Question 1

An increase in business excise taxes will shift the aggregate supply curve leftward.

Accepted Answer

A) True 
 B)False  True

Question 2

If investment decreases by $20 billion and the economy's MPC is 0.5, the aggregate demand curve will shift

Accepted Answer

A)  leftward by $40 billion at each price level. 
B)  rightward by $20 billion at each price level. 
C)  rightward by $40 billion at each price level. 
D)  leftward by $20 billion at each price level. 
A)  leftward by $40 billion at each price level. 
B)  rightward by $20 billion at each price level. 
C)  rightward by $40 billion at each price level. 
D)  leftward by $20 billion at each price level. A

Question 3

The short-run aggregate supply curve shows the

Accepted Answer

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

Question 4

$$\begin{array} { | c | c | c | c | c | c | c | } 
\hline \text { Price Level } & C & I _ { g } & G & X & M & \text { Real GDP } \
\hline 128 & \$ 18 & \$ 2 & \$ 3 & \$ 1 & \$ 5 & \
\hline 125 & 20 & 4 & 3 & 2 & 4 & \
\hline 122 & 22 & 6 & 3 & 3 & 3 & \
\hline 119 & 24 & 8 & 3 & 4 & 2 & \
\hline 116 & 26 & 10 & 3 & 5 & 1 & \
\hline
\end{array}$$ In the accompanying table for a particular country, C is consumption expenditures, $$I _ { g }$$ is gross
Investment expenditures, G is government expenditures, X is exports, and M is imports. All ?gures
Are in billions of dollars. A decline in the international value of the dollar would

Accepted Answer

A)  increase the values in the X and M columns and reduce aggregate demand. 
B)  decrease the values in the X and M columns and increase aggregate demand. 
C)  decrease the values in column X increase the values in column M, and reduce aggregate demand. 
D)  increase the values in column X, decrease the values in column M, and increase aggregate demand. 
A)  increase the values in the X and M columns and reduce aggregate demand. 
B)  decrease the values in the X and M columns and increase aggregate demand. 
C)  decrease the values in column X increase the values in column M, and reduce aggregate demand. 
D)  increase the values in column X, decrease the values in column M, and increase aggregate demand.

Question 5

The labels for the axes of an aggregate supply curve should be

Accepted Answer

A)  real domestic output for the vertical axis and price level for the horizontal axis. 
B)  real domestic output for the horizontal axis and price level for the vertical axis. 
C)  real employment for the vertical axis and price level for the horizontal axis. 
D)  aggregate demand for the vertical axis and real national output for the horizontal axis. 
A)  real domestic output for the vertical axis and price level for the horizontal axis. 
B)  real domestic output for the horizontal axis and price level for the vertical axis. 
C)  real employment for the vertical axis and price level for the horizontal axis. 
D)  aggregate demand for the vertical axis and real national output for the horizontal axis.

Question 6

In the diagram, the economy's immediate-short-run AS curve is line ______, its short-run AS curve is _____, and its long-run AS curve is line ______.

Accepted Answer

A)  1; 2; 4 
B)  1; 2; 3 
C)  2; 3; 4 
D)  3; 2; 1 
A)  1; 2; 4 
B)  1; 2; 3 
C)  2; 3; 4 
D)  3; 2; 1

Question 7

Graphically, cost-push inﬂation is shown as a

Accepted Answer

A)  leftward shift of the AD curve. 
B)  rightward shift of the AS curve. 
C)  leftward shift of the AS curve. 
D)  rightward shift of the AD curve. 
A)  leftward shift of the AD curve. 
B)  rightward shift of the AS curve. 
C)  leftward shift of the AS curve. 
D)  rightward shift of the AD curve.

Question 8

An increase in wealth from a substantial increase in stock prices will move the economy along a
ﬁxed aggregate demand curve.

Accepted Answer

A) True 
 B)False

Question 9

Government actions that were taken in order to stimulate the economy during the Great Recession of 2007-09 included the following, except

Accepted Answer

A)  a signiﬁcant reduction of interest rates to nearly zero. 
B)  a large increase in transfer payments. 
C)  an increase in the deﬁcit spending of the government. 
D)  a sharp increase in the natural rate of unemployment. 
A)  a signiﬁcant reduction of interest rates to nearly zero. 
B)  a large increase in transfer payments. 
C)  an increase in the deﬁcit spending of the government. 
D)  a sharp increase in the natural rate of unemployment.

Question 10

The interest rate effect on aggregate demand indicates that a(n)

Accepted Answer

A)  decrease in the price level will increase the demand for money, increase interest rates, and decrease consumption and investment spending. 
B)  decrease in the price level will decrease the demand for money, decrease interest rates, and increase consumption and investment spending. 
C)  increase in the price level will increase the demand for money, reduce interest rates, and decrease consumption and investment spending. 
D)  increase in the supply of money will increase interest rates and decrease interest-sensitive consumption and investment spending. 
A)  decrease in the price level will increase the demand for money, increase interest rates, and decrease consumption and investment spending. 
B)  decrease in the price level will decrease the demand for money, decrease interest rates, and increase consumption and investment spending. 
C)  increase in the price level will increase the demand for money, reduce interest rates, and decrease consumption and investment spending. 
D)  increase in the supply of money will increase interest rates and decrease interest-sensitive consumption and investment spending.

Question 11

Depreciation of the dollar relative to foreign currencies will tend to increase net exports and thus
aggregate demand of the U.S. economy.

Accepted Answer

A) True 
 B)False

Question 12

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
A)  A 
B)  B 
C)  C 
D)  D

Question 13

$$\begin{array} { | c | c | c | c | c | c | c | } 
\hline \text { Price Level } & C & I _ { g } & G & X & M & \text { Real GDP } \
\hline 128 & \$ 18 & \$ 2 & \$ 3 & \$ 1 & \$ 5 & \
\hline 125 & 20 & 4 & 3 & 2 & 4 & \
\hline 122 & 22 & 6 & 3 & 3 & 3 & \
\hline 119 & 24 & 8 & 3 & 4 & 2 & \
\hline 116 & 26 & 10 & 3 & 5 & 1 & \
\hline
\end{array}$$ In the accompanying table for a particular country, C is consumption expenditures, $$I _ { g }$$ is gross
Investment expenditures, G is government expenditures, X is exports, and M is imports. All ?gures
Are in billions of dollars. If this nation's equilibrium price level is 125, its net exports will be

Accepted Answer

A)  minus $4 billion. 
B)  minus $2 billion. 
C)  zero. 
D)  $2 billion. 
A)  minus $4 billion. 
B)  minus $2 billion. 
C)  zero. 
D)  $2 billion.

Question 14

The labels for the axes of the aggregate demand graph should be

Accepted Answer

A)  quantity of a product on the vertical axis and the price of a product on the horizontal axis. 
B)  price of a product on the vertical axis and quantity of a product on the horizontal axis. 
C)  real domestic output on the vertical axis and the price level on the horizontal axis. 
D)  real domestic output on the horizontal axis and the price level on the vertical axis. 
A)  quantity of a product on the vertical axis and the price of a product on the horizontal axis. 
B)  price of a product on the vertical axis and quantity of a product on the horizontal axis. 
C)  real domestic output on the vertical axis and the price level on the horizontal axis. 
D)  real domestic output on the horizontal axis and the price level on the vertical axis.

Question 15

The short-run aggregate supply curve represents circumstances where

Accepted Answer

A)  both input and output prices are ﬁxed. 
B)  both input and output prices are ﬂexible. 
C)  input prices are ﬁxed, but output prices are ﬂexible. 
D)  input prices are ﬂexible, but output prices are ﬁxed. 
A)  both input and output prices are ﬁxed. 
B)  both input and output prices are ﬂexible. 
C)  input prices are ﬁxed, but output prices are ﬂexible. 
D)  input prices are ﬂexible, but output prices are ﬁxed.

Question 16

Refer to the graph, which shows an aggregate demand curve. If the economy is at point C and the price level increases by 100, then the wealth, interest-rate, and foreign purchases effects will

Accepted Answer

A)  move the economy to point A. 
B)  move the economy to point B. 
C)  move the economy to point D. 
D)  shift the AD curve to the left. 
A)  move the economy to point A. 
B)  move the economy to point B. 
C)  move the economy to point D. 
D)  shift the AD curve to the left.

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

Accepted Answer

A)  $0.50. 
B)  $1. 
C)  $2. 
D)  $5. 
A)  $0.50. 
B)  $1. 
C)  $2. 
D)  $5.

Question 18

The foreign purchases effect on aggregate demand suggests that a

Accepted Answer

A)  fall in our domestic price level will increase our imports and reduce our exports, thereby reducing the net exports component of aggregate demand. 
B)  fall in our domestic price level will decrease our imports and increase our exports, thereby reducing the net exports component of aggregate demand. 
C)  rise in our domestic price level will increase our imports and reduce our exports, thereby reducing the net exports component of aggregate demand. 
D)  rise in our domestic price level will decrease our imports and increase our exports, thereby reducing the net exports component of aggregate demand. 
A)  fall in our domestic price level will increase our imports and reduce our exports, thereby reducing the net exports component of aggregate demand. 
B)  fall in our domestic price level will decrease our imports and increase our exports, thereby reducing the net exports component of aggregate demand. 
C)  rise in our domestic price level will increase our imports and reduce our exports, thereby reducing the net exports component of aggregate demand. 
D)  rise in our domestic price level will decrease our imports and increase our exports, thereby reducing the net exports component of aggregate demand.

Question 19

In the accompanying graph, the long-run aggregate supply curve would be represented by which line?

Accepted Answer

A)  1 
B)  2 
C)  3 
D)  4 
A)  1 
B)  2 
C)  3 
D)  4

Question 20

What determines the equilibrium price level and the level of real domestic output in the aggregate
demand-aggregate supply model?

Accepted Answer

The intersection of the aggregate demand

An increase in business excise taxes will shift the aggregate supply curve leftward.

If investment decreases by $20 billion and the economy's MPC is 0.5, the aggregate demand curve will shift

The short-run aggregate supply curve shows the

The labels for the axes of an aggregate supply curve should be

In the diagram, the economy's immediate-short-run AS curve is line ____, its short-run AS curve is _, and its long-run AS curve is line ____.

Graphically, cost-push inﬂation is shown as a

An increase in wealth from a substantial increase in stock prices will move the economy along a ﬁxed aggregate demand curve.

Government actions that were taken in order to stimulate the economy during the Great Recession of 2007-09 included the following, except

The interest rate effect on aggregate demand indicates that a(n)

Depreciation of the dollar relative to foreign currencies will tend to increase net exports and thus aggregate demand of the U.S. economy.

The labels for the axes of the aggregate demand graph should be

The short-run aggregate supply curve represents circumstances where

Refer to the graph, which shows an aggregate demand curve. If the economy is at point C and the price level increases by 100, then the wealth, interest-rate, and foreign purchases effects will

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 is

The foreign purchases effect on aggregate demand suggests that a

In the accompanying graph, the long-run aggregate supply curve would be represented by which line?

What determines the equilibrium price level and the level of real domestic output in the aggregate demand-aggregate supply model?

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures Caused by Externalities Asymmetric Information

Public Goods, Public Choice, and Government Failure

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

The Aggregate Expenditures Model

Fiscal Policy, Deficits, and Debt

Money, Banking, and Financial Institutions

Money Creation

Interest Rates and Monetary Policy

Financial Economics

Extending the Analysis of Aggregate Supply

Current Issues in Macro Theory and Policy

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

Filters

Exam 12: Aggregate Demand and Aggregate Supply

An increase in business excise taxes will shift the aggregate supply curve leftward.

If investment decreases by $20 billion and the economy's MPC is 0.5, the aggregate demand curve will shift

The short-run aggregate supply curve shows the

The labels for the axes of an aggregate supply curve should be

In the diagram, the economy's immediate-short-run AS curve is line ______, its short-run AS curve is _____, and its long-run AS curve is line ______.

Graphically, cost-push inﬂation is shown as a

An increase in wealth from a substantial increase in stock prices will move the economy along a ﬁxed aggregate demand curve.

Government actions that were taken in order to stimulate the economy during the Great Recession of 2007-09 included the following, except

The interest rate effect on aggregate demand indicates that a(n)

Depreciation of the dollar relative to foreign currencies will tend to increase net exports and thus aggregate demand of the U.S. economy.

The labels for the axes of the aggregate demand graph should be

The short-run aggregate supply curve represents circumstances where

Refer to the graph, which shows an aggregate demand curve. If the economy is at point C and the price level increases by 100, then the wealth, interest-rate, and foreign purchases effects will

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 is

The foreign purchases effect on aggregate demand suggests that a

In the accompanying graph, the long-run aggregate supply curve would be represented by which line?

What determines the equilibrium price level and the level of real domestic output in the aggregate demand-aggregate supply model?

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures Caused by Externalities Asymmetric Information

Public Goods, Public Choice, and Government Failure

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

The Aggregate Expenditures Model

Fiscal Policy, Deficits, and Debt

Money, Banking, and Financial Institutions

Money Creation

Interest Rates and Monetary Policy

Financial Economics

Extending the Analysis of Aggregate Supply

Current Issues in Macro Theory and Policy

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

Filters

In the diagram, the economy's immediate-short-run AS curve is line ____, its short-run AS curve is _, and its long-run AS curve is line ____.