Question 1

If net exports are negative, then aggregate demand will be less than the sum of consumption, investment, and government purchases.

Accepted Answer

A) True 
 B)False  True

Question 2

The SRAS is ____; the LRAS is ____.

Accepted Answer

A)  ​upward sloping; upward sloping
B)  ​upward sloping; vertical
C)  ​vertical; upward sloping
D)  ​vertical; vertical B

Question 3

Which of the following will cause consumption, and as a result, aggregate demand, to decrease?

Accepted Answer

A)  ​a tax cut
B)  ​a decrease in consumer confidence
C)  ​increased population
D)  ​an optimistic forecast of future income growth B

Question 4

Ceteris paribus, which of the following would cause the aggregate demand curve to shift to the left?

Accepted Answer

A)  ​lower personal taxes
B)  ​a rise in consumer confidence
C)  ​greater stock market wealth
D)  ​a reduction in transfer payments

Question 5

In the analysis of the interest rate effect, when the price level changes, the quantity of money households and firms' want to hold and interest rates move in the ____ direction as the change in the price level, while investment and the quantity RGDP demanded move in the ____ direction as the change in the price level.

Accepted Answer

A)  ​Same, same
B)  ​Same, opposite
C)  ​Opposite, same
D)  ​opposite, opposite

Question 6

The short-run aggregate supply curve is drawn with:

Accepted Answer

A)  ​the price level on the vertical axis and real GDP on the horizontal axis.
B)  ​the price level on the vertical axis and nominal GDP on the horizontal axis.
C)  ​nominal GDP on the vertical axis and real GDP on the horizontal axis.
D)  ​real GDP on the horizontal axis and the rate of unemployment on the vertical axis.

Question 7

Aggregate demand includes:

Accepted Answer

A)  ​the demand for intermediate goods and final goods.
B)  ​all monetary and nonmonetary transactions.
C)  ​the demand for investment, including stocks, bonds, and gold.
D)  ​the demand for final goods and services.

Question 8

A decrease in the U.S. price level will:

Accepted Answer

A)  ​decrease U.S.imports.
B)  ​decrease U.S.exports.
C)  ​decrease the quantity of RGDP demanded in the United States.
D)  ​both (a)  and (c)

Question 9

​Exhibit 14-1 
-Refer to Exhibit 14-1. Which of the following would be illustrated by a shift in aggregate demand from AD0 to AD2?

Accepted Answer

A)  ​an increase in investment, combined with an increase in imports
B)  ​a reduction in business expectations, combined with the imposition of new tariffs by major trading partners
C)  ​the discovery of new profitable technological investment opportunities, combined with inventory levels that have fallen below desired levels
D)  ​faster growth rates by a major trading partner, combined with an increase in stock market wealth

Question 10

An increase in business tax rates, combined with a decrease in consumer confidence, would have what effect on aggregate demand?

Accepted Answer

A)  ​AD would increase.
B)  ​AD would decrease.
C)  ​AD would stay the same.
D)  ​AD could either increase or decrease, depending on which change was of a greater magnitude.

Question 11

Aggregate demand does not include:

Accepted Answer

A)  ​Purchases of intermediate goods and final goods.
B)  ​Purchases of used goods and services.
C)  ​Purchases of stocks and bonds.
D)  ​Aggregate demand does not include any of the above.

Question 12

Cost-push inflation is caused by:

Accepted Answer

A)  ​an increase in aggregate demand.
B)  ​a decrease in aggregate demand.
C)  ​an increase in short-run aggregate supply.
D)  ​a decrease in short-run aggregate supply.

Question 13

The economy is in long-run equilibrium only when the short run aggregate supply curve intersects the aggregate demand curve along the long run aggregate supply curve.

Accepted Answer

A) True 
 B)False

Question 14

A reduction in the price level will cause the aggregate demand curve to shift to the left.

Accepted Answer

A) True 
 B)False

Question 15

The LRAS curve is ____ with real output levels that ____.

Accepted Answer

A)  ​upward sloping; vary positively with the price level
B)  ​upward sloping; vary negatively with the price level
C)  ​vertical; are equal to the natural level of real output at all price levels
D)  ​vertical; can be either greater than or less than the natural level of real output

Question 16

When there is a recessionary gap:

Accepted Answer

A)  ​Unemployment exceeds the natural rate of unemployment.
B)  ​Unemployment equals the natural rate of unemployment.
C)  ​Unemployment is less than the natural rate of unemployment.
D)  ​Any of the above is possible.

Question 17

An economic boom in China is likely to lead to a(n):

Accepted Answer

A)  ​decrease in U.S.exports and U.S.aggregate demand.
B)  ​increase in U.S.exports and U.S.aggregate demand.
C)  ​decrease in U.S.imports and U.S.aggregate demand.
D)  ​increase in U.S.imports and U.S.aggregate demand.

Question 18

An economic slowdown in Europe is likely to lead to a(n):

Accepted Answer

A)  ​decrease in U.S.exports and U.S.aggregate demand.
B)  ​increase in U.S.exports and U.S.aggregate demand.
C)  ​decrease in U.S.imports and U.S.aggregate demand.
D)  ​increase in U.S.imports and U.S.aggregate demand.

Question 19

Which of the following is true when there is a recessionary gap?

Accepted Answer

A)  ​Real output exceeds the natural level of real output.
B)  ​Unemployment exceeds the natural rate of unemployment.
C)  ​Employment exceeds full employment.
D)  ​All of the above are true when there is a recessionary gap.

Question 20

Either a cut in business taxes or an increase in real interest rates would increase investment and aggregate demand, other things equal.

Accepted Answer

A) True 
 B)False

Exam 14: Monopolistic Competition and Product Differentiation

If net exports are negative, then aggregate demand will be less than the sum of consumption, investment, and government purchases.

The SRAS is ; the LRAS is .

Which of the following will cause consumption, and as a result, aggregate demand, to decrease?

Ceteris paribus, which of the following would cause the aggregate demand curve to shift to the left?

The short-run aggregate supply curve is drawn with:

Aggregate demand includes:

A decrease in the U.S. price level will:

Exhibit 14-1 -Refer to Exhibit 14-1. Which of the following would be illustrated by a shift in aggregate demand from AD₀ to AD₂?

An increase in business tax rates, combined with a decrease in consumer confidence, would have what effect on aggregate demand?

Aggregate demand does not include:

Cost-push inflation is caused by:

The economy is in long-run equilibrium only when the short run aggregate supply curve intersects the aggregate demand curve along the long run aggregate supply curve.

A reduction in the price level will cause the aggregate demand curve to shift to the left.

The LRAS curve is with real output levels that .

When there is a recessionary gap:

An economic boom in China is likely to lead to a(n) :

An economic slowdown in Europe is likely to lead to a(n) :

Which of the following is true when there is a recessionary gap?

Either a cut in business taxes or an increase in real interest rates would increase investment and aggregate demand, other things equal.

Exam 14: Monopolistic Competition and Product Differentiation

If net exports are negative, then aggregate demand will be less than the sum of consumption, investment, and government purchases.

The SRAS is ____; the LRAS is ____.

Which of the following will cause consumption, and as a result, aggregate demand, to decrease?

Ceteris paribus, which of the following would cause the aggregate demand curve to shift to the left?

The short-run aggregate supply curve is drawn with:

Aggregate demand includes:

A decrease in the U.S. price level will:

​Exhibit 14-1 -Refer to Exhibit 14-1. Which of the following would be illustrated by a shift in aggregate demand from AD0 to AD2?

An increase in business tax rates, combined with a decrease in consumer confidence, would have what effect on aggregate demand?

Aggregate demand does not include:

Cost-push inflation is caused by:

The economy is in long-run equilibrium only when the short run aggregate supply curve intersects the aggregate demand curve along the long run aggregate supply curve.

A reduction in the price level will cause the aggregate demand curve to shift to the left.

The LRAS curve is ____ with real output levels that ____.

When there is a recessionary gap:

An economic boom in China is likely to lead to a(n) :

An economic slowdown in Europe is likely to lead to a(n) :

Which of the following is true when there is a recessionary gap?

Either a cut in business taxes or an increase in real interest rates would increase investment and aggregate demand, other things equal.

The SRAS is ; the LRAS is .

Exhibit 14-1 -Refer to Exhibit 14-1. Which of the following would be illustrated by a shift in aggregate demand from AD₀ to AD₂?

The LRAS curve is with real output levels that .