Question 1

The concept of ʺdemand-determined outputʺ requires ________ to remain constant as output increases.

Accepted Answer

A) technology of production 
B) government purchases 
C) firmsʹ unit costs 
D) labour productivity 
E) the ratio of price setters to price takers 
A) technology of production 
B) government purchases 
C) firmsʹ unit costs 
D) labour productivity 
E) the ratio of price setters to price takers

Question 2

A decrease in aggregate supply in the short run is

Accepted Answer

A) reflected in a movement to the left along the AS curve. 
B) reflected in a shift to the right in the AS curve. 
C) interpreted to mean that less total output will be supplied at any given price level. 
D) caused by a decrease in the price level. 
E) caused by an increase in the price level. 
A) reflected in a movement to the left along the AS curve. 
B) reflected in a shift to the right in the AS curve. 
C) interpreted to mean that less total output will be supplied at any given price level. 
D) caused by a decrease in the price level. 
E) caused by an increase in the price level.

Question 3

Other things being equal,an exogenous increase in the price level causes the aggregate wealth of holders and issuers of private-sector bonds to

Accepted Answer

A) decrease. 
B) increase. 
C) not change since the changes in the wealth of bondholders and bond issuers offset each other. 
D) either increase or decrease depending on other factors. 
E) rise in nominal terms,but fall in real terms. 
A) decrease. 
B) increase. 
C) not change since the changes in the wealth of bondholders and bond issuers offset each other. 
D) either increase or decrease depending on other factors. 
E) rise in nominal terms,but fall in real terms.

Question 4

Consider the following two headlines appearing in the same day: ʺFederal government announces major new infrastructure investmentsʺ and ʺNew technology drives down transport costs.ʺ Choose the statement below that best describes the likely macroeconomic effects.

Accepted Answer

A) The AS curve shifts to the left; the price level rises and real GDP falls. 
B) The AS curve shifts to the right; the price level falls and real GDP rises. 
C) The AD curve shifts to the left; the price level falls and real GDP falls. 
D) The AD curve shifts to the right; the price level rises and real GDP rises. 
E) The AD and AS curves both shift to the right; the effect on the price level is indeterminate and real GDP rises. 
A) The AS curve shifts to the left; the price level rises and real GDP falls. 
B) The AS curve shifts to the right; the price level falls and real GDP rises. 
C) The AD curve shifts to the left; the price level falls and real GDP falls. 
D) The AD curve shifts to the right; the price level rises and real GDP rises. 
E) The AD and AS curves both shift to the right; the effect on the price level is indeterminate and real GDP rises.

Question 5

Consider a simple macro model with demand-determined output.An exogenous increase in the domestic price level will

Accepted Answer

A) shift both the net export function and the AE curve upward. 
B) shift the net export function upward and the AE curve downward. 
C) shift both the net export function and the AE curve downward. 
D) shift the net export function downward and the AE curve upward. 
E) pivot the net export function and the AE curve upward. 
A) shift both the net export function and the AE curve upward. 
B) shift the net export function upward and the AE curve downward. 
C) shift both the net export function and the AE curve downward. 
D) shift the net export function downward and the AE curve upward. 
E) pivot the net export function and the AE curve upward.

Question 6

Consider the economyʹs aggregate supply curve.Other things being equal,unit costs will tend to increase if

Accepted Answer

A) there is a rise in the price of oil. 
B) the government reduces payroll taxes. 
C) wage increases exceed productivity increases. 
D) wages rise. 
E) wage and price controls are in effect. 
A) there is a rise in the price of oil. 
B) the government reduces payroll taxes. 
C) wage increases exceed productivity increases. 
D) wages rise. 
E) wage and price controls are in effect.

Question 7

Which of the following would likely cause a downward shift in the AE curve and a movement upward along the AD curve?

Accepted Answer

A) a decrease in the business confidence of firms 
B) a reduction in government purchases 
C) a decrease in the MPC 
D) a decrease in the price level 
E) an increase in the price level 
A) a decrease in the business confidence of firms 
B) a reduction in government purchases 
C) a decrease in the MPC 
D) a decrease in the price level 
E) an increase in the price level

Question 8

The economyʹs aggregate supply (AS)curve shows the relationship between the

Accepted Answer

A) equilibrium real GDP and marginal cost. 
B) equilibrium real GDP and desired consumption. 
C) price level and the marginal propensity to consume (MP
C) . 
D) price level and the total output that firms wish to produce and sell,with technology and input prices held constant. 
E) price level and the total output that firms wish to produce and sell,as technology and input prices vary. 
A) equilibrium real GDP and marginal cost. 
B) equilibrium real GDP and desired consumption. 
C) price level and the marginal propensity to consume (MP
C) . 
D) price level and the total output that firms wish to produce and sell,with technology and input prices held constant. 
E) price level and the total output that firms wish to produce and sell,as technology and input prices vary.

Question 9

In building a macro model with an AS curve,it is assumed that producers will

Accepted Answer

A) increase prices without changing their output. 
B) decrease their prices without changing output. 
C) decrease their prices when they expand output. 
D) produce as much as possible at the existing price level. 
E) produce more output only if prices rise. 
A) increase prices without changing their output. 
B) decrease their prices without changing output. 
C) decrease their prices when they expand output. 
D) produce as much as possible at the existing price level. 
E) produce more output only if prices rise.

Question 10

Consider the basic AD/AS model.Suppose that a rising percentage of high -school graduates are illiterate,resulting in a decrease in average labour productivity.This change will

Accepted Answer

A) shift the AD curve to the left. 
B) shift the AD curve to the right. 
C) shift the AS curve to the left. 
D) shift the AS curve to the right. 
E) cause a movement to the right along the AS curve. 
A) shift the AD curve to the left. 
B) shift the AD curve to the right. 
C) shift the AS curve to the left. 
D) shift the AS curve to the right. 
E) cause a movement to the right along the AS curve.

Question 11

Consider the relationship between the AE curve and the AD curve.A fall in the amount of desired consumption,investment,government purchases,or net exports at any given level of national income

Accepted Answer

A) shifts the AD curve to the left. 
B) shifts the AD curve to the right. 
C) causes a movement along the AD curve. 
D) causes a movement along the AE curve. 
E) causes a shift of the AE curve but no movement of the AD curve. 
A) shifts the AD curve to the left. 
B) shifts the AD curve to the right. 
C) causes a movement along the AD curve. 
D) causes a movement along the AE curve. 
E) causes a shift of the AE curve but no movement of the AD curve.

Question 12

A rightward shift in the economyʹs AS curve implies that

Accepted Answer

A) at any given price level,a lower level of output will be supplied. 
B) at any given price level,a higher level of output will be supplied. 
C) there is a decrease in aggregate supply. 
D) there is a demand shock. 
E) the same output will be produced,but only at a higher price level. 
A) at any given price level,a lower level of output will be supplied. 
B) at any given price level,a higher level of output will be supplied. 
C) there is a decrease in aggregate supply. 
D) there is a demand shock. 
E) the same output will be produced,but only at a higher price level.

Question 13

Consider the basic AD/AS model.Suppose that high-school graduates have better computing skills than did graduates in the past,resulting in an increase in average labour productivity.This change will

Accepted Answer

A) shift the AS curve to the left. 
B) shift the AS curve to the right. 
C) shift the AD curve to the left. 
D) shift the AD curve to the right. 
E) cause a movement along the AS curve to the right. 
A) shift the AS curve to the left. 
B) shift the AS curve to the right. 
C) shift the AD curve to the left. 
D) shift the AD curve to the right. 
E) cause a movement along the AS curve to the right.

Question 14

A decrease in aggregate supply in the short run is

Accepted Answer

A) shown by a shift to the left of the AS curve. 
B) shown by a shift to the right of the AS curve. 
C) interpreted to mean that more national output will be supplied at any given price level. 
D) caused by a decrease in the price level. 
E) caused by an increase in the price level. 
A) shown by a shift to the left of the AS curve. 
B) shown by a shift to the right of the AS curve. 
C) interpreted to mean that more national output will be supplied at any given price level. 
D) caused by a decrease in the price level. 
E) caused by an increase in the price level.

Question 15

Consider the basic AD/AS model.If there is a decrease in the cost of non-labour inputs to production,the result will be to

Accepted Answer

A) shift the AD curve to the left. 
B) shift the AD curve to the right. 
C) shift the AS curve to the left. 
D) shift the AS curve to the right. 
E) cause a movement to the left along the AS curve. 
A) shift the AD curve to the left. 
B) shift the AD curve to the right. 
C) shift the AS curve to the left. 
D) shift the AS curve to the right. 
E) cause a movement to the left along the AS curve.

Question 16

Consider the following news headline: ʺThreat of widespread labour unrest leads to generous wage increases in several industries.ʺ Choose the statement below that best describes the likely macroeconomic effects.

Accepted Answer

A) The AS curve shifts to the left; the price level rises and real GDP falls. 
B) The AS curve shifts to the right; the price level falls and real GDP rises. 
C) The AD curve shifts to the left; the price level falls and real GDP falls. 
D) The AD curve shifts to the right; the price level rises and real GDP rises. 
E) The AD and AS curves both shift to the left; the effect on the price level is indeterminate and real GDP falls. 
A) The AS curve shifts to the left; the price level rises and real GDP falls. 
B) The AS curve shifts to the right; the price level falls and real GDP rises. 
C) The AD curve shifts to the left; the price level falls and real GDP falls. 
D) The AD curve shifts to the right; the price level rises and real GDP rises. 
E) The AD and AS curves both shift to the left; the effect on the price level is indeterminate and real GDP falls.

Question 17

Consider the AD/AS model.An increase in government purchases will have no impact on equilibrium real GDP if

Accepted Answer

A) the AS curve slopes upward. 
B) the AS curve is vertical. 
C) the AS curve is horizontal. 
D) the marginal propensity to spend is very small. 
E) the simple multiplier is very small. 
A) the AS curve slopes upward. 
B) the AS curve is vertical. 
C) the AS curve is horizontal. 
D) the marginal propensity to spend is very small. 
E) the simple multiplier is very small.

Question 18

Consider the AD/AS model.Suppose there is a decrease in aggregate demand and,simultaneously,an increase in aggregate supply.The result will be a

Accepted Answer

A) rise in real GDP but price level changes will be indeterminate. 
B) rise in real GDP and a rise in the price level. 
C) rise in real GDP and a fall in the price level. 
D) an indeterminate change in real GDP and a rise in the price level. 
E) an indeterminate change in real GDP and a fall in the price level. 
A) rise in real GDP but price level changes will be indeterminate. 
B) rise in real GDP and a rise in the price level. 
C) rise in real GDP and a fall in the price level. 
D) an indeterminate change in real GDP and a rise in the price level. 
E) an indeterminate change in real GDP and a fall in the price level.

Question 19

A movement along the economyʹs AS curve could be caused by a change in

Accepted Answer

A) labour productivity. 
B) the cost of capital. 
C) the price level,caused in turn by an AD shock. 
D) technology. 
E) the wage rate. 
A) labour productivity. 
B) the cost of capital. 
C) the price level,caused in turn by an AD shock. 
D) technology. 
E) the wage rate.

Exam 23: Output and Prices in the Short Run

The concept of ʺdemand-determined outputʺ requires ________ to remain constant as output increases.

A decrease in aggregate supply in the short run is

Other things being equal,an exogenous increase in the price level causes the aggregate wealth of holders and issuers of private-sector bonds to

Consider the following two headlines appearing in the same day: ʺFederal government announces major new infrastructure investmentsʺ and ʺNew technology drives down transport costs.ʺ Choose the statement below that best describes the likely macroeconomic effects.

Consider a simple macro model with demand-determined output.An exogenous increase in the domestic price level will

Consider the economyʹs aggregate supply curve.Other things being equal,unit costs will tend to increase if

Which of the following would likely cause a downward shift in the AE curve and a movement upward along the AD curve?

The economyʹs aggregate supply (AS)curve shows the relationship between the

In building a macro model with an AS curve,it is assumed that producers will

Consider the basic AD/AS model.Suppose that a rising percentage of high -school graduates are illiterate,resulting in a decrease in average labour productivity.This change will

Consider the relationship between the AE curve and the AD curve.A fall in the amount of desired consumption,investment,government purchases,or net exports at any given level of national income

A rightward shift in the economyʹs AS curve implies that

Consider the basic AD/AS model.Suppose that high-school graduates have better computing skills than did graduates in the past,resulting in an increase in average labour productivity.This change will

A decrease in aggregate supply in the short run is

Consider the basic AD/AS model.If there is a decrease in the cost of non-labour inputs to production,the result will be to

Consider the following news headline: ʺThreat of widespread labour unrest leads to generous wage increases in several industries.ʺ Choose the statement below that best describes the likely macroeconomic effects.

Consider the AD/AS model.An increase in government purchases will have no impact on equilibrium real GDP if

Consider the AD/AS model.Suppose there is a decrease in aggregate demand and,simultaneously,an increase in aggregate supply.The result will be a

A movement along the economyʹs AS curve could be caused by a change in

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