Question 1

If productivity increases, then the per-unit production cost decreases.

Accepted Answer

A) True 
 B)False

Question 2

Cost-push inflation can be described as a rightward shift of the aggregate supply curve.

Accepted Answer

A) True 
 B)False

Question 3

The short-run version of aggregate supply assumes that product prices are:

Accepted Answer

A)  Fixed while resource prices are flexible 
B)  Flexible while resource prices are fixed 
C)  Both input and product prices are flexible 
D)  Both input and product prices are fixed 
A)  Fixed while resource prices are flexible 
B)  Flexible while resource prices are fixed 
C)  Both input and product prices are flexible 
D)  Both input and product prices are fixed

Question 4

Suppose that an economy produces 2400 units of output, employing the 60 units of input, and the price of the input is $30 per unit. Refer to the information above. The level of productivity in this economy is:

Accepted Answer

A)  20 
B)  30 
C)  40 
D)  50 
A)  20 
B)  30 
C)  40 
D)  50

Question 5

The oil crises of the 1970s and 1980s can best be illustrated as a shift of the aggregate demand curve to the left.

Accepted Answer

A) True 
 B)False

Question 6

If the dollar appreciates relative to foreign currencies, then:

Accepted Answer

A)  U.S. goods will look cheaper to foreign buyers 
B)  Foreign goods will look more expensive to U.S. buyers 
C)  Net exports of the U.S. will increase 
D)  Foreign buyers will find U.S. goods become more expensive 
A)  U.S. goods will look cheaper to foreign buyers 
B)  Foreign goods will look more expensive to U.S. buyers 
C)  Net exports of the U.S. will increase 
D)  Foreign buyers will find U.S. goods become more expensive

Question 7

The long-run aggregate supply analysis assumes that:

Accepted Answer

A)  Input prices are fixed while product prices are variable 
B)  Input prices are variable while product prices are fixed 
C)  Both input and product prices are variable 
D)  Both input and product prices are fixed 
A)  Input prices are fixed while product prices are variable 
B)  Input prices are variable while product prices are fixed 
C)  Both input and product prices are variable 
D)  Both input and product prices are fixed

Question 8

The aggregate expenditures schedule relates total spending with the price level, while the aggregate demand schedule relates total demand for output with income.

Accepted Answer

A) True 
 B)False

Question 9

Refer to the figure above. A shift from AD2 shifts to AD1 would be consistent with what economic event in U.S. history?

Accepted Answer

A)  World War II in the 1940s 
B)  Cost-push inflation in the mid-1970s 
C)  Demand-pull inflation in the late 1960s 
D)  Great Recession of 2007-2009 
A)  World War II in the 1940s 
B)  Cost-push inflation in the mid-1970s 
C)  Demand-pull inflation in the late 1960s 
D)  Great Recession of 2007-2009

Question 10

Refer to the graph above. If the price level is initially at P1, then the economy will adjust by:

Accepted Answer

A)  Increasing output produced 
B)  Decreasing the GDP produced 
C)  Reducing the price level 
D)  Increasing the total output demanded 
A)  Increasing output produced 
B)  Decreasing the GDP produced 
C)  Reducing the price level 
D)  Increasing the total output demanded

Question 11

Suppose that an economy produces 2400 units of output, employing the 60 units of input, and the price of the input is $30 per unit. Refer to the information above. The per-unit cost of production is:

Accepted Answer

A)  $0.25 
B)  $0.50 
C)  $0.75 
D)  $2.00 
A)  $0.25 
B)  $0.50 
C)  $0.75 
D)  $2.00

Question 12

When the excess capacity of business expands unintentionally, aggregate:

Accepted Answer

A)  Demand will increase 
B)  Demand will decrease 
C)  Supply will increase 
D)  Supply will decrease 
A)  Demand will increase 
B)  Demand will decrease 
C)  Supply will increase 
D)  Supply will decrease

Question 13

An increase in the price level, other things equal, will shift the:

Accepted Answer

A)  Consumption, investment, and net exports schedules of the aggregate expenditures model downward 
B)  Consumption, investment, and net exports schedules of the aggregate expenditures model upward 
C)  Consumption, and investment schedules of the aggregate expenditures model upward, but the net exports schedule downward 
D)  Consumption, and net exports schedules of the aggregate expenditures model upward, but the investment schedule downward 
A)  Consumption, investment, and net exports schedules of the aggregate expenditures model downward 
B)  Consumption, investment, and net exports schedules of the aggregate expenditures model upward 
C)  Consumption, and investment schedules of the aggregate expenditures model upward, but the net exports schedule downward 
D)  Consumption, and net exports schedules of the aggregate expenditures model upward, but the investment schedule downward

Question 14

Inflation tends to:

Accepted Answer

A)  Increase productivity 
B)  Decrease input prices 
C)  Increase the strength of the multiplier 
D)  Reduce the strength of the multiplier 
A)  Increase productivity 
B)  Decrease input prices 
C)  Increase the strength of the multiplier 
D)  Reduce the strength of the multiplier

Question 15

The real-balance effect explains a shift in aggregate demand, while the wealth effect explains a movement along the AD curve.

Accepted Answer

A) True 
 B)False

Question 16

Refer to the graph above. Which of the following factors will shift AD1 to AD3?

Accepted Answer

A)  An increase in expected returns on investment 
B)  An increase in productivity 
C)  A decrease in real interest rates 
D)  A decrease in consumer wealth 
A)  An increase in expected returns on investment 
B)  An increase in productivity 
C)  A decrease in real interest rates 
D)  A decrease in consumer wealth

Question 17

A decrease in consumer spending can be expected to shift the:

Accepted Answer

A)  Aggregate expenditures curve downward and the aggregate demand curve leftward 
B)  Aggregate expenditures curve upward and the aggregate demand curve leftward 
C)  Aggregate expenditures curve downward and the aggregate demand curve rightward 
D)  Aggregate expenditures curve upward and the aggregate demand curve rightward 
A)  Aggregate expenditures curve downward and the aggregate demand curve leftward 
B)  Aggregate expenditures curve upward and the aggregate demand curve leftward 
C)  Aggregate expenditures curve downward and the aggregate demand curve rightward 
D)  Aggregate expenditures curve upward and the aggregate demand curve rightward

Question 18

The stimulus package that the government implemented during the Great Recession of 2007-09 did not have as strong an impact on GDP and unemployment as expected, for the following reasons, except:

Accepted Answer

A)  Very high debt levels of households 
B)  Consumers raised their saving rates 
C)  The stimulus package caused prices to fall in many sectors 
D)  The effects of the stimulus package were diffuse and spread thinly among many sectors 
A)  Very high debt levels of households 
B)  Consumers raised their saving rates 
C)  The stimulus package caused prices to fall in many sectors 
D)  The effects of the stimulus package were diffuse and spread thinly among many sectors

Question 19

The economy experiences an increase in the price level and an increase in real domestic output. Which is a likely explanation?

Accepted Answer

A)  Interest rates have increased 
B)  Business taxes have increased 
C)  Wage rates have fallen 
D)  Net exports have increased 
A)  Interest rates have increased 
B)  Business taxes have increased 
C)  Wage rates have fallen 
D)  Net exports have increased

Question 20

Answer the question based on the following list of items that are related to aggregate demand and/or aggregate supply.   Refer to the list above. Changes in which of the above two factors would most likely cause a change in aggregate demand?

Accepted Answer

A)  1 and 5 
B)  3 and 10 
C)  5 and 7 
D)  8 and 9 
A)  1 and 5 
B)  3 and 10 
C)  5 and 7 
D)  8 and 9

Exam 12: Aggregate Demand and Aggregate Supply

If productivity increases, then the per-unit production cost decreases.

Cost-push inflation can be described as a rightward shift of the aggregate supply curve.

The short-run version of aggregate supply assumes that product prices are:

Suppose that an economy produces 2400 units of output, employing the 60 units of input, and the price of the input is $30 per unit. Refer to the information above. The level of productivity in this economy is:

The oil crises of the 1970s and 1980s can best be illustrated as a shift of the aggregate demand curve to the left.

If the dollar appreciates relative to foreign currencies, then:

The long-run aggregate supply analysis assumes that:

The aggregate expenditures schedule relates total spending with the price level, while the aggregate demand schedule relates total demand for output with income.

Refer to the figure above. A shift from AD2 shifts to AD1 would be consistent with what economic event in U.S. history?

Refer to the graph above. If the price level is initially at P1, then the economy will adjust by:

Suppose that an economy produces 2400 units of output, employing the 60 units of input, and the price of the input is $30 per unit. Refer to the information above. The per-unit cost of production is:

When the excess capacity of business expands unintentionally, aggregate:

An increase in the price level, other things equal, will shift the:

Inflation tends to:

The real-balance effect explains a shift in aggregate demand, while the wealth effect explains a movement along the AD curve.

Refer to the graph above. Which of the following factors will shift AD1 to AD3?

A decrease in consumer spending can be expected to shift the:

The stimulus package that the government implemented during the Great Recession of 2007-09 did not have as strong an impact on GDP and unemployment as expected, for the following reasons, except:

The economy experiences an increase in the price level and an increase in real domestic output. Which is a likely explanation?

Answer the question based on the following list of items that are related to aggregate demand and/or aggregate supply. Refer to the list above. Changes in which of the above two factors would most likely cause a change in aggregate demand?

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Governments Role and Government Failure

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

The Aggregate Expenditures Model

Fiscal Policy, Deficits, and Debt

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

Filters

Refer to the figure above. A shift from AD₂ shifts to AD₁ would be consistent with what economic event in U.S. history?

Refer to the graph above. If the price level is initially at P₁, then the economy will adjust by:

Refer to the graph above. Which of the following factors will shift AD₁ to AD₃?