per-unit production costs. 
B)  reduce worker morale and work effort,and thus lower productivity. 
C)  increase the firms' cost of raising financial capital. 
D)  reduce the demands for their products.

Question 15

The equilibrium price level and equilibrium level of real GDP occur at the intersection of the aggregate demand curve and the aggregate supply curve.

Accepted Answer

A) True 
 B)False

Question 16

An increase in imports (independent of a change in the U.S.price level)will increase both U.S.aggregate supply and U.S.aggregate demand.

Accepted Answer

A) True 
 B)False

Question 17

In response to the Great Recession,the federal government engaged in significant deficit-funded spending.While it kept the recession from getting worse,and did result in some positive economic growth,it did not fully achieve the desired result.Which of the following best explains why the fiscal policy actions fell short of their objective?

Accepted Answer

A)  Despite the fiscal stimulus,aggregate demand continued to shift to the right. 
B)  The fiscal stimulus caused a significant leftward shift of aggregate supply. 
C)  Offsetting monetary policy caused the aggregate demand to remain virtually unchanged,meaning that all gains in output came from aggregate supply shifts. 
D)  The fiscal stimulus shifted aggregate demand to the right,but not enough to restore full employment. 
A)  Despite the fiscal stimulus,aggregate demand continued to shift to the right. 
B)  The fiscal stimulus caused a significant leftward shift of aggregate supply. 
C)  Offsetting monetary policy caused the aggregate demand to remain virtually unchanged,meaning that all gains in output came from aggregate supply shifts. 
D)  The fiscal stimulus shifted aggregate demand to the right,but not enough to restore full employment.

Question 18

Suppose that real domestic output in an economy is 20 units,the quantity of inputs is 10,and the price of each input is $4.Answer the following question on the basis of this information. Refer to the information.The level of productivity is:

Accepted Answer

A)  20. 
B)  10. 
C)  5. 
D)  2. 
A)  20. 
B)  10. 
C)  5. 
D)  2.

Question 19

The aggregate supply curve (short run):

Accepted Answer

A)  graphs as a horizontal line. 
B)  is steeper above the full-employment output than below it. 
C)  slopes downward and to the right. 
D)  presumes that changes in wages and other resource prices match changes in the price level. 
A)  graphs as a horizontal line. 
B)  is steeper above the full-employment output than below it. 
C)  slopes downward and to the right. 
D)  presumes that changes in wages and other resource prices match changes in the price level.

Question 20

An increase in aggregate expenditures resulting from some factor other than a change in the price level is equivalent to:

Accepted Answer

A)  a rightward shift of the aggregate demand curve in the AD-AS model. 
B)  a leftward shift of the aggregate demand curve in the AD-AS model. 
C)  a movement downward along a fixed aggregate demand curve in the AD-AS model. 
D)  a decrease in aggregate supply in the AD-AS model. 
A)  a rightward shift of the aggregate demand curve in the AD-AS model. 
B)  a leftward shift of the aggregate demand curve in the AD-AS model. 
C)  a movement downward along a fixed aggregate demand curve in the AD-AS model. 
D)  a decrease in aggregate supply in the AD-AS model.

When aggregate demand declines,the price level may remain constant,at least for a time,because:

Per-unit production cost is:

Which of the following would most likely reduce aggregate demand (shift the AD curve to the left)?

Productivity measures:

Suppose that nominal wages fall and productivity rises in a particular economy.Other things equal,the aggregate:

The real-balances effect indicates that:

Cost-push inflation is depicted as a rightward shift of the aggregate demand curve along an upsloping aggregate supply curve.

In deriving the aggregate demand curve from the aggregate expenditures model,we note that:

Other things equal,an increase in productivity will shift the short-run aggregate supply curve rightward.

Answer the question on the basis of the following aggregate demand and supply schedules for a hypothetical economy: Amount of Real \ 200 300 400 500 600 Price Level 300 250 200 150 100 Amount of Real \ 500 450 400 300 200 Refer to the data.The equilibrium price level will be:

When aggregate demand declines,many firms may reduce employment rather than wages because wage reductions may:

The equilibrium price level and equilibrium level of real GDP occur at the intersection of the aggregate demand curve and the aggregate supply curve.

An increase in imports (independent of a change in the U.S.price level)will increase both U.S.aggregate supply and U.S.aggregate demand.

Suppose that real domestic output in an economy is 20 units,the quantity of inputs is 10,and the price of each input is $4.Answer the following question on the basis of this information. Refer to the information.The level of productivity is:

The aggregate supply curve (short run):

An increase in aggregate expenditures resulting from some factor other than a change in the price level is equivalent to:

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

Exam 31: Aggregate Demand and Aggregate Supply

When aggregate demand declines,the price level may remain constant,at least for a time,because:

Per-unit production cost is:

Which of the following would most likely reduce aggregate demand (shift the AD curve to the left)?

Productivity measures:

Suppose that nominal wages fall and productivity rises in a particular economy.Other things equal,the aggregate:

The real-balances effect indicates that:

Cost-push inflation is depicted as a rightward shift of the aggregate demand curve along an upsloping aggregate supply curve.

In deriving the aggregate demand curve from the aggregate expenditures model,we note that:

Other things equal,an increase in productivity will shift the short-run aggregate supply curve rightward.

Answer the question on the basis of the following aggregate demand and supply schedules for a hypothetical economy: Amount of Real \ 200 300 400 500 600 Price Level 300 250 200 150 100 Amount of Real \ 500 450 400 300 200 Refer to the data.The equilibrium price level will be:

When aggregate demand declines,many firms may reduce employment rather than wages because wage reductions may:

The equilibrium price level and equilibrium level of real GDP occur at the intersection of the aggregate demand curve and the aggregate supply curve.

An increase in imports (independent of a change in the U.S.price level)will increase both U.S.aggregate supply and U.S.aggregate demand.

Suppose that real domestic output in an economy is 20 units,the quantity of inputs is 10,and the price of each input is $4.Answer the following question on the basis of this information. Refer to the information.The level of productivity is:

The aggregate supply curve (short run):

An increase in aggregate expenditures resulting from some factor other than a change in the price level is equivalent to:

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