Question 1

Sticky prices are a result of:

Accepted Answer

A)  lack of coordination between auction prices and custom prices. 
B)  labor union influence. 
C)  economic coordination problems. 
D)  government regulation of the economy. 
A)  lack of coordination between auction prices and custom prices. 
B)  labor union influence. 
C)  economic coordination problems. 
D)  government regulation of the economy.

Question 2

In the consumption function C = Ca + bY, the term Ca represents:

Accepted Answer

A)  the marginal propensity to consume. 
B)  the marginal propensity to save. 
C)  the multiplier effect. 
D)  the autonomous consumption spending. 
A)  the marginal propensity to consume. 
B)  the marginal propensity to save. 
C)  the multiplier effect. 
D)  the autonomous consumption spending.

Question 3

The international effect explanation of the downward slope of the AD operates through which component of aggregate demand?

Accepted Answer

A)  consumption 
B)  net exports 
C)  investment 
D)  government purchases. 
A)  consumption 
B)  net exports 
C)  investment 
D)  government purchases.

Question 4

_______ is a curve that shows the relationship between the price level and the quantity of real GDP demanded.

Accepted Answer

A)  The aggregate supply curve 
B)  The market demand curve 
C)  The product demand curve 
D)  The aggregate demand curve 
A)  The aggregate supply curve 
B)  The market demand curve 
C)  The product demand curve 
D)  The aggregate demand curve

Question 5

An increase in the money supply will cause:

Accepted Answer

A)  output to increase in the short- run and return to the potential output in the long run. 
B)  output to decrease in the long run and return to potential output in the long run. 
C)  output to increase in the long run and in the short run. 
D)  output to decrease in the long run and in the short run. 
A)  output to increase in the short- run and return to the potential output in the long run. 
B)  output to decrease in the long run and return to potential output in the long run. 
C)  output to increase in the long run and in the short run. 
D)  output to decrease in the long run and in the short run.

Question 6

According to the international effect explanation of the downward slope of the AD curve, a lower price level in the U.S. economy causes:

Accepted Answer

A)  U.S. imports and U.S. exports to decrease. 
B)  U.S. imports and U.S. exports to increase. 
C)  U.S. imports to increase and U.S. exports to decrease. 
D)  U.S. imports to decrease and U.S. exports to increase. 
A)  U.S. imports and U.S. exports to decrease. 
B)  U.S. imports and U.S. exports to increase. 
C)  U.S. imports to increase and U.S. exports to decrease. 
D)  U.S. imports to decrease and U.S. exports to increase.

Question 7

Using aggregate supply and aggregate demand curves, indicate the impact of an increase in the money supply on the price level and on the equilibrium level of real GDP in the short run.

Accepted Answer

Aggregate demand will increase

Question 8

Explain what the aggregate demand curve shows.

Accepted Answer

The aggregate demand curve sho

Question 9

If the marginal propensity to consume is 0.2, the value of the marginal propensity to save is:

Accepted Answer

A)  2. 
B)  5. 
C)  1.25. 
D)  0.8. 
A)  2. 
B)  5. 
C)  1.25. 
D)  0.8.

Question 10

For most firms, payments to capital inputs are the biggest cost of doing business in the U.S..

Accepted Answer

A) True 
 B)False

Question 11

Figure 9.6
-Refer to Figure 9.6. Suppose the equilibrium is at point A. An oil embargo which raises the price of oil would move the equilibrium to:

Accepted Answer

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

Question 12

Figure 9.5
-Refer to Figure 9.5. Suppose the economy is a point B. A large in the price of crude oil leads to a shift from _______ to _______.

Accepted Answer

A)  increase; AS1; AS0  
B)  increase; AS1; AS2 
C)  decrease; AS2; AS1  
D)  increase; AS2; AS1 
A)  increase; AS1; AS0  
B)  increase; AS1; AS2 
C)  decrease; AS2; AS1  
D)  increase; AS2; AS1

Question 13

The "short run" in macroeconomics is a period in which prices

Accepted Answer

A)  reflect the equilibrium price. 
B)  do not change or change very little. 
C)  change by a lot. 
D)  are determined by changes in the supply. 
A)  reflect the equilibrium price. 
B)  do not change or change very little. 
C)  change by a lot. 
D)  are determined by changes in the supply.

Question 14

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 marginal propensity to consume the largest?

Accepted Answer

A)  Country B 
B)  Country C 
C)  Country A 
D)  All countries have the same marginal propensity to consume. 
A)  Country B 
B)  Country C 
C)  Country A 
D)  All countries have the same marginal propensity to consume.

Question 15

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

Accepted Answer

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

Question 16

Recall Application 2, "Two Approaches to Determining the Causes of Recessions," to answer the following questions:
-According to the application, a recession caused by a decrease in aggregate demand occurred in:

Accepted Answer

A)  1973 
B)  1929 
C)  1979 
D)  All of the above were caused by a decrease in aggregate demand. 
A)  1973 
B)  1929 
C)  1979 
D)  All of the above were caused by a decrease in aggregate demand.

Question 17

The long run aggregate supply curve assumes that in the long run, the economy:

Accepted Answer

A)  does not experience supply shocks. 
B)  has no unemployment. 
C)  is at full employment. 
D)  has no inflation. 
A)  does not experience supply shocks. 
B)  has no unemployment. 
C)  is at full employment. 
D)  has no inflation.

Question 18

Along the short run supply curve, when the price level rises, there is an increase in aggregate quantity supplied.

Accepted Answer

A) True 
 B)False

Question 19

The multiplier is always larger than one because the marginal propensity to consume is always larger than one.

Accepted Answer

A) True 
 B)False

Question 20

Figure 9.4
-Refer to Figure 9.4. A decrease in aggregate supply is represented by:

Accepted Answer

A)  a movement from Point B to Point A along AS1. 
B)  a shift from AS1 to AS2. 
C)  a movement from Point A to Point B along AS1. 
D)  a shift from AS1 to AS0. 
A)  a movement from Point B to Point A along AS1. 
B)  a shift from AS1 to AS2. 
C)  a movement from Point A to Point B along AS1. 
D)  a shift from AS1 to AS0.

Sticky prices are a result of:

In the consumption function C = Ca + bY, the term Ca represents:

The international effect explanation of the downward slope of the AD operates through which component of aggregate demand?

_______ is a curve that shows the relationship between the price level and the quantity of real GDP demanded.

An increase in the money supply will cause:

According to the international effect explanation of the downward slope of the AD curve, a lower price level in the U.S. economy causes:

Using aggregate supply and aggregate demand curves, indicate the impact of an increase in the money supply on the price level and on the equilibrium level of real GDP in the short run.

Explain what the aggregate demand curve shows.

If the marginal propensity to consume is 0.2, the value of the marginal propensity to save is:

For most firms, payments to capital inputs are the biggest cost of doing business in the U.S..

Figure 9.6 -Refer to Figure 9.6. Suppose the equilibrium is at point A. An oil embargo which raises the price of oil would move the equilibrium to:

Figure 9.5 -Refer to Figure 9.5. Suppose the economy is a point B. A large in the price of crude oil leads to a shift from _ to _.

The "short run" in macroeconomics is a period in which prices

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 marginal propensity to consume the largest?

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

Recall Application 2, "Two Approaches to Determining the Causes of Recessions," to answer the following questions: -According to the application, a recession caused by a decrease in aggregate demand occurred in:

The long run aggregate supply curve assumes that in the long run, the economy:

Along the short run supply curve, when the price level rises, there is an increase in aggregate quantity supplied.

The multiplier is always larger than one because the marginal propensity to consume is always larger than one.

Figure 9.4 -Refer to Figure 9.4. A decrease in aggregate supply is represented by:

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

Sticky prices are a result of:

In the consumption function C = Ca + bY, the term Ca represents:

The international effect explanation of the downward slope of the AD operates through which component of aggregate demand?

_______ is a curve that shows the relationship between the price level and the quantity of real GDP demanded.

An increase in the money supply will cause:

According to the international effect explanation of the downward slope of the AD curve, a lower price level in the U.S. economy causes:

Using aggregate supply and aggregate demand curves, indicate the impact of an increase in the money supply on the price level and on the equilibrium level of real GDP in the short run.

Explain what the aggregate demand curve shows.

If the marginal propensity to consume is 0.2, the value of the marginal propensity to save is:

For most firms, payments to capital inputs are the biggest cost of doing business in the U.S..

Figure 9.6 -Refer to Figure 9.6. Suppose the equilibrium is at point A. An oil embargo which raises the price of oil would move the equilibrium to:

Figure 9.5 -Refer to Figure 9.5. Suppose the economy is a point B. A large in the price of crude oil leads to a shift from _______ to _______.

The "short run" in macroeconomics is a period in which prices

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 marginal propensity to consume the largest?

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

Recall Application 2, "Two Approaches to Determining the Causes of Recessions," to answer the following questions: -According to the application, a recession caused by a decrease in aggregate demand occurred in:

The long run aggregate supply curve assumes that in the long run, the economy:

Along the short run supply curve, when the price level rises, there is an increase in aggregate quantity supplied.

The multiplier is always larger than one because the marginal propensity to consume is always larger than one.

Figure 9.4 -Refer to Figure 9.4. A decrease in aggregate supply is represented by:

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 of crude oil leads to a shift from _ to _.