Question 1

The Fed rule shows combinations of income and interest rates consistent with equilibrium in the goods market.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following sequence of events follows a decrease in the discount rate?

Accepted Answer

A)  r↓ ⇒ I↓ ⇒ AE↓ ⇒ Y↑ 
B)  r↑ ⇒ I↓ ⇒ AE↓ ⇒ Y↓ 
C)  r↓ ⇒ I↑ ⇒ AE↑ ⇒ Y↑ 
D)  r↑ ⇒ I↑ ⇒ AE↑ ⇒ Y↑ 
A)  r↓ ⇒ I↓ ⇒ AE↓ ⇒ Y↑ 
B)  r↑ ⇒ I↓ ⇒ AE↓ ⇒ Y↓ 
C)  r↓ ⇒ I↑ ⇒ AE↑ ⇒ Y↑ 
D)  r↑ ⇒ I↑ ⇒ AE↑ ⇒ Y↑

Question 3

Refer to the information provided in Figure 26.1 below to answer the question(s) that follow.   Figure 26.1
-Refer to Figure 26.1. This economy is most likely experiencing excess capacity at aggregate output levels

Accepted Answer

A)  above $1,500 billion. 
B)  between $1,000 billion and $1,500 billion. 
C)  between $500 billion and $1,000 billion. 
D)  below $500 billion. 
A)  above $1,500 billion. 
B)  between $1,000 billion and $1,500 billion. 
C)  between $500 billion and $1,000 billion. 
D)  below $500 billion.

Question 4

To decrease output the government could

Accepted Answer

A)  adopt policies that discourage immigration and increase government spending. 
B)  adopt policies that encourage immigration and decrease government spending. 
C)  adopt policies that encourage technological advancement and increase government spending. 
D)  adopt policies that discourage technological advancement and decrease government spending. 
A)  adopt policies that discourage immigration and increase government spending. 
B)  adopt policies that encourage immigration and decrease government spending. 
C)  adopt policies that encourage technological advancement and increase government spending. 
D)  adopt policies that discourage technological advancement and decrease government spending.

Question 5

An increase in the price level will cause a decrease in the aggregate amount of output supplied.

Accepted Answer

A) True 
 B)False

Question 6

The aggregate demand curve shows that at higher price levels the total quantity of output demanded is greater.

Accepted Answer

A) True 
 B)False

Question 7

Refer to the information provided in Figure 26.8 below to answer the question(s) that follow.   Figure 26.8
-Refer to Figure 26.8. If the economy is currently at Point D producing output level Y2, which of the following is not true?

Accepted Answer

A)  The economy is operating below full employment. 
B)  Input prices are likely to fall. 
C)  Aggregate supply shifts to the right and the economy ends up at Point E. 
D)  The economy is operating above full employment. 
A)  The economy is operating below full employment. 
B)  Input prices are likely to fall. 
C)  Aggregate supply shifts to the right and the economy ends up at Point E. 
D)  The economy is operating above full employment.

Question 8

The aggregate demand curve is the sum of all market demand curves in the economy.

Accepted Answer

A) True 
 B)False

Question 9

Output in the short run is determined by which of the following factors when an economy operates at full employment?

Accepted Answer

A)  demand 
B)  the labor force 
C)  supply 
D)  the price level 
A)  demand 
B)  the labor force 
C)  supply 
D)  the price level

Question 10

The aggregate demand curve slopes downward because at lower price levels the purchasing power of consumers' assets ________, which ________ real wealth.

Accepted Answer

A)  decreases; decreases 
B)  increases; increases 
C)  decreases; increases 
D)  increases; decreases 
A)  decreases; decreases 
B)  increases; increases 
C)  decreases; increases 
D)  increases; decreases

Question 11

Related to the Economics in Practice on p. 547: In the simple "Keynesian" view, the aggregate supply curve

Accepted Answer

A)  is downward sloping. 
B)  is completely horizontal. 
C)  is completely vertical. 
D)  is horizontal in part, and vertical in part. 
A)  is downward sloping. 
B)  is completely horizontal. 
C)  is completely vertical. 
D)  is horizontal in part, and vertical in part.

Question 12

The aggregate demand curve is the sum of all demand curves of all goods and services in the economy.

Accepted Answer

A) True 
 B)False

Question 13

The graph that shows the relationship between the aggregate quantity of output supplied by all the firms in an economy and the overall price level is

Accepted Answer

A)  the aggregate supply curve. 
B)  the aggregate production function. 
C)  the production possibilities frontier. 
D)  the aggregate demand curve. 
A)  the aggregate supply curve. 
B)  the aggregate production function. 
C)  the production possibilities frontier. 
D)  the aggregate demand curve.

Question 14

If ________ equilibrium output ________, the price level rises.

Accepted Answer

A)  actual; is below potential GDP 
B)  potential; is equal to actual GDP 
C)  potential; exceeds actual GDP 
D)  actual; exceeds potential GDP 
A)  actual; is below potential GDP 
B)  potential; is equal to actual GDP 
C)  potential; exceeds actual GDP 
D)  actual; exceeds potential GDP

Question 15

Refer to the information provided in Figure 26.4 below to answer the question(s) that follow.   Figure 26.4
-Refer to Figure 26.4. During the 2008-2009 recession, many firms in the United States reduced investment in new capital. If the economy was originally at Point A, this would have caused a movement to Point

Accepted Answer

A)  E. 
B)  B. 
C)  C. 
D)  D. 
A)  E. 
B)  B. 
C)  C. 
D)  D.

Question 16

The quantity of aggregate output demanded will fall if

Accepted Answer

A)  government spending increases. 
B)  the price level increases. 
C)  Aggregate supply increases. 
D)  net taxes are reduced. 
A)  government spending increases. 
B)  the price level increases. 
C)  Aggregate supply increases. 
D)  net taxes are reduced.

Question 17

To determine the price level and aggregate output, the aggregate demand and aggregate supply must

Accepted Answer

A)  be considered separately. 
B)  be disregarded. 
C)  be considered as a multiplier. 
D)  intersect. 
A)  be considered separately. 
B)  be disregarded. 
C)  be considered as a multiplier. 
D)  intersect.

Question 18

Potential output is the same as long-run aggregate supply.

Accepted Answer

A) True 
 B)False

Question 19

Refer to the information provided in Figure 26.1 below to answer the question(s) that follow.   Figure 26.1
-Refer to Figure 26.1. This economy is most likely experiencing costs increasing as fast as output prices are increasing at aggregate output levels

Accepted Answer

A)  above $1,500 billion. 
B)  between $1,000 billion and $1,500 billion. 
C)  between $500 billion and $1,000 billion. 
D)  below $500 billion. 
A)  above $1,500 billion. 
B)  between $1,000 billion and $1,500 billion. 
C)  between $500 billion and $1,000 billion. 
D)  below $500 billion.

Question 20

Which of the following will, unambiguously, decrease the price level?

Accepted Answer

A)  an increase in government spending and an increase in costs 
B)  an increase in government spending and a decrease in costs 
C)  a decrease in government spending and an increase in costs 
D)  a decrease in government spending and a decrease in costs 
A)  an increase in government spending and an increase in costs 
B)  an increase in government spending and a decrease in costs 
C)  a decrease in government spending and an increase in costs 
D)  a decrease in government spending and a decrease in costs

Exam 26: The Determination of Aggregate Output, the Price Level, and the Interest Rate

The Fed rule shows combinations of income and interest rates consistent with equilibrium in the goods market.

Which of the following sequence of events follows a decrease in the discount rate?

Refer to the information provided in Figure 26.1 below to answer the question(s) that follow. Figure 26.1 -Refer to Figure 26.1. This economy is most likely experiencing excess capacity at aggregate output levels

To decrease output the government could

An increase in the price level will cause a decrease in the aggregate amount of output supplied.

The aggregate demand curve shows that at higher price levels the total quantity of output demanded is greater.

Refer to the information provided in Figure 26.8 below to answer the question(s) that follow. Figure 26.8 -Refer to Figure 26.8. If the economy is currently at Point D producing output level Y2, which of the following is not true?

The aggregate demand curve is the sum of all market demand curves in the economy.

Output in the short run is determined by which of the following factors when an economy operates at full employment?

The aggregate demand curve slopes downward because at lower price levels the purchasing power of consumers' assets ________, which ________ real wealth.

Related to the Economics in Practice on p. 547: In the simple "Keynesian" view, the aggregate supply curve

The aggregate demand curve is the sum of all demand curves of all goods and services in the economy.

The graph that shows the relationship between the aggregate quantity of output supplied by all the firms in an economy and the overall price level is

If ________ equilibrium output ________, the price level rises.

The quantity of aggregate output demanded will fall if

To determine the price level and aggregate output, the aggregate demand and aggregate supply must

Potential output is the same as long-run aggregate supply.

Refer to the information provided in Figure 26.1 below to answer the question(s) that follow. Figure 26.1 -Refer to Figure 26.1. This economy is most likely experiencing costs increasing as fast as output prices are increasing at aggregate output levels

Which of the following will, unambiguously, decrease the price level?

The Scope and Method of Economics

The Economic Problem: Scarcity and Choice

Demand, Supply, and Market Equilibrium

Demand and Supply Applications

Elasticity

Household Behavior and Consumer Choice

The Production Process: the Behavior of Profit-Maximizing Firms

Short-Run Costs and Output Decisions

Long-Run Costs and Output Decisions

Input Demand: The Labor and Land Markets

Input Demand: The Capital Market and the Investment Decision

General Equilibrium and the Efficiency of Perfect Competition

Monopoly and Antitrust Policy

Oligopoly

Monopolistic Competition

Externalities, Public Goods, and Common Resources

Uncertainty and Asymmetric Information

Income Distribution and Poverty

Public Finance: The Economics of Taxation

Introduction to Macroeconomics

Measuring National Output and National Income

Unemployment, Inflation, and Long-Run Growth

Aggregate Expenditure and Equilibrium Output

The Government and Fiscal Policy

Money, the Federal Reserve, and the Interest Rate

Policy Effects and Cost Shocks in the Asad Model

The Labor Market in the Macroeconomy

Financial Crises, Stabilization, and Deficits

Household and Firm Behavior in the Macroeconomy: a Further Look

Long-Run Growth

Alternative Views in Macroeconomics

International Trade, Comparative Advantage, and Protectionism

Open-Economy Macroeconomics: the Balance of Payments and Exchange Rates

Economic Growth in Developing Economies

Critical Thinking About Research

Filters

Refer to the information provided in Figure 26.8 below to answer the question(s) that follow. Figure 26.8 -Refer to Figure 26.8. If the economy is currently at Point D producing output level Y₂, which of the following is not true?

The aggregate demand curve slopes downward because at lower price levels the purchasing power of consumers' assets , which real wealth.

If equilibrium output , the price level rises.