Question 1

A fall in real interest rates will reduce aggregate demand.

Accepted Answer

A) True 
 B)False

Question 2

Collective bargaining agreements that prohibit wage cuts for the duration of the contract contribute to:

Accepted Answer

A) a wealth effect. 
B) a multiplier effect. 
C) an increase in aggregate supply. 
D) a price level that is inflexible downward. 
A) a wealth effect. 
B) a multiplier effect. 
C) an increase in aggregate supply. 
D) a price level that is inflexible downward.

Question 3

The interest-rate and real-balances effects are important because they help explain:

Accepted Answer

A) rightward and leftward shifts of the aggregate demand curve. 
B) why demand-management policy cannot be used effectively to curb stagflation. 
C) the shape of the aggregate demand curve. 
D) the shape of the aggregate supply curve. 
A) rightward and leftward shifts of the aggregate demand curve. 
B) why demand-management policy cannot be used effectively to curb stagflation. 
C) the shape of the aggregate demand curve. 
D) the shape of the aggregate supply curve.

Question 4

The economy experiences a decrease in the price level and an increase in real domestic output.Which is a likely explanation?

Accepted Answer

A) consumer incomes and the quantity of labour have decreased 
B) interest rates and wage rates have decreased 
C) the prices of imported resources have increased 
D) national income abroad has increased 
A) consumer incomes and the quantity of labour have decreased 
B) interest rates and wage rates have decreased 
C) the prices of imported resources have increased 
D) national income abroad has increased

Question 5

Which would most likely shift the aggregate supply curve? A change in:

Accepted Answer

A) consumer expectations. 
B) government spending. 
C) excess capacity in business. 
D) prices of imported resources. 
A) consumer expectations. 
B) government spending. 
C) excess capacity in business. 
D) prices of imported resources.

Question 6

The horizontal shape of the immediate short run aggregate supply implies that:

Accepted Answer

A) the total amount of output in the economy depends only on the general price level. 
B) the total amount of output in the economy depends only on the volume of spending. 
C) the total amount of output in the economy is fixed. 
D) the total amount of spending depends on the price of inputs. 
A) the total amount of output in the economy depends only on the general price level. 
B) the total amount of output in the economy depends only on the volume of spending. 
C) the total amount of output in the economy is fixed. 
D) the total amount of spending depends on the price of inputs.

Question 7

Per-unit production cost is determined by dividing output by total input cost.

Accepted Answer

A) True 
 B)False

Question 8

The following aggregate demand and supply schedules are for a hypothetical economy:   Refer to the above data.The change in aggregate demand indicated in the previous question might have been caused by:

Accepted Answer

A) an increase in net exports. 
B) a worsening of business expectations. 
C) an increase in consumer wealth. 
D) a decrease in the personal income tax. 
A) an increase in net exports. 
B) a worsening of business expectations. 
C) an increase in consumer wealth. 
D) a decrease in the personal income tax.

Question 9

An increase in aggregate expenditures resulting from a decrease in the price level is equivalent to a:

Accepted Answer

A) rightward shift of the aggregate demand curve. 
B) leftward shift of the aggregate demand curve. 
C) movement downward along a fixed aggregate demand curve. 
D) decrease in aggregate supply. 
A) rightward shift of the aggregate demand curve. 
B) leftward shift of the aggregate demand curve. 
C) movement downward along a fixed aggregate demand curve. 
D) decrease in aggregate supply.

Question 10

The short-run aggregate supply curve is upward-sloping because:

Accepted Answer

A) of the interest-rate effect. 
B) higher price levels create incentives to expand output when resource prices remain constant. 
C) of the net export effect. 
D) higher price levels create an expectation among producers of still higher price levels. 
A) of the interest-rate effect. 
B) higher price levels create incentives to expand output when resource prices remain constant. 
C) of the net export effect. 
D) higher price levels create an expectation among producers of still higher price levels.

Question 11

Assume that an initial change in spending of $10 billion results in a rightward shift in aggregate demand that increases real GDP by $40 billion.The multiplier is:

Accepted Answer

A) $10 billion. 
B) $40 billion. 
C) 4 
D) 5 
A) $10 billion. 
B) $40 billion. 
C) 4 
D) 5

Question 12

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.The per unit cost of production in the economy described above is:

Accepted Answer

A) $.50. 
B) $1 
C) $2 
D) $5 
A) $.50. 
B) $1 
C) $2 
D) $5

Question 13

The short run aggregate supply curve:

Accepted Answer

A) shows the various amounts of real output which businesses will produce at each price level. 
B) is downward sloping because real purchasing power increases as the price level falls. 
C) contains a vertical range where real output is variable and the price level is constant. 
D) is explained by the interest rate, wealth, and foreign trade effects. 
A) shows the various amounts of real output which businesses will produce at each price level. 
B) is downward sloping because real purchasing power increases as the price level falls. 
C) contains a vertical range where real output is variable and the price level is constant. 
D) is explained by the interest rate, wealth, and foreign trade effects.

Question 14

In the long run, the aggregate supply curve of an economy is:

Accepted Answer

A) upward sloping. 
B) downward sloping. 
C) horizontal. 
D) vertical. 
A) upward sloping. 
B) downward sloping. 
C) horizontal. 
D) vertical.

Question 15

The determinants of aggregate supply:

Accepted Answer

A) are consumption, investment, government, and net export spending. 
B) explain why real domestic output and the price level are directly related. 
C) explain the three distinct ranges of the aggregate supply curve. 
D) include input prices and r productivity. 
A) are consumption, investment, government, and net export spending. 
B) explain why real domestic output and the price level are directly related. 
C) explain the three distinct ranges of the aggregate supply curve. 
D) include input prices and r productivity.

Question 16

The aggregate supply curve slopes downward.

Accepted Answer

A) True 
 B)False

Question 17

An increase in the price level, other things equal, will shift the:

Accepted Answer

A) consumption, investment, and net exports schedules of the aggregate expenditures model downward. 
B) consumption, investment, and net exports schedules of the aggregate expenditures model upward. 
C) consumption, and investment schedules of the aggregate expenditures model upward, but the net exports schedule downward. 
D) consumption, and net exports schedules of the aggregate expenditures model upward, but the investment schedule downward. 
A) consumption, investment, and net exports schedules of the aggregate expenditures model downward. 
B) consumption, investment, and net exports schedules of the aggregate expenditures model upward. 
C) consumption, and investment schedules of the aggregate expenditures model upward, but the net exports schedule downward. 
D) consumption, and net exports schedules of the aggregate expenditures model upward, but the investment schedule downward.

Question 18

Productivity measures:

Accepted Answer

A) real output per unit of input. 
B) per unit production costs. 
C) the changes in real wealth caused by price level changes. 
D) the amount of capital goods used per worker. 
A) real output per unit of input. 
B) per unit production costs. 
C) the changes in real wealth caused by price level changes. 
D) the amount of capital goods used per worker.

Question 19

The real-balances, interest rate, and foreign trade effects all help explain:

Accepted Answer

A) why the aggregate demand curve is downward sloping. 
B) why the aggregate supply curve is upward sloping. 
C) shifts in the aggregate demand curve. 
D) shifts in the aggregate supply curve. 
A) why the aggregate demand curve is downward sloping. 
B) why the aggregate supply curve is upward sloping. 
C) shifts in the aggregate demand curve. 
D) shifts in the aggregate supply curve.

Question 20

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.In the long run, a fall in the price level from 100 to 75 will:

Accepted Answer

A) decrease real output from $500 to $440. 
B) increase real output from $500 to $620. 
C) change the aggregate supply schedule from (a) to (c) and produce an equilibrium level of real output of $500. 
D) change the aggregate supply schedule from (a) to (b) and produce an equilibrium level of real output of $500. 
A) decrease real output from $500 to $440. 
B) increase real output from $500 to $620. 
C) change the aggregate supply schedule from (a) to (c) and produce an equilibrium level of real output of $500. 
D) change the aggregate supply schedule from (a) to (b) and produce an equilibrium level of real output of $500.

Exam 12: Part B: Aggregate Demand and Aggregate Supply

A fall in real interest rates will reduce aggregate demand.

Collective bargaining agreements that prohibit wage cuts for the duration of the contract contribute to:

The interest-rate and real-balances effects are important because they help explain:

The economy experiences a decrease in the price level and an increase in real domestic output.Which is a likely explanation?

Which would most likely shift the aggregate supply curve? A change in:

The horizontal shape of the immediate short run aggregate supply implies that:

Per-unit production cost is determined by dividing output by total input cost.

The following aggregate demand and supply schedules are for a hypothetical economy: Refer to the above data.The change in aggregate demand indicated in the previous question might have been caused by:

An increase in aggregate expenditures resulting from a decrease in the price level is equivalent to a:

The short-run aggregate supply curve is upward-sloping because:

Assume that an initial change in spending of $10 billion results in a rightward shift in aggregate demand that increases real GDP by $40 billion.The multiplier is:

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.The per unit cost of production in the economy described above is:

The short run aggregate supply curve:

In the long run, the aggregate supply curve of an economy is:

The determinants of aggregate supply:

The aggregate supply curve slopes downward.

An increase in the price level, other things equal, will shift the:

Productivity measures:

The real-balances, interest rate, and foreign trade effects all help explain:

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

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