Question 1

Prices and wages tend to be

Accepted Answer

A)  ﬂexible both upward and downward. 
B)  inﬂexible both upward and downward. 
C)  ﬂexible downward but inﬂexible upward. 
D)  ﬂexible upward but inﬂexible downward. 
A)  ﬂexible both upward and downward. 
B)  inﬂexible both upward and downward. 
C)  ﬂexible downward but inﬂexible upward. 
D)  ﬂexible upward but inﬂexible downward.

Question 2

The aggregate supply curve (short run)

Accepted Answer

A)  graphs as a horizontal line. 
B)  is steeper above the full-employment output than below it. 
C)  slopes downward and to the right. 
D)  presumes that changes in wages and other resource prices match changes in the price level. 
A)  graphs as a horizontal line. 
B)  is steeper above the full-employment output than below it. 
C)  slopes downward and to the right. 
D)  presumes that changes in wages and other resource prices match changes in the price level.

Question 3

In the Great Recession of 2007-2009, stock market values shrank, causing a reverse

Accepted Answer

A)  wealth effect. 
B)  real-balances effect. 
C)  interest-rate effect. 
D)  expectations effect. 
A)  wealth effect. 
B)  real-balances effect. 
C)  interest-rate effect. 
D)  expectations effect.

Question 4

Accepted Answer

A)  $Q _ { 3 } \text { to } Q _ { 1 } \text {. }$ 
B)  $Q _ { 2 } \text { to } Q _ { 4 }$ 
C)  $Q _ { 2 } \text { to } Q _ { 1 } \text {. }$ 
D)  $Q _ { 3 } \text { to } Q _ { 4 }$ . 
A)  $Q _ { 3 } \text { to } Q _ { 1 } \text {. }$ 
B)  $Q _ { 2 } \text { to } Q _ { 4 }$ 
C)  $Q _ { 2 } \text { to } Q _ { 1 } \text {. }$ 
D)  $Q _ { 3 } \text { to } Q _ { 4 }$ .

Question 5

A decrease in personal and business taxes will cause government spending and aggregate demand
to decrease.

Accepted Answer

A) True 
 B)False

Question 6

The factors that affect the amounts that consumers, businesses, government, and foreigners wish to purchase at each price level are the

Accepted Answer

A)  real-balances, interest-rate, and foreign purchases effects. 
B)  determinants of aggregate supply. 
C)  determinants of aggregate demand. 
D)  sole determinants of the equilibrium price level and the equilibrium real output. 
A)  real-balances, interest-rate, and foreign purchases effects. 
B)  determinants of aggregate supply. 
C)  determinants of aggregate demand. 
D)  sole determinants of the equilibrium price level and the equilibrium real output.

Question 7

If the dollar price of foreign currencies falls (that is, the dollar appreciates), we would expect

Accepted Answer

A)  aggregate demand to decrease and aggregate supply to increase. 
B)  both aggregate demand and aggregate supply to decrease. 
C)  both aggregate demand and aggregate supply to increase. 
D)  aggregate demand to increase and aggregate supply to decrease. 
A)  aggregate demand to decrease and aggregate supply to increase. 
B)  both aggregate demand and aggregate supply to decrease. 
C)  both aggregate demand and aggregate supply to increase. 
D)  aggregate demand to increase and aggregate supply to decrease.

Question 8

1. Government Spending 
2. Consumer Expectations
3. Degree of Excess Capacity
4. Personal Income Tax Rates
5. Productivity
6. National Income Abroad
7. Business Taxes
8. Domestic Resource Availability
9. Prices of Imported Products
10. Proﬁt Expectations on Investments
Answer the question based on the accompanying list of items related to aggregate demand or
aggregate supply. Changes in which combination of factors best explain why the aggregate supply
curve would shift?

Accepted Answer

A)  1 and 2 
B)  2 and 10 
C)  3 and 6 
D)  7 and 8 
A)  1 and 2 
B)  2 and 10 
C)  3 and 6 
D)  7 and 8

Question 9

A decrease in aggregate demand will cause a greater decline in real output the

Accepted Answer

A)  less ﬂexible is the economy's price level. 
B)  more ﬂexible is the economy's price level. 
C)  steeper is the economy's AS curve. 
D)  larger is the economy's marginal propensity to save. 
A)  less ﬂexible is the economy's price level. 
B)  more ﬂexible is the economy's price level. 
C)  steeper is the economy's AS curve. 
D)  larger is the economy's marginal propensity to save.

Question 10

Other things equal, if the national incomes of the major trading partners of the United States were to rise, the U.S.

Accepted Answer

A)  aggregate demand curve would shift to the right. 
B)  aggregate supply curve would shift to the left. 
C)  aggregate supply curve would shift to the right. 
D)  aggregate demand curve would shift to the left. 
A)  aggregate demand curve would shift to the right. 
B)  aggregate supply curve would shift to the left. 
C)  aggregate supply curve would shift to the right. 
D)  aggregate demand curve would shift to the left.

Question 11

When there is an increase in aggregate demand in the short run, there will be an increase in the
price level but not in the level of output or employment.

Accepted Answer

A) True 
 B)False

Question 12

An increase in personal income tax rates will cause a(n)

Accepted Answer

A)  decrease (or shift left) in aggregate demand. 
B)  increase (or shift right) in aggregate demand. 
C)  decrease in the quantity of real output demanded (or movement up along A
D) . 
D)  increase in the quantity of real output demanded (or movement down along A
D) . 
A)  decrease (or shift left) in aggregate demand. 
B)  increase (or shift right) in aggregate demand. 
C)  decrease in the quantity of real output demanded (or movement up along A
D) . 
D)  increase in the quantity of real output demanded (or movement down along A
D) .

Question 13

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 14

Accepted Answer

A)  A. 
B)  B. 
C)  C. 
D)  B and C. 
A)  A. 
B)  B. 
C)  C. 
D)  B and C.

Question 15

What happens to bring the AD-AS system back into equilibrium when prices are below the
equilibrium level?

Accepted Answer

When prices are below equilibrium, busin

Question 16

Accepted Answer

A)  increasing output produced. 
B)  decreasing the GDP produced. 
C)  reducing the price level. 
D)  increasing the total output demanded. 
A)  increasing output produced. 
B)  decreasing the GDP produced. 
C)  reducing the price level. 
D)  increasing the total output demanded.

Question 17

1. Real-Balances Effect 
2. Household Expectations
3. Interest-Rate Effect
4. Personal Income Tax Rates
5. Proﬁt Expectations
6. National Incomes Abroad
7. Government Spending
8. Foreign Purchases Effect
9. Exchange Rates 
10. Degree of Excess Capacity
Answer the question based on the accompanying list of factors that are related to the aggregate
demand curve. Which of the factors best explain the downward slope of aggregate demand curve?

Accepted Answer

A)  2, 4, and 6 
B)  7, 9, and 10 
C)  1, 3, and 8 
D)  4, 6, and 7 
A)  2, 4, and 6 
B)  7, 9, and 10 
C)  1, 3, and 8 
D)  4, 6, and 7

Question 18

Accepted Answer

A)  stricter government regulations. 
B)  an increase in the prices of imported resources. 
C)  a decrease in the prices of domestic resources. 
D)  an increase in business taxes. 
A)  stricter government regulations. 
B)  an increase in the prices of imported resources. 
C)  a decrease in the prices of domestic resources. 
D)  an increase in business taxes.

Question 19

Accepted Answer

A)  the expenditure multiplier effect 
B)  the real-balances effect 
C)  the interest-rate effect 
D)  the foreign purchases effect 
A)  the expenditure multiplier effect 
B)  the real-balances effect 
C)  the interest-rate effect 
D)  the foreign purchases effect

Question 20

Accepted Answer

A)  $Q _ { 1 } \text { to } Q _ { 2 }$ 
B)  $Q _ { 1 } \text { to } Q _ { 3 }$ 
C)  $Q _ { 2 } \text { to } Q _ { 3 } \text {. }$ 
D)  $Q _ { 2 } \text { to more than } Q _ { 3 } \text {. }$ 
A)  $Q _ { 1 } \text { to } Q _ { 2 }$ 
B)  $Q _ { 1 } \text { to } Q _ { 3 }$ 
C)  $Q _ { 2 } \text { to } Q _ { 3 } \text {. }$ 
D)  $Q _ { 2 } \text { to more than } Q _ { 3 } \text {. }$

Prices and wages tend to be

The aggregate supply curve (short run)

In the Great Recession of 2007-2009, stock market values shrank, causing a reverse

A decrease in personal and business taxes will cause government spending and aggregate demand to decrease.

The factors that affect the amounts that consumers, businesses, government, and foreigners wish to purchase at each price level are the

If the dollar price of foreign currencies falls (that is, the dollar appreciates), we would expect

A decrease in aggregate demand will cause a greater decline in real output the

Other things equal, if the national incomes of the major trading partners of the United States were to rise, the U.S.

When there is an increase in aggregate demand in the short run, there will be an increase in the price level but not in the level of output or employment.

An increase in personal income tax rates will cause a(n)

The equilibrium price level and level of real output occur where

What happens to bring the AD-AS system back into equilibrium when prices are below the equilibrium level?

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

Prices and wages tend to be

The aggregate supply curve (short run)

In the Great Recession of 2007-2009, stock market values shrank, causing a reverse

A decrease in personal and business taxes will cause government spending and aggregate demand to decrease.

The factors that affect the amounts that consumers, businesses, government, and foreigners wish to purchase at each price level are the

If the dollar price of foreign currencies falls (that is, the dollar appreciates), we would expect

A decrease in aggregate demand will cause a greater decline in real output the

Other things equal, if the national incomes of the major trading partners of the United States were to rise, the U.S.

When there is an increase in aggregate demand in the short run, there will be an increase in the price level but not in the level of output or employment.

An increase in personal income tax rates will cause a(n)

The equilibrium price level and level of real output occur where

What happens to bring the AD-AS system back into equilibrium when prices are below the equilibrium level?

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