Question 1

Which of the following sequence of events follows a rise 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 2

If the long-run aggregate supply curve is vertical, factors that shift the aggregate demand curve to the left will increase the price level.

Accepted Answer

A) True 
 B)False

Question 3

To decrease the price level the government could adopt policies that

Accepted Answer

A)  increase aggregate supply and aggregate demand. 
B)  decrease aggregate supply and aggregate demand. 
C)  increase aggregate supply and decrease aggregate demand. 
D)  decrease aggregate supply and increase aggregate demand. 
A)  increase aggregate supply and aggregate demand. 
B)  decrease aggregate supply and aggregate demand. 
C)  increase aggregate supply and decrease aggregate demand. 
D)  decrease aggregate supply and increase aggregate demand.

Question 4

When the economy is producing ________, the aggregate supply curve becomes vertical.

Accepted Answer

A)  below full capacity 
B)  beyond full capacity 
C)  at full capacity 
D)  at negative capacity 
A)  below full capacity 
B)  beyond full capacity 
C)  at full capacity 
D)  at negative capacity

Question 5

A movement up the aggregate supply curve is caused by a(n)

Accepted Answer

A)  increase in aggregate supply. 
B)  decrease in aggregate supply. 
C)  increase in the price level. 
D)  decrease in the price level. 
A)  increase in aggregate supply. 
B)  decrease in aggregate supply. 
C)  increase in the price level. 
D)  decrease in the price level.

Question 6

Related to the Economics in Practice on p. 547: In the simple "Keynesian" view, maximum output is not defined by the

Accepted Answer

A)  existing labor force. 
B)  current capital stock. 
C)  existing state of technology. 
D)  level of consumption. 
A)  existing labor force. 
B)  current capital stock. 
C)  existing state of technology. 
D)  level of consumption.

Question 7

The Federal Reserve's policy to ________ means that the Fed decreases the interest rate when output is low.

Accepted Answer

A)  "inherit the wind" 
B)  "stand upwind" 
C)  "be dust in the wind" 
D)  "lean against the wind" 
A)  "inherit the wind" 
B)  "stand upwind" 
C)  "be dust in the wind" 
D)  "lean against the wind"

Question 8

Refer to the information provided in Figure 26.5 below to answer the question(s) that follow.   Figure 26.5
-Refer to Figure 26.5. A decrease in the price level shifts the ________ to the ________.

Accepted Answer

A)  Fed rule; right 
B)  IS curve; right 
C)  IS curve; left 
D)  Fed rule; left 
A)  Fed rule; right 
B)  IS curve; right 
C)  IS curve; left 
D)  Fed rule; left

Question 9

Refer to the information provided in Figure 26.3 below to answer the question(s) that follow.   Figure 26.3
-Refer to Figure 26.3. A shift from AS1 to AS0 represents a(n)

Accepted Answer

A)  increase in aggregate supply. 
B)  decrease in aggregate supply. 
C)  increase in aggregate quantity supplied. 
D)  decrease in aggregate quantity supplied. 
A)  increase in aggregate supply. 
B)  decrease in aggregate supply. 
C)  increase in aggregate quantity supplied. 
D)  decrease in aggregate quantity supplied.

Question 10

The aggregate demand curve shows a ________ relationship between ________ and aggregate output ________.

Accepted Answer

A)  positive; the interest rate; demanded 
B)  negative; the price level; supplied 
C)  positive; the price level; demanded 
D)  negative; the price level; demanded 
A)  positive; the interest rate; demanded 
B)  negative; the price level; supplied 
C)  positive; the price level; demanded 
D)  negative; the price level; demanded

Question 11

A decrease in the price level raises the real value of wealth.

Accepted Answer

A) True 
 B)False

Question 12

If input prices change at exactly the same rate as output prices, the aggregate supply curve will be vertical.

Accepted Answer

A) True 
 B)False

Question 13

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

Accepted Answer

A)  an increase in government spending and an increase in the Z factors 
B)  a decrease in government spending and an increase in the Z factors 
C)  an increase in government spending and a decrease in the Z factors 
D)  a decrease in government spending and a decrease in the Z factors 
A)  an increase in government spending and an increase in the Z factors 
B)  a decrease in government spending and an increase in the Z factors 
C)  an increase in government spending and a decrease in the Z factors 
D)  a decrease in government spending and a decrease in the Z factors

Question 14

Refer to the information provided in Figure 26.3 below to answer the question(s) that follow.   Figure 26.3
-Refer to Figure 26.3. Hurricane Katrina destroyed a large portion of the infrastructure along the Gulf of Mexico coast. This caused

Accepted Answer

A)  the short-run aggregate supply curve to shift from AS1 to AS2. 
B)  the short-run aggregate supply curve to shift from AS1 to AS0. 
C)  the economy to move from Point B to Point A along AS1. 
D)  the economy to move from Point C to Point B along AS1. 
A)  the short-run aggregate supply curve to shift from AS1 to AS2. 
B)  the short-run aggregate supply curve to shift from AS1 to AS0. 
C)  the economy to move from Point B to Point A along AS1. 
D)  the economy to move from Point C to Point B along AS1.

Question 15

If the United States were to pass legislation that would make it harder for people to emigrate to the United States, this would cause

Accepted Answer

A)  the short-run aggregate supply curve to become nearly vertical at all levels of output. 
B)  the short-run aggregate supply curve to shift to the left. 
C)  the short-run aggregate supply curve to become flatter. 
D)  the short-run aggregate supply curve to shift to the right. 
A)  the short-run aggregate supply curve to become nearly vertical at all levels of output. 
B)  the short-run aggregate supply curve to shift to the left. 
C)  the short-run aggregate supply curve to become flatter. 
D)  the short-run aggregate supply curve to shift to the right.

Question 16

Any point on the IS curve is an equilibrium in the goods market for the given interest rate.

Accepted Answer

A) True 
 B)False

Question 17

The aggregate demand curve

Accepted Answer

A)  is an upward-sloping curve. 
B)  is a downward-sloping curve. 
C)  may slope upward or downward. 
D)  is horizontal. 
A)  is an upward-sloping curve. 
B)  is a downward-sloping curve. 
C)  may slope upward or downward. 
D)  is horizontal.

Question 18

The aggregate demand curve shows that, ceteris paribus

Accepted Answer

A)  at higher price levels, total quantity of output demanded is higher. 
B)  at lower price levels, total quantity of output supplied is lower. 
C)  at lower price levels, total quantity of output demanded is higher. 
D)  at higher price levels, total quantity of output supplied is lower. 
A)  at higher price levels, total quantity of output demanded is higher. 
B)  at lower price levels, total quantity of output supplied is lower. 
C)  at lower price levels, total quantity of output demanded is higher. 
D)  at higher price levels, total quantity of output supplied is lower.

Question 19

________ shifts the IS curve to the right.

Accepted Answer

A)  An increase in government spending 
B)  A decrease in government spending 
C)  An increase in the price level 
D)  A decrease in the Z factors 
A)  An increase in government spending 
B)  A decrease in government spending 
C)  An increase in the price level 
D)  A decrease in the Z factors

Question 20

The change in consumption brought about by a change in purchasing power of savings that results from a change in the price level is the

Accepted Answer

A)  consumption effect. 
B)  money supply effect. 
C)  real wealth effect. 
D)  interest rate effect. 
A)  consumption effect. 
B)  money supply effect. 
C)  real wealth effect. 
D)  interest rate effect.

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

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

If the long-run aggregate supply curve is vertical, factors that shift the aggregate demand curve to the left will increase the price level.

To decrease the price level the government could adopt policies that

When the economy is producing ________, the aggregate supply curve becomes vertical.

A movement up the aggregate supply curve is caused by a(n)

Related to the Economics in Practice on p. 547: In the simple "Keynesian" view, maximum output is not defined by the

The Federal Reserve's policy to ________ means that the Fed decreases the interest rate when output is low.

Refer to the information provided in Figure 26.5 below to answer the question(s) that follow. Figure 26.5 -Refer to Figure 26.5. A decrease in the price level shifts the ________ to the ________.

Refer to the information provided in Figure 26.3 below to answer the question(s) that follow. Figure 26.3 -Refer to Figure 26.3. A shift from AS1 to AS0 represents a(n)

The aggregate demand curve shows a ________ relationship between ________ and aggregate output ________.

A decrease in the price level raises the real value of wealth.

If input prices change at exactly the same rate as output prices, the aggregate supply curve will be vertical.

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

Refer to the information provided in Figure 26.3 below to answer the question(s) that follow. Figure 26.3 -Refer to Figure 26.3. Hurricane Katrina destroyed a large portion of the infrastructure along the Gulf of Mexico coast. This caused

If the United States were to pass legislation that would make it harder for people to emigrate to the United States, this would cause

Any point on the IS curve is an equilibrium in the goods market for the given interest rate.

The aggregate demand curve

The aggregate demand curve shows that, ceteris paribus

________ shifts the IS curve to the right.

The change in consumption brought about by a change in purchasing power of savings that results from a change in the price level is the

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 26.5 below to answer the question(s) that follow. Figure 26.5 -Refer to Figure 26.5. A decrease in the price level shifts the to the .

Refer to the information provided in Figure 26.3 below to answer the question(s) that follow. Figure 26.3 -Refer to Figure 26.3. A shift from AS₁ to AS₀ represents a(n)

The aggregate demand curve shows a relationship between and aggregate output .