Question 1

The long-run aggregate supply curve uses the classical assumptions that all variables are _____ in the long run and that long-run equilibrium occurs at _____.

Accepted Answer

A)  flexible; full employment 
B)  flexible; less than full employment 
C)  fixed; less than full employment 
D)  fixed; full employment 
A)  flexible; full employment 
B)  flexible; less than full employment 
C)  fixed; less than full employment 
D)  fixed; full employment

Question 2

The 1973 oil price shock was an example of cost-push inflation.

Accepted Answer

A) True 
 B)False

Question 3

The actual price level is determined by:

Accepted Answer

A)  government policy. 
B)  the intersection of short-run aggregate supply and demand. 
C)  microeconomic equilibrium. 
D)  monopolists. 
A)  government policy. 
B)  the intersection of short-run aggregate supply and demand. 
C)  microeconomic equilibrium. 
D)  monopolists.

Question 4

If the pound sterling appreciates against the U.S. dollar, England buys _____ U.S. goods, causing the U.S. aggregate demand curve to shift to the _____.

Accepted Answer

A)  more; right 
B)  more; left 
C)  fewer; left 
D)  fewer; right 
A)  more; right 
B)  more; left 
C)  fewer; left 
D)  fewer; right

Question 5

What is the spending multiplier if the marginal propensity to consume is 0.60?

Accepted Answer

A)  1.67 
B)  2.5 
C)  4.0 
D)  6.67 
A)  1.67 
B)  2.5 
C)  4.0 
D)  6.67

Question 6

In Productovia, aggregate demand increases and aggregate supply decreases. Based on the shifts of these two curves, which of the following is a likely outcome?

Accepted Answer

A)  deflation 
B)  higher taxes 
C)  lower imports 
D)  inflation 
A)  deflation 
B)  higher taxes 
C)  lower imports 
D)  inflation

Question 7

Which of the following events will NOT cause the aggregate demand curve to shift?

Accepted Answer

A)  Businesses are optimistic about the economy, investing heavily in new equipment. 
B)  Consumers' wealth declines because of a drop in the stock market. 
C)  A rise in the aggregate price level causes a decline in exports. 
D)  Governments increase spending on national security in the wake of terrorist attacks. 
A)  Businesses are optimistic about the economy, investing heavily in new equipment. 
B)  Consumers' wealth declines because of a drop in the stock market. 
C)  A rise in the aggregate price level causes a decline in exports. 
D)  Governments increase spending on national security in the wake of terrorist attacks.

Question 8

The aggregate demand curve shows the relationship between nominal GDP and the price level.

Accepted Answer

A) True 
 B)False

Question 9

Demand-pull inflation occurs when aggregate demand expands so much that equilibrium output exceeds full employment output.

Accepted Answer

A) True 
 B)False

Question 10

In the aggregate demand/aggregate supply (AD/AS) model, the vertical axis is labeled:

Accepted Answer

A)  aggregate price level. 
B)  consumption. 
C)  GDP. 
D)  consumption plus investment plus government spending. 
A)  aggregate price level. 
B)  consumption. 
C)  GDP. 
D)  consumption plus investment plus government spending.

Question 11

The short-run supply curve slopes upward because:

Accepted Answer

A)  profits increase at higher price levels. 
B)  productivity increases at higher price levels. 
C)  wages increase at higher output levels in the short run. 
D)  resource costs increase at higher price levels. 
A)  profits increase at higher price levels. 
B)  productivity increases at higher price levels. 
C)  wages increase at higher output levels in the short run. 
D)  resource costs increase at higher price levels.

Question 12

Technological advances increase aggregate supply.

Accepted Answer

A) True 
 B)False

Question 13

The oil shock of 1973 led to demand-pull inflation.

Accepted Answer

A) True 
 B)False

Question 14

A rise in real GDP is associated with increased employment.

Accepted Answer

A) True 
 B)False

Question 15

The Potbelly Pothole Company is undertaking some investments in its plant. Suppose interest rates fall and new technologies increase the return on its investment. What is likely to happen?

Accepted Answer

A)  The company's demand for investments will fall. 
B)  There will be no change in the company's demand for investments. 
C)  The company's demand for investments will first fall as interest rates fall and then rise as technology improves. 
D)  The company's demand for investments will rise. 
A)  The company's demand for investments will fall. 
B)  There will be no change in the company's demand for investments. 
C)  The company's demand for investments will first fall as interest rates fall and then rise as technology improves. 
D)  The company's demand for investments will rise.

Question 16

(Figure: Shifting SRAS and AD)   What economic event is represented if full employment GDP occurs at point a?

Accepted Answer

A)  a recession 
B)  demand-pull inflation 
C)  cost-push inflation 
D)  deflation 
A)  a recession 
B)  demand-pull inflation 
C)  cost-push inflation 
D)  deflation

Question 17

In the Keynesian model, the price level is _____; in the aggregate demand and supply model, the price level is _____.

Accepted Answer

A)  fixed; fixed 
B)  flexible; flexible 
C)  flexible; fixed 
D)  fixed; flexible 
A)  fixed; fixed 
B)  flexible; flexible 
C)  flexible; fixed 
D)  fixed; flexible

Question 18

(Figure: Predicting Aggregate Demand Shifts) Which of the following would shift the aggregate demand curve from AD1 to AD2?

Accepted Answer

A)  a tax increase 
B)  a decrease in interest rates 
C)  a decrease in government purchases 
D)  a worsening of consumer expectations about the future 
A)  a tax increase 
B)  a decrease in interest rates 
C)  a decrease in government purchases 
D)  a worsening of consumer expectations about the future

Question 19

All of the following are determinants of aggregate supply EXCEPT:

Accepted Answer

A)  productivity. 
B)  taxes. 
C)  subsidies. 
D)  net exports. 
A)  productivity. 
B)  taxes. 
C)  subsidies. 
D)  net exports.

Question 20

Other things equal, when the U.S. aggregate price level falls, U.S. exports _____ and U.S. imports _____.

Accepted Answer

A)  fall; rise 
B)  fall; fall 
C)  rise; fall 
D)  rise; rise 
A)  fall; rise 
B)  fall; fall 
C)  rise; fall 
D)  rise; rise

The long-run aggregate supply curve uses the classical assumptions that all variables are _ in the long run and that long-run equilibrium occurs at _.

The 1973 oil price shock was an example of cost-push inflation.

The actual price level is determined by:

If the pound sterling appreciates against the U.S. dollar, England buys _ U.S. goods, causing the U.S. aggregate demand curve to shift to the _.

What is the spending multiplier if the marginal propensity to consume is 0.60?

In Productovia, aggregate demand increases and aggregate supply decreases. Based on the shifts of these two curves, which of the following is a likely outcome?

Which of the following events will NOT cause the aggregate demand curve to shift?

The aggregate demand curve shows the relationship between nominal GDP and the price level.

Demand-pull inflation occurs when aggregate demand expands so much that equilibrium output exceeds full employment output.

In the aggregate demand/aggregate supply (AD/AS) model, the vertical axis is labeled:

The short-run supply curve slopes upward because:

Technological advances increase aggregate supply.

The oil shock of 1973 led to demand-pull inflation.

A rise in real GDP is associated with increased employment.

The Potbelly Pothole Company is undertaking some investments in its plant. Suppose interest rates fall and new technologies increase the return on its investment. What is likely to happen?

(Figure: Shifting SRAS and AD) What economic event is represented if full employment GDP occurs at point a?

In the Keynesian model, the price level is _; in the aggregate demand and supply model, the price level is _.

(Figure: Predicting Aggregate Demand Shifts) Which of the following would shift the aggregate demand curve from AD₁ to AD₂?

All of the following are determinants of aggregate supply EXCEPT:

Other things equal, when the U.S. aggregate price level falls, U.S. exports _ and U.S. imports _.

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

The long-run aggregate supply curve uses the classical assumptions that all variables are _____ in the long run and that long-run equilibrium occurs at _____.

The 1973 oil price shock was an example of cost-push inflation.

The actual price level is determined by:

If the pound sterling appreciates against the U.S. dollar, England buys _____ U.S. goods, causing the U.S. aggregate demand curve to shift to the _____.

What is the spending multiplier if the marginal propensity to consume is 0.60?

In Productovia, aggregate demand increases and aggregate supply decreases. Based on the shifts of these two curves, which of the following is a likely outcome?

Which of the following events will NOT cause the aggregate demand curve to shift?

The aggregate demand curve shows the relationship between nominal GDP and the price level.

Demand-pull inflation occurs when aggregate demand expands so much that equilibrium output exceeds full employment output.

In the aggregate demand/aggregate supply (AD/AS) model, the vertical axis is labeled:

The short-run supply curve slopes upward because:

Technological advances increase aggregate supply.

The oil shock of 1973 led to demand-pull inflation.

A rise in real GDP is associated with increased employment.

The Potbelly Pothole Company is undertaking some investments in its plant. Suppose interest rates fall and new technologies increase the return on its investment. What is likely to happen?

(Figure: Shifting SRAS and AD) What economic event is represented if full employment GDP occurs at point a?

In the Keynesian model, the price level is _____; in the aggregate demand and supply model, the price level is _____.

(Figure: Predicting Aggregate Demand Shifts) Which of the following would shift the aggregate demand curve from AD1 to AD2?

All of the following are determinants of aggregate supply EXCEPT:

Other things equal, when the U.S. aggregate price level falls, U.S. exports _____ and U.S. imports _____.

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

The long-run aggregate supply curve uses the classical assumptions that all variables are _ in the long run and that long-run equilibrium occurs at _.

If the pound sterling appreciates against the U.S. dollar, England buys _ U.S. goods, causing the U.S. aggregate demand curve to shift to the _.

In the Keynesian model, the price level is _; in the aggregate demand and supply model, the price level is _.

(Figure: Predicting Aggregate Demand Shifts) Which of the following would shift the aggregate demand curve from AD₁ to AD₂?

Other things equal, when the U.S. aggregate price level falls, U.S. exports _ and U.S. imports _.