Question 1

The expenditure multiplier concept of the aggregate expenditures model

Accepted Answer

A)  is not at all relevant in the AD-AS model. 
B)  magniﬁes the shifts of the aggregate demand curve. 
C)  explains movement up or down the aggregate demand curve. 
D)  reverses the shift of the aggregate demand curve. 
A)  is not at all relevant in the AD-AS model. 
B)  magniﬁes the shifts of the aggregate demand curve. 
C)  explains movement up or down the aggregate demand curve. 
D)  reverses the shift of the aggregate demand curve.

Question 2

When the dollar appreciates relative to foreign currencies, it means that

Accepted Answer

A)  we need more dollars to buy each unit of another currency. 
B)  we can buy less foreign currency with a given amount of dollars. 
C)  the value of foreign currencies decreased relative to our dollar. 
D)  foreigners need less of their currency to buy one dollar. 
A)  we need more dollars to buy each unit of another currency. 
B)  we can buy less foreign currency with a given amount of dollars. 
C)  the value of foreign currencies decreased relative to our dollar. 
D)  foreigners need less of their currency to buy one dollar.

Question 3

The accompanying graph depicts an economy in the

Accepted Answer

A)  immediate short run. 
B)  short run. 
C)  immediate long run. 
D)  long run. 
A)  immediate short run. 
B)  short run. 
C)  immediate long run. 
D)  long run.

Question 4

If the dollar appreciates in value relative to foreign currencies,

Accepted Answer

A)  aggregate demand decreases because C decreases. 
B)  aggregate demand increases because C increases. 
C)  aggregate demand decreases because net exports decrease. 
D)  aggregate demand increases because net exports increase. 
A)  aggregate demand decreases because C decreases. 
B)  aggregate demand increases because C increases. 
C)  aggregate demand decreases because net exports decrease. 
D)  aggregate demand increases because net exports increase.

Question 5

An increase in net exports will shift the

Accepted Answer

A)  aggregate expenditures curve upward and the aggregate demand curve rightward. 
B)  aggregate expenditures curve upward and the aggregate demand curve leftward. 
C)  aggregate expenditures curve downward and the aggregate demand curve rightward. 
D)  aggregate expenditures curve downward and the aggregate demand curve leftward. 
A)  aggregate expenditures curve upward and the aggregate demand curve rightward. 
B)  aggregate expenditures curve upward and the aggregate demand curve leftward. 
C)  aggregate expenditures curve downward and the aggregate demand curve rightward. 
D)  aggregate expenditures curve downward and the aggregate demand curve leftward.

Question 6

The economy experiences an increase in the price level and a decrease in real domestic output. Which of the following is a likely explanation?

Accepted Answer

A)  Productivity has increased. 
B)  Input prices have increased. 
C)  There has been an increase in government spending. 
D)  Government regulations have been reduced. 
A)  Productivity has increased. 
B)  Input prices have increased. 
C)  There has been an increase in government spending. 
D)  Government regulations have been reduced.

Question 7

What are two underlying factors affecting input prices? How does a change in input prices affect
aggregate supply?

Accepted Answer

The two underlying factors affecting inp

Question 8

The real-balances effect on aggregate demand suggests that a

Accepted Answer

A)  lower price level will decrease the demand for money, decrease interest rates, and increase consumption and investment spending. 
B)  lower price level will decrease the real value of many ﬁnancial assets and therefore cause an increase in spending. 
C)  lower price level will increase the real value of many ﬁnancial assets and therefore cause an increase in spending. 
D)  higher price level will increase the real value of many ﬁnancial assets and therefore cause an increase in spending. 
A)  lower price level will decrease the demand for money, decrease interest rates, and increase consumption and investment spending. 
B)  lower price level will decrease the real value of many ﬁnancial assets and therefore cause an increase in spending. 
C)  lower price level will increase the real value of many ﬁnancial assets and therefore cause an increase in spending. 
D)  higher price level will increase the real value of many ﬁnancial assets and therefore cause an increase in spending.

Question 9

Accepted Answer

A)  World War II in the 1940s 
B)  cost-push inﬂation in the early 1970s 
C)  demand-pull inﬂation in the late 1960s 
D)  the Great Recession of 2007-2009 
A)  World War II in the 1940s 
B)  cost-push inﬂation in the early 1970s 
C)  demand-pull inﬂation in the late 1960s 
D)  the Great Recession of 2007-2009

Question 10

$$\begin{array} { | c | c | c | c | c | c | c | } 
\hline \text { Price Level } & C & I _ { g } & G & X & M & \text { Real GDP } \
\hline 128 & \$ 18 & \$ 2 & \$ 3 & \$ 1 & \$ 5 & \
\hline 125 & 20 & 4 & 3 & 2 & 4 & \
\hline 122 & 22 & 6 & 3 & 3 & 3 & \
\hline 119 & 24 & 8 & 3 & 4 & 2 & \
\hline 116 & 26 & 10 & 3 & 5 & 1 & \
\hline
\end{array}$$ 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 decrease in the interest rate not caused by a change in the price level
Would

Accepted Answer

A)  increase the values in column $$I _ { g }$$ and increase aggregate demand. 
B)  decrease the values in column $$I _ { g }$$ and increase aggregate demand. 
C)  increase the values in column C and decrease aggregate demand. 
D)  decrease the values in column C and decrease aggregate demand. 
A)  increase the values in column $$I _ { g }$$ and increase aggregate demand. 
B)  decrease the values in column $$I _ { g }$$ and increase aggregate demand. 
C)  increase the values in column C and decrease aggregate demand. 
D)  decrease the values in column C and decrease aggregate demand.

Question 11

The economy experiences a decrease in the price level and an increase in real domestic output. Which is a likely explanation?

Accepted Answer

A)  Consumer incomes and the quantity of labor have decreased. 
B)  Business costs and wage rates have decreased. 
C)  The prices of imported resources have increased. 
D)  National income abroad has increased. 
A)  Consumer incomes and the quantity of labor have decreased. 
B)  Business costs and wage rates have decreased. 
C)  The prices of imported resources have increased. 
D)  National income abroad has increased.

Question 12

Other things equal, appreciation of the dollar

Accepted Answer

A)  increases aggregate demand in the United States and may increase aggregate supply by reducing the prices of imported resources. 
B)  increases aggregate demand in the United States and may decrease aggregate supply by reducing the prices of imported resources. 
C)  decreases aggregate demand in the United States and may increase aggregate supply by reducing the prices of imported resources. 
D)  decreases aggregate demand in the United States and may reduce aggregate supply by increasing the prices of imported resources. 
A)  increases aggregate demand in the United States and may increase aggregate supply by reducing the prices of imported resources. 
B)  increases aggregate demand in the United States and may decrease aggregate supply by reducing the prices of imported resources. 
C)  decreases aggregate demand in the United States and may increase aggregate supply by reducing the prices of imported resources. 
D)  decreases aggregate demand in the United States and may reduce aggregate supply by increasing the prices of imported resources.

Question 13

The aggregate demand curve shows that when the price level rises, the quantity of real output
demanded decreases.

Accepted Answer

A) True 
 B)False

Question 14

(Last Word) In response to the Great Recession, the federal government engaged in signiﬁcant deﬁcit-funded spending, but it did not fully achieve the desired result. Which of the following best
Explains why the ﬁscal policy actions fell short of their objective?

Accepted Answer

A)  Monetary policy counteracted ﬁscal policy, keeping the unemployment rate from falling as much as intended. 
B)  Consumers did not respond to the ﬁscal stimulus as well as hoped, as they put more income into saving and repaying debt. 
C)  Although the ﬁscal stimulus increased consumer spending signiﬁcantly, it mostly went to purchase foreign-produced goods and services. 
D)  The ﬁscal stimulus caused massive inﬂation that further disrupted economic activity. 
A)  Monetary policy counteracted ﬁscal policy, keeping the unemployment rate from falling as much as intended. 
B)  Consumers did not respond to the ﬁscal stimulus as well as hoped, as they put more income into saving and repaying debt. 
C)  Although the ﬁscal stimulus increased consumer spending signiﬁcantly, it mostly went to purchase foreign-produced goods and services. 
D)  The ﬁscal stimulus caused massive inﬂation that further disrupted economic activity.

Question 15

A decrease in business taxes will tend to

Accepted Answer

A)  increase aggregate demand but not change aggregate supply. 
B)  increase aggregate supply but not change aggregate demand. 
C)  increase aggregate demand and increase aggregate supply. 
D)  decrease aggregate supply and decrease aggregate demand. 
A)  increase aggregate demand but not change aggregate supply. 
B)  increase aggregate supply but not change aggregate demand. 
C)  increase aggregate demand and increase aggregate supply. 
D)  decrease aggregate supply and decrease aggregate demand.

Question 16

Inﬂation tends to

Accepted Answer

A)  increase productivity. 
B)  decrease input prices. 
C)  increase the strength of the multiplier. 
D)  reduce the strength of the multiplier. 
A)  increase productivity. 
B)  decrease input prices. 
C)  increase the strength of the multiplier. 
D)  reduce the strength of the multiplier.

Question 17

A decrease in aggregate demand in the short run will reduce

Accepted Answer

A)  both real output and the price level. 
B)  the price level and increase the real domestic output. 
C)  the real domestic output and have no effect on the price level. 
D)  the price level and have no effect on real domestic output. 
A)  both real output and the price level. 
B)  the price level and increase the real domestic output. 
C)  the real domestic output and have no effect on the price level. 
D)  the price level and have no effect on real domestic output.

Question 18

Which one of the following would increase per-unit production cost and therefore shift the aggregate supply curve to the left?

Accepted Answer

A)  a reduction in business taxes 
B)  production bottlenecks occurring when producers near full plant capacity 
C)  an increase in the price of imported resources 
D)  deregulation of industry 
A)  a reduction in business taxes 
B)  production bottlenecks occurring when producers near full plant capacity 
C)  an increase in the price of imported resources 
D)  deregulation of industry

Question 19

The shape of the short-run aggregate supply curve indicates that as the general price level rises,
output will expand but not by much when the economy reaches full employment.

Accepted Answer

A) True 
 B)False

Question 20

The aggregate supply curve (short run)

Accepted Answer

A)  slopes downward and to the right. 
B)  graphs as a vertical line. 
C)  slopes upward and to the right. 
D)  graphs as a horizontal line. 
A)  slopes downward and to the right. 
B)  graphs as a vertical line. 
C)  slopes upward and to the right. 
D)  graphs as a horizontal line.

The expenditure multiplier concept of the aggregate expenditures model

When the dollar appreciates relative to foreign currencies, it means that

The accompanying graph depicts an economy in the

If the dollar appreciates in value relative to foreign currencies,

An increase in net exports will shift the

The economy experiences an increase in the price level and a decrease in real domestic output. Which of the following is a likely explanation?

What are two underlying factors affecting input prices? How does a change in input prices affect aggregate supply?

The real-balances effect on aggregate demand suggests that a

The economy experiences a decrease in the price level and an increase in real domestic output. Which is a likely explanation?

Other things equal, appreciation of the dollar

The aggregate demand curve shows that when the price level rises, the quantity of real output demanded decreases.

(Last Word) In response to the Great Recession, the federal government engaged in signiﬁcant deﬁcit-funded spending, but it did not fully achieve the desired result. Which of the following best Explains why the ﬁscal policy actions fell short of their objective?

A decrease in business taxes will tend to

Inﬂation tends to

A decrease in aggregate demand in the short run will reduce

Which one of the following would increase per-unit production cost and therefore shift the aggregate supply curve to the left?

The shape of the short-run aggregate supply curve indicates that as the general price level rises, output will expand but not by much when the economy reaches full employment.

The aggregate supply curve (short run)

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

The expenditure multiplier concept of the aggregate expenditures model

When the dollar appreciates relative to foreign currencies, it means that

The accompanying graph depicts an economy in the

If the dollar appreciates in value relative to foreign currencies,

An increase in net exports will shift the

The economy experiences an increase in the price level and a decrease in real domestic output. Which of the following is a likely explanation?

What are two underlying factors affecting input prices? How does a change in input prices affect aggregate supply?

The real-balances effect on aggregate demand suggests that a

The economy experiences a decrease in the price level and an increase in real domestic output. Which is a likely explanation?

Other things equal, appreciation of the dollar

The aggregate demand curve shows that when the price level rises, the quantity of real output demanded decreases.

(Last Word) In response to the Great Recession, the federal government engaged in signiﬁcant deﬁcit-funded spending, but it did not fully achieve the desired result. Which of the following best Explains why the ﬁscal policy actions fell short of their objective?

A decrease in business taxes will tend to

Inﬂation tends to

A decrease in aggregate demand in the short run will reduce

Which one of the following would increase per-unit production cost and therefore shift the aggregate supply curve to the left?

The shape of the short-run aggregate supply curve indicates that as the general price level rises, output will expand but not by much when the economy reaches full employment.

The aggregate supply curve (short run)

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