Question 1

An increase in government expenditure has a multiplier effect on aggregate demand due to:

Accepted Answer

A)  the additional spending by consumers stimulated by the actual government expenditure. 
B)  the negative slope of the consumption function. 
C)  the fact that the marginal propensity to consume is larger than one. 
D)  the autonomous nature of private consumption expenditure. 
A)  the additional spending by consumers stimulated by the actual government expenditure. 
B)  the negative slope of the consumption function. 
C)  the fact that the marginal propensity to consume is larger than one. 
D)  the autonomous nature of private consumption expenditure.

Question 2

Figure 9.1
-Refer to Figure 9.1. An increase in the money supply causes:

Accepted Answer

A)  the aggregate demand curve to shift from AD1 to AD2. 
B)  the aggregate demand curve to shift from AD1 to AD0. 
C)  the economy to move from Point A to Point B, but will not shift the aggregate demand curve. 
D)  neither a shift of the aggregate demand curve nor a change in real GDP. 
A)  the aggregate demand curve to shift from AD1 to AD2. 
B)  the aggregate demand curve to shift from AD1 to AD0. 
C)  the economy to move from Point A to Point B, but will not shift the aggregate demand curve. 
D)  neither a shift of the aggregate demand curve nor a change in real GDP.

Question 3

If the economy is in long run equilibrium at full employment, an increase in the money supply will lead to a higher aggregate demand and a higher output level in the long- run.

Accepted Answer

A) True 
 B)False

Question 4

The aggregate supply curve in the short run is different from the aggregate supply curve in the long run because of:

Accepted Answer

A)  the existence of sticky prices in the short run. 
B)  the crowding out effect. 
C)  the recurring nature of supply shocks. 
D)  the wealth effect. 
A)  the existence of sticky prices in the short run. 
B)  the crowding out effect. 
C)  the recurring nature of supply shocks. 
D)  the wealth effect.

Question 5

An example of a good that has auction prices is

Accepted Answer

A)  fresh fish. 
B)  a pair of Levi's jeans. 
C)  orange juice. 
D)  a Big Mac. 
A)  fresh fish. 
B)  a pair of Levi's jeans. 
C)  orange juice. 
D)  a Big Mac.

Question 6

An increase in the price level results in a decline in aggregate demand because people's "net worth" decreases and will spend less. This effect is called the:

Accepted Answer

A)  interest rate effect. 
B)  income effect. 
C)  wealth effect. 
D)  trade effect. 
A)  interest rate effect. 
B)  income effect. 
C)  wealth effect. 
D)  trade effect.

Question 7

An increase in the price level lowers the real value of wealth.

Accepted Answer

A) True 
 B)False

Question 8

In the short run, an increase in the money supply will lead to a higher aggregate demand and a higher price level.

Accepted Answer

A) True 
 B)False

Question 9

Figure 9.6
-Refer to Figure 9.6. In the short run, a large decrease in oil prices will would move the equilibrium to:

Accepted Answer

A)  point H. 
B)  point F. 
C)  point D. 
D)  point E. 
A)  point H. 
B)  point F. 
C)  point D. 
D)  point E.

Question 10

As the marginal propensity to consume increases, the value of the multiplier

Accepted Answer

A)  stays the same. 
B)  increases. 
C)  decreases. 
D)  can increase or decrease. 
A)  stays the same. 
B)  increases. 
C)  decreases. 
D)  can increase or decrease.

Question 11

In the long run, higher taxes will lead to a lower price level and a lower level of real GDP.

Accepted Answer

A) True 
 B)False

Question 12

In the short run, an increase in the price of a major input such as oil will:

Accepted Answer

A)  decrease both the price level and the level of output. 
B)  decrease the price level and increase the level of output. 
C)  increase the price level and decrease the level of output. 
D)  increase the price level and increase the level of output. 
A)  decrease both the price level and the level of output. 
B)  decrease the price level and increase the level of output. 
C)  increase the price level and decrease the level of output. 
D)  increase the price level and increase the level of output.

Question 13

The aggregate demand curve that shows the _______ relationship between the price level and the quantity of real GDP demanded.

Accepted Answer

A)  exponential 
B)  positive 
C)  linear 
D)  negative 
A)  exponential 
B)  positive 
C)  linear 
D)  negative

Question 14

Figure 9.5
-Refer to Figure 9.5. Suppose the economy is a point B. A large _______ in the price level will move the economy to _______ .

Accepted Answer

A)  decrease; AS0  
B)  decrease; point A 
C)  decrease; point C. 
D)  decrease; AS1 
A)  decrease; AS0  
B)  decrease; point A 
C)  decrease; point C. 
D)  decrease; AS1

Question 15

A large increase in oil prices will cause the aggregate supply curve to shift left.

Accepted Answer

A) True 
 B)False

Question 16

The aggregate supply curve depicts the relationship between:

Accepted Answer

A)  the unemployment rate and the total quantity of goods and services that firms supply. 
B)  the cost of inputs and the total quantity of goods and services that firms supply. 
C)  the cost of labor and the total quantity of goods and services that firms supply. 
D)  the level of prices and the total quantity of goods and services that firms supply. 
A)  the unemployment rate and the total quantity of goods and services that firms supply. 
B)  the cost of inputs and the total quantity of goods and services that firms supply. 
C)  the cost of labor and the total quantity of goods and services that firms supply. 
D)  the level of prices and the total quantity of goods and services that firms supply.

Question 17

Define the aggregate demand curve. Explain the impact of an increase in the price level on the quantity of real GDP demanded.

Accepted Answer

The aggregate demand curve shows the tot

Question 18

The curve that depicts aggregate demand slopes downward because:

Accepted Answer

A)  as the overall price level (P) falls, real GDP (y) falls. 
B)  as the overall price level (P) rises, real GDP (y) does not change. 
C)  as the overall price level (P) rises, real GDP (y) rises. 
D)  as the overall price level (P) rises, real GDP (y) falls. 
A)  as the overall price level (P) falls, real GDP (y) falls. 
B)  as the overall price level (P) rises, real GDP (y) does not change. 
C)  as the overall price level (P) rises, real GDP (y) rises. 
D)  as the overall price level (P) rises, real GDP (y) falls.

Question 19

Figure 9.2
-Refer to Figure 9.2. Suppose the economy is at Point A, a decrease in taxes causes a movement to Point:

Accepted Answer

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

Question 20

Suppose there are three economies with 3 different consumption functions: Country A: C = 100 + 0.8Y Country B: C = 200 + 0.75 Y
Country C: C = 75 + 0.9Y
In which of these countries is the multiplier the largest?

Accepted Answer

A)  Country A 
B)  Country C 
C)  Country B 
D)  All countries have the same multipliers. 
A)  Country A 
B)  Country C 
C)  Country B 
D)  All countries have the same multipliers.

An increase in government expenditure has a multiplier effect on aggregate demand due to:

Figure 9.1 -Refer to Figure 9.1. An increase in the money supply causes:

If the economy is in long run equilibrium at full employment, an increase in the money supply will lead to a higher aggregate demand and a higher output level in the long- run.

The aggregate supply curve in the short run is different from the aggregate supply curve in the long run because of:

An example of a good that has auction prices is

An increase in the price level results in a decline in aggregate demand because people's "net worth" decreases and will spend less. This effect is called the:

An increase in the price level lowers the real value of wealth.

In the short run, an increase in the money supply will lead to a higher aggregate demand and a higher price level.

Figure 9.6 -Refer to Figure 9.6. In the short run, a large decrease in oil prices will would move the equilibrium to:

As the marginal propensity to consume increases, the value of the multiplier

In the long run, higher taxes will lead to a lower price level and a lower level of real GDP.

In the short run, an increase in the price of a major input such as oil will:

The aggregate demand curve that shows the _______ relationship between the price level and the quantity of real GDP demanded.

Figure 9.5 -Refer to Figure 9.5. Suppose the economy is a point B. A large _ in the price level will move the economy to _ .

A large increase in oil prices will cause the aggregate supply curve to shift left.

The aggregate supply curve depicts the relationship between:

Define the aggregate demand curve. Explain the impact of an increase in the price level on the quantity of real GDP demanded.

The curve that depicts aggregate demand slopes downward because:

Figure 9.2 -Refer to Figure 9.2. Suppose the economy is at Point A, a decrease in taxes causes a movement to Point:

Suppose there are three economies with 3 different consumption functions: Country A: C = 100 + 0.8Y Country B: C = 200 + 0.75 Y Country C: C = 75 + 0.9Y In which of these countries is the multiplier the largest?

Introduction: What Is Economics

The Key Principles of Economics

Exchange and Markets

Demand, Supply, and Market Equilibrium

Measuring a Nations Production and Income

Unemployment and Inflation

The Economy at Full Employment

Why Do Economies Grow

Fiscal Policy

The Income-Expenditure Model

Investment and Financial Markets

Money and the Banking System

The Federal Reserve and Monetary Policy

Modern Macroeconomics: From the Short Run to the Long Run

The Dynamics of Inflation and Unemployment

Macroeconomic Policy Debates

International Trade and Public Policy

The World of International Finance

Filters

Exam 9: Aggregate Demand and Aggregate Supply

An increase in government expenditure has a multiplier effect on aggregate demand due to:

Figure 9.1 -Refer to Figure 9.1. An increase in the money supply causes:

If the economy is in long run equilibrium at full employment, an increase in the money supply will lead to a higher aggregate demand and a higher output level in the long- run.

The aggregate supply curve in the short run is different from the aggregate supply curve in the long run because of:

An example of a good that has auction prices is

An increase in the price level results in a decline in aggregate demand because people's "net worth" decreases and will spend less. This effect is called the:

An increase in the price level lowers the real value of wealth.

In the short run, an increase in the money supply will lead to a higher aggregate demand and a higher price level.

Figure 9.6 -Refer to Figure 9.6. In the short run, a large decrease in oil prices will would move the equilibrium to:

As the marginal propensity to consume increases, the value of the multiplier

In the long run, higher taxes will lead to a lower price level and a lower level of real GDP.

In the short run, an increase in the price of a major input such as oil will:

The aggregate demand curve that shows the _______ relationship between the price level and the quantity of real GDP demanded.

Figure 9.5 -Refer to Figure 9.5. Suppose the economy is a point B. A large _______ in the price level will move the economy to _______ .

A large increase in oil prices will cause the aggregate supply curve to shift left.

The aggregate supply curve depicts the relationship between:

Define the aggregate demand curve. Explain the impact of an increase in the price level on the quantity of real GDP demanded.

The curve that depicts aggregate demand slopes downward because:

Figure 9.2 -Refer to Figure 9.2. Suppose the economy is at Point A, a decrease in taxes causes a movement to Point:

Suppose there are three economies with 3 different consumption functions: Country A: C = 100 + 0.8Y Country B: C = 200 + 0.75 Y Country C: C = 75 + 0.9Y In which of these countries is the multiplier the largest?

Introduction: What Is Economics

The Key Principles of Economics

Exchange and Markets

Demand, Supply, and Market Equilibrium

Measuring a Nations Production and Income

Unemployment and Inflation

The Economy at Full Employment

Why Do Economies Grow

Fiscal Policy

The Income-Expenditure Model

Investment and Financial Markets

Money and the Banking System

The Federal Reserve and Monetary Policy

Modern Macroeconomics: From the Short Run to the Long Run

The Dynamics of Inflation and Unemployment

Macroeconomic Policy Debates

International Trade and Public Policy

The World of International Finance

Filters

Figure 9.5 -Refer to Figure 9.5. Suppose the economy is a point B. A large _ in the price level will move the economy to _ .