Question 1

The consumption function explains:

Accepted Answer

A)  the relationship between consumption and dissaving. 
B)  how much households want to spend on goods and services at different levels of disposable income. 
C)  purposes of consumption. 
D)  none of these. 
A)  the relationship between consumption and dissaving. 
B)  how much households want to spend on goods and services at different levels of disposable income. 
C)  purposes of consumption. 
D)  none of these.

Question 2

Narrbegin Exhibit 14.2 Aggregate demand and supply   
-In Exhibit 14.2, if aggregate demand shifts from AD3 to AD4, real GDP will:

Accepted Answer

A)  rise from $7 to $8 and the price level will rise from 120 to 140. 
B)  rise from $7 to $8 and the price level will rise from 120 to 170. 
C)  rise from $7 to $8 and the price level will rise from 100 to 140. 
D)  not change and the price level will rise from 120 to 140. 
A)  rise from $7 to $8 and the price level will rise from 120 to 140. 
B)  rise from $7 to $8 and the price level will rise from 120 to 170. 
C)  rise from $7 to $8 and the price level will rise from 100 to 140. 
D)  not change and the price level will rise from 120 to 140.

Question 3

The aggregate supply curve is defined as:

Accepted Answer

A)  net national product. 
B)  the sum of wages, rent, interest and profits. 
C)  the real GDP produced at different price levels. 
D)  the total dollar value of household expenditures. 
A)  net national product. 
B)  the sum of wages, rent, interest and profits. 
C)  the real GDP produced at different price levels. 
D)  the total dollar value of household expenditures.

Question 4

Which of the following is not a reason for the downward slope of an aggregate demand curve?

Accepted Answer

A)  Real balance effect. 
B)  Real interest-rate effect. 
C)  Net exports effect. 
D)  Effect of changes in the composition of inputs for aggregate production function. 
A)  Real balance effect. 
B)  Real interest-rate effect. 
C)  Net exports effect. 
D)  Effect of changes in the composition of inputs for aggregate production function.

Question 5

Along the intermediate range of the aggregate supply curve, an increase in the aggregate demand curve will increase:

Accepted Answer

A)  both the price level and real GDP. 
B)  only real GDP. 
C)  only the price level. 
D)  real GDP and reduce the price level. 
A)  both the price level and real GDP. 
B)  only real GDP. 
C)  only the price level. 
D)  real GDP and reduce the price level.

Question 6

A decrease in aggregate supply will tend to cause the price level to:

Accepted Answer

A)  rise and GDP to fall. 
B)  rise and GDP to rise. 
C)  rise and the unemployment rate to fall. 
D)  fall and GDP to rise. 
A)  rise and GDP to fall. 
B)  rise and GDP to rise. 
C)  rise and the unemployment rate to fall. 
D)  fall and GDP to rise.

Question 7

If aggregate demand increases in the intermediate range of the aggregate supply curve then the:

Accepted Answer

A)  price level rises and real GDP falls. 
B)  price level rises and real GDP rises. 
C)  price level falls and real GDP falls. 
D)  price level falls and real GDP rises. 
A)  price level rises and real GDP falls. 
B)  price level rises and real GDP rises. 
C)  price level falls and real GDP falls. 
D)  price level falls and real GDP rises.

Question 8

Classical economics argued that:

Accepted Answer

A)  the supply curve should remain vertical in the long run. 
B)  the First World War was fought to free Britain from economic ruin. 
C)  depression was only a short-run, temporary departure from full-employment equilibrium. 
D)  funeral plots need to be determined by the market. 
A)  the supply curve should remain vertical in the long run. 
B)  the First World War was fought to free Britain from economic ruin. 
C)  depression was only a short-run, temporary departure from full-employment equilibrium. 
D)  funeral plots need to be determined by the market.

Question 9

In the upward-sloping segment of the aggregate supply curve:

Accepted Answer

A)  increases in output are linked to decreases in the price level. 
B)  increasing prices drag down resource costs. 
C)  producers can hire more workers without having to raise the wage rate. 
D)  firms are willing to pay higher wages to get more labour. 
A)  increases in output are linked to decreases in the price level. 
B)  increasing prices drag down resource costs. 
C)  producers can hire more workers without having to raise the wage rate. 
D)  firms are willing to pay higher wages to get more labour.

Question 10

Why is investment demand more unstable than personal consumption?

Accepted Answer

A)  Because business decisions are often made based on the expectations, and moods of optimism and pessimism concerning future economic conditions. 
B)  Because business decisions are often made based only on interest rates. 
C)  Because business decisions are made more often than personal purchasing decisions. 
D)  Because personal purchasing decisions are often made based on the forecasts of future sales. 
A)  Because business decisions are often made based on the expectations, and moods of optimism and pessimism concerning future economic conditions. 
B)  Because business decisions are often made based only on interest rates. 
C)  Because business decisions are made more often than personal purchasing decisions. 
D)  Because personal purchasing decisions are often made based on the forecasts of future sales.

Question 11

The French economist Jean-Baptiste Say transformed the equality of total output and total spending into a law that can be expressed as follows:

Accepted Answer

A)  unemployment is not possible in the short run. 
B)  demand and supply are never equal. 
C)  supply creates its own demand. 
D)  demand creates its own supply. 
A)  unemployment is not possible in the short run. 
B)  demand and supply are never equal. 
C)  supply creates its own demand. 
D)  demand creates its own supply.

Question 12

Demand-pull inflation is caused by a leftward shift of the aggregate demand curve.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is not a component of the aggregate demand curve?

Accepted Answer

A)  Government spending (G). 
B)  Investment (I). 
C)  Consumption (
C) . 
D)  Saving. 
A)  Government spending (G). 
B)  Investment (I). 
C)  Consumption (
C) . 
D)  Saving.

Question 14

The theory that supply creates its own demand is called Say's Law.

Accepted Answer

A) True 
 B)False

Question 15

Other things being equal, an improvement in technology causes:

Accepted Answer

A)  a decrease in the aggregate supply curve. 
B)  an increase in the aggregate demand curve. 
C)  a decrease in the aggregate demand curve. 
D)  an increase in the aggregate supply curve. 
A)  a decrease in the aggregate supply curve. 
B)  an increase in the aggregate demand curve. 
C)  a decrease in the aggregate demand curve. 
D)  an increase in the aggregate supply curve.

Question 16

As the marginal propensity to consume (MPC) decreases, the spending multiplier:

Accepted Answer

A)  increases. 
B)  decreases. 
C)  remains constant. 
D)  becomes undefinable. 
A)  increases. 
B)  decreases. 
C)  remains constant. 
D)  becomes undefinable.

Question 17

The net export effect is caused by:

Accepted Answer

A)  the negative relationship between the price level and the exports minus imports. 
B)  the positive relationship between the price level and the exports minus imports. 
C)  the negative relationship between the price level and the exports. 
D)  the negative relationship between the price level and the exports plus imports. 
A)  the negative relationship between the price level and the exports minus imports. 
B)  the positive relationship between the price level and the exports minus imports. 
C)  the negative relationship between the price level and the exports. 
D)  the negative relationship between the price level and the exports plus imports.

Question 18

A leftward shift in the aggregate demand curve can be caused by:

Accepted Answer

A)  a decrease in the price level. 
B)  an increase in business investment spending. 
C)  a decrease in business investment spending 
D)  an increase in consumer optimism about the future. 
A)  a decrease in the price level. 
B)  an increase in business investment spending. 
C)  a decrease in business investment spending 
D)  an increase in consumer optimism about the future.

Question 19

In the aggregate demand and aggregate supply model:

Accepted Answer

A)  the factors that cause the demand curves in both models to slope downward are the same. 
B)  the factors that cause the supply curves in both models to slope upward are the same. 
C)  the upward-sloping aggregate demand curve intersects the downward-sloping aggregate supply curve to determine the economy's price level and GDP. 
D)  the upward-sloping aggregate supply curve intersects the downward-sloping aggregate demand curve to determine the economy's price level and GDP. 
A)  the factors that cause the demand curves in both models to slope downward are the same. 
B)  the factors that cause the supply curves in both models to slope upward are the same. 
C)  the upward-sloping aggregate demand curve intersects the downward-sloping aggregate supply curve to determine the economy's price level and GDP. 
D)  the upward-sloping aggregate supply curve intersects the downward-sloping aggregate demand curve to determine the economy's price level and GDP.

Question 20

Which of the following are beliefs of classical theory?

Accepted Answer

A)  Both production costs as well as selling prices are flexible. 
B)  Inflexible wages. 
C)  Inflexible prices. 
D)  Prices cannot change rapidly. 
A)  Both production costs as well as selling prices are flexible. 
B)  Inflexible wages. 
C)  Inflexible prices. 
D)  Prices cannot change rapidly.

The consumption function explains:

Narrbegin Exhibit 14.2 Aggregate demand and supply -In Exhibit 14.2, if aggregate demand shifts from AD₃ to AD₄, real GDP will:

The aggregate supply curve is defined as:

Which of the following is not a reason for the downward slope of an aggregate demand curve?

Along the intermediate range of the aggregate supply curve, an increase in the aggregate demand curve will increase:

A decrease in aggregate supply will tend to cause the price level to:

If aggregate demand increases in the intermediate range of the aggregate supply curve then the:

Classical economics argued that:

In the upward-sloping segment of the aggregate supply curve:

Why is investment demand more unstable than personal consumption?

The French economist Jean-Baptiste Say transformed the equality of total output and total spending into a law that can be expressed as follows:

Demand-pull inflation is caused by a leftward shift of the aggregate demand curve.

Which of the following is not a component of the aggregate demand curve?

The theory that supply creates its own demand is called Say's Law.

Other things being equal, an improvement in technology causes:

As the marginal propensity to consume (MPC) decreases, the spending multiplier:

The net export effect is caused by:

A leftward shift in the aggregate demand curve can be caused by:

In the aggregate demand and aggregate supply model:

Which of the following are beliefs of classical theory?

Thinking Like an Economist

Applying Graphs to Economics

Production Possibilities and Opportunity Cost

Market Demand and Supply

Markets in Action

Elasticity of Demand and Supply

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Policy Issues: Housing Affordability and Climate Change

Measuring the Size of the Economy

Business Cycles and Economic Growth

Inflation and Unemployment

The Monetary and Financial System

Macroeconomic Policy I: Monetary Policy

Macroeconomic Policy II: Fiscal Policy

International Trade and Finance

Filters

Exam 15: A Simple Model of the Macro Economy

The consumption function explains:

Narrbegin Exhibit 14.2 Aggregate demand and supply -In Exhibit 14.2, if aggregate demand shifts from AD3 to AD4, real GDP will:

The aggregate supply curve is defined as:

Which of the following is not a reason for the downward slope of an aggregate demand curve?

Along the intermediate range of the aggregate supply curve, an increase in the aggregate demand curve will increase:

A decrease in aggregate supply will tend to cause the price level to:

If aggregate demand increases in the intermediate range of the aggregate supply curve then the:

Classical economics argued that:

In the upward-sloping segment of the aggregate supply curve:

Why is investment demand more unstable than personal consumption?

The French economist Jean-Baptiste Say transformed the equality of total output and total spending into a law that can be expressed as follows:

Demand-pull inflation is caused by a leftward shift of the aggregate demand curve.

Which of the following is not a component of the aggregate demand curve?

The theory that supply creates its own demand is called Say's Law.

Other things being equal, an improvement in technology causes:

As the marginal propensity to consume (MPC) decreases, the spending multiplier:

The net export effect is caused by:

A leftward shift in the aggregate demand curve can be caused by:

In the aggregate demand and aggregate supply model:

Which of the following are beliefs of classical theory?

Thinking Like an Economist

Applying Graphs to Economics

Production Possibilities and Opportunity Cost

Market Demand and Supply

Markets in Action

Elasticity of Demand and Supply

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Policy Issues: Housing Affordability and Climate Change

Measuring the Size of the Economy

Business Cycles and Economic Growth

Inflation and Unemployment

The Monetary and Financial System

Macroeconomic Policy I: Monetary Policy

Macroeconomic Policy II: Fiscal Policy

International Trade and Finance

Filters

Narrbegin Exhibit 14.2 Aggregate demand and supply -In Exhibit 14.2, if aggregate demand shifts from AD₃ to AD₄, real GDP will: