Question 1

A product demand curve and the aggregate demand curve are negatively sloped for the same reasons.

Accepted Answer

A) True 
 B)False

Question 2

Why does the wealth effect not apply to assets such as houses or artwork?

Accepted Answer

The wealth effect stipulates that as pri

Question 3

The more time a free-market economy has to adjust to price changes, the

Accepted Answer

A)  greater the rate of inflation. 
B)  closer GDP gets to the natural rate of output. 
C)  closer the economy gets to the horizontal portion of the aggregate demand curve. 
D)  more volatility is seen in the business cycle. 
A)  greater the rate of inflation. 
B)  closer GDP gets to the natural rate of output. 
C)  closer the economy gets to the horizontal portion of the aggregate demand curve. 
D)  more volatility is seen in the business cycle.

Question 4

_____ inflation occurs when a negative supply shock hits the economy, shifting the short-run aggregate supply curve to the left.

Accepted Answer

A)  Demand-pull 
B)  Demand-push 
C)  Cost-push 
D)  Cost-pull 
A)  Demand-pull 
B)  Demand-push 
C)  Cost-push 
D)  Cost-pull

Question 5

Which of these 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

Which event will shift the aggregate demand curve to the right?

Accepted Answer

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

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

One reason the price level did not rise after the 2008-2009 stimulus policy actions is that it may not have shifted aggregate demand to the right.

Accepted Answer

A) True 
 B)False

Question 9

If the economy shown in the figure begins on AD1 and SRAS1, what will happen in the short run and long run if the government begins a sustained period of increased spending?

Accepted Answer

A)  The economy moves from point C to E to B. 
B)  The economy moves from point D to C to A. 
C)  The economy moves from point D to C to E. 
D)  The economy moves from point C to A to B. 
A)  The economy moves from point C to E to B. 
B)  The economy moves from point D to C to A. 
C)  The economy moves from point D to C to E. 
D)  The economy moves from point C to A to B.

Question 10

If the money supply is fixed and prices rise, the cost of borrowing will _____ and business investment will _____. This is called the _____.

Accepted Answer

A)  rise; rise; wealth effect 
B)  fall; rise; interest rate effect 
C)  rise; fall; wealth effect 
D)  rise; fall; interest rate effect 
A)  rise; rise; wealth effect 
B)  fall; rise; interest rate effect 
C)  rise; fall; wealth effect 
D)  rise; fall; interest rate effect

Question 11

Which effect tends to make aggregate demand decrease by more than the amount that consumer spending decreases?

Accepted Answer

A)  crowding-out 
B)  multiplier 
C)  wealth 
D)  interest rate 
A)  crowding-out 
B)  multiplier 
C)  wealth 
D)  interest rate

Question 12

The aggregate supply curve shows that the price level and real GDP are indirectly related.

Accepted Answer

A) True 
 B)False

Question 13

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

Accepted Answer

A)  a decrease in taxes 
B)  an increase in interest rates 
C)  an increase in government purchases 
D)  an improvement in consumer expectations about the future 
A)  a decrease in taxes 
B)  an increase in interest rates 
C)  an increase in government purchases 
D)  an improvement in consumer expectations about the future

Question 14

(Figure: Determining SRAS Shifts 2)   Consider the shift in aggregate supply shown in the accompanying figure. Which of these might cause this change in short-run aggregate supply?

Accepted Answer

A)  Unions successfully negotiate higher wages. 
B)  Businesses are increasingly optimistic about the future. 
C)  Incomes of consumers decrease. 
D)  Taxes on businesses increase. 
A)  Unions successfully negotiate higher wages. 
B)  Businesses are increasingly optimistic about the future. 
C)  Incomes of consumers decrease. 
D)  Taxes on businesses increase.

Question 15

Which is NOT consistent with the level of output in the long run?

Accepted Answer

A)  the natural rate of output 
B)  full capacity output level 
C)  high inflation 
D)  the natural rate of unemployment 
A)  the natural rate of output 
B)  full capacity output level 
C)  high inflation 
D)  the natural rate of unemployment

Question 16

Knowing the marginal propensity to consume makes it possible to calculate the marginal propensity to save.

Accepted Answer

A) True 
 B)False

Question 17

Suppose the economy is at full employment, and consumers spend more than usual. In the short run, output will _____; in the long run, output will _____.

Accepted Answer

A)  increase; remain unchanged 
B)  increase; increase 
C)  remain unchanged; decrease 
D)  remain unchanged; increase 
A)  increase; remain unchanged 
B)  increase; increase 
C)  remain unchanged; decrease 
D)  remain unchanged; increase

Question 18

Hypothetically speaking, if the Organization of the Petroleum Exporting Countries (OPEC) stopped exporting oil, a decrease in production would lead to a decrease in aggregate supply.

Accepted Answer

A) True 
 B)False

Question 19

A change in _____ will cause a change in the quantity demanded of real GDP.

Accepted Answer

A)  consumer spending 
B)  investment 
C)  the price level 
D)  imports 
A)  consumer spending 
B)  investment 
C)  the price level 
D)  imports

Question 20

An increase in subsidies will lead to an increase in aggregate supply.

Accepted Answer

A) True 
 B)False

A product demand curve and the aggregate demand curve are negatively sloped for the same reasons.

Why does the wealth effect not apply to assets such as houses or artwork?

The more time a free-market economy has to adjust to price changes, the

_____ inflation occurs when a negative supply shock hits the economy, shifting the short-run aggregate supply curve to the left.

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

Which event will shift the aggregate demand curve to the right?

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

One reason the price level did not rise after the 2008-2009 stimulus policy actions is that it may not have shifted aggregate demand to the right.

If the economy shown in the figure begins on AD₁ and SRAS₁, what will happen in the short run and long run if the government begins a sustained period of increased spending?

If the money supply is fixed and prices rise, the cost of borrowing will ___ and business investment will _. This is called the ___.

Which effect tends to make aggregate demand decrease by more than the amount that consumer spending decreases?

The aggregate supply curve shows that the price level and real GDP are indirectly related.

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

(Figure: Determining SRAS Shifts 2) Consider the shift in aggregate supply shown in the accompanying figure. Which of these might cause this change in short-run aggregate supply?

Which is NOT consistent with the level of output in the long run?

Knowing the marginal propensity to consume makes it possible to calculate the marginal propensity to save.

Suppose the economy is at full employment, and consumers spend more than usual. In the short run, output will _; in the long run, output will _.

Hypothetically speaking, if the Organization of the Petroleum Exporting Countries (OPEC) stopped exporting oil, a decrease in production would lead to a decrease in aggregate supply.

A change in _____ will cause a change in the quantity demanded of real GDP.

An increase in subsidies will lead to an increase in aggregate supply.

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

A product demand curve and the aggregate demand curve are negatively sloped for the same reasons.

Why does the wealth effect not apply to assets such as houses or artwork?

The more time a free-market economy has to adjust to price changes, the

_____ inflation occurs when a negative supply shock hits the economy, shifting the short-run aggregate supply curve to the left.

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

Which event will shift the aggregate demand curve to the right?

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

One reason the price level did not rise after the 2008-2009 stimulus policy actions is that it may not have shifted aggregate demand to the right.

If the economy shown in the figure begins on AD1 and SRAS1, what will happen in the short run and long run if the government begins a sustained period of increased spending?

If the money supply is fixed and prices rise, the cost of borrowing will _____ and business investment will _____. This is called the _____.

Which effect tends to make aggregate demand decrease by more than the amount that consumer spending decreases?

The aggregate supply curve shows that the price level and real GDP are indirectly related.

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

(Figure: Determining SRAS Shifts 2) Consider the shift in aggregate supply shown in the accompanying figure. Which of these might cause this change in short-run aggregate supply?

Which is NOT consistent with the level of output in the long run?

Knowing the marginal propensity to consume makes it possible to calculate the marginal propensity to save.

Suppose the economy is at full employment, and consumers spend more than usual. In the short run, output will _____; in the long run, output will _____.

Hypothetically speaking, if the Organization of the Petroleum Exporting Countries (OPEC) stopped exporting oil, a decrease in production would lead to a decrease in aggregate supply.

A change in _____ will cause a change in the quantity demanded of real GDP.

An increase in subsidies will lead to an increase in aggregate supply.

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 the economy shown in the figure begins on AD₁ and SRAS₁, what will happen in the short run and long run if the government begins a sustained period of increased spending?

If the money supply is fixed and prices rise, the cost of borrowing will ___ and business investment will _. This is called the ___.

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

Suppose the economy is at full employment, and consumers spend more than usual. In the short run, output will _; in the long run, output will _.