Question 1

If a country's currency appreciates, what impact will it have on aggregate demand or aggregate supply?

Accepted Answer

A)  Aggregate demand will rise because the currency will buy more abroad. 
B)  Long-run aggregate supply will rise because investment returns will rise. 
C)  Short-run aggregate supply will rise due to lower prices on imported inputs. 
D)  Long-run aggregate supply will fall because imports will rise. 
A)  Aggregate demand will rise because the currency will buy more abroad. 
B)  Long-run aggregate supply will rise because investment returns will rise. 
C)  Short-run aggregate supply will rise due to lower prices on imported inputs. 
D)  Long-run aggregate supply will fall because imports will rise. C

Question 2

The "wealth effect" refers to the fact that when aggregate price levels rise:

Accepted Answer

A)  exports decline. 
B)  firms cut back on their investments. 
C)  the real value of savings accounts, bonds, and cash declines. 
D)  interest rates tend to rise. 
A)  exports decline. 
B)  firms cut back on their investments. 
C)  the real value of savings accounts, bonds, and cash declines. 
D)  interest rates tend to rise. C

Question 3

How do changes in inflation expectations impact the short-run aggregate supply curve and the long-run aggregate supply curve?

Accepted Answer

A)  Expectations for inflation to rise will cause short-run and long-run aggregate supply to increase. 
B)  Expectations for inflation to rise will cause short-run and long-run aggregate supply to decrease. 
C)  Expectations that inflation will rise will cause movements along both curves but would cause neither curve to shift. 
D)  Expectations that inflation will rise will cause short-run aggregate supply to decrease and long-run aggregate supply to remain constant. 
A)  Expectations for inflation to rise will cause short-run and long-run aggregate supply to increase. 
B)  Expectations for inflation to rise will cause short-run and long-run aggregate supply to decrease. 
C)  Expectations that inflation will rise will cause movements along both curves but would cause neither curve to shift. 
D)  Expectations that inflation will rise will cause short-run aggregate supply to decrease and long-run aggregate supply to remain constant. D

Question 4

The long-run aggregate supply curve is vertical because of the assumption that all variables are fixed in the long run.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following will NOT shift the aggregate supply curve to the right?

Accepted Answer

A)  the discovery of cheap solar energy 
B)  the development in the methods of production of nanotechnology 
C)  an increase in the minimum wage 
D)  a decrease in corporate taxes 
A)  the discovery of cheap solar energy 
B)  the development in the methods of production of nanotechnology 
C)  an increase in the minimum wage 
D)  a decrease in corporate taxes

Question 6

Demand-pull inflation is caused by:

Accepted Answer

A)  increases in wages, pushing prices higher. 
B)  increases in aggregate demand. 
C)  decreases in aggregate supply. 
D)  consumers demanding better quality, which increases costs. 
A)  increases in wages, pushing prices higher. 
B)  increases in aggregate demand. 
C)  decreases in aggregate supply. 
D)  consumers demanding better quality, which increases costs.

Question 7

Cost-push inflation occurs when:

Accepted Answer

A)  total spending expands so much that equilibrium output exceeds full-employment output. 
B)  a supply shock shifts the short-run aggregate supply curve to the right. 
C)  rising resource costs reduce short-run aggregate supply. 
D)  subsidies to businesses rise. 
A)  total spending expands so much that equilibrium output exceeds full-employment output. 
B)  a supply shock shifts the short-run aggregate supply curve to the right. 
C)  rising resource costs reduce short-run aggregate supply. 
D)  subsidies to businesses rise.

Question 8

An increase in taxes shifts the aggregate demand curve to the left.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following events causes a decrease in aggregate demand?

Accepted Answer

A)  improving consumer confidence 
B)  increase in taxes 
C)  decrease in interest rates 
D)  increase in government spending 
A)  improving consumer confidence 
B)  increase in taxes 
C)  decrease in interest rates 
D)  increase in government spending

Question 10

The multiplier is calculated by using the formula 1 divided by the marginal propensity to save.

Accepted Answer

A) True 
 B)False

Question 11

Suppose a booming stock market encourages consumption spending to rise dramatically. What would be the most likely short-run impact?

Accepted Answer

A)  a recession and falling prices 
B)  inflation and rising GDP 
C)  a recession and rising prices 
D)  The impact cannot be determined from the information given. 
A)  a recession and falling prices 
B)  inflation and rising GDP 
C)  a recession and rising prices 
D)  The impact cannot be determined from the information given.

Question 12

Which of the following events will shift the aggregate demand curve to the right?

Accepted Answer

A)  a catastrophic hurricane hitting the northeastern United States 
B)  an increase in household debt 
C)  a decrease in taxes 
D)  a decrease in military spending 
A)  a catastrophic hurricane hitting the northeastern United States 
B)  an increase in household debt 
C)  a decrease in taxes 
D)  a decrease in military spending

Question 13

Econia's currency appreciates. This will cause:

Accepted Answer

A)  aggregate demand to rise. 
B)  aggregate demand to fall. 
C)  a movement upward along Econia's aggregate demand curve. 
D)  a movement downward along Econia's aggregate demand curve. 
A)  aggregate demand to rise. 
B)  aggregate demand to fall. 
C)  a movement upward along Econia's aggregate demand curve. 
D)  a movement downward along Econia's aggregate demand curve.

Question 14

If AD shifts right as the economy booms, and then SRAS shifts left, what happens to inflation?

Accepted Answer

A)  It increases. 
B)  It decreases. 
C)  It stays the same, 
D)  It falls to zero. 
A)  It increases. 
B)  It decreases. 
C)  It stays the same, 
D)  It falls to zero.

Question 15

Demand-pull inflation is due to excessive spending on goods and services.

Accepted Answer

A) True 
 B)False

Question 16

The long-run supply curve is:

Accepted Answer

A)  vertical. 
B)  horizontal. 
C)  elastic. 
D)  inelastic. 
A)  vertical. 
B)  horizontal. 
C)  elastic. 
D)  inelastic.

Question 17

If oil prices decline, the short-run aggregate supply curve shifts _____ and output supplied will _____.

Accepted Answer

A)  left; increase 
B)  left; decrease 
C)  right; increase 
D)  right; decrease 
A)  left; increase 
B)  left; decrease 
C)  right; increase 
D)  right; decrease

Question 18

One reason real output declines when the aggregate price level rises is the reduction in the purchasing power of money.

Accepted Answer

A) True 
 B)False

Question 19

_____ will most likely increase the economy's long-run aggregate supply.

Accepted Answer

A)  A low rate of investment 
B)  Unfavorable weather in the Corn Belt 
C)  Advances in technology 
D)  An increase in the expected inflation rate 
A)  A low rate of investment 
B)  Unfavorable weather in the Corn Belt 
C)  Advances in technology 
D)  An increase in the expected inflation rate

Question 20

_____ are components of consumer spending that affect aggregate demand.

Accepted Answer

A)  Expected rates of return on investment 
B)  Taxes 
C)  Exchange rate changes 
D)  Government spending programs 
A)  Expected rates of return on investment 
B)  Taxes 
C)  Exchange rate changes 
D)  Government spending programs

If a country's currency appreciates, what impact will it have on aggregate demand or aggregate supply?

The "wealth effect" refers to the fact that when aggregate price levels rise:

How do changes in inflation expectations impact the short-run aggregate supply curve and the long-run aggregate supply curve?

The long-run aggregate supply curve is vertical because of the assumption that all variables are fixed in the long run.

Which of the following will NOT shift the aggregate supply curve to the right?

Demand-pull inflation is caused by:

Cost-push inflation occurs when:

An increase in taxes shifts the aggregate demand curve to the left.

Which of the following events causes a decrease in aggregate demand?

The multiplier is calculated by using the formula 1 divided by the marginal propensity to save.

Suppose a booming stock market encourages consumption spending to rise dramatically. What would be the most likely short-run impact?

Which of the following events will shift the aggregate demand curve to the right?

Econia's currency appreciates. This will cause:

If AD shifts right as the economy booms, and then SRAS shifts left, what happens to inflation?

Demand-pull inflation is due to excessive spending on goods and services.

The long-run supply curve is:

If oil prices decline, the short-run aggregate supply curve shifts _ and output supplied will _.

One reason real output declines when the aggregate price level rises is the reduction in the purchasing power of money.

_____ will most likely increase the economy's long-run aggregate supply.

_____ are components of consumer spending that affect aggregate demand.

Exploring Economics

Production, Economic Growth, and Trade

Supply and Demand

Markets and Government

Introduction to Macroeconomics

Measuring Inflation and Unemployment

Economic Growth

Aggregate Expenditures

Fiscal Policy and Debt

Saving, Investment, and the Financial System

Money Creation and the Federal Reserve

Monetary Policy

Macroeconomic Policy: Challenges in a Global Economy

International Trade

Open Economy Macroeconomics

Filters

Exam 9: Aggregate Demand and Supply

If a country's currency appreciates, what impact will it have on aggregate demand or aggregate supply?

The "wealth effect" refers to the fact that when aggregate price levels rise:

How do changes in inflation expectations impact the short-run aggregate supply curve and the long-run aggregate supply curve?

The long-run aggregate supply curve is vertical because of the assumption that all variables are fixed in the long run.

Which of the following will NOT shift the aggregate supply curve to the right?

Demand-pull inflation is caused by:

Cost-push inflation occurs when:

An increase in taxes shifts the aggregate demand curve to the left.

Which of the following events causes a decrease in aggregate demand?

The multiplier is calculated by using the formula 1 divided by the marginal propensity to save.

Suppose a booming stock market encourages consumption spending to rise dramatically. What would be the most likely short-run impact?

Which of the following events will shift the aggregate demand curve to the right?

Econia's currency appreciates. This will cause:

If AD shifts right as the economy booms, and then SRAS shifts left, what happens to inflation?

Demand-pull inflation is due to excessive spending on goods and services.

The long-run supply curve is:

If oil prices decline, the short-run aggregate supply curve shifts _____ and output supplied will _____.

One reason real output declines when the aggregate price level rises is the reduction in the purchasing power of money.

_____ will most likely increase the economy's long-run aggregate supply.

_____ are components of consumer spending that affect aggregate demand.

Exploring Economics

Production, Economic Growth, and Trade

Supply and Demand

Markets and Government

Introduction to Macroeconomics

Measuring Inflation and Unemployment

Economic Growth

Aggregate Expenditures

Fiscal Policy and Debt

Saving, Investment, and the Financial System

Money Creation and the Federal Reserve

Monetary Policy

Macroeconomic Policy: Challenges in a Global Economy

International Trade

Open Economy Macroeconomics

Filters

If oil prices decline, the short-run aggregate supply curve shifts _ and output supplied will _.