Question 1

Per-unit production cost is

Accepted Answer

A)  real output divided by inputs. 
B)  total input cost divided by units of output. 
C)  units of output divided by total input cost. 
D)  a determinant of aggregate demand. 
A)  real output divided by inputs. 
B)  total input cost divided by units of output. 
C)  units of output divided by total input cost. 
D)  a determinant of aggregate demand.

Question 2

The aggregate expenditures model and the aggregate demand curve can be reconciled because, other things equal, in the aggregate expenditures model,

Accepted Answer

A)  changes in the price level have no effect on the equilibrium level of GDP. 
B)  an increase in the price level increases the real value of wealth. 
C)  the level of aggregate expenditures and therefore the level of real GDP vary inversely with the price level. 
D)  the level of aggregate expenditures and therefore the level of real GDP vary directly with the price level. 
A)  changes in the price level have no effect on the equilibrium level of GDP. 
B)  an increase in the price level increases the real value of wealth. 
C)  the level of aggregate expenditures and therefore the level of real GDP vary inversely with the price level. 
D)  the level of aggregate expenditures and therefore the level of real GDP vary directly with the price level.

Question 3

A rightward shift of the AD curve in the very steep upper part of the short-run AS curve will

Accepted Answer

A)  increase real output by more than the price level. 
B)  increase the price level by more than real output. 
C)  reduce real output by more than the price level. 
D)  reduce the price level by more than real output. 
A)  increase real output by more than the price level. 
B)  increase the price level by more than real output. 
C)  reduce real output by more than the price level. 
D)  reduce the price level by more than real output.

Question 4

Accepted Answer

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

Question 5

The version of aggregate supply that allows for changes in both product prices and resource prices is 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 6

Accepted Answer

A)  shift of the AD curve in A. 
B)  move from point a to point b in B. 
C)  shift of the AS curve in B. 
D)  move from point a to point c in C. 
A)  shift of the AD curve in A. 
B)  move from point a to point b in B. 
C)  shift of the AS curve in B. 
D)  move from point a to point c in C.

Question 7

If the dollar appreciates relative to foreign currencies, then

Accepted Answer

A)  U.S. goods will look cheaper to foreign buyers. 
B)  foreign goods will look more expensive to U.S. buyers. 
C)  net exports of the U.S. will increase. 
D)  foreign buyers will ﬁnd U.S. goods have become more expensive. 
A)  U.S. goods will look cheaper to foreign buyers. 
B)  foreign goods will look more expensive to U.S. buyers. 
C)  net exports of the U.S. will increase. 
D)  foreign buyers will ﬁnd U.S. goods have become more expensive.

Question 8

The economy's long-run AS curve assumes that wages and other resource prices

Accepted Answer

A)  eventually rise and fall to match upward or downward changes in the price level. 
B)  are ﬂexible upward but inﬂexible downward. 
C)  rise and fall more rapidly than the price level. 
D)  are relatively inﬂexible both upward and downward. 
A)  eventually rise and fall to match upward or downward changes in the price level. 
B)  are ﬂexible upward but inﬂexible downward. 
C)  rise and fall more rapidly than the price level. 
D)  are relatively inﬂexible both upward and downward.

Question 9

Accepted Answer

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

Question 10

$$\begin{array} { | c | c | c | } 
\hline \begin{array} { c } 
\text { Real Domestic Output } \
\text { Demanded (in Billions) }
\end{array} & \text { Price Level (Index Value) } & \begin{array} { c } 
\text { Real Domestic Output } \
\text { Supplied }
\end{array} \
\hline \$ 500 & 350 & \$ 3,500 \
\hline 1,000 & 300 & 3,000 \
\hline 1,500 & 250 & 2,500 \
\hline 2,000 & 200 & 2,000 \
\hline 2,500 & 150 & 1,500 \
\hline 3,000 & 100 & 1,000 \
\hline
\end{array}$$ The accompanying table shows the aggregate demand and aggregate supply schedule for a hypothetical economy. If the quantity of real domestic output demanded increased by $1,000 at
Each price level, the new equilibrium price level and quantity of real domestic output would be

Accepted Answer

A)  150 and $2,500. 
B)  250 and $2,500. 
C)  200 and $2,000. 
D)  300 and $3,000. 
A)  150 and $2,500. 
B)  250 and $2,500. 
C)  200 and $2,000. 
D)  300 and $3,000.

Question 11

A change in which one of the following factors would shift the aggregate supply curve?

Accepted Answer

A)  personal income taxes 
B)  consumer spending 
C)  government regulation 
D)  proﬁt expectations on investment projects 
A)  personal income taxes 
B)  consumer spending 
C)  government regulation 
D)  proﬁt expectations on investment projects

Question 12

In the aggregate demand-aggregate supply model, the economy's price level is assumed to be

Accepted Answer

A)  constant, just like in the aggregate expenditures model. 
B)  variable, just like in the aggregate expenditures model. 
C)  constant, unlike in the aggregate expenditures model. 
D)  variable, unlike in the aggregate expenditures model. 
A)  constant, just like in the aggregate expenditures model. 
B)  variable, just like in the aggregate expenditures model. 
C)  constant, unlike in the aggregate expenditures model. 
D)  variable, unlike in the aggregate expenditures model.

Question 13

A movement upward along a given aggregate demand curve is equivalent to a(n)

Accepted Answer

A)  increase in aggregate supply. 
B)  increase in aggregate demand. 
C)  upward shift in the aggregate expenditures schedule. 
D)  downward shift in the aggregate expenditures schedule. 
A)  increase in aggregate supply. 
B)  increase in aggregate demand. 
C)  upward shift in the aggregate expenditures schedule. 
D)  downward shift in the aggregate expenditures schedule.

Question 14

Graphically, demand-pull inﬂation is shown as a

Accepted Answer

A)  rightward shift of the AD curve along an upsloping AS curve. 
B)  leftward shift of the AS curve along a downsloping AD curve. 
C)  leftward shift of the AS curve along an upsloping AD curve. 
D)  rightward shift of the AD curve along a downsloping AS curve. 
A)  rightward shift of the AD curve along an upsloping AS curve. 
B)  leftward shift of the AS curve along a downsloping AD curve. 
C)  leftward shift of the AS curve along an upsloping AD curve. 
D)  rightward shift of the AD curve along a downsloping AS curve.

Question 15

The real-balances effect indicates that

Accepted Answer

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

Question 16

A decrease in expected returns on investment will most likely shift the AD curve to the

Accepted Answer

A)  right because C will increase. 
B)  left because C will decrease. 
C)  right because I $$I _ { g }$$ will increase. 
D)  left because I $$I _ { g }$$ will decrease. 
A)  right because C will increase. 
B)  left because C will decrease. 
C)  right because I $$I _ { g }$$ will increase. 
D)  left because I $$I _ { g }$$ will decrease.

Question 17

Which one of the following would not shift the aggregate demand curve?

Accepted Answer

A)  a change in the price level 
B)  depreciation of the international value of the dollar 
C)  a decline in the interest rate at each possible price level 
D)  an increase in personal income tax rates 
A)  a change in the price level 
B)  depreciation of the international value of the dollar 
C)  a decline in the interest rate at each possible price level 
D)  an increase in personal income tax rates

Question 18

The relationship between the aggregate demand curve and the aggregate expenditures model is derived from the fact that

Accepted Answer

A)  a decrease in the price level shifts the aggregate expenditures schedule downward and decreases equilibrium GDP. 
B)  a decrease in the price level shifts the aggregate expenditures schedule upward and increases equilibrium GDP. 
C)  an increase in the price level shifts the aggregate expenditures schedule upward and increases equilibrium GDP. 
D)  an increase in the price level shifts the aggregate expenditures schedule downward and increases equilibrium GDP. 
A)  a decrease in the price level shifts the aggregate expenditures schedule downward and decreases equilibrium GDP. 
B)  a decrease in the price level shifts the aggregate expenditures schedule upward and increases equilibrium GDP. 
C)  an increase in the price level shifts the aggregate expenditures schedule upward and increases equilibrium GDP. 
D)  an increase in the price level shifts the aggregate expenditures schedule downward and increases equilibrium GDP.

Question 19

An expected increase in the prices of consumer goods in the near future will

Accepted Answer

A)  decrease (or shift left) in aggregate demand now. 
B)  increase (or shift right) in aggregate demand now. 
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 now. 
B)  increase (or shift right) in aggregate demand now. 
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 20

Which of the following is incorrect?

Accepted Answer

A)  As the U.S. price level rises, U.S. goods become relatively more expensive so that U.S. exports fall and U.S. imports rise. 
B)  As the price level falls, the demand for money declines, the interest rate declines, and interest-rate-sensitive spending increases. 
C)  When the price level increases, real balances increase and businesses and households ﬁnd themselves wealthier and therefore increase their spending. 
D)  Given aggregate demand, an increase in aggregate supply increases real output and, assuming downward-ﬂexible prices, reduces the price level. 
A)  As the U.S. price level rises, U.S. goods become relatively more expensive so that U.S. exports fall and U.S. imports rise. 
B)  As the price level falls, the demand for money declines, the interest rate declines, and interest-rate-sensitive spending increases. 
C)  When the price level increases, real balances increase and businesses and households ﬁnd themselves wealthier and therefore increase their spending. 
D)  Given aggregate demand, an increase in aggregate supply increases real output and, assuming downward-ﬂexible prices, reduces the price level.

Per-unit production cost is

The aggregate expenditures model and the aggregate demand curve can be reconciled because, other things equal, in the aggregate expenditures model,

A rightward shift of the AD curve in the very steep upper part of the short-run AS curve will

The version of aggregate supply that allows for changes in both product prices and resource prices is the

If the dollar appreciates relative to foreign currencies, then

The economy's long-run AS curve assumes that wages and other resource prices

A change in which one of the following factors would shift the aggregate supply curve?

In the aggregate demand-aggregate supply model, the economy's price level is assumed to be

A movement upward along a given aggregate demand curve is equivalent to a(n)

Graphically, demand-pull inﬂation is shown as a

The real-balances effect indicates that

A decrease in expected returns on investment will most likely shift the AD curve to the

Which one of the following would not shift the aggregate demand curve?

The relationship between the aggregate demand curve and the aggregate expenditures model is derived from the fact that

An expected increase in the prices of consumer goods in the near future will

Which of the following is incorrect?

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

Per-unit production cost is

The aggregate expenditures model and the aggregate demand curve can be reconciled because, other things equal, in the aggregate expenditures model,

A rightward shift of the AD curve in the very steep upper part of the short-run AS curve will

The version of aggregate supply that allows for changes in both product prices and resource prices is the

If the dollar appreciates relative to foreign currencies, then

The economy's long-run AS curve assumes that wages and other resource prices

A change in which one of the following factors would shift the aggregate supply curve?

In the aggregate demand-aggregate supply model, the economy's price level is assumed to be

A movement upward along a given aggregate demand curve is equivalent to a(n)

Graphically, demand-pull inﬂation is shown as a

The real-balances effect indicates that

A decrease in expected returns on investment will most likely shift the AD curve to the

Which one of the following would not shift the aggregate demand curve?

The relationship between the aggregate demand curve and the aggregate expenditures model is derived from the fact that

An expected increase in the prices of consumer goods in the near future will

Which of the following is incorrect?

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