Question 1

According to the ______ effect, a lower price level decreases interest rates, which results in additional spending on investment goods and so increases the aggregate quantity of goods and services demanded.

Accepted Answer

A)  money supply 
B)  interest rate 
C)  consumption 
D)  investment

Question 2

According to Keynesian economics, a nation's level of economic activity primarily depends on the

Accepted Answer

A)  total spending of consumers, business, and government 
B)  stock of the economy's capital goods 
C)  amount of saving that is channeled into net imports 
D)  extent of union activity in major industries

Question 3

The aggregate supply curve would shift leftward if there is a decrease in resource prices, an increase in the availability of resources, or an increase in labor productivity.

Accepted Answer

A) True 
 B)False

Question 4

Rising prices in the economy tend to

Accepted Answer

A)  increase the size of the multiplier 
B)  decrease the size of the multiplier 
C)  not change the size of the multiplier 
D)  have an unknown effect on the size of the multiplier

Question 5

Stagflation would be the result of a(n)

Accepted Answer

A)  increase in the economy's aggregate demand curve 
B)  decrease in the economy's aggregate demand curve 
C)  decrease in the economy's aggregate supply curve 
D)  increase in the economy's aggregate supply curve

Question 6

With stock prices rising, Americans who hold stocks suddenly become less concerned about saving for retirement and increase their current consumption. As a result, the

Accepted Answer

A)  aggregate demand curve shifts leftward 
B)  aggregate demand curve shifts rightward 
C)  aggregate supply curve shifts leftward 
D)  aggregate supply curve shifts rightward

Question 7

An increase in aggregate demand will increase the economy's real output and price level if the aggregate supply curve is

Accepted Answer

A)  horizontal 
B)  downward sloping 
C)  upward sloping 
D)  vertical

Question 8

Due to expectations of a future recession, companies do not think that they can sell all of their output and therefore purchase less equipment and machinery. As an immediate result, the

Accepted Answer

A)  aggregate supply curve becomes vertical 
B)  aggregate supply curve becomes horizontal 
C)  aggregate demand curve shifts rightward 
D)  aggregate demand curve shifts leftward

Question 9

According to John Maynard Keynes, a nation's level of economic activity depends primarily on the amount of international trade it generates.

Accepted Answer

A) True 
 B)False

Question 10

An increase in the economy's price level will reduce the size of the spending multiplier.

Accepted Answer

A) True 
 B)False

Question 11

A decrease in the aggregate supply curve generally results in a(n)

Accepted Answer

A)  decrease in the price level and an increase in output 
B)  decrease in the price level and a decrease in output 
C)  increase in the price level and an increase in output 
D)  increase in the price level and a decrease in output

Question 12

In the aggregate supply-aggregate demand model, an increase in the economy's price level reduces the size of the multiplier.

Accepted Answer

A) True 
 B)False

Question 13

Along the horizontal portion of the aggregate supply curve, the economy is assumed to be at full employment.

Accepted Answer

A) True 
 B)False

Question 14

For the full multiplier effect to occur, there must be

Accepted Answer

A)  some idle resources in the economy, which results in a constant price level 
B)  full employment in the economy, which results in rising prices 
C)  consumers in the economy who are not affected by changing interest rates 
D)  no businesses investment in the economy

Question 15

To combat demand-pull inflation, policy makers could reduce the growth rate of the money supply or government spending.

Accepted Answer

A) True 
 B)False

Question 16

To combat demand-pull inflation, government might reduce taxes for households in order to encourage additional consumption spending.

Accepted Answer

A) True 
 B)False

Question 17

Figure 12.1 Aggregate Supply and Aggregate Demand
 
-Refer to Figure 12.1. The shift from AS0 to AS1 results in

Accepted Answer

A)  stable prices 
B)  lower unemployment 
C)  higher real output 
D)  stagflation

Question 18

An upward movement along the aggregate demand curve is caused by a(n)

Accepted Answer

A)  decrease in the economy's interest rate 
B)  increase in the economy's money supply 
C)  increase in the economy's price level 
D)  increase in households' consumption spending

Exam 12: Macroeconomic Instability: Aggregate Demand and Aggregate Supply

According to the ______ effect, a lower price level decreases interest rates, which results in additional spending on investment goods and so increases the aggregate quantity of goods and services demanded.

According to Keynesian economics, a nation's level of economic activity primarily depends on the

The aggregate supply curve would shift leftward if there is a decrease in resource prices, an increase in the availability of resources, or an increase in labor productivity.

Rising prices in the economy tend to

Stagflation would be the result of a(n)

With stock prices rising, Americans who hold stocks suddenly become less concerned about saving for retirement and increase their current consumption. As a result, the

An increase in aggregate demand will increase the economy's real output and price level if the aggregate supply curve is

Due to expectations of a future recession, companies do not think that they can sell all of their output and therefore purchase less equipment and machinery. As an immediate result, the

According to John Maynard Keynes, a nation's level of economic activity depends primarily on the amount of international trade it generates.

An increase in the economy's price level will reduce the size of the spending multiplier.

A decrease in the aggregate supply curve generally results in a(n)

In the aggregate supply-aggregate demand model, an increase in the economy's price level reduces the size of the multiplier.

Along the horizontal portion of the aggregate supply curve, the economy is assumed to be at full employment.

For the full multiplier effect to occur, there must be

To combat demand-pull inflation, policy makers could reduce the growth rate of the money supply or government spending.

To combat demand-pull inflation, government might reduce taxes for households in order to encourage additional consumption spending.

Figure 12.1 Aggregate Supply and Aggregate Demand -Refer to Figure 12.1. The shift from AS₀ to AS₁ results in

An upward movement along the aggregate demand curve is caused by a(n)

Exam 12: Macroeconomic Instability: Aggregate Demand and Aggregate Supply

According to the ______ effect, a lower price level decreases interest rates, which results in additional spending on investment goods and so increases the aggregate quantity of goods and services demanded.

According to Keynesian economics, a nation's level of economic activity primarily depends on the

The aggregate supply curve would shift leftward if there is a decrease in resource prices, an increase in the availability of resources, or an increase in labor productivity.

Rising prices in the economy tend to

Stagflation would be the result of a(n)

With stock prices rising, Americans who hold stocks suddenly become less concerned about saving for retirement and increase their current consumption. As a result, the

An increase in aggregate demand will increase the economy's real output and price level if the aggregate supply curve is

Due to expectations of a future recession, companies do not think that they can sell all of their output and therefore purchase less equipment and machinery. As an immediate result, the

According to John Maynard Keynes, a nation's level of economic activity depends primarily on the amount of international trade it generates.

An increase in the economy's price level will reduce the size of the spending multiplier.

A decrease in the aggregate supply curve generally results in a(n)

In the aggregate supply-aggregate demand model, an increase in the economy's price level reduces the size of the multiplier.

Along the horizontal portion of the aggregate supply curve, the economy is assumed to be at full employment.

For the full multiplier effect to occur, there must be

To combat demand-pull inflation, policy makers could reduce the growth rate of the money supply or government spending.

To combat demand-pull inflation, government might reduce taxes for households in order to encourage additional consumption spending.

Figure 12.1 Aggregate Supply and Aggregate Demand -Refer to Figure 12.1. The shift from AS0 to AS1 results in

An upward movement along the aggregate demand curve is caused by a(n)

Figure 12.1 Aggregate Supply and Aggregate Demand -Refer to Figure 12.1. The shift from AS₀ to AS₁ results in