Question 1

Refer to the diagram below.   A shift of the aggregate demand curve from AD1 to AD0 might be caused by a(n):

Accepted Answer

A) increase in the price level. 
B) increase in the price of resources. 
C) increase in investment spending. 
D) decrease in net export spending. 
A) increase in the price level. 
B) increase in the price of resources. 
C) increase in investment spending. 
D) decrease in net export spending. C

Question 2

Suppose that real domestic output in an economy is 20 units, the quantity of inputs is 10, and the price of each input is $4.Refer to the above information.Given an increase in input price from $4 to $6, we would expect the aggregate:

Accepted Answer

A) supply curve to shift to the left. 
B) supply curve to shift to the right. 
C) demand curve to shift to the left. 
D) demand curve to shift to the right. 
A) supply curve to shift to the left. 
B) supply curve to shift to the right. 
C) demand curve to shift to the left. 
D) demand curve to shift to the right. A

Question 3

We would expect a decline in personal and corporate income taxes to:

Accepted Answer

A) shift the aggregate demand curve rightward. 
B) increase consumption and investment spending. 
C) increase the real output. 
D) all of these. 
A) shift the aggregate demand curve rightward. 
B) increase consumption and investment spending. 
C) increase the real output. 
D) all of these. D

Question 4

Aggregate demand decreases and real output falls but the price level remains the same.Which factor most likely contributes to downward price inflexibility?

Accepted Answer

A) the multiplier effect 
B) the wealth effect 
C) fear of price wars 
D) business taxes 
A) the multiplier effect 
B) the wealth effect 
C) fear of price wars 
D) business taxes

Question 5

Refer to the information below.Investment spending would most likely be influenced by changes in: The following list of factors, are related to the aggregate demand curve.Real-balances effect
Household expectations
Interest-rate effect
Personal income tax rates
Profit expectations
National income abroad
Government spending
Foreign trade effect
Exchange rates
Degree of excess capacity

Accepted Answer

A) 1 and 3. 
B) 4 and 6. 
C) 5 and 10. 
D) 8 and 9. 
A) 1 and 3. 
B) 4 and 6. 
C) 5 and 10. 
D) 8 and 9.

Question 6

Which effect best explains the downward slope of the aggregate demand curve?

Accepted Answer

A) a multiplier effect 
B) an income effect 
C) a substitution effect 
D) an interest rate effect 
A) a multiplier effect 
B) an income effect 
C) a substitution effect 
D) an interest rate effect

Question 7

The aggregate expenditures model and the aggregate demand curve can be reconciled because, other things equal, in the aggregate expenditures model:

Accepted Answer

A) changes in the price level have no effect on the equilibrium level of GDP. 
B) an increase in the price level increases the real value of wealth. 
C) the level of aggregate expenditures and therefore the level of real GDP vary inversely with the price level. 
D) the level of aggregate expenditures and therefore the level of real GDP vary directly with the price level. 
A) changes in the price level have no effect on the equilibrium level of GDP. 
B) an increase in the price level increases the real value of wealth. 
C) the level of aggregate expenditures and therefore the level of real GDP vary inversely with the price level. 
D) the level of aggregate expenditures and therefore the level of real GDP vary directly with the price level.

Question 8

A decrease in government spending will cause a(n):

Accepted Answer

A) increase in the quantity of real domestic output demanded. 
B) decrease in the quantity of real domestic output demanded. 
C) decrease in aggregate demand. 
D) increase in aggregate demand. 
A) increase in the quantity of real domestic output demanded. 
B) decrease in the quantity of real domestic output demanded. 
C) decrease in aggregate demand. 
D) increase in aggregate demand.

Question 9

Which of the following statements correctly states the relationship between the per-unit production cost of output and productivity?

Accepted Answer

A) They are exact opposites, with slightly different wording. 
B) They are similar. 
C) They are not related. 
D) They are exactly the same. 
A) They are exact opposites, with slightly different wording. 
B) They are similar. 
C) They are not related. 
D) They are exactly the same.

Question 10

The recession that began in 2008 dispelled the idea of The Great Moderation.

Accepted Answer

A) True 
 B)False

Question 11

An increase in wealth from a substantial increase in stock prices will move the economy along the existing aggregate demand curve.

Accepted Answer

A) True 
 B)False

Question 12

A n expected rise in the rate of inflation for consumer goods will:

Accepted Answer

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

Question 13

Suppose the full-employment level of real output (Q) for a hypothetical economy is $500 and that the price level (P) initially is 100.Use the following short-run aggregate supply schedules to answer the next question.   Refer to the information above.If the price level unexpectedly increases from 100 to 125, the level of real output in the short run will:

Accepted Answer

A) rise from $500 to $560. 
B) fall from $500 to $440. 
C) fall from $560 to $500. 
D) rise from $440 to $500. 
A) rise from $500 to $560. 
B) fall from $500 to $440. 
C) fall from $560 to $500. 
D) rise from $440 to $500.

Question 14

A decrease in taxes will cause a(n):

Accepted Answer

A) decrease in the quantity of real domestic output demanded. 
B) increase in the quantity of real domestic output demanded. 
C) increase in aggregate demand. 
D) decrease in aggregate demand. 
A) decrease in the quantity of real domestic output demanded. 
B) increase in the quantity of real domestic output demanded. 
C) increase in aggregate demand. 
D) decrease in aggregate demand.

Question 15

Suppose higher taxes on businesses cause a decrease in spending on plant and equipment.How will this affect the aggregate expenditure (AE) and the aggregate demand (AD) schedules?

Accepted Answer

A) AE shifts up; AD shifts to the left 
B) AE shifts down; AD shifts to the left 
C) AE shifts up; AD shifts to the right 
D) AE shifts down; AD shifts to the right 
A) AE shifts up; AD shifts to the left 
B) AE shifts down; AD shifts to the left 
C) AE shifts up; AD shifts to the right 
D) AE shifts down; AD shifts to the right

Question 16

Refer to the diagram given below.   Cost-push inflation can be illustrated by a:

Accepted Answer

A) shift of the aggregate supply curve from AS1 to AS2. 
B) shift of the aggregate supply curve from AS1 to AS3. 
C) shift of the aggregate supply curve from AS2 to AS3. 
D) movement along the aggregate demand curve from e1 to e3. 
A) shift of the aggregate supply curve from AS1 to AS2. 
B) shift of the aggregate supply curve from AS1 to AS3. 
C) shift of the aggregate supply curve from AS2 to AS3. 
D) movement along the aggregate demand curve from e1 to e3.

Question 17

Refer to the diagram given below.   If AD1 shifts to AD2, then the equilibrium output and price level are:

Accepted Answer

A) P1 and Q3. 
B) P2 and Q3. 
C) P1 and Q2. 
D) P2 and Q2. 
A) P1 and Q3. 
B) P2 and Q3. 
C) P1 and Q2. 
D) P2 and Q2.

Question 18

Refer to the diagram below.Suppose that aggregate demand increased from AD1 to AD2.For the price level to stay constant:

Accepted Answer

A) the aggregate supply curve would have to shift rightward. 
B) the aggregate supply curve would have to shift leftward. 
C) real domestic output would have to remain constant. 
D) the aggregate supply curve would have to be vertical. 
A) the aggregate supply curve would have to shift rightward. 
B) the aggregate supply curve would have to shift leftward. 
C) real domestic output would have to remain constant. 
D) the aggregate supply curve would have to be vertical.

Question 19

Refer to the diagram given below.   Assume that the nominal wages of workers are initially set on the basis of the price level P2 and that the economy is initially operating at its full-employment level of output Qf.In the long run, demand-pull inflation could best be shown as:

Accepted Answer

A) a movement from point b to point c on AS2. 
B) a movement from point a to point b. 
C) a shift of the aggregate supply curve from AS2 to AS1. 
D) a movement from point b to point d. 
A) a movement from point b to point c on AS2. 
B) a movement from point a to point b. 
C) a shift of the aggregate supply curve from AS2 to AS1. 
D) a movement from point b to point d.

Question 20

Other things equal, appreciation of the dollar:

Accepted Answer

A) increases aggregate demand in Canada and may increase aggregate supply by reducing the prices of imported resources. 
B) increases aggregate demand in Canada and may decrease aggregate supply by reducing the prices of imported resources. 
C) decreases aggregate demand in Canada and may increase aggregate supply by reducing the prices of imported resources. 
D) decreases aggregate demand in Canada and may reduce aggregate supply by increasing the prices of imported resources. 
A) increases aggregate demand in Canada and may increase aggregate supply by reducing the prices of imported resources. 
B) increases aggregate demand in Canada and may decrease aggregate supply by reducing the prices of imported resources. 
C) decreases aggregate demand in Canada and may increase aggregate supply by reducing the prices of imported resources. 
D) decreases aggregate demand in Canada and may reduce aggregate supply by increasing the prices of imported resources.

Exam 12: Part B: Aggregate Demand and Aggregate Supply

Refer to the diagram below. A shift of the aggregate demand curve from AD1 to AD0 might be caused by a(n):

Suppose that real domestic output in an economy is 20 units, the quantity of inputs is 10, and the price of each input is $4.Refer to the above information.Given an increase in input price from $4 to $6, we would expect the aggregate:

We would expect a decline in personal and corporate income taxes to:

Aggregate demand decreases and real output falls but the price level remains the same.Which factor most likely contributes to downward price inflexibility?

Which effect best explains the downward slope of the aggregate demand curve?

The aggregate expenditures model and the aggregate demand curve can be reconciled because, other things equal, in the aggregate expenditures model:

A decrease in government spending will cause a(n):

Which of the following statements correctly states the relationship between the per-unit production cost of output and productivity?

The recession that began in 2008 dispelled the idea of The Great Moderation.

An increase in wealth from a substantial increase in stock prices will move the economy along the existing aggregate demand curve.

A n expected rise in the rate of inflation for consumer goods will:

A decrease in taxes will cause a(n):

Suppose higher taxes on businesses cause a decrease in spending on plant and equipment.How will this affect the aggregate expenditure (AE) and the aggregate demand (AD) schedules?

Refer to the diagram given below. Cost-push inflation can be illustrated by a:

Refer to the diagram given below. If AD1 shifts to AD2, then the equilibrium output and price level are:

Refer to the diagram below.Suppose that aggregate demand increased from AD1 to AD2.For the price level to stay constant:

Refer to the diagram given below. Assume that the nominal wages of workers are initially set on the basis of the price level P2 and that the economy is initially operating at its full-employment level of output Qf.In the long run, demand-pull inflation could best be shown as:

Other things equal, appreciation of the dollar:

Part A: Limits, Alternatives, and Choices

Part B: Limits, Alternatives, and Choices

Part A: The Market System and the Circular Flow

Part B: The Market System and the Circular Flow

Part A: Demand, Supply, and Market Equilibrium

Part B: Demand, Supply, and Market Equilibrium

Part A: Market Failures: Public Goods and Externalities

Part B: Market Failures: Public Goods and Externalities

Part A: Governments Role and Government Failure

Part B: Governments Role and Government Failure

Part A: An Introduction to Macroeconomics

Part B: An Introduction to Macroeconomics

Part A: Measuring the Economys Output

Part B: Measuring the Economys Output

Part A: Economic Growth

Part B: Economic Growth

Part A: Business Cycles, Unemployment, and Inflation

Part B: Business Cycles, Unemployment, and Inflation

Part A: Basic Macroeconomic Relationships

Part B: Basic Macroeconomic Relationships

Part A: The Aggregate Expenditures Model

Part B: The Aggregate Expenditures Model

Part A: Aggregate Demand and Aggregate Supply

Part A: Fiscal Policy, Deficits, Surpluses, and Debt

Part B: Fiscal Policy, Deficits, Surpluses, and Debt

Part A: Money, Banking, and Money Creation

Part B: Money, Banking, and Money Creation

Part A: Interest Rates and Monetary Policy

Part B: Interest Rates and Monetary Policy

Part A: Long-Run Macroeconomic Adjustments

Part B: Long-Run Macroeconomic Adjustments

Part A: International Trade

Part B: International Trade

Part C: Financial Economics

Part A: The Balance of Payments and Exchange Rates

Part B: The Balance of Payments and Exchange Rates

The Economics of Developing Countries

Filters

Refer to the diagram below. A shift of the aggregate demand curve from AD₁ to AD₀ might be caused by a(n):

Refer to the diagram given below. If AD₁ shifts to AD₂, then the equilibrium output and price level are:

Refer to the diagram below.Suppose that aggregate demand increased from AD₁ to AD₂.For the price level to stay constant:

Refer to the diagram given below. Assume that the nominal wages of workers are initially set on the basis of the price level P₂ and that the economy is initially operating at its full-employment level of output Q_f.In the long run, demand-pull inflation could best be shown as: