Question 1

Holding other factors constant, an increase in the price level causes the aggregate demand curve to shift to the left.

Accepted Answer

A) True 
 B)False

Question 2

In the short run, an increase in the money supply will cause output:

Accepted Answer

A)  to remain the same. 
B)  to decrease. 
C)  to become zero. 
D)  to increase. 
A)  to remain the same. 
B)  to decrease. 
C)  to become zero. 
D)  to increase.

Question 3

Figure 9.1
-Refer to Figure 9.1. When the price level drops and causes a higher net exports, it is illustrated as:

Accepted Answer

A)  an aggregate demand curve shift from AD1 to AD0. 
B)  an aggregate demand curve shift from AD1 to AD2. 
C)  a move from Point A to Point B, but not a shift of the aggregate demand curve. 
D)  a move from Point B to Point A, but not shift of the aggregate demand curve. 
A)  an aggregate demand curve shift from AD1 to AD0. 
B)  an aggregate demand curve shift from AD1 to AD2. 
C)  a move from Point A to Point B, but not a shift of the aggregate demand curve. 
D)  a move from Point B to Point A, but not shift of the aggregate demand curve.

Question 4

If the marginal propensity to consume is 0.5, a decrease in consumption by $100 will shift the aggregate demand curve horizontally to the left by

Accepted Answer

A)  $400. 
B)  $100.5. 
C)  $200. 
D)  $100. 
A)  $400. 
B)  $100.5. 
C)  $200. 
D)  $100.

Question 5

Many economists have argued that oil prices have a big impact on the performance of the economy. During the late 1990s, oil prices fell dramatically. Explain the effects of this drop in oil prices in the aggregate demand- aggregate supply model.

Accepted Answer

The drop in oil prices is a beneficial s

Question 6

Figure 9.4
-Refer to Figure 9.4. The flooding in the Midwest during the summer of 1993 destroyed a large portion of the agricultural crop in the United States. This caused:

Accepted Answer

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

Question 7

Recall Application 2, "Two Approaches to Determining the Causes of Recessions," to answer the following questions:
-According to the application, a recession can be caused by:

Accepted Answer

A)  a decrease in aggregate demand or an increase in aggregate supply. 
B)  a decrease in ether aggregate demand or aggregate supply. 
C)  an increase in aggregate demand or a decrease in aggregate supply. 
D)  an increase in either aggregate demand or aggregate supply. 
A)  a decrease in aggregate demand or an increase in aggregate supply. 
B)  a decrease in ether aggregate demand or aggregate supply. 
C)  an increase in aggregate demand or a decrease in aggregate supply. 
D)  an increase in either aggregate demand or aggregate supply.

Question 8

If the economy is in long run equilibrium at full employment, the level of overall economic activity is not affected by changes in the price level due to:

Accepted Answer

A)  the fact that firms' profits increase with the price level. 
B)  the existence of sticky prices. 
C)  the fact that prices and input costs change simultaneously and in the same direction. 
D)  the fact that prices increase more slowly than input costs. 
A)  the fact that firms' profits increase with the price level. 
B)  the existence of sticky prices. 
C)  the fact that prices and input costs change simultaneously and in the same direction. 
D)  the fact that prices increase more slowly than input costs.

Question 9

Recall Application 3, "How the U.S. Economy has Coped with Oil Price Fluctuations," to answer the following questions:
-According to the application, the price of gasoline in the U.S. in 2008 shot up as high as _______ per gallon.

Accepted Answer

A)  $2.50 
B)  $8.00 
C)  $4.00 
D)  $10 
A)  $2.50 
B)  $8.00 
C)  $4.00 
D)  $10

Question 10

Recall Application 3, "How the U.S. Economy has Coped with Oil Price Fluctuations," to answer the following questions:
-According to the application, the increase in the oil prices:

Accepted Answer

A)  was caused by the recession and the financial crisis. 
B)  caused the recession and the financial crisis. 
C)  caused the recession, which was exacerbated by the financial crisis. 
D)  exacerbated the recession brought about by the financial crisis. 
A)  was caused by the recession and the financial crisis. 
B)  caused the recession and the financial crisis. 
C)  caused the recession, which was exacerbated by the financial crisis. 
D)  exacerbated the recession brought about by the financial crisis.

Question 11

The multiplier is always larger than one.

Accepted Answer

A) True 
 B)False

Question 12

Custom prices are also known as:

Accepted Answer

A)  flexible prices. 
B)  auction prices. 
C)  equilibrium prices. 
D)  sticky prices. 
A)  flexible prices. 
B)  auction prices. 
C)  equilibrium prices. 
D)  sticky prices.

Question 13

Because the long run aggregate supply curve is vertical at the full employment level of GDP, then this would imply that the long run aggregate supply curve:

Accepted Answer

A)  decreases as the price level increases. 
B)  is independent of changes in the price level. 
C)  shifts to the right when the price level increases. 
D)  increases as the price level increases. 
A)  decreases as the price level increases. 
B)  is independent of changes in the price level. 
C)  shifts to the right when the price level increases. 
D)  increases as the price level increases.

Question 14

If prices are sticky, output in an economy will be mostly determined by the level of demand.

Accepted Answer

A) True 
 B)False

Question 15

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 price level in the short- run.

Accepted Answer

A) True 
 B)False

Question 16

If the consumption function is C = 200 + 0.75Y and there is a $10 million increase in consumption spending, then the aggregate demand curve will shift horizontally to the right by:

Accepted Answer

A)  $750 million. 
B)  $7.5 million. 
C)  $75 million. 
D)  $40 million. 
A)  $750 million. 
B)  $7.5 million. 
C)  $75 million. 
D)  $40 million.

Question 17

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 supply occurred in:

Accepted Answer

A)  1981 
B)  1929 
C)  1979 
D)  All of the above were caused by a decrease in aggregate supply. 
A)  1981 
B)  1929 
C)  1979 
D)  All of the above were caused by a decrease in aggregate supply.

Question 18

The aggregate demand curve slopes downward because at a higher price level:

Accepted Answer

A)  the purchasing power of consumers' assets declines and consumption increases. 
B)  the purchasing power of consumers' wealth declines and consumption decreases. 
C)  producers can get more for what they produce, and they increase production. 
D)  the purchasing power of consumers' wealth increases and consumption increases. 
A)  the purchasing power of consumers' assets declines and consumption increases. 
B)  the purchasing power of consumers' wealth declines and consumption decreases. 
C)  producers can get more for what they produce, and they increase production. 
D)  the purchasing power of consumers' wealth increases and consumption increases.

Question 19

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

Accepted Answer

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

Question 20

Figure 9.3
-Refer to Figure 9.3. Suppose the economy is at Point A, an increase in the price level moves the economy in the short run to Point:

Accepted Answer

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

Holding other factors constant, an increase in the price level causes the aggregate demand curve to shift to the left.

In the short run, an increase in the money supply will cause output:

Figure 9.1 -Refer to Figure 9.1. When the price level drops and causes a higher net exports, it is illustrated as:

If the marginal propensity to consume is 0.5, a decrease in consumption by $100 will shift the aggregate demand curve horizontally to the left by

Many economists have argued that oil prices have a big impact on the performance of the economy. During the late 1990s, oil prices fell dramatically. Explain the effects of this drop in oil prices in the aggregate demand- aggregate supply model.

Figure 9.4 -Refer to Figure 9.4. The flooding in the Midwest during the summer of 1993 destroyed a large portion of the agricultural crop in the United States. This caused:

Recall Application 2, "Two Approaches to Determining the Causes of Recessions," to answer the following questions: -According to the application, a recession can be caused by:

If the economy is in long run equilibrium at full employment, the level of overall economic activity is not affected by changes in the price level due to:

Recall Application 3, "How the U.S. Economy has Coped with Oil Price Fluctuations," to answer the following questions: -According to the application, the price of gasoline in the U.S. in 2008 shot up as high as _______ per gallon.

Recall Application 3, "How the U.S. Economy has Coped with Oil Price Fluctuations," to answer the following questions: -According to the application, the increase in the oil prices:

The multiplier is always larger than one.

Custom prices are also known as:

Because the long run aggregate supply curve is vertical at the full employment level of GDP, then this would imply that the long run aggregate supply curve:

If prices are sticky, output in an economy will be mostly determined by the level of demand.

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 price level in the short- run.

If the consumption function is C = 200 + 0.75Y and there is a $10 million increase in consumption spending, then the aggregate demand curve will shift horizontally to the right by:

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 supply occurred in:

The aggregate demand curve slopes downward because at a higher price level:

Figure 9.5 -Refer to Figure 9.5. Suppose the economy is a point B. A large ___ in the supply of labor leads to a shift from _ to _____.

Figure 9.3 -Refer to Figure 9.3. Suppose the economy is at Point A, an increase in the price level moves the economy in the short run to Point:

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

Holding other factors constant, an increase in the price level causes the aggregate demand curve to shift to the left.

In the short run, an increase in the money supply will cause output:

Figure 9.1 -Refer to Figure 9.1. When the price level drops and causes a higher net exports, it is illustrated as:

If the marginal propensity to consume is 0.5, a decrease in consumption by $100 will shift the aggregate demand curve horizontally to the left by

Many economists have argued that oil prices have a big impact on the performance of the economy. During the late 1990s, oil prices fell dramatically. Explain the effects of this drop in oil prices in the aggregate demand- aggregate supply model.

Figure 9.4 -Refer to Figure 9.4. The flooding in the Midwest during the summer of 1993 destroyed a large portion of the agricultural crop in the United States. This caused:

Recall Application 2, "Two Approaches to Determining the Causes of Recessions," to answer the following questions: -According to the application, a recession can be caused by:

If the economy is in long run equilibrium at full employment, the level of overall economic activity is not affected by changes in the price level due to:

Recall Application 3, "How the U.S. Economy has Coped with Oil Price Fluctuations," to answer the following questions: -According to the application, the price of gasoline in the U.S. in 2008 shot up as high as _______ per gallon.

Recall Application 3, "How the U.S. Economy has Coped with Oil Price Fluctuations," to answer the following questions: -According to the application, the increase in the oil prices:

The multiplier is always larger than one.

Custom prices are also known as:

Because the long run aggregate supply curve is vertical at the full employment level of GDP, then this would imply that the long run aggregate supply curve:

If prices are sticky, output in an economy will be mostly determined by the level of demand.

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 price level in the short- run.

If the consumption function is C = 200 + 0.75Y and there is a $10 million increase in consumption spending, then the aggregate demand curve will shift horizontally to the right by:

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 supply occurred in:

The aggregate demand curve slopes downward because at a higher price level:

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

Figure 9.3 -Refer to Figure 9.3. Suppose the economy is at Point A, an increase in the price level moves the economy in the short run to Point:

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 supply of labor leads to a shift from _ to _____.