Question 1

What would happen to aggregate demand if the federal government increased military purchases and state and local governments increased their road building budgets at the same time?

Accepted Answer

A) ​AD would increase. 
B) ​AD would increase, because only federal government purchases affect AD. 
C) ​AD would increase only if the change in federal purchases were smaller than the change in state and local purchases. 
D) ​AD would decrease only if the change in federal purchases was smaller than the change in state and local purchases.

Question 2

If there was no profit effect or misperception effect in the short run, then SRAS is ____ and LRAS is ____.

Accepted Answer

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

Question 3

A temporary decrease in the price of oil will shift the short run aggregate supply curve right but not shift the long run aggregate supply curve.

Accepted Answer

A) True 
 B)False

Question 4

If the overall price level decreases, then the aggregate demand curve will shift to the right.

Accepted Answer

A) True 
 B)False

Question 5

If, due to rising demand, the price of cotton rose 15 percent while the prices of other goods and services rose an average of 10 percent,

Accepted Answer

A) ​the relative price of cotton has risen and one would expect the output of cotton to rise as a result. 
B) ​the relative price of cotton has risen and one would expect the output of cotton to fall as a result. 
C) ​the relative price of cotton has fallen and one would expect the output of cotton to rise as a result. 
D) ​the relative price of cotton has fallen and one would expect the output of cotton to fall as a result.

Question 6

Which of the following expenditures would be counted as consumption in GDP accounts?

Accepted Answer

A) ​Mary buys a new home computer to check her e-mail and play computer games. 
B) ​Mark buys a new computer for his medical economic consulting business. 
C) ​Leslie, an EPA scientist, buys a new computer for her lab at work. 
D) ​Juan leases a new computer for his graphic design company.

Question 7

If both imports and exports fell,

Accepted Answer

A) ​AD would decrease. 
B) ​AD would increase. 
C) ​AD would decrease if exports fell more than imports. 
D) ​AD would increase if exports fell more than imports.

Question 8

If some non-price level determinant causes total spending to increase, then the effect on aggregate demand will be a:

Accepted Answer

A) ​movement upward along the curve. 
B) ​movement downward along the curve. 
C) ​shift to the left. 
D) ​shift to the right.

Question 9

An increase in disposable income would tend to shift aggregate demand right.

Accepted Answer

A) True 
 B)False

Question 10

The short-run equilibrium level of real output and the price level are determined by the intersection of the aggregate demand curve and the short-run aggregate supply curve.

Accepted Answer

A) True 
 B)False

Question 11

The long-run equilibrium level of RGDP only changes when the LRAS shifts.

Accepted Answer

A) True 
 B)False

Question 12

The aggregate demand curve portrays the relationship between price level and real GDP. What are the three reasons this relationship is a negative or inverse relationship? Provide brief illustrations of each.

Accepted Answer

The answer of The aggregate demand curve portrays the relationship...

Question 13

Investment will decrease if business taxes ____, real interest rates ____, or if business confidence ____.

Accepted Answer

A) ​increase, increase, increases 
B) ​decrease, decrease, decreases 
C) ​increase, increase, decreases 
D) ​decrease, decrease, increases

Question 14

The aggregate supply curves show how much a nation's businesses are willing and able to produce at each price level.

Accepted Answer

A) True 
 B)False

Question 15

Imports are not included in GDP because they do not reflect output produced within the domestic economy.

Accepted Answer

A) True 
 B)False

Question 16

Identify four changes in the economy that would cause the aggregate demand curve to decrease (shift to the left).

Accepted Answer

The answer of Identify four changes in the economy that...

Question 17

Both positive nor negative supply shocks

Accepted Answer

A) ​Change AD. 
B) ​Permanently change real output in an economy. 
C) ​Change the price level in the long run. 
D) ​None of the above are true

Question 18

Faster growth rates by a major trading partner, combined with an increase in stock market wealth, 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 19

Which of the following is true of the long-run aggregate supply curve?

Accepted Answer

A) ​It is vertical. 
B) ​The level of RGDP supplied does not change as the price level changes. 
C) ​The level of RGDP supplied changes with the levels of capital, land, labor, and technology available to the economy. 
D) ​all of the above

Question 20

If there is currently a recessionary gap, a decrease in aggregate demand would make the recessionary gap larger.

Accepted Answer

A) True 
 B)False

Exam 14: Monopolistic Competition and Product Differentiation

What would happen to aggregate demand if the federal government increased military purchases and state and local governments increased their road building budgets at the same time?

If there was no profit effect or misperception effect in the short run, then SRAS is and LRAS is .

A temporary decrease in the price of oil will shift the short run aggregate supply curve right but not shift the long run aggregate supply curve.

If the overall price level decreases, then the aggregate demand curve will shift to the right.

If, due to rising demand, the price of cotton rose 15 percent while the prices of other goods and services rose an average of 10 percent,

Which of the following expenditures would be counted as consumption in GDP accounts?

If both imports and exports fell,

If some non-price level determinant causes total spending to increase, then the effect on aggregate demand will be a:

An increase in disposable income would tend to shift aggregate demand right.

The short-run equilibrium level of real output and the price level are determined by the intersection of the aggregate demand curve and the short-run aggregate supply curve.

The long-run equilibrium level of RGDP only changes when the LRAS shifts.

The aggregate demand curve portrays the relationship between price level and real GDP. What are the three reasons this relationship is a negative or inverse relationship? Provide brief illustrations of each.

Investment will decrease if business taxes , real interest rates , or if business confidence .

The aggregate supply curves show how much a nation's businesses are willing and able to produce at each price level.

Imports are not included in GDP because they do not reflect output produced within the domestic economy.

Identify four changes in the economy that would cause the aggregate demand curve to decrease (shift to the left).

Both positive nor negative supply shocks

Faster growth rates by a major trading partner, combined with an increase in stock market wealth, would have what effect on aggregate demand?

Which of the following is true of the long-run aggregate supply curve?

If there is currently a recessionary gap, a decrease in aggregate demand would make the recessionary gap larger.