Question 1

The Keynesian view is that the aggregate supply curve is vertical.

Accepted Answer

A) True 
 B)False

Question 2

A reduction in regulation will shift the aggregate:

Accepted Answer

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

Question 3

Which of the following could be expected to shift the aggregate demand curve?

Accepted Answer

A) An increase in government spending. 
B) Consumption spending decreases. 
C) Net exports fall. 
D) All of these. 
A) An increase in government spending. 
B) Consumption spending decreases. 
C) Net exports fall. 
D) All of these.

Question 4

The aggregate supply curve is defined as:

Accepted Answer

A) net national product. 
B) the sum of wages, rent, interest, and profits. 
C) the real GDP produced at different price levels. 
D) the total dollar value of household expenditures. 
A) net national product. 
B) the sum of wages, rent, interest, and profits. 
C) the real GDP produced at different price levels. 
D) the total dollar value of household expenditures.

Question 5

The negative slope of the aggregate demand curve is caused by:

Accepted Answer

A) the real balances effect, the interest rate effect, and the price level effect. 
B) the real balances effect, the money supply effect, and the net exports effect. 
C) the interest rate effect, the net exports effect, and the real GDP effect. 
D) the real balances effect, the interest rate effect, and the net exports effect. 
E) the real balances effect, the interest rate effect, and the net export effect. 
A) the real balances effect, the interest rate effect, and the price level effect. 
B) the real balances effect, the money supply effect, and the net exports effect. 
C) the interest rate effect, the net exports effect, and the real GDP effect. 
D) the real balances effect, the interest rate effect, and the net exports effect. 
E) the real balances effect, the interest rate effect, and the net export effect.

Question 6

A rightward shift in the aggregate demand curve can be caused by an increase in:

Accepted Answer

A) the price level. 
B) business investment spending. 
C) taxes. 
D) production costs. 
A) the price level. 
B) business investment spending. 
C) taxes. 
D) production costs.

Question 7

Exhibit 10-8 Aggregate demand and supply   In Exhibit 10-8, if aggregate demand shifts from AD2 to AD1, real GDP will:

Accepted Answer

A) fall from $4.0 to $3.0, and the price level will fall from 120 to 100. 
B) fall from $4.0 to $3.0, and the price level will not change. 
C) fall from $7.0 to $4.0, and the price level will not change. 
D) not change, and the price level will not change. 
E) fall from $4.0 to $3.0, and the price level will fall from 170 to 100. 
A) fall from $4.0 to $3.0, and the price level will fall from 120 to 100. 
B) fall from $4.0 to $3.0, and the price level will not change. 
C) fall from $7.0 to $4.0, and the price level will not change. 
D) not change, and the price level will not change. 
E) fall from $4.0 to $3.0, and the price level will fall from 170 to 100.

Question 8

The interest-rate effect is the impact on real GDP caused by the ____ relationship between the price level and the interest rate.

Accepted Answer

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

Question 9

Suppose workers become pessimistic about their future employment, which causes them to save more and spend less. If the economy is on the intermediate range of the aggregate supply curve, then:

Accepted Answer

A) both real GDP and the price level will fall. 
B) real GDP will fall and the price level will rise. 
C) real GDP will rise and the price level will fall. 
D) real GDP and the price level will rise. 
A) both real GDP and the price level will fall. 
B) real GDP will fall and the price level will rise. 
C) real GDP will rise and the price level will fall. 
D) real GDP and the price level will rise.

Question 10

The aggregate supply curve indicates the:

Accepted Answer

A) relationship between prices and the aggregate quantity of goods and services purchased by consumers, investors, governments, and foreigners (net exports). 
B) relationship between prices and the natural rate of unemployment. 
C) relationship between the real wage rate and the quantity of labor supplied by households. 
D) quantity of goods and services producers will supply at different price levels. 
A) relationship between prices and the aggregate quantity of goods and services purchased by consumers, investors, governments, and foreigners (net exports). 
B) relationship between prices and the natural rate of unemployment. 
C) relationship between the real wage rate and the quantity of labor supplied by households. 
D) quantity of goods and services producers will supply at different price levels.

Question 11

Gradual adjustment of prices and wages to an increase in the aggregate demand curve implies that the aggregate supply curve is:

Accepted Answer

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

Question 12

Which of the following are inherent in classical theory?

Accepted Answer

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

Question 13

Which of the following will not shift the aggregate demand curve to the right?

Accepted Answer

A) Consumers becoming more optimistic about the future. 
B) An increase in government spending. 
C) Business optimism increases. 
D) Consumers become pessimistic about the future. 
A) Consumers becoming more optimistic about the future. 
B) An increase in government spending. 
C) Business optimism increases. 
D) Consumers become pessimistic about the future.

Question 14

Lower taxes on businesses will shift the aggregate:

Accepted Answer

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

Question 15

Discuss the three ranges of the aggregate supply (AS)curve. What could cause the AS curve to shift to the left? What impact would a leftward shift of the AS curve have on the economy?

Accepted Answer

The Keynesian range is the horizontal ra

Question 16

Exhibit 10-1 Aggregate supply curve   In Exhibit 10-1, there are plenty of idle resources and no upward pressure on prices in:

Accepted Answer

A) the segment labeled ab. 
B) the segment labeled bc. 
C) the segment labeled cd. 
D) both segment bc and segment cd. 
E) the entire curve. 
A) the segment labeled ab. 
B) the segment labeled bc. 
C) the segment labeled cd. 
D) both segment bc and segment cd. 
E) the entire curve.

Question 17

Which of the following will not shift the aggregate demand cure to the left?

Accepted Answer

A) Consumers become more optimistic about the future. 
B) Government spending decreases. 
C) Business optimism decreases. 
D) Consumers become pessimistic about the future. 
A) Consumers become more optimistic about the future. 
B) Government spending decreases. 
C) Business optimism decreases. 
D) Consumers become pessimistic about the future.

Question 18

The interest-rate effect is the impact on real GDP caused by the direct relationship between the interest rate and the:

Accepted Answer

A) price level. 
B) exports. 
C) consumption. 
D) investment. 
A) price level. 
B) exports. 
C) consumption. 
D) investment.

Question 19

Exhibit 10-2 Aggregate supply and demand curves   In Exhibit 10-2, the change in equilibrium from E1 to E2 represents:

Accepted Answer

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

Question 20

Which of the following will increase aggregate demand in the United States?

Accepted Answer

A) A higher price level. 
B) An increase in the real interest rate. 
C) An increase in wealth due to a substantial appreciation in the value of stocks. 
D) A decrease in real income in Japan and Western Europe. 
A) A higher price level. 
B) An increase in the real interest rate. 
C) An increase in wealth due to a substantial appreciation in the value of stocks. 
D) A decrease in real income in Japan and Western Europe.

Exam 10: Aggregate Demand and Supply

The Keynesian view is that the aggregate supply curve is vertical.

A reduction in regulation will shift the aggregate:

Which of the following could be expected to shift the aggregate demand curve?

The aggregate supply curve is defined as:

The negative slope of the aggregate demand curve is caused by:

A rightward shift in the aggregate demand curve can be caused by an increase in:

Exhibit 10-8 Aggregate demand and supply In Exhibit 10-8, if aggregate demand shifts from AD2 to AD1, real GDP will:

The interest-rate effect is the impact on real GDP caused by the ____ relationship between the price level and the interest rate.

Suppose workers become pessimistic about their future employment, which causes them to save more and spend less. If the economy is on the intermediate range of the aggregate supply curve, then:

The aggregate supply curve indicates the:

Gradual adjustment of prices and wages to an increase in the aggregate demand curve implies that the aggregate supply curve is:

Which of the following are inherent in classical theory?

Which of the following will not shift the aggregate demand curve to the right?

Lower taxes on businesses will shift the aggregate:

Discuss the three ranges of the aggregate supply (AS)curve. What could cause the AS curve to shift to the left? What impact would a leftward shift of the AS curve have on the economy?

Exhibit 10-1 Aggregate supply curve In Exhibit 10-1, there are plenty of idle resources and no upward pressure on prices in:

Which of the following will not shift the aggregate demand cure to the left?

The interest-rate effect is the impact on real GDP caused by the direct relationship between the interest rate and the:

Exhibit 10-2 Aggregate supply and demand curves In Exhibit 10-2, the change in equilibrium from E1 to E2 represents:

Which of the following will increase aggregate demand in the United States?

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 AD₂ to AD₁, real GDP will:

Exhibit 10-2 Aggregate supply and demand curves In Exhibit 10-2, the change in equilibrium from E₁to E₂represents: