Question 1

Exhibit 10-6 Aggregate supply curve   In Exhibit 10-6, the economy's employment potential is fully exhausted at:

Accepted Answer

A) GDP = $1,000 billion. 
B) GDP = $1,100 billion. 
C) GDP = $1,200 billion. 
D) GDP slightly above $1,200 billion. 
E) the employment potential is never fully exhausted. 
A) GDP = $1,000 billion. 
B) GDP = $1,100 billion. 
C) GDP = $1,200 billion. 
D) GDP slightly above $1,200 billion. 
E) the employment potential is never fully exhausted.

Question 2

Greater entrepreneurship in the economy will shift the aggregate:

Accepted Answer

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

Question 3

A leftward shift in the aggregate supply curve along a fixed aggregate demand curve will cause cost-push inflation.

Accepted Answer

A) True 
 B)False

Question 4

Exhibit 10-8 Aggregate demand and supply   In Exhibit 10-8, if aggregate demand shifts from AD5 to AD4, real GDP will:

Accepted Answer

A) not change, and the price level will fall from 170 to 100. 
B) not change, and the price level will fall from 140 to 100. 
C) fall from $8.0 to $6.0, and the price level will not change. 
D) fall from $8.0 to $6.0, and the price level will fall from 140 to 120. 
E) not change, and the price level will fall from 170 to 140. 
A) not change, and the price level will fall from 170 to 100. 
B) not change, and the price level will fall from 140 to 100. 
C) fall from $8.0 to $6.0, and the price level will not change. 
D) fall from $8.0 to $6.0, and the price level will fall from 140 to 120. 
E) not change, and the price level will fall from 170 to 140.

Question 5

The classical economists believed there was no role for government to play in restoring full employment.

Accepted Answer

A) True 
 B)False

Question 6

Exhibit 10-2 Aggregate supply and demand curves   A shift in the aggregate supply curve in Exhibit 10-2 from AS1 to AS2 would be caused by a(n):

Accepted Answer

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

Question 7

The real balances effect is caused by an inverse relationship between the price level and the real value of financial assets with fixed nominal value.

Accepted Answer

A) True 
 B)False

Question 8

In the classical range of the aggregate supply curve, greater spending for consumer and investment goods results in:

Accepted Answer

A) stagflation. 
B) more unemployment. 
C) greater output. 
D) a higher price level. 
A) stagflation. 
B) more unemployment. 
C) greater output. 
D) a higher price level.

Question 9

Exhibit 10-6 Aggregate supply curve   In Exhibit 10-6, the aggregate supply curve becomes vertical at GDP = $1,200 because:

Accepted Answer

A) there are no more workers available at any wage rate to increase real GDP. 
B) the price level remains constant. 
C) the only workers available would demand higher wage rates. 
D) the economy is experiencing low employment and low production. 
E) the Treasury is no longer allowed to explain away the deficit with creative accounting 
A) there are no more workers available at any wage rate to increase real GDP. 
B) the price level remains constant. 
C) the only workers available would demand higher wage rates. 
D) the economy is experiencing low employment and low production. 
E) the Treasury is no longer allowed to explain away the deficit with creative accounting

Question 10

In the intermediate range of the aggregate supply curve, if government spending increases caused the aggregate demand curve to shift outwards, which of the following is most likely to occur?

Accepted Answer

A) The price level and real GDP will both rise. 
B) The price level will not change, but real GDP will increase. 
C) The price level will rise, but real GDP will not change. 
D) Both the price level and real GDP will not change. 
A) The price level and real GDP will both rise. 
B) The price level will not change, but real GDP will increase. 
C) The price level will rise, but real GDP will not change. 
D) Both the price level and real GDP will not change.

Question 11

Given aggregate demand, a decrease in aggregate supply creates:

Accepted Answer

A) a higher price level and a higher GDP level. 
B) a lower price level and a higher GDP level. 
C) cost-push inflation. 
D) demand-pull inflation. 
A) a higher price level and a higher GDP level. 
B) a lower price level and a higher GDP level. 
C) cost-push inflation. 
D) demand-pull inflation.

Question 12

Which of the following is true , other things equal?

Accepted Answer

A) A reduction in prices will increase the real wealth of those holding a fixed quantity of money. 
B) A reduction in prices will lead to a decline in net exports. 
C) A reduction in prices will increase the scarcity of money, raise the real interest rate, and, thereby, encourage investment and consumption. 
D) A reduction in prices will increase profit margins and, thereby, stimulate additional investment. 
A) A reduction in prices will increase the real wealth of those holding a fixed quantity of money. 
B) A reduction in prices will lead to a decline in net exports. 
C) A reduction in prices will increase the scarcity of money, raise the real interest rate, and, thereby, encourage investment and consumption. 
D) A reduction in prices will increase profit margins and, thereby, stimulate additional investment.

Question 13

If aggregate demand increases in the intermediate range of the aggregate supply curve then the:

Accepted Answer

A) price level rises and real GDP falls. 
B) price level rises and real GDP rises. 
C) price level falls and real GDP falls. 
D) price level falls and real GDP rises. 
A) price level rises and real GDP falls. 
B) price level rises and real GDP rises. 
C) price level falls and real GDP falls. 
D) price level falls and real GDP rises.

Question 14

Exhibit 10-3 Aggregate supply and demand curves   In Exhibit 10-3, the change in equilibrium from E1 to E2 represents:

Accepted Answer

A) deflation. 
B) demand-pull inflation. 
C) price-push inflation. 
D) cost-push inflation. 
A) deflation. 
B) demand-pull inflation. 
C) price-push inflation. 
D) cost-push inflation.

Question 15

The concurrent problems of inflation and unemployment are termed:

Accepted Answer

A) depression. 
B) downturn. 
C) deflation. 
D) demand-pull inflation. 
E) stagflation. 
A) depression. 
B) downturn. 
C) deflation. 
D) demand-pull inflation. 
E) stagflation.

Question 16

Which of the following is a belief of classical theory?

Accepted Answer

A) Long-run full employment. 
B) Inflexible wages. 
C) Inflexible prices. 
D) All of these. 
A) Long-run full employment. 
B) Inflexible wages. 
C) Inflexible prices. 
D) All of these.

Question 17

An increase in regulation will shift the aggregate:

Accepted Answer

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

Question 18

When the supply of credit is fixed, an increase in the price level stimulates the demand for credit, which in turn reduces consumption and investment spending. This argument is called the:

Accepted Answer

A) real balances effect. 
B) interest-rate effect. 
C) net exports effect. 
D) substitution effect. 
A) real balances effect. 
B) interest-rate effect. 
C) net exports effect. 
D) substitution effect.

Question 19

Which of the following is not a component of the aggregate demand curve?

Accepted Answer

A) Consumption (
C) . 
B) Investment (I). 
C) Government spending (G). 
D) Net exports (X-M). 
E) All of these are components. 
A) Consumption (
C) . 
B) Investment (I). 
C) Government spending (G). 
D) Net exports (X-M). 
E) All of these are components.

Question 20

Which of the following could not be expected to shift the aggregate demand curve?

Accepted Answer

A) Net exports fall. 
B) Consumption spending decreases. 
C) An increase in government spending. 
D) A change in real GDP. 
A) Net exports fall. 
B) Consumption spending decreases. 
C) An increase in government spending. 
D) A change in real GDP.

Exam 10: Aggregate Demand and Supply

Exhibit 10-6 Aggregate supply curve In Exhibit 10-6, the economy's employment potential is fully exhausted at:

Greater entrepreneurship in the economy will shift the aggregate:

A leftward shift in the aggregate supply curve along a fixed aggregate demand curve will cause cost-push inflation.

Exhibit 10-8 Aggregate demand and supply In Exhibit 10-8, if aggregate demand shifts from AD5 to AD4, real GDP will:

The classical economists believed there was no role for government to play in restoring full employment.

Exhibit 10-2 Aggregate supply and demand curves A shift in the aggregate supply curve in Exhibit 10-2 from AS1 to AS2 would be caused by a(n):

The real balances effect is caused by an inverse relationship between the price level and the real value of financial assets with fixed nominal value.

In the classical range of the aggregate supply curve, greater spending for consumer and investment goods results in:

Exhibit 10-6 Aggregate supply curve In Exhibit 10-6, the aggregate supply curve becomes vertical at GDP = $1,200 because:

In the intermediate range of the aggregate supply curve, if government spending increases caused the aggregate demand curve to shift outwards, which of the following is most likely to occur?

Given aggregate demand, a decrease in aggregate supply creates:

Which of the following is true , other things equal?

If aggregate demand increases in the intermediate range of the aggregate supply curve then the:

Exhibit 10-3 Aggregate supply and demand curves In Exhibit 10-3, the change in equilibrium from E1 to E2 represents:

The concurrent problems of inflation and unemployment are termed:

Which of the following is a belief of classical theory?

An increase in regulation will shift the aggregate:

When the supply of credit is fixed, an increase in the price level stimulates the demand for credit, which in turn reduces consumption and investment spending. This argument is called the:

Which of the following is not a component of the aggregate demand curve?

Which of the following could not be expected to shift the aggregate demand curve?

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 10-8 Aggregate demand and supply In Exhibit 10-8, if aggregate demand shifts from AD₅ to AD₄, real GDP will:

Exhibit 10-2 Aggregate supply and demand curves A shift in the aggregate supply curve in Exhibit 10-2 from AS₁ to AS₂ would be caused by a(n):

Exhibit 10-3 Aggregate supply and demand curves In Exhibit 10-3, the change in equilibrium from E₁ to E₂ represents: