Question 1

The aggregate demand curve shows the:

Accepted Answer

A) inverse relationship between the price level and real GDP purchased. 
B) direct relationship between the price level and real GDP produced. 
C) inverse relationship between interest rates and real GDP produced. 
D) direct relationship between real-balances and real GDP purchased. 
A) inverse relationship between the price level and real GDP purchased. 
B) direct relationship between the price level and real GDP produced. 
C) inverse relationship between interest rates and real GDP produced. 
D) direct relationship between real-balances and real GDP purchased.

Question 2

The determinants of aggregate demand:

Accepted Answer

A) explain why the aggregate demand curve is downward sloping. 
B) explain shifts in the aggregate demand curve. 
C) demonstrate why real output and the price level are inversely related. 
D) include input prices and resource productivity. 
A) explain why the aggregate demand curve is downward sloping. 
B) explain shifts in the aggregate demand curve. 
C) demonstrate why real output and the price level are inversely related. 
D) include input prices and resource productivity.

Question 3

Suppose that nominal wages fall and productivity rises in a particular economy.Other things equal, the aggregate:

Accepted Answer

A) demand curve will shift leftward. 
B) supply curve will shift rightward. 
C) supply curve will shift leftward. 
D) expenditures curve will shift downward. 
A) demand curve will shift leftward. 
B) supply curve will shift rightward. 
C) supply curve will shift leftward. 
D) expenditures curve will shift downward.

Question 4

The following table is for a particular country in which C is consumption expenditures, Ig is gross investment expenditures, G is government expenditures, X is exports, and M is imports.All figures are in billions of dollars.Each question is independent of the other questions.   Refer to the above table.If the aggregate supply schedule intersects the aggregate demand at price level 119 in this country, its equilibrium level of real GDP will be:

Accepted Answer

A) $37 billion. 
B) $35 billion. 
C) $26 billion. 
D) $43 billion. 
A) $37 billion. 
B) $35 billion. 
C) $26 billion. 
D) $43 billion.

Question 5

The foreign trade effect:

Accepted Answer

A) shifts the aggregate demand curve rightward. 
B) shifts the aggregate demand curve leftward. 
C) shifts the aggregate supply curve rightward. 
D) none of these. 
A) shifts the aggregate demand curve rightward. 
B) shifts the aggregate demand curve leftward. 
C) shifts the aggregate supply curve rightward. 
D) none of these.

Question 6

An increase in investment spending can be expected to shift the:

Accepted Answer

A) aggregate expenditures curve downward and the aggregate demand curve leftward. 
B) aggregate expenditures curve upward and the aggregate demand curve leftward. 
C) aggregate expenditures curve downward and the aggregate demand curve rightward. 
D) aggregate expenditures curve upward and the aggregate demand curve rightward. 
A) aggregate expenditures curve downward and the aggregate demand curve leftward. 
B) aggregate expenditures curve upward and the aggregate demand curve leftward. 
C) aggregate expenditures curve downward and the aggregate demand curve rightward. 
D) aggregate expenditures curve upward and the aggregate demand curve rightward.

Question 7

A decrease in consumer spending can be expected to shift the:

Accepted Answer

A) aggregate expenditures curve downward and the aggregate demand curve leftward. 
B) aggregate expenditures curve upward and the aggregate demand curve leftward. 
C) aggregate expenditures curve downward and the aggregate demand curve rightward. 
D) aggregate expenditures curve upward and the aggregate demand curve rightward. 
A) aggregate expenditures curve downward and the aggregate demand curve leftward. 
B) aggregate expenditures curve upward and the aggregate demand curve leftward. 
C) aggregate expenditures curve downward and the aggregate demand curve rightward. 
D) aggregate expenditures curve upward and the aggregate demand curve rightward.

Question 8

Other things equal, a decrease in the price level will:

Accepted Answer

A) shift the short run aggregate supply curve to the left. 
B) shift the aggregate demand curve to the left. 
C) cause a movement up a short-run aggregate supply curve. 
D) cause a movement down a short run aggregate supply curve. 
A) shift the short run aggregate supply curve to the left. 
B) shift the aggregate demand curve to the left. 
C) cause a movement up a short-run aggregate supply curve. 
D) cause a movement down a short run aggregate supply curve.

Question 9

Minimum wage laws tend to make the price level more flexible rather than less flexible.

Accepted Answer

A) True 
 B)False

Question 10

The equilibrium price level and level of real output occur where:

Accepted Answer

A) real output is at its highest possible level. 
B) exports equal imports. 
C) the price level is at its lowest level. 
D) the aggregate demand and supply curves intersect. 
A) real output is at its highest possible level. 
B) exports equal imports. 
C) the price level is at its lowest level. 
D) the aggregate demand and supply curves intersect.

Question 11

The following table is for a particular country in which C is consumption expenditures, Ig is gross investment expenditures, G is government expenditures, X is exports, and M is imports.All figures are in billions of dollars.Each question is independent of the other questions.   Refer to the above table.If the equilibrium level of real GDP is $43 billion in this country, its level of consumption will be:

Accepted Answer

A) $18 billion. 
B) $20 billion. 
C) $22 billion. 
D) $26 billion. 
A) $18 billion. 
B) $20 billion. 
C) $22 billion. 
D) $26 billion.

Question 12

An increase in productivity will shift the aggregate:

Accepted Answer

A) demand curve leftward. 
B) demand curve rightward. 
C) supply curve rightward. 
D) supply curve leftward. 
A) demand curve leftward. 
B) demand curve rightward. 
C) supply curve rightward. 
D) supply curve leftward.

Question 13

Refer to the diagram given below.   If aggregate supply shifts from AS1 to AS2, then the price level will:

Accepted Answer

A) increase and real domestic output will increase. 
B) decrease and real domestic output will increase. 
C) increase and real domestic output will decrease. 
D) decrease and real domestic output will decrease. 
A) increase and real domestic output will increase. 
B) decrease and real domestic output will increase. 
C) increase and real domestic output will decrease. 
D) decrease and real domestic output will decrease.

Question 14

Refer to the diagram below.   Assume that the nominal wages of workers in an economy are initially set on the basis of the price level P2 and that the economy initially is operating at the full-employment level of output Qf.In the short run, cost-push inflation could best be shown by a:

Accepted Answer

A) leftward shift of the aggregate supply curve from AS2 to AS3. 
B) movement from point b to point c on AS2. 
C) movement from point b point a on AS2. 
D) rightward shift of the aggregate supply curve from AS2 to AS1. 
A) leftward shift of the aggregate supply curve from AS2 to AS3. 
B) movement from point b to point c on AS2. 
C) movement from point b point a on AS2. 
D) rightward shift of the aggregate supply curve from AS2 to AS1.

Question 15

The real-balances effect suggests that a:

Accepted Answer

A) lower price level will decrease the demand for money, decrease interest rates, and increase consumption and investment spending. 
B) lower price level will decrease the real value of many financial assets and therefore cause an increase in spending. 
C) lower price level will increase the real value of many financial assets and therefore cause an increase in spending. 
D) higher price level will increase the real value of many financial assets and therefore cause an increase in spending. 
A) lower price level will decrease the demand for money, decrease interest rates, and increase consumption and investment spending. 
B) lower price level will decrease the real value of many financial assets and therefore cause an increase in spending. 
C) lower price level will increase the real value of many financial assets and therefore cause an increase in spending. 
D) higher price level will increase the real value of many financial assets and therefore cause an increase in spending.

Question 16

An increase in imports (independently of a change in our price level) will increase both aggregate supply and aggregate demand.

Accepted Answer

A) True 
 B)False

Question 17

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 information above, the level of productivity is:

Accepted Answer

A) 20 
B) 10 
C) 5 
D) 2 
A) 20 
B) 10 
C) 5 
D) 2

Question 18

The long-run aggregate supply curve is vertical:

Accepted Answer

A) because the rate of inflation is steady in the long run. 
B) because resource prices eventually catch up with product prices. 
C) because product prices always increase at a faster rate than resource prices. 
D) only when the money supply increases at the same rate as real GDP. 
A) because the rate of inflation is steady in the long run. 
B) because resource prices eventually catch up with product prices. 
C) because product prices always increase at a faster rate than resource prices. 
D) only when the money supply increases at the same rate as real GDP.

Question 19

When the price level decreases:

Accepted Answer

A) the demand for money falls and the interest rate falls. 
B) holders of financial assets with fixed money values decrease their spending. 
C) holders of financial assets with fixed money values have less purchasing power. 
D) there is a decrease in consumer spending that is sensitive to changes in interest rates. 
A) the demand for money falls and the interest rate falls. 
B) holders of financial assets with fixed money values decrease their spending. 
C) holders of financial assets with fixed money values have less purchasing power. 
D) there is a decrease in consumer spending that is sensitive to changes in interest rates.

Question 20

A firm is concerned that if it lowers its prices, its competitors will not only match its price cuts but may also retaliate by making even deeper cuts.This is referred to as:

Accepted Answer

A) price wars. 
B) healthy competition. 
C) the capitalist system at work. 
D) unfair trade practices. 
A) price wars. 
B) healthy competition. 
C) the capitalist system at work. 
D) unfair trade practices.

Exam 12: Part B: Aggregate Demand and Aggregate Supply

The aggregate demand curve shows the:

The determinants of aggregate demand:

Suppose that nominal wages fall and productivity rises in a particular economy.Other things equal, the aggregate:

The foreign trade effect:

An increase in investment spending can be expected to shift the:

A decrease in consumer spending can be expected to shift the:

Other things equal, a decrease in the price level will:

Minimum wage laws tend to make the price level more flexible rather than less flexible.

The equilibrium price level and level of real output occur where:

An increase in productivity will shift the aggregate:

Refer to the diagram given below. If aggregate supply shifts from AS1 to AS2, then the price level will:

Refer to the diagram below. Assume that the nominal wages of workers in an economy are initially set on the basis of the price level P2 and that the economy initially is operating at the full-employment level of output Qf.In the short run, cost-push inflation could best be shown by a:

The real-balances effect suggests that a:

An increase in imports (independently of a change in our price level) will increase both aggregate supply and aggregate demand.

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 information above, the level of productivity is:

The long-run aggregate supply curve is vertical:

When the price level decreases:

A firm is concerned that if it lowers its prices, its competitors will not only match its price cuts but may also retaliate by making even deeper cuts.This is referred to as:

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 given below. If aggregate supply shifts from AS₁ to AS₂, then the price level will:

Refer to the diagram below. Assume that the nominal wages of workers in an economy are initially set on the basis of the price level P₂ and that the economy initially is operating at the full-employment level of output Q_f.In the short run, cost-push inflation could best be shown by a: