Question 1

Policy levers and external shocks are determinants of macroeconomic performance.

Accepted Answer

A) True 
 B)False  True

Question 2

Figure 11.1:  
-In Figure 11.1,at which of the following price levels would a shortage occur?

Accepted Answer

A)  P1 
B)  P2 
C)  P3 
D)  P4 
A)  P1 
B)  P2 
C)  P3 
D)  P4 A

Question 3

A tax cut can best be characterized as:

Accepted Answer

A)  Monetary policy only. 
B)  Fiscal policy only. 
C)  Both monetary and supply-side policy. 
D)  Both fiscal and supply-side policy. 
A)  Monetary policy only. 
B)  Fiscal policy only. 
C)  Both monetary and supply-side policy. 
D)  Both fiscal and supply-side policy. D

Question 4

Ceteris paribus,a leftward shift of the aggregate supply curve will cause the equilibrium price level to _______ and equilibrium real output to _______.

Accepted Answer

A)  Increase;increase 
B)  Increase;decrease 
C)  Decrease;increase 
D)  Decrease;decrease 
A)  Increase;increase 
B)  Increase;decrease 
C)  Decrease;increase 
D)  Decrease;decrease

Question 5

Business cycles are the result of changes in real GDP caused by shifts in aggregate demand and aggregate supply.

Accepted Answer

A) True 
 B)False

Question 6

Say's Law implies that:

Accepted Answer

A)  Wages and prices are fixed. 
B)  Full employment equilibrium is unlikely. 
C)  Whatever is produced will be sold. 
D)  Unemployment causes inflation. 
A)  Wages and prices are fixed. 
B)  Full employment equilibrium is unlikely. 
C)  Whatever is produced will be sold. 
D)  Unemployment causes inflation.

Question 7

According to the real balances effect,when the price level:

Accepted Answer

A)  Falls,cash is worth less and therefore people buy less. 
B)  Falls,cash is worth more and therefore people buy more. 
C)  Rises,cash is worth less and therefore people buy more. 
D)  Rises,cash is worth more and therefore people buy less. 
A)  Falls,cash is worth less and therefore people buy less. 
B)  Falls,cash is worth more and therefore people buy more. 
C)  Rises,cash is worth less and therefore people buy more. 
D)  Rises,cash is worth more and therefore people buy less.

Question 8

Keynes and classical economists disagree about whether:

Accepted Answer

A)  Government intervention should be used to correct business cycles. 
B)  Unemployment occurs. 
C)  Supply-side policies should be used to correct business cycles. 
D)  Business cycles occur. 
A)  Government intervention should be used to correct business cycles. 
B)  Unemployment occurs. 
C)  Supply-side policies should be used to correct business cycles. 
D)  Business cycles occur.

Question 9

One reason why the quantity of real output supplied rises with the price level,ceteris paribus,is because profits are higher.

Accepted Answer

A) True 
 B)False

Question 10

The foreign trade effect states that,ceteris paribus:

Accepted Answer

A)  The quantity demanded of domestic goods falls when the domestic price level falls. 
B)  The quantity demanded of imported goods falls when the price of imported goods falls. 
C)  Foreign consumers have more incentive to buy American-made products when U.S.prices rise. 
D)  The quantity demanded of domestic goods rises when the domestic price level falls. 
A)  The quantity demanded of domestic goods falls when the domestic price level falls. 
B)  The quantity demanded of imported goods falls when the price of imported goods falls. 
C)  Foreign consumers have more incentive to buy American-made products when U.S.prices rise. 
D)  The quantity demanded of domestic goods rises when the domestic price level falls.

Question 11

If the stock market plunged over the next week,consumers would:

Accepted Answer

A)  Rush to buy more goods and services. 
B)  Buy more stocks to make up for their losses. 
C)  Demand fewer goods and services. 
D)  Cause the aggregate demand curve to shift to the right. 
A)  Rush to buy more goods and services. 
B)  Buy more stocks to make up for their losses. 
C)  Demand fewer goods and services. 
D)  Cause the aggregate demand curve to shift to the right.

Question 12

Monetary policy can best cure a recession by:

Accepted Answer

A)  Reducing interest rate,which shifts aggregate supply to the left. 
B)  Reducing interest rate,which shifts aggregate demand to the right. 
C)  Raising interest rate,which shifts aggregate supply to the right. 
D)  Raising interest rate,which shifts aggregate demand to the left. 
A)  Reducing interest rate,which shifts aggregate supply to the left. 
B)  Reducing interest rate,which shifts aggregate demand to the right. 
C)  Raising interest rate,which shifts aggregate supply to the right. 
D)  Raising interest rate,which shifts aggregate demand to the left.

Question 13

Figure 11.1:  
-In Figure 11.1,at which of the following price levels would a surplus occur?

Accepted Answer

A)  P1 
B)  P2 but not P3 
C)  P2 and P3 
D)  P3 and P4 
A)  P1 
B)  P2 but not P3 
C)  P2 and P3 
D)  P3 and P4

Question 14

Supply-side theories focus on stimulating production by increasing the demand for goods and services.

Accepted Answer

A) True 
 B)False

Question 15

The aggregate demand curve shows the relationship between the volume of purchases and:

Accepted Answer

A)  The amount producers supply. 
B)  Real GDP. 
C)  Which goods and services people will buy. 
D)  The price level. 
A)  The amount producers supply. 
B)  Real GDP. 
C)  Which goods and services people will buy. 
D)  The price level.

Question 16

Which of the following is an example of the interest-rate effect,assuming the U.S.price level decreases?

Accepted Answer

A)  The purchasing power of money decreases and people buy more goods 
B)  U.S.goods are more expensive for foreigners to buy and exports decrease 
C)  U.S.production costs increase and producers charge higher prices 
D)  The demand for loans decreases so interest rates decline and loan-financed purchases increase 
A)  The purchasing power of money decreases and people buy more goods 
B)  U.S.goods are more expensive for foreigners to buy and exports decrease 
C)  U.S.production costs increase and producers charge higher prices 
D)  The demand for loans decreases so interest rates decline and loan-financed purchases increase

Question 17

Macro equilibrium always occurs:

Accepted Answer

A)  When aggregate supply is greater than aggregate demand. 
B)  When the labor force is fully employed. 
C)  When aggregate demand equals aggregate supply at the average price level. 
D)  At a zero inflation rate. 
A)  When aggregate supply is greater than aggregate demand. 
B)  When the labor force is fully employed. 
C)  When aggregate demand equals aggregate supply at the average price level. 
D)  At a zero inflation rate.

Question 18

Macro equilibrium always occurs at an optimal level of output.

Accepted Answer

A) True 
 B)False

Question 19

Ceteris paribus,based on the aggregate supply curve,if the price level _______ the quantity of real output _______ increases.

Accepted Answer

A)  Increases;produced 
B)  Decreases;produced 
C)  Increases;demanded 
D)  Decreases;demanded 
A)  Increases;produced 
B)  Decreases;produced 
C)  Increases;demanded 
D)  Decreases;demanded

Question 20

According to the foreign trade effect,when the U.S.price level decreases,U.S.consumers are likely to buy:

Accepted Answer

A)  More American-made products. 
B)  Different American-made products. 
C)  More foreign-made products. 
D)  Less of all products,both American made and foreign made. 
A)  More American-made products. 
B)  Different American-made products. 
C)  More foreign-made products. 
D)  Less of all products,both American made and foreign made.

Policy levers and external shocks are determinants of macroeconomic performance.

Figure 11.1: -In Figure 11.1,at which of the following price levels would a shortage occur?

A tax cut can best be characterized as:

Ceteris paribus,a leftward shift of the aggregate supply curve will cause the equilibrium price level to _ and equilibrium real output to _.

Business cycles are the result of changes in real GDP caused by shifts in aggregate demand and aggregate supply.

Say's Law implies that:

According to the real balances effect,when the price level:

Keynes and classical economists disagree about whether:

One reason why the quantity of real output supplied rises with the price level,ceteris paribus,is because profits are higher.

The foreign trade effect states that,ceteris paribus:

If the stock market plunged over the next week,consumers would:

Monetary policy can best cure a recession by:

Figure 11.1: -In Figure 11.1,at which of the following price levels would a surplus occur?

Supply-side theories focus on stimulating production by increasing the demand for goods and services.

The aggregate demand curve shows the relationship between the volume of purchases and:

Which of the following is an example of the interest-rate effect,assuming the U.S.price level decreases?

Macro equilibrium always occurs:

Macro equilibrium always occurs at an optimal level of output.

Ceteris paribus,based on the aggregate supply curve,if the price level _ the quantity of real output _ increases.

According to the foreign trade effect,when the U.S.price level decreases,U.S.consumers are likely to buy:

The Challenge of Economics

The US Economy

Supply and Demand

Consumer Demand

Supply Decisions

Competition

Monopoly

The Labor Market

Government Intervention

The Business Cycle

Fiscal Policy

Money and Banks

Monetary Policy

Economic Growth

Theory and Reality

International Trade

Filters

Exam 11: Aggregate Supply and Demand

Policy levers and external shocks are determinants of macroeconomic performance.

Figure 11.1: -In Figure 11.1,at which of the following price levels would a shortage occur?

A tax cut can best be characterized as:

Ceteris paribus,a leftward shift of the aggregate supply curve will cause the equilibrium price level to _______ and equilibrium real output to _______.

Business cycles are the result of changes in real GDP caused by shifts in aggregate demand and aggregate supply.

Say's Law implies that:

According to the real balances effect,when the price level:

Keynes and classical economists disagree about whether:

One reason why the quantity of real output supplied rises with the price level,ceteris paribus,is because profits are higher.

The foreign trade effect states that,ceteris paribus:

If the stock market plunged over the next week,consumers would:

Monetary policy can best cure a recession by:

Figure 11.1: -In Figure 11.1,at which of the following price levels would a surplus occur?

Supply-side theories focus on stimulating production by increasing the demand for goods and services.

The aggregate demand curve shows the relationship between the volume of purchases and:

Which of the following is an example of the interest-rate effect,assuming the U.S.price level decreases?

Macro equilibrium always occurs:

Macro equilibrium always occurs at an optimal level of output.

Ceteris paribus,based on the aggregate supply curve,if the price level _______ the quantity of real output _______ increases.

According to the foreign trade effect,when the U.S.price level decreases,U.S.consumers are likely to buy:

The Challenge of Economics

The US Economy

Supply and Demand

Consumer Demand

Supply Decisions

Competition

Monopoly

The Labor Market

Government Intervention

The Business Cycle

Fiscal Policy

Money and Banks

Monetary Policy

Economic Growth

Theory and Reality

International Trade

Filters

Ceteris paribus,a leftward shift of the aggregate supply curve will cause the equilibrium price level to _ and equilibrium real output to _.

Ceteris paribus,based on the aggregate supply curve,if the price level _ the quantity of real output _ increases.