Question 1

In the immediate short run, both input and output prices are ﬁxed.

Accepted Answer

A) True 
 B)False

Question 2

Cost-push inﬂation is characterized by a(n)

Accepted Answer

A)  increase in aggregate supply and a decrease in aggregate demand. 
B)  increase in aggregate demand and no change in aggregate supply. 
C)  decrease in aggregate supply and no change in aggregate demand. 
D)  decrease in both aggregate supply and aggregate demand. 
A)  increase in aggregate supply and a decrease in aggregate demand. 
B)  increase in aggregate demand and no change in aggregate supply. 
C)  decrease in aggregate supply and no change in aggregate demand. 
D)  decrease in both aggregate supply and aggregate demand.

Question 3

An increase in aggregate expenditures resulting from some factor other than a change in the price level is equivalent to

Accepted Answer

A)  a rightward shift of the aggregate demand curve in the AD-AS model. 
B)  a leftward shift of the aggregate demand curve in the AD-AS model. 
C)  a movement downward along a ﬁxed aggregate demand curve in the AD-AS model. 
D)  a decrease in aggregate supply in the AD-AS model. 
A)  a rightward shift of the aggregate demand curve in the AD-AS model. 
B)  a leftward shift of the aggregate demand curve in the AD-AS model. 
C)  a movement downward along a ﬁxed aggregate demand curve in the AD-AS model. 
D)  a decrease in aggregate supply in the AD-AS model.

Question 4

Accepted Answer

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

Question 5

Accepted Answer

A)  move the economy from A to C along AD $$A D _ { 1 } .$$ 
B)  move the economy from C to A along AD $$A D _ { 1 } .$$ 
C)  increase aggregate demand from AD $$A D _ { 1 } \text { to } A D _ { 2 }$$ 
D)  decrease aggregate demand from AD $$A D _ { 2 } \text { to } A D _ { 1 }$$ 
A)  move the economy from A to C along AD $$A D _ { 1 } .$$ 
B)  move the economy from C to A along AD $$A D _ { 1 } .$$ 
C)  increase aggregate demand from AD $$A D _ { 1 } \text { to } A D _ { 2 }$$ 
D)  decrease aggregate demand from AD $$A D _ { 2 } \text { to } A D _ { 1 }$$

Question 6

Accepted Answer

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

Question 7

What percentage of the average U.S. ﬁrm's costs is accounted for by wages and salaries?

Accepted Answer

A)  40 
B)  60 
C)  75 
D)  85 
A)  40 
B)  60 
C)  75 
D)  85

Question 8

Accepted Answer

A)  at any price level above G, a shortage of real output would occur. 
B)  F represents a price level that would result in a surplus of real output of AC. 
C)  a surplus of real output of GH would occur. 
D)  F represents a price level that would result in a shortage of real output of AC. 
A)  at any price level above G, a shortage of real output would occur. 
B)  F represents a price level that would result in a surplus of real output of AC. 
C)  a surplus of real output of GH would occur. 
D)  F represents a price level that would result in a shortage of real output of AC.

Question 9

A decrease in government spending will cause a(n)

Accepted Answer

A)  increase in the quantity of real output demanded. 
B)  decrease in the quantity of real output demanded. 
C)  decrease in aggregate demand. 
D)  increase in aggregate demand. 
A)  increase in the quantity of real output demanded. 
B)  decrease in the quantity of real output demanded. 
C)  decrease in aggregate demand. 
D)  increase in aggregate demand.

Question 10

Identify the three major factors that can cause a shift in aggregate supply.

Accepted Answer

The three major factors that s

Question 11

The real-balance and interest-rate effects help explain why aggregate demand might shift to the
right or to the left.

Accepted Answer

A) True 
 B)False

Question 12

A decrease in aggregate supply means

Accepted Answer

A)  both the real domestic output and the price level will decrease. 
B)  the real domestic output will increase and rises in the price level will become smaller. 
C)  the real domestic output will decrease and the price level will rise. 
D)  both the real domestic output and rises in the price level will become greater. 
A)  both the real domestic output and the price level will decrease. 
B)  the real domestic output will increase and rises in the price level will become smaller. 
C)  the real domestic output will decrease and the price level will rise. 
D)  both the real domestic output and rises in the price level will become greater.

Question 13

The short-run version of aggregate supply assumes that

Accepted Answer

A)  product prices are ﬁxed, while resource prices are ﬂexible. 
B)  product prices are ﬂexible, while resource prices are ﬁxed. 
C)  both input and product prices are ﬂexible. 
D)  both input and product prices are ﬁxed. 
A)  product prices are ﬁxed, while resource prices are ﬂexible. 
B)  product prices are ﬂexible, while resource prices are ﬁxed. 
C)  both input and product prices are ﬂexible. 
D)  both input and product prices are ﬁxed.

Question 14

In the early-1970s, changes in oil prices greatly affected U.S. inﬂation. When oil prices rose, the U.S. experienced

Accepted Answer

A)  cost-push inﬂation and rising output. 
B)  demand-pull inﬂation and rising output. 
C)  cost-push inﬂation and falling output. 
D)  demand-pull inﬂation and falling output. 
A)  cost-push inﬂation and rising output. 
B)  demand-pull inﬂation and rising output. 
C)  cost-push inﬂation and falling output. 
D)  demand-pull inﬂation and falling output.

Question 15

Why can't the substitution and income effects be used to explain the downward slope of the
aggregate demand curve?

Accepted Answer

The demand for a single product slopes d

Question 16

Graphically, the full-employment, low-inﬂation, rapid-growth economy of the last half of the 1990s is depicted by a

Accepted Answer

A)  rightward shift of the aggregate demand curve along a ﬁxed aggregate supply curve. 
B)  rightward shift of the aggregate supply curve along a ﬁxed aggregate demand curve. 
C)  rightward shift of the aggregate demand curve and a rightward shift of the aggregate supply curve. 
D)  leftward shift of the aggregate demand curve and a leftward shift of the aggregate supply curve. 
A)  rightward shift of the aggregate demand curve along a ﬁxed aggregate supply curve. 
B)  rightward shift of the aggregate supply curve along a ﬁxed aggregate demand curve. 
C)  rightward shift of the aggregate demand curve and a rightward shift of the aggregate supply curve. 
D)  leftward shift of the aggregate demand curve and a leftward shift of the aggregate supply curve.

Question 17

An economy is employing 2 units of capital, 5 units of raw materials, and 8 units of labor to produce its total output of 640 units. Each unit of capital costs $10; each unit of raw materials, $4; and each
Unit of labor, $3. If the per-unit price of raw materials rises from $4 to $8 and all else remains
Constant, the per-unit cost of production will rise by about

Accepted Answer

A)  100 percent. 
B)  50 percent. 
C)  40 percent. 
D)  30 percent. 
A)  100 percent. 
B)  50 percent. 
C)  40 percent. 
D)  30 percent.

Question 18

Which of the following is not an effect that occurs when the general price level in our economy increases?

Accepted Answer

A)  The purchasing power of people's savings will increase. 
B)  The interest rate will also tend to increase. 
C)  Foreign buyers will buy less of our output, and we tend to import more. 
D)  Our net exports will tend to decrease. 
A)  The purchasing power of people's savings will increase. 
B)  The interest rate will also tend to increase. 
C)  Foreign buyers will buy less of our output, and we tend to import more. 
D)  Our net exports will tend to decrease.

Question 19

What factors determine the vertical shape of the aggregate supply curve in the long run? Explain.

Accepted Answer

The long-run aggregate supply curve is v

Question 20

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. Investment spending would most likely be inﬂuenced by changes in

Accepted Answer

A)  1 and 3. 
B)  4 and 6. 
C)  5 and 10. 
D)  8 and 9. 
A)  1 and 3. 
B)  4 and 6. 
C)  5 and 10. 
D)  8 and 9.

In the immediate short run, both input and output prices are ﬁxed.

Cost-push inﬂation is characterized by a(n)

An increase in aggregate expenditures resulting from some factor other than a change in the price level is equivalent to

What percentage of the average U.S. ﬁrm's costs is accounted for by wages and salaries?

A decrease in government spending will cause a(n)

Identify the three major factors that can cause a shift in aggregate supply.

The real-balance and interest-rate effects help explain why aggregate demand might shift to the right or to the left.

A decrease in aggregate supply means

The short-run version of aggregate supply assumes that

In the early-1970s, changes in oil prices greatly affected U.S. inﬂation. When oil prices rose, the U.S. experienced

Why can't the substitution and income effects be used to explain the downward slope of the aggregate demand curve?

Graphically, the full-employment, low-inﬂation, rapid-growth economy of the last half of the 1990s is depicted by a

Which of the following is not an effect that occurs when the general price level in our economy increases?

What factors determine the vertical shape of the aggregate supply curve in the long run? Explain.

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

In the immediate short run, both input and output prices are ﬁxed.

Cost-push inﬂation is characterized by a(n)

An increase in aggregate expenditures resulting from some factor other than a change in the price level is equivalent to

What percentage of the average U.S. ﬁrm's costs is accounted for by wages and salaries?

A decrease in government spending will cause a(n)

Identify the three major factors that can cause a shift in aggregate supply.

The real-balance and interest-rate effects help explain why aggregate demand might shift to the right or to the left.

A decrease in aggregate supply means

The short-run version of aggregate supply assumes that

In the early-1970s, changes in oil prices greatly affected U.S. inﬂation. When oil prices rose, the U.S. experienced

Why can't the substitution and income effects be used to explain the downward slope of the aggregate demand curve?

Graphically, the full-employment, low-inﬂation, rapid-growth economy of the last half of the 1990s is depicted by a

Which of the following is not an effect that occurs when the general price level in our economy increases?

What factors determine the vertical shape of the aggregate supply curve in the long run? Explain.

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