Question 1

The steepness of the aggregate supply curve depends on the:

Accepted Answer

A)  rate of inflation in the economy. 
B)  change in relative prices of commodities. 
C)  substitutability of the inputs used in producing various goods and services. 
D)  ability of the producers to respond to price-level changes in the short run. 
E)  the market rate of interest. 
A)  rate of inflation in the economy. 
B)  change in relative prices of commodities. 
C)  substitutability of the inputs used in producing various goods and services. 
D)  ability of the producers to respond to price-level changes in the short run. 
E)  the market rate of interest.

Question 2

In the short-run, an increase in the average price level will cause:

Accepted Answer

A)  demand for the good to increase but total production to decline. 
B)  profits to rise and, thus, total production to increase. 
C)  interest rates to fall and thus total production to decline. 
D)  input costs to fall and, thus, total production to rise. 
E)  input costs to fall and, thus, total production to decline. 
A)  demand for the good to increase but total production to decline. 
B)  profits to rise and, thus, total production to increase. 
C)  interest rates to fall and thus total production to decline. 
D)  input costs to fall and, thus, total production to rise. 
E)  input costs to fall and, thus, total production to decline.

Question 3

Which of the following would result in a decrease in aggregate demand?

Accepted Answer

A)  A higher domestic price level 
B)  Higher raw materials prices 
C)  Lower aggregate expenditures 
D)  Technological advances 
E)  Expansionary government policy 
A)  A higher domestic price level 
B)  Higher raw materials prices 
C)  Lower aggregate expenditures 
D)  Technological advances 
E)  Expansionary government policy

Question 4

Each of the panels given below represents the short-run equilibrium in the U.S. economy. The Aggregate Demand and Aggregate Supply curves in each panel responds to various economic changes.
Figure 8.1
  
-Aggregate demand-aggregate supply analysis shows that in the long run the effect of increased aggregate spending on real GDP is:

Accepted Answer

A)  negative. 
B)  close to infinity. 
C)  indeterminate. 
D)  zero. 
E)  positive. 
A)  negative. 
B)  close to infinity. 
C)  indeterminate. 
D)  zero. 
E)  positive.

Question 5

In the 1970s the international price of crude oil rocketed because:

Accepted Answer

A)  the demand for crude oil fell short of its supply. 
B)  a new source of natural gas was discovered. 
C)  the demand for automobiles increased drastically. 
D)  the supply of oil was restricted by the oil exporting countries. 
E)  of the appreciation of dollar in the international market. 
A)  the demand for crude oil fell short of its supply. 
B)  a new source of natural gas was discovered. 
C)  the demand for automobiles increased drastically. 
D)  the supply of oil was restricted by the oil exporting countries. 
E)  of the appreciation of dollar in the international market.

Question 6

The positive slope of the AS curve is a _____ phenomena, when the _____ are held constant.

Accepted Answer

A)  long-run; business profits 
B)  short-run; government expenditures 
C)  short-run; costs of production 
D)  long-run; commodity prices 
E)  long-run; aggregate expenditures 
A)  long-run; business profits 
B)  short-run; government expenditures 
C)  short-run; costs of production 
D)  long-run; commodity prices 
E)  long-run; aggregate expenditures

Question 7

The table given below reports the average hourly wage received by laborers and the price index for two years.
Table 8.2
 $\begin{array}{|l|c|c|}
\hline & \text { Year 1 } & \text { Year 2 } \
\hline \text { Average hourly wage } & \$ 6.00 & \$ 7.00 \
\hline \text { Price index } & 117 & 125 \
\hline
\end{array}$
-Refer to Table 8.2. The data in the table suggests that in year 2:

Accepted Answer

A)  aggregate supply remains constant. 
B)  aggregate demand decreases. 
C)  aggregate supply decreases. 
D)  aggregate demand increases. 
E)  aggregate supply increases 
A)  aggregate supply remains constant. 
B)  aggregate demand decreases. 
C)  aggregate supply decreases. 
D)  aggregate demand increases. 
E)  aggregate supply increases

Question 8

In the short run, a decrease in the general price level will cause business profits to rise and, hence, the total quantity of output to increase.

Accepted Answer

A) True 
 B)False

Question 9

Assume that the AD curve is held constant and short-run aggregate supply decreases. The result is a(n):

Accepted Answer

A)  increase in both equilibrium real GDP and the price level. 
B)  decrease in equilibrium real GDP and an increase in the price level. 
C)  decrease in both equilibrium real GDP and the price level. 
D)  decrease in equilibrium real GDP, while the price level remains fixed. 
E)  increase in the price level, while equilibrium real GDP remains fixed. 
A)  increase in both equilibrium real GDP and the price level. 
B)  decrease in equilibrium real GDP and an increase in the price level. 
C)  decrease in both equilibrium real GDP and the price level. 
D)  decrease in equilibrium real GDP, while the price level remains fixed. 
E)  increase in the price level, while equilibrium real GDP remains fixed.

Question 10

The movement of the vertical _____ curve to the _____ reflects the increase in potential output on account of the development of new technologies and increase in the quantity and quality of resources.

Accepted Answer

A)  long-run aggregate supply; right 
B)  short-run aggregate supply; right 
C)  short-run aggregate demand; left 
D)  long-run aggregate demand curve; left 
E)  long-run aggregate supply; left 
A)  long-run aggregate supply; right 
B)  short-run aggregate supply; right 
C)  short-run aggregate demand; left 
D)  long-run aggregate demand curve; left 
E)  long-run aggregate supply; left

Question 11

Each of the panels given below represents the short-run equilibrium in the U.S. economy. The Aggregate Demand and Aggregate Supply curves in each panel responds to various economic changes.
Figure 8.1
  
-Refer to Figure 8.1. Which of the graphs in the figure best describes the impact of a generalized more optimistic view of the future by consumers?

Accepted Answer

A)  Panel A 
B)  Panel B 
C)  Panel C 
D)  Panel D 
E)  Panel E 
A)  Panel A 
B)  Panel B 
C)  Panel C 
D)  Panel D 
E)  Panel E

Question 12

Other things equal, an increase in aggregate demand will result in:

Accepted Answer

A)  an economic expansion. 
B)  higher unemployment and a lower equilibrium price level. 
C)  an economic recession. 
D)  a decrease in equilibrium real GDP and an increase in the equilibrium level of prices. 
E)  decreased economic welfare. 
A)  an economic expansion. 
B)  higher unemployment and a lower equilibrium price level. 
C)  an economic recession. 
D)  a decrease in equilibrium real GDP and an increase in the equilibrium level of prices. 
E)  decreased economic welfare.

Question 13

Consider the following statement: "If the government attempts to raise employment through increased fiscal spending, all it will end up doing will be to increase the price level." The statement rests on the assumption that:

Accepted Answer

A)  the aggregate demand curve is a horizontal line. 
B)  the aggregate supply curve is a vertical line. 
C)  the aggregate supply curve is upward-sloping. 
D)  the aggregate supply curve is downward-sloping. 
E)  the aggregate supply curve is a horizontal line. 
A)  the aggregate demand curve is a horizontal line. 
B)  the aggregate supply curve is a vertical line. 
C)  the aggregate supply curve is upward-sloping. 
D)  the aggregate supply curve is downward-sloping. 
E)  the aggregate supply curve is a horizontal line.

Question 14

Other things equal, an increase in aggregate spending tends to be associated with:

Accepted Answer

A)  cost-push inflation. 
B)  an economic depression. 
C)  a lower level of equilibrium real GDP. 
D)  demand-pull inflation. 
E)  an increase in the quality of goods and services produced. 
A)  cost-push inflation. 
B)  an economic depression. 
C)  a lower level of equilibrium real GDP. 
D)  demand-pull inflation. 
E)  an increase in the quality of goods and services produced.

Question 15

Which of the following is true of the aggregate supply curve?

Accepted Answer

A)  It shows the inverse relationship between prices and national output. 
B)  It shows the positive relationship between the price level and the supply of all goods produced in the economy. 
C)  It shows the amount of real GDP consumed at different price levels. 
D)  It is a negatively sloped curve that shows the relationship between the price level and the cost of production of firms in the economy. 
E)  It shows the positive relationship between price and quantity supplied of an individual good. 
A)  It shows the inverse relationship between prices and national output. 
B)  It shows the positive relationship between the price level and the supply of all goods produced in the economy. 
C)  It shows the amount of real GDP consumed at different price levels. 
D)  It is a negatively sloped curve that shows the relationship between the price level and the cost of production of firms in the economy. 
E)  It shows the positive relationship between price and quantity supplied of an individual good.

Question 16

In the long run, increased government spending is ineffective in raising equilibrium real GDP.

Accepted Answer

A) True 
 B)False

Question 17

If the aggregate supply curve is vertical, then shifts in aggregate demand will not change aggregate output.

Accepted Answer

A) True 
 B)False

Question 18

The change in aggregate expenditures resulting from a movement in the domestic price level, which in turn changes the price of domestic goods in relation to foreign goods, is known as the:

Accepted Answer

A)  international trade effect. 
B)  multilateral equilibrium condition. 
C)  international exchange rate effect. 
D)  magnified international pricing effect. 
E)  international deficit effect. 
A)  international trade effect. 
B)  multilateral equilibrium condition. 
C)  international exchange rate effect. 
D)  magnified international pricing effect. 
E)  international deficit effect.

Question 19

In the long run, increased consumption spending raises only the price level.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following illustrates an optimistic expectation of the people about the economy?

Accepted Answer

A)  A movement to the right along the aggregate demand curve 
B)  A rightward shift of the aggregate demand curve 
C)  A leftward shift of the aggregate demand curve 
D)  A movement to the left along the aggregate demand curve 
E)  A flatter slope of the aggregate demand curve 
A)  A movement to the right along the aggregate demand curve 
B)  A rightward shift of the aggregate demand curve 
C)  A leftward shift of the aggregate demand curve 
D)  A movement to the left along the aggregate demand curve 
E)  A flatter slope of the aggregate demand curve

The steepness of the aggregate supply curve depends on the:

In the short-run, an increase in the average price level will cause:

Which of the following would result in a decrease in aggregate demand?

In the 1970s the international price of crude oil rocketed because:

The positive slope of the AS curve is a _ phenomena, when the _ are held constant.

The table given below reports the average hourly wage received by laborers and the price index for two years. Table 8.2 Year 1 Year 2 Average hourly wage \ 6.00 \ 7.00 Price index 117 125 -Refer to Table 8.2. The data in the table suggests that in year 2:

In the short run, a decrease in the general price level will cause business profits to rise and, hence, the total quantity of output to increase.

Assume that the AD curve is held constant and short-run aggregate supply decreases. The result is a(n):

The movement of the vertical _ curve to the _ reflects the increase in potential output on account of the development of new technologies and increase in the quantity and quality of resources.

Other things equal, an increase in aggregate demand will result in:

Consider the following statement: "If the government attempts to raise employment through increased fiscal spending, all it will end up doing will be to increase the price level." The statement rests on the assumption that:

Other things equal, an increase in aggregate spending tends to be associated with:

Which of the following is true of the aggregate supply curve?

In the long run, increased government spending is ineffective in raising equilibrium real GDP.

If the aggregate supply curve is vertical, then shifts in aggregate demand will not change aggregate output.

The change in aggregate expenditures resulting from a movement in the domestic price level, which in turn changes the price of domestic goods in relation to foreign goods, is known as the:

In the long run, increased consumption spending raises only the price level.

Which of the following illustrates an optimistic expectation of the people about the economy?

Economics: the World Around You

Choice, Opportunity Costs, and Specialization

Markets, Demand and Supply, and the Price System

The Market System and the Private and Public Sector

National Income Accounting

An Introduction to the Foreign Exchange Market and the Balance of Payments

Unemployment and Inflation

Aggregate Expenditures

Income and Expenditures Equilibrium

Fiscal Policy

Money and Banking

Monetary Policy

Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

Economic Growth

Development Economics

Globalization

World Trade Equilibrium

International Trade Restrictions

Exchange Rates and Financial Links Between Countries

Filters

Exam 8: Macroeconomic Equilibrium: Aggregate Demand and Supply

The steepness of the aggregate supply curve depends on the:

In the short-run, an increase in the average price level will cause:

Which of the following would result in a decrease in aggregate demand?

In the 1970s the international price of crude oil rocketed because:

The positive slope of the AS curve is a _____ phenomena, when the _____ are held constant.

The table given below reports the average hourly wage received by laborers and the price index for two years. Table 8.2 Year 1 Year 2 Average hourly wage \ 6.00 \ 7.00 Price index 117 125 -Refer to Table 8.2. The data in the table suggests that in year 2:

In the short run, a decrease in the general price level will cause business profits to rise and, hence, the total quantity of output to increase.

Assume that the AD curve is held constant and short-run aggregate supply decreases. The result is a(n):

The movement of the vertical _____ curve to the _____ reflects the increase in potential output on account of the development of new technologies and increase in the quantity and quality of resources.

Other things equal, an increase in aggregate demand will result in:

Consider the following statement: "If the government attempts to raise employment through increased fiscal spending, all it will end up doing will be to increase the price level." The statement rests on the assumption that:

Other things equal, an increase in aggregate spending tends to be associated with:

Which of the following is true of the aggregate supply curve?

In the long run, increased government spending is ineffective in raising equilibrium real GDP.

If the aggregate supply curve is vertical, then shifts in aggregate demand will not change aggregate output.

The change in aggregate expenditures resulting from a movement in the domestic price level, which in turn changes the price of domestic goods in relation to foreign goods, is known as the:

In the long run, increased consumption spending raises only the price level.

Which of the following illustrates an optimistic expectation of the people about the economy?

Economics: the World Around You

Choice, Opportunity Costs, and Specialization

Markets, Demand and Supply, and the Price System

The Market System and the Private and Public Sector

National Income Accounting

An Introduction to the Foreign Exchange Market and the Balance of Payments

Unemployment and Inflation

Aggregate Expenditures

Income and Expenditures Equilibrium

Fiscal Policy

Money and Banking

Monetary Policy

Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

Economic Growth

Development Economics

Globalization

World Trade Equilibrium

International Trade Restrictions

Exchange Rates and Financial Links Between Countries

Filters

The positive slope of the AS curve is a _ phenomena, when the _ are held constant.

The movement of the vertical _ curve to the _ reflects the increase in potential output on account of the development of new technologies and increase in the quantity and quality of resources.