Question 1

A decrease in aggregate supply can result in:

Accepted Answer

A) unemployment. 
B) demand-pull inflation. 
C) prosperity. 
D) cost-push inflation. 
E) a recession. 
A) unemployment. 
B) demand-pull inflation. 
C) prosperity. 
D) cost-push inflation. 
E) a recession. D

Question 2

Which of the following correctly describes the interest-rate effect?

Accepted Answer

A) If the price level decreases, consumer purchasing power decreases, the demand for credit rises, interest rates rise, debt-financed borrowing decreases, and real GDP demanded falls. 
B) If the price level decreases, consumer purchasing power increases, the demand for credit rises, interest rates rise, debt-financed borrowing decreases, and real GDP demanded falls. 
C) If the price level decreases, consumer purchasing power increases, the demand for credit falls, interest rates rise, debt-financed borrowing decreases, and real GDP demanded falls. 
D) If the price level decreases, consumer purchasing power increases, the demand for credit falls, interest rates fall, debt-financed borrowing increases, and real GDP demanded increases. 
A) If the price level decreases, consumer purchasing power decreases, the demand for credit rises, interest rates rise, debt-financed borrowing decreases, and real GDP demanded falls. 
B) If the price level decreases, consumer purchasing power increases, the demand for credit rises, interest rates rise, debt-financed borrowing decreases, and real GDP demanded falls. 
C) If the price level decreases, consumer purchasing power increases, the demand for credit falls, interest rates rise, debt-financed borrowing decreases, and real GDP demanded falls. 
D) If the price level decreases, consumer purchasing power increases, the demand for credit falls, interest rates fall, debt-financed borrowing increases, and real GDP demanded increases. D

Question 3

When price level in the United States rises,

Accepted Answer

A) there is a increased demand for borrowed money. 
B) producers' demand for new machinery increases, contributing to an increase in aggregate demand. 
C) Americans tend to buy more foreign goods and services. 
D) the French, Canadians, and Japanese would find our exports more attractive. 
E) to replenish the value of your real wealth, you would save less and consume more. 
A) there is a increased demand for borrowed money. 
B) producers' demand for new machinery increases, contributing to an increase in aggregate demand. 
C) Americans tend to buy more foreign goods and services. 
D) the French, Canadians, and Japanese would find our exports more attractive. 
E) to replenish the value of your real wealth, you would save less and consume more. C

Question 4

Assuming prices and wages are fully flexible, the aggregate supply curve will be:

Accepted Answer

A) upward sloping, but not vertical. 
B) vertical. 
C) horizontal. 
D) downward sloping. 
A) upward sloping, but not vertical. 
B) vertical. 
C) horizontal. 
D) downward sloping.

Question 5

Which of the following is not a reason for the downward slope of the aggregate demand curve?

Accepted Answer

A) Real balances effect 
B) Interest-rate effect 
C) Net exports effect 
D) Government spending effect 
A) Real balances effect 
B) Interest-rate effect 
C) Net exports effect 
D) Government spending effect

Question 6

Cost-push inflation occurs when the:

Accepted Answer

A) aggregate demand curve shifts leftward while the aggregate supply curve is fixed. 
B) aggregate supply curve shifts leftward while the aggregate demand curve is fixed. 
C) aggregate demand curve shifts rightward while the aggregate supply curve is fixed. 
D) aggregate supply curve shifts rightward. 
A) aggregate demand curve shifts leftward while the aggregate supply curve is fixed. 
B) aggregate supply curve shifts leftward while the aggregate demand curve is fixed. 
C) aggregate demand curve shifts rightward while the aggregate supply curve is fixed. 
D) aggregate supply curve shifts rightward.

Question 7

Stagflation occurs when the economy experiences:

Accepted Answer

A) low unemployment and low inflation. 
B) high unemployment and rapid inflation. 
C) low unemployment and rapid inflation. 
D) high unemployment and low inflation. 
A) low unemployment and low inflation. 
B) high unemployment and rapid inflation. 
C) low unemployment and rapid inflation. 
D) high unemployment and low inflation.

Question 8

The vertical portion of the aggregate supply curve shows that at full employment an increase in the price level will:

Accepted Answer

A) not alter the economy's full-employment real GDP. 
B) increase the economy's full-employment real GDP. 
C) reduce the quantity of goods and services purchasers will demand. 
D) improve the overall efficiency of resource use. 
A) not alter the economy's full-employment real GDP. 
B) increase the economy's full-employment real GDP. 
C) reduce the quantity of goods and services purchasers will demand. 
D) improve the overall efficiency of resource use.

Question 9

The aggregate supply curve is vertical at the level of real GDP that corresponds to the natural rate of unemployment.

Accepted Answer

A) True 
 B)False

Question 10

Cost-push inflation is caused by a leftward shift of the aggregate demand curve.

Accepted Answer

A) True 
 B)False

Question 11

The total quantity of goods and services demanded by households, firms, foreigners, and government at varying price levels is:

Accepted Answer

A) gross domestic product. 
B) aggregate demand. 
C) aggregate expenditure. 
D) total demand. 
E) total expenditure. 
A) gross domestic product. 
B) aggregate demand. 
C) aggregate expenditure. 
D) total demand. 
E) total expenditure.

Question 12

Exhibit 10-7 Aggregate supply and demand curves   In Exhibit 10-7, the aggregate demand and supply curves reflect an economy in which:

Accepted Answer

A) full employment is at $1,000 billion GDP. 
B) excess aggregate supply is created when there is a shift from AD1 to AD2. 
C) excess aggregate demand forces prices up to P = 120. 
D) excess aggregate demand causes prices to stabilize at P = 110. 
E) a new equilibrium is found at point b. 
A) full employment is at $1,000 billion GDP. 
B) excess aggregate supply is created when there is a shift from AD1 to AD2. 
C) excess aggregate demand forces prices up to P = 120. 
D) excess aggregate demand causes prices to stabilize at P = 110. 
E) a new equilibrium is found at point b.

Question 13

The aggregate supply curve is horizontal in the intermediate range.

Accepted Answer

A) True 
 B)False

Question 14

The effect of an increase in aggregate supply is a(n):

Accepted Answer

A) increase in the general level of prices and a decrease in real output. 
B) increase in the general level of prices and an increase in real output. 
C) decrease in the general level of prices and a decrease in real output. 
D) decrease in the general level of prices and an increase in real output. 
A) increase in the general level of prices and a decrease in real output. 
B) increase in the general level of prices and an increase in real output. 
C) decrease in the general level of prices and a decrease in real output. 
D) decrease in the general level of prices and an increase in real output.

Question 15

Exhibit 10-3 Aggregate supply and demand curves   A shift in the aggregate supply curve in Exhibit 10-3 from AS1 to AS2 would be caused by a(n):

Accepted Answer

A) increase in consumer spending. 
B) increase in input prices. 
C) decrease in input prices. 
D) decrease in real output. 
A) increase in consumer spending. 
B) increase in input prices. 
C) decrease in input prices. 
D) decrease in real output.

Question 16

In the upward-sloping segment of the aggregate supply curve,

Accepted Answer

A) increases in output are linked to decreases in the price level. 
B) increasing prices drag down resource costs. 
C) producers can hire more workers without having to raise the wage rate. 
D) the economy can increase aggregate supply without prices going up. 
E) firms are willing to pay higher wages to get more labor. 
A) increases in output are linked to decreases in the price level. 
B) increasing prices drag down resource costs. 
C) producers can hire more workers without having to raise the wage rate. 
D) the economy can increase aggregate supply without prices going up. 
E) firms are willing to pay higher wages to get more labor.

Question 17

The Keynesian range of the aggregate supply curve applies when the economy is at or near full employment.

Accepted Answer

A) True 
 B)False

Question 18

Other factors held constant, a decrease in resource prices will shift the aggregate:

Accepted Answer

A) demand curve leftward. 
B) demand curve rightward. 
C) supply curve leftward. 
D) supply curve rightward. 
A) demand curve leftward. 
B) demand curve rightward. 
C) supply curve leftward. 
D) supply curve rightward.

Question 19

When the economy is operating well below capacity, an increase in spending tends to be reflected primarily in a(n):

Accepted Answer

A) lower level of employment. 
B) increase in price. 
C) lower level of output. 
D) higher level of output and employment. 
E) increase in business failures. 
A) lower level of employment. 
B) increase in price. 
C) lower level of output. 
D) higher level of output and employment. 
E) increase in business failures.

Question 20

How are demand-pull and cost-push inflation reflected in terms of the AD-AS model?

Accepted Answer

Demand-pull inflation is reflected as a

Exam 10: Aggregate Demand and Supply

A decrease in aggregate supply can result in:

Which of the following correctly describes the interest-rate effect?

When price level in the United States rises,

Assuming prices and wages are fully flexible, the aggregate supply curve will be:

Which of the following is not a reason for the downward slope of the aggregate demand curve?

Cost-push inflation occurs when the:

Stagflation occurs when the economy experiences:

The vertical portion of the aggregate supply curve shows that at full employment an increase in the price level will:

The aggregate supply curve is vertical at the level of real GDP that corresponds to the natural rate of unemployment.

Cost-push inflation is caused by a leftward shift of the aggregate demand curve.

The total quantity of goods and services demanded by households, firms, foreigners, and government at varying price levels is:

Exhibit 10-7 Aggregate supply and demand curves In Exhibit 10-7, the aggregate demand and supply curves reflect an economy in which:

The aggregate supply curve is horizontal in the intermediate range.

The effect of an increase in aggregate supply is a(n):

Exhibit 10-3 Aggregate supply and demand curves A shift in the aggregate supply curve in Exhibit 10-3 from AS1 to AS2 would be caused by a(n):

In the upward-sloping segment of the aggregate supply curve,

The Keynesian range of the aggregate supply curve applies when the economy is at or near full employment.

Other factors held constant, a decrease in resource prices will shift the aggregate:

When the economy is operating well below capacity, an increase in spending tends to be reflected primarily in a(n):

How are demand-pull and cost-push inflation reflected in terms of the AD-AS model?

Introducing the Economic Way of Thinking

Production Possibilities, Opportunity Cost, and Economic Growth

Market Demand and Supply

Markets in Action

Gross Domestic Product

Business Cycles and Unemployment

Inflation

The Keynesian Model

The Keynesian Model in Action

Fiscal Policy

The Public Sector

Federal Deficits, Surpluses, and the National Debt

Money and the Federal Reserve System

Money Creation

Monetary Policy

The Phillips Curve and Expectations Theory

International Trade and Finance

Economies in Transition

Growth and the Less-Developed Countries

Applying Graphs to Economics

Consumer Surplus, Producer Surplus, and Market Efficiency

the Self-Correcting Aggregate Demand and Supply Model

Policy Disputes Using the Self-Correcting Aggregate Demand and Supply Model

Filters

Exhibit 10-3 Aggregate supply and demand curves A shift in the aggregate supply curve in Exhibit 10-3 from AS₁ to AS₂ would be caused by a(n):