Question 1

The real-balance effect pertains to the effect of

Accepted Answer

A)  consumer spending on the price level, while the wealth effect refers to the impact of changes in wealth on consumer spending. 
B)  wealth changes on aggregate demand, while the wealth effect refers to the impact of changes in the price level on the real value of wealth. 
C)  changes in interest rate on aggregate demand, while the wealth effect refers to the impact of changes aggregate demand on people's wealth. 
D)  price changes on aggregate demand, while the wealth effect refers to the impact of changes in wealth on aggregate demand. 
A)  consumer spending on the price level, while the wealth effect refers to the impact of changes in wealth on consumer spending. 
B)  wealth changes on aggregate demand, while the wealth effect refers to the impact of changes in the price level on the real value of wealth. 
C)  changes in interest rate on aggregate demand, while the wealth effect refers to the impact of changes aggregate demand on people's wealth. 
D)  price changes on aggregate demand, while the wealth effect refers to the impact of changes in wealth on aggregate demand.

Question 2

How does the aggregate expenditures analysis relate to the aggregate demand analysis?

Accepted Answer

The aggregate expenditures analysis assu

Question 3

In an economy, it costs $1,500 to produce 2,000 units of output. If the costs increase to $2,500, then the per unit cost of production will have increased from

Accepted Answer

A)  $0.75 to $1.25. 
B)  $0.75 to $1.00. 
C)  $1.33 to $1.75. 
D)  $0.80 to $1.33. 
A)  $0.75 to $1.25. 
B)  $0.75 to $1.00. 
C)  $1.33 to $1.75. 
D)  $0.80 to $1.33.

Question 4

Accepted Answer

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

Question 5

If investment increases by $10 billion and the economy's MPC is 0.8, the aggregate demand curve will shift

Accepted Answer

A)  leftward by $50 billion at each price level. 
B)  rightward by $10 billion at each price level. 
C)  rightward by $50 billion at each price level. 
D)  leftward by $40 billion at each price level. 
A)  leftward by $50 billion at each price level. 
B)  rightward by $10 billion at each price level. 
C)  rightward by $50 billion at each price level. 
D)  leftward by $40 billion at each price level.

Question 6

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 two factors would most likely cause a change in aggregate
demand?

Accepted Answer

A)  1 and 5 
B)  3 and 10 
C)  5 and 7 
D)  8 and 9 
A)  1 and 5 
B)  3 and 10 
C)  5 and 7 
D)  8 and 9

Question 7

The aggregate demand curve or schedule shows the relationship between the total demand for output and the

Accepted Answer

A)  income level. 
B)  interest rate. 
C)  price level. 
D)  real GDP. 
A)  income level. 
B)  interest rate. 
C)  price level. 
D)  real GDP.

Question 8

(Last Word) In response to the Great Recession, the federal government engaged in signiﬁcant deﬁcit-funded spending. While it kept the recession from getting worse, and did result in some
Positive economic growth, 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)  Despite the ﬁscal stimulus, aggregate demand continued to shift to the right. 
B)  The ﬁscal stimulus caused a signiﬁcant leftward shift of aggregate supply. 
C)  Offsetting monetary policy caused the aggregate demand to remain virtually unchanged, meaning that all gains in output came from aggregate supply shifts. 
D)  The ﬁscal stimulus shifted aggregate demand to the right, but not enough to restore full employment. 
A)  Despite the ﬁscal stimulus, aggregate demand continued to shift to the right. 
B)  The ﬁscal stimulus caused a signiﬁcant leftward shift of aggregate supply. 
C)  Offsetting monetary policy caused the aggregate demand to remain virtually unchanged, meaning that all gains in output came from aggregate supply shifts. 
D)  The ﬁscal stimulus shifted aggregate demand to the right, but not enough to restore full employment.

Question 9

The price level in the United States is more ﬂexible downward than upward.

Accepted Answer

A) True 
 B)False

Question 10

The immediate-short-run aggregate supply curve is

Accepted Answer

A)  downsloping. 
B)  upsloping. 
C)  vertical. 
D)  horizontal. 
A)  downsloping. 
B)  upsloping. 
C)  vertical. 
D)  horizontal.

Question 11

The shape of the immediate-short-run aggregate supply curve implies that

Accepted Answer

A)  total output depends on the volume of spending. 
B)  increases in aggregate demand are inﬂationary. 
C)  output prices are ﬂexible, but input prices are not. 
D)  government cannot bring an economy out of a recession by increasing spending. 
A)  total output depends on the volume of spending. 
B)  increases in aggregate demand are inﬂationary. 
C)  output prices are ﬂexible, but input prices are not. 
D)  government cannot bring an economy out of a recession by increasing spending.

Question 12

Other things equal, an improvement in productivity will

Accepted Answer

A)  shift the aggregate demand curve to the left. 
B)  shift the aggregate supply curve to the left. 
C)  shift the aggregate supply curve to the right. 
D)  increase the price level. 
A)  shift the aggregate demand curve to the left. 
B)  shift the aggregate supply curve to the left. 
C)  shift the aggregate supply curve to the right. 
D)  increase the price level.

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. Which of the following schedules constitutes aggregate demand in this Country?

Accepted Answer

A)  $$\begin{array} { | c | r | } 
\hline \mathrm { P } & \text { GDP } \
\hline 128 & \$ 19 \
\hline 125 & 25 \
\hline 122 & 31 \
\hline 119 & 37 \
\hline 116 & 43 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | c | r | } 
\hline P & \text { GDP } \
\hline 128 & \$ 23 \
\hline 125 & 27 \
\hline 122 & 31 \
\hline 119 & 35 \
\hline 116 & 39 \
\hline
\end{array}$$ 
C)  $$\begin{array} { | c | r | } 
\hline \mathrm { P } & \text { GDP } \
\hline 128 & \$ 20 \
\hline 125 & 22 \
\hline 122 & 24 \
\hline 119 & 26 \
\hline 116 & 28 \
\hline
\end{array}$$ 
D)  $$\begin{array} { | c | r | } 
\hline P & \text { GDP } \
\hline 128 & \$ 34 \
\hline 125 & 37 \
\hline 122 & 40 \
\hline 119 & 43 \
\hline 116 & 46 \
\hline
\end{array}$$ 
A)  $$\begin{array} { | c | r | } 
\hline \mathrm { P } & \text { GDP } \
\hline 128 & \$ 19 \
\hline 125 & 25 \
\hline 122 & 31 \
\hline 119 & 37 \
\hline 116 & 43 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | c | r | } 
\hline P & \text { GDP } \
\hline 128 & \$ 23 \
\hline 125 & 27 \
\hline 122 & 31 \
\hline 119 & 35 \
\hline 116 & 39 \
\hline
\end{array}$$ 
C)  $$\begin{array} { | c | r | } 
\hline \mathrm { P } & \text { GDP } \
\hline 128 & \$ 20 \
\hline 125 & 22 \
\hline 122 & 24 \
\hline 119 & 26 \
\hline 116 & 28 \
\hline
\end{array}$$ 
D)  $$\begin{array} { | c | r | } 
\hline P & \text { GDP } \
\hline 128 & \$ 34 \
\hline 125 & 37 \
\hline 122 & 40 \
\hline 119 & 43 \
\hline 116 & 46 \
\hline
\end{array}$$

Question 14

$$\begin{array} { | c | c | c | } 
\hline \begin{array} { c } 
\text { Amount of Real Output } \
\text { Demanded }
\end{array} & \text { Price Level (Index Value) } & \begin{array} { c } 
\text { Amount of Real Output } \
\text { Supplied }
\end{array} \
\hline \$ 200 & 300 & \$ 500 \
\hline 300 & 250 & 450 \
\hline 400 & 200 & 400 \
\hline 500 & 150 & 300 \
\hline 600 & 100 & 200 \
\hline
\end{array}$$ The table gives aggregate demand and supply schedules for a hypothetical economy. If the amount of real output demanded at each price level falls by $200, this might have been caused by

Accepted Answer

A)  an increase in net exports. 
B)  a worsening of business expectations. 
C)  an increase in consumer wealth. 
D)  a decrease in the personal income tax. 
A)  an increase in net exports. 
B)  a worsening of business expectations. 
C)  an increase in consumer wealth. 
D)  a decrease in the personal income tax.

Question 15

$$\begin{array} { | c | c | c | } 
\hline \begin{array} { c } 
\text { Amount of Real Output } \
\text { Demanded }
\end{array} & \text { Price Level (Index Value) } & \begin{array} { c } 
\text { Amount of Real Output } \
\text { Supplied }
\end{array} \
\hline \$ 200 & 300 & \$ 500 \
\hline 300 & 250 & 450 \
\hline 400 & 200 & 400 \
\hline 500 & 150 & 300 \
\hline 600 & 100 & 200 \
\hline
\end{array}$$ The table gives aggregate demand and supply schedules for a hypothetical economy. The equilibrium price level will be

Accepted Answer

A)  150. 
B)  200. 
C)  250. 
D)  300. 
A)  150. 
B)  200. 
C)  250. 
D)  300.

Question 16

The aggregate supply curve

Accepted Answer

A)  is explained by the interest rate, real-balances, and foreign purchases effects. 
B)  gets steeper as the economy moves from the top of the curve to the bottom of the curve. 
C)  shows the various amounts of real output that businesses will produce at each price level. 
D)  is downsloping because real purchasing power increases as the price level falls. 
A)  is explained by the interest rate, real-balances, and foreign purchases effects. 
B)  gets steeper as the economy moves from the top of the curve to the bottom of the curve. 
C)  shows the various amounts of real output that businesses will produce at each price level. 
D)  is downsloping because real purchasing power increases as the price level falls.

Question 17

$$\begin{array} { | c | c | c | } 
\hline \begin{array} { c } 
\text { Amount of Real Output } \
\text { Demanded }
\end{array} & \text { Price Level (Index Value) } & \begin{array} { c } 
\text { Amount of Real Output } \
\text { Supplied }
\end{array} \
\hline \$ 200 & 300 & \$ 500 \
\hline 300 & 250 & 450 \
\hline 400 & 200 & 400 \
\hline 500 & 150 & 300 \
\hline 600 & 100 & 200 \
\hline
\end{array}$$ The table gives aggregate demand and supply schedules for a hypothetical economy. If the price level is 250 and producers supply $450 of real output,

Accepted Answer

A)  a shortage of real output of $150 will occur. 
B)  a shortage of real output of $100 will occur. 
C)  a surplus of real output of $150 will occur. 
D)  neither a shortage nor a surplus of real output will occur. 
A)  a shortage of real output of $150 will occur. 
B)  a shortage of real output of $100 will occur. 
C)  a surplus of real output of $150 will occur. 
D)  neither a shortage nor a surplus of real output will occur.

Question 18

The equilibrium price level and equilibrium level of real GDP occur at the intersection of the
aggregate demand curve and the aggregate supply curve.

Accepted Answer

A) True 
 B)False

Question 19

$$\begin{array} { | c | c | c | c | c | c | c | } 
\hline \text { Price Level } & C & I _ { g } & G & X & M & \text { Real GDP } \
\hline 128 & \$ 18 & \$ 2 & \$ 3 & \$ 1 & \$ 5 & \
\hline 125 & 20 & 4 & 3 & 2 & 4 & \
\hline 122 & 22 & 6 & 3 & 3 & 3 & \
\hline 119 & 24 & 8 & 3 & 4 & 2 & \
\hline 116 & 26 & 10 & 3 & 5 & 1 & \
\hline
\end{array}$$ 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 the equilibrium level of real GDP is $43 billion, its level of consumption will
Be

Accepted Answer

A)  $20 billion. 
B)  $22 billion. 
C)  $24 billion. 
D)  $26 billion. 
A)  $20 billion. 
B)  $22 billion. 
C)  $24 billion. 
D)  $26 billion.

Question 20

An increase in the aggregate expenditures schedule

Accepted Answer

A)  increases aggregate demand by the amount of the increase in aggregate expenditures only. 
B)  increases aggregate demand by the amount of the initial increase in aggregate expenditures times the multiplier. 
C)  decreases aggregate demand by the amount of the increase in aggregate expenditures. 
D)  decreases aggregate demand by the amount of the initial increase in aggregate expenditures times the multiplier. 
A)  increases aggregate demand by the amount of the increase in aggregate expenditures only. 
B)  increases aggregate demand by the amount of the initial increase in aggregate expenditures times the multiplier. 
C)  decreases aggregate demand by the amount of the increase in aggregate expenditures. 
D)  decreases aggregate demand by the amount of the initial increase in aggregate expenditures times the multiplier.

The real-balance effect pertains to the effect of

How does the aggregate expenditures analysis relate to the aggregate demand analysis?

In an economy, it costs $1,500 to produce 2,000 units of output. If the costs increase to $2,500, then the per unit cost of production will have increased from

If investment increases by $10 billion and the economy's MPC is 0.8, the aggregate demand curve will shift

The aggregate demand curve or schedule shows the relationship between the total demand for output and the

The price level in the United States is more ﬂexible downward than upward.

The immediate-short-run aggregate supply curve is

The shape of the immediate-short-run aggregate supply curve implies that

Other things equal, an improvement in productivity will

Amount of Real Output Demanded Price Level (Index Value) Amount of Real Output Supplied \ 200 300 \ 500 300 250 450 400 200 400 500 150 300 600 100 200 The table gives aggregate demand and supply schedules for a hypothetical economy. The equilibrium price level will be

The aggregate supply curve

The equilibrium price level and equilibrium level of real GDP occur at the intersection of the aggregate demand curve and the aggregate supply curve.

An increase in the aggregate expenditures schedule

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 real-balance effect pertains to the effect of

How does the aggregate expenditures analysis relate to the aggregate demand analysis?

In an economy, it costs $1,500 to produce 2,000 units of output. If the costs increase to $2,500, then the per unit cost of production will have increased from

If investment increases by $10 billion and the economy's MPC is 0.8, the aggregate demand curve will shift

The aggregate demand curve or schedule shows the relationship between the total demand for output and the

The price level in the United States is more ﬂexible downward than upward.

The immediate-short-run aggregate supply curve is

The shape of the immediate-short-run aggregate supply curve implies that

Other things equal, an improvement in productivity will

Amount of Real Output Demanded Price Level (Index Value) Amount of Real Output Supplied \ 200 300 \ 500 300 250 450 400 200 400 500 150 300 600 100 200 The table gives aggregate demand and supply schedules for a hypothetical economy. The equilibrium price level will be

The aggregate supply curve

The equilibrium price level and equilibrium level of real GDP occur at the intersection of the aggregate demand curve and the aggregate supply curve.

An increase in the aggregate expenditures schedule

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