Question 1

Exhibit 10-6 Aggregate supply curve   In Exhibit 10-6, where the GDP = $1,200 billion,

Accepted Answer

A) everyone willing to work at the current wage is employed. 
B) the economy has reached full employment. 
C) GDP can increase to $1,100 billion without triggering an increase in the price level. 
D) no further increases in the price level can generate more real GDP. 
E) further increases in the price level must generate lower levels of employment. 
A) everyone willing to work at the current wage is employed. 
B) the economy has reached full employment. 
C) GDP can increase to $1,100 billion without triggering an increase in the price level. 
D) no further increases in the price level can generate more real GDP. 
E) further increases in the price level must generate lower levels of employment.

Question 2

The quantity of real GDP rises with the price level, ceteris paribus .

Accepted Answer

A) True 
 B)False

Question 3

Exhibit 10-5 Aggregate demand curves   In Exhibit 10-5, which one of the following could cause the U.S. aggregate demand curve to move from AD3 to AD2?

Accepted Answer

A) Greater resource availability. 
B) Nonfluctuating resource availability. 
C) A recession in Japan. 
D) An increase in government grants for AIDS awareness programs. 
E) An expectation that future income will rise. 
A) Greater resource availability. 
B) Nonfluctuating resource availability. 
C) A recession in Japan. 
D) An increase in government grants for AIDS awareness programs. 
E) An expectation that future income will rise.

Question 4

The aggregate supply curve shows the relationship between the price level and the level of real GDP produced by the nation's economy.

Accepted Answer

A) True 
 B)False

Question 5

An increase in input prices will cause the aggregate supply curve to shift rightward.

Accepted Answer

A) True 
 B)False

Question 6

The net exports effect is the ____ relationship between net exports and the price level of an economy.

Accepted Answer

A) inverse 
B) independent 
C) direct 
D) linear 
A) inverse 
B) independent 
C) direct 
D) linear

Question 7

Exhibit 10-4 Aggregate supply and demand curves   In Exhibit 10-4 which of the following is not consistent with a shift in the aggregate demand curve from AD1 to AD2?

Accepted Answer

A) A decrease in consumer spending. 
B) An increase in investment. 
C) An increase in government spending. 
D) An increase in net exports. 
A) A decrease in consumer spending. 
B) An increase in investment. 
C) An increase in government spending. 
D) An increase in net exports.

Question 8

In the vertical segment of the aggregate supply curve,

Accepted Answer

A) different levels of GDP correspond with high unemployment. 
B) competition among producers for already-employed resources can succeed only in lowering the economy's price level. 
C) full employment is achieved. 
D) producers are able to hire more workers at lower wages. 
E) increases in GDP are due solely to production gains. 
A) different levels of GDP correspond with high unemployment. 
B) competition among producers for already-employed resources can succeed only in lowering the economy's price level. 
C) full employment is achieved. 
D) producers are able to hire more workers at lower wages. 
E) increases in GDP are due solely to production gains.

Question 9

The aggregate demand curve will shift rightward when there is:

Accepted Answer

A) a decrease in government spending. 
B) a decrease in incomes abroad. 
C) a tax increase. 
D) the expectation that future consumer income will rise. 
A) a decrease in government spending. 
B) a decrease in incomes abroad. 
C) a tax increase. 
D) the expectation that future consumer income will rise.

Question 10

During the Great Depression of the 1930s, the aggregate demand curve intersected the aggregate supply curve in the:

Accepted Answer

A) horizontal portion of the aggregate supply curve. 
B) upward-sloping part of the aggregate supply curve. 
C) vertical portion of the aggregate supply curve. 
D) early years in the horizontal portion, but in the later years in the vertical portion. 
E) early years in the vertical portion, but in the later years in the horizontal portion. 
A) horizontal portion of the aggregate supply curve. 
B) upward-sloping part of the aggregate supply curve. 
C) vertical portion of the aggregate supply curve. 
D) early years in the horizontal portion, but in the later years in the vertical portion. 
E) early years in the vertical portion, but in the later years in the horizontal portion.

Question 11

For an economy, aggregate demand equals:

Accepted Answer

A) consumption plus investment plus government spending plus exports. 
B) consumption plus investment plus government spending plus (exports minus imports). 
C) consumption plus investment plus (taxes minus transfers)plus (exports minus imports). 
D) consumption plus investment plus government spending plus net exports (imports minus exports). 
A) consumption plus investment plus government spending plus exports. 
B) consumption plus investment plus government spending plus (exports minus imports). 
C) consumption plus investment plus (taxes minus transfers)plus (exports minus imports). 
D) consumption plus investment plus government spending plus net exports (imports minus exports).

Question 12

According to the interest rate effect, as the price level:

Accepted Answer

A) rises, people feel poorer and buy less. 
B) rises, United States products become more expensive and foreigners buy less U.S. goods. 
C) rises, interest rates fall, and people buy less. 
D) rises, interest rates rise, and people buy less. 
E) falls, interest rates fall, and people buy less. 
A) rises, people feel poorer and buy less. 
B) rises, United States products become more expensive and foreigners buy less U.S. goods. 
C) rises, interest rates fall, and people buy less. 
D) rises, interest rates rise, and people buy less. 
E) falls, interest rates fall, and people buy less.

Question 13

Cost-push inflation is caused by supply shocks like higher oil prices and poor weather conditions.

Accepted Answer

A) True 
 B)False

Question 14

The net exports effect is the inverse relationship between net exports and the ____ of an economy.

Accepted Answer

A) potential real GDP 
B) chain-price deflator 
C) price level 
D) consumption spending 
A) potential real GDP 
B) chain-price deflator 
C) price level 
D) consumption spending

Question 15

According to Keynesian theory, if equilibrium real GDP is below the full-employment level, then an increase in aggregate demand will result in which of the following changes in equilibrium?

Accepted Answer

A) Real GDP will rise, but the price level will remain constant. 
B) Real GDP and the price level will both rise. 
C) Real GDP will remain unchanged but the price level will rise. 
D) None of the above. 
A) Real GDP will rise, but the price level will remain constant. 
B) Real GDP and the price level will both rise. 
C) Real GDP will remain unchanged but the price level will rise. 
D) None of the above.

Question 16

Demand-pull inflation is caused by a rightward shift of the aggregate demand curve.

Accepted Answer

A) True 
 B)False

Question 17

Other things constant, an increase in resource prices will:

Accepted Answer

A) increase aggregate demand. 
B) decrease aggregate demand. 
C) decrease aggregate supply. 
D) increase aggregate supply. 
A) increase aggregate demand. 
B) decrease aggregate demand. 
C) decrease aggregate supply. 
D) increase aggregate supply.

Question 18

A cut in government spending, a decrease in income abroad, an increase in taxes, or an expectation that future consumer income will fall will all cause aggregate:

Accepted Answer

A) demand to shift rightward. 
B) demand to shift leftward. 
C) supply to shift rightward. 
D) supply to shift leftward. 
E) supply and aggregate demand to both shift equally inward. 
A) demand to shift rightward. 
B) demand to shift leftward. 
C) supply to shift rightward. 
D) supply to shift leftward. 
E) supply and aggregate demand to both shift equally inward.

Question 19

An increase in the price level caused by a rightward shift of the aggregate demand curve is called:

Accepted Answer

A) cost-push inflation. 
B) supply shock inflation. 
C) demand shock inflation. 
D) demand-pull inflation. 
A) cost-push inflation. 
B) supply shock inflation. 
C) demand shock inflation. 
D) demand-pull inflation.

Question 20

The aggregate demand curve indicates the relationship between:

Accepted Answer

A) the real wage rate and the quality of resources demanded by producers of goods and services. 
B) the interest rate and the amount of loanable funds demanded by borrowers. 
C) the natural rate of unemployment and the demand for goods and services when the economy is in long-run equilibrium. 
D) the general price level and the aggregate quantity of goods and services demanded. 
A) the real wage rate and the quality of resources demanded by producers of goods and services. 
B) the interest rate and the amount of loanable funds demanded by borrowers. 
C) the natural rate of unemployment and the demand for goods and services when the economy is in long-run equilibrium. 
D) the general price level and the aggregate quantity of goods and services demanded.

Exam 10: Aggregate Demand and Supply

Exhibit 10-6 Aggregate supply curve In Exhibit 10-6, where the GDP = $1,200 billion,

The quantity of real GDP rises with the price level, ceteris paribus .

Exhibit 10-5 Aggregate demand curves In Exhibit 10-5, which one of the following could cause the U.S. aggregate demand curve to move from AD3 to AD2?

The aggregate supply curve shows the relationship between the price level and the level of real GDP produced by the nation's economy.

An increase in input prices will cause the aggregate supply curve to shift rightward.

The net exports effect is the ____ relationship between net exports and the price level of an economy.

Exhibit 10-4 Aggregate supply and demand curves In Exhibit 10-4 which of the following is not consistent with a shift in the aggregate demand curve from AD1 to AD2?

In the vertical segment of the aggregate supply curve,

The aggregate demand curve will shift rightward when there is:

During the Great Depression of the 1930s, the aggregate demand curve intersected the aggregate supply curve in the:

For an economy, aggregate demand equals:

According to the interest rate effect, as the price level:

Cost-push inflation is caused by supply shocks like higher oil prices and poor weather conditions.

The net exports effect is the inverse relationship between net exports and the ____ of an economy.

According to Keynesian theory, if equilibrium real GDP is below the full-employment level, then an increase in aggregate demand will result in which of the following changes in equilibrium?

Demand-pull inflation is caused by a rightward shift of the aggregate demand curve.

Other things constant, an increase in resource prices will:

A cut in government spending, a decrease in income abroad, an increase in taxes, or an expectation that future consumer income will fall will all cause aggregate:

An increase in the price level caused by a rightward shift of the aggregate demand curve is called:

The aggregate demand curve indicates the relationship between:

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 10-5 Aggregate demand curves In Exhibit 10-5, which one of the following could cause the U.S. aggregate demand curve to move from AD₃ to AD₂?

Exhibit 10-4 Aggregate supply and demand curves In Exhibit 10-4 which of the following is not consistent with a shift in the aggregate demand curve from AD₁ to AD₂?