Question 1

Which of the following events is the most likely to create stagflation?

Accepted Answer

A) An increase in the money supply. 
B) A reduction in the amount spent on national defense. 
C) A doubling of oil prices. 
D) A decrease in investment spending. 
A) An increase in the money supply. 
B) A reduction in the amount spent on national defense. 
C) A doubling of oil prices. 
D) A decrease in investment spending.

Question 2

Exhibit 10-7 Aggregate supply and demand curves   In Exhibit 10-7, choosing to operate the economy at GDP = $1200 billion and P = 110 would be opting for an economy of:

Accepted Answer

A) moderate unemployment with inflation. 
B) full employment without inflation. 
C) full employment with inflation. 
D) high unemployment and high inflation. 
E) moderate cyclical unemployment without inflation. 
A) moderate unemployment with inflation. 
B) full employment without inflation. 
C) full employment with inflation. 
D) high unemployment and high inflation. 
E) moderate cyclical unemployment without inflation.

Question 3

Which one of the following factors will most likely cause an increase in aggregate demand?

Accepted Answer

A) An increase in net exports. 
B) An increase in the real interest rate. 
C) A decrease in net exports due to falling incomes abroad. 
D) A technological development that decreases the cost of producing computer chips. 
A) An increase in net exports. 
B) An increase in the real interest rate. 
C) A decrease in net exports due to falling incomes abroad. 
D) A technological development that decreases the cost of producing computer chips.

Question 4

An increase in oil 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 5

The real balance effect (wealth effect), the interest rate effect, and the net exports effect all help to explain the:

Accepted Answer

A) decrease in supply in the loanable funds market. 
B) large federal budget deficit. 
C) increase in short-run aggregate supply. 
D) downward-sloping aggregate demand curve. 
A) decrease in supply in the loanable funds market. 
B) large federal budget deficit. 
C) increase in short-run aggregate supply. 
D) downward-sloping aggregate demand curve.

Question 6

Exhibit 10-1 Aggregate supply curve   In Exhibit 10-1, higher price levels allow producers to earn higher profits, stimulating production and employment 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 7

At low levels of employment, the Keynesian aggregate supply curve:

Accepted Answer

A) tilts downward to the right. 
B) tilts upward to the right. 
C) is vertical. 
D) shows a constant price level. 
E) shows a rising price level. 
A) tilts downward to the right. 
B) tilts upward to the right. 
C) is vertical. 
D) shows a constant price level. 
E) shows a rising price level.

Question 8

Exhibit 10-1 Aggregate supply curve   In Exhibit 10-1, as production increases, firms resort to offering higher-wage rates to attract the dwindling supply of unemployed resources 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 9

If aggregate demand equals aggregate supply, macroeconomic equilibrium exists.

Accepted Answer

A) True 
 B)False

Question 10

Exhibit 10-8 Aggregate demand and supply   In Exhibit 10-8, if aggregate demand shifts from AD3 to AD4, real GDP will:

Accepted Answer

A) rise from $7.0 to $8.0, and the price level will rise from 120 to 140. 
B) rise from $7.0 to $8.0, and the price level will rise from 120 to 170. 
C) rise from $7.0 to $8.0, and the price level will rise from 100 to 140. 
D) not change, and the price level will rise from 120 to 140. 
E) rise from $4.0 to $8.0, and the price level will rise from 120 to 140. 
A) rise from $7.0 to $8.0, and the price level will rise from 120 to 140. 
B) rise from $7.0 to $8.0, and the price level will rise from 120 to 170. 
C) rise from $7.0 to $8.0, and the price level will rise from 100 to 140. 
D) not change, and the price level will rise from 120 to 140. 
E) rise from $4.0 to $8.0, and the price level will rise from 120 to 140.

Question 11

Which of the following correctly describes the aggregate supply curve?

Accepted Answer

A) A curve that shows the level of real GDP demanded at different possible price levels. 
B) A curve that shows the level of real GDP produced at different possible price levels. 
C) A curve that shows the level of quantity supplied by firms in a market at different possible prices, such as the supply of oranges in the oranges market. 
D) None of the above. 
A) A curve that shows the level of real GDP demanded at different possible price levels. 
B) A curve that shows the level of real GDP produced at different possible price levels. 
C) A curve that shows the level of quantity supplied by firms in a market at different possible prices, such as the supply of oranges in the oranges market. 
D) None of the above.

Question 12

_________ inflation can be explained by an ________ shift in the aggregate _________ curve.

Accepted Answer

A) Demand-pull, leftward, demand 
B) Cost-push, rightward, supply 
C) Demand-pull, leftward, supply 
A) Demand-pull, leftward, demand 
B) Cost-push, rightward, supply 
C) Demand-pull, leftward, supply

Question 13

The aggregate supply curve reflects the relationship between the price:

Accepted Answer

A) of a particular good and the quantity supplied by all firms producing that good. 
B) of a particular good and the quantity supplied by the aggregate economy. 
C) level and the quantity supplied of all goods in the economy. 
D) level and the quantity of all goods purchased in the economy. 
A) of a particular good and the quantity supplied by all firms producing that good. 
B) of a particular good and the quantity supplied by the aggregate economy. 
C) level and the quantity supplied of all goods in the economy. 
D) level and the quantity of all goods purchased in the economy.

Question 14

Along the intermediate range of the aggregate supply curve, an increase in the aggregate demand curve will increase:

Accepted Answer

A) both the price level and real GDP. 
B) only real GDP. 
C) only the price level. 
D) real GDP and reduce the price level. 
A) both the price level and real GDP. 
B) only real GDP. 
C) only the price level. 
D) real GDP and reduce the price level.

Question 15

The aggregate demand curve:

Accepted Answer

A) shows the level of real GDP purchased in the economy at different possible price levels during a period of time. 
B) shows the level of real GDP produced in the economy at different possible price levels during a period of time. 
C) shifts to the left whenever there is an increase in aggregate expenditures. 
D) slopes upward. 
A) shows the level of real GDP purchased in the economy at different possible price levels during a period of time. 
B) shows the level of real GDP produced in the economy at different possible price levels during a period of time. 
C) shifts to the left whenever there is an increase in aggregate expenditures. 
D) slopes upward.

Question 16

The net exports effect exists because a:

Accepted Answer

A) higher price level will reduce interest rates and stimulate foreign investment. 
B) lower price level will make domestically produced exports less expensive relative to foreign goods. 
C) higher price level will reduce the purchasing power of money. 
D) lower price level will encourage Americans to import more foreign goods. 
A) higher price level will reduce interest rates and stimulate foreign investment. 
B) lower price level will make domestically produced exports less expensive relative to foreign goods. 
C) higher price level will reduce the purchasing power of money. 
D) lower price level will encourage Americans to import more foreign goods.

Question 17

Suppose the price level falls. The result is that the:

Accepted Answer

A) aggregate supply curve would shift to the right. 
B) aggregate supply curve would shift to the left. 
C) general price level would rise causing a movement up the aggregate demand curve. 
D) aggregate demand curve would slope downward because of the real balances effect. 
A) aggregate supply curve would shift to the right. 
B) aggregate supply curve would shift to the left. 
C) general price level would rise causing a movement up the aggregate demand curve. 
D) aggregate demand curve would slope downward because of the real balances effect.

Question 18

A decrease in aggregate supply will cause the price level to:

Accepted Answer

A) rise and GDP to fall. 
B) rise and GDP to rise. 
C) rise and the unemployment rate to fall. 
D) fall and GDP to rise. 
E) fall and the unemployment rate to rise. 
A) rise and GDP to fall. 
B) rise and GDP to rise. 
C) rise and the unemployment rate to fall. 
D) fall and GDP to rise. 
E) fall and the unemployment rate to rise.

Question 19

In the United States during the 1960s, government spending dramatically increased to fight the Vietnam War, which resulted in:

Accepted Answer

A) demand-pull inflation. 
B) cost-push inflation. 
C) a disinflationary recession. 
D) stagflation. 
A) demand-pull inflation. 
B) cost-push inflation. 
C) a disinflationary recession. 
D) stagflation.

Question 20

In the aggregate demand and supply model, the:

Accepted Answer

A) aggregate supply curve is horizontal at full-employment real GDP. 
B) vertical axis measures real GDP. 
C) vertical axis measures the average price level. 
D) All of the above. 
E) None of the above. 
A) aggregate supply curve is horizontal at full-employment real GDP. 
B) vertical axis measures real GDP. 
C) vertical axis measures the average price level. 
D) All of the above. 
E) None of the above.

Exam 10: Aggregate Demand and Supply

Which of the following events is the most likely to create stagflation?

Exhibit 10-7 Aggregate supply and demand curves In Exhibit 10-7, choosing to operate the economy at GDP = $1200 billion and P = 110 would be opting for an economy of:

Which one of the following factors will most likely cause an increase in aggregate demand?

An increase in oil prices will shift the aggregate:

The real balance effect (wealth effect), the interest rate effect, and the net exports effect all help to explain the:

Exhibit 10-1 Aggregate supply curve In Exhibit 10-1, higher price levels allow producers to earn higher profits, stimulating production and employment in:

At low levels of employment, the Keynesian aggregate supply curve:

Exhibit 10-1 Aggregate supply curve In Exhibit 10-1, as production increases, firms resort to offering higher-wage rates to attract the dwindling supply of unemployed resources in:

If aggregate demand equals aggregate supply, macroeconomic equilibrium exists.

Exhibit 10-8 Aggregate demand and supply In Exhibit 10-8, if aggregate demand shifts from AD3 to AD4, real GDP will:

Which of the following correctly describes the aggregate supply curve?

_________ inflation can be explained by an ________ shift in the aggregate _________ curve.

The aggregate supply curve reflects the relationship between the price:

Along the intermediate range of the aggregate supply curve, an increase in the aggregate demand curve will increase:

The aggregate demand curve:

The net exports effect exists because a:

Suppose the price level falls. The result is that the:

A decrease in aggregate supply will cause the price level to:

In the United States during the 1960s, government spending dramatically increased to fight the Vietnam War, which resulted in:

In the aggregate demand and supply model, the:

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 AD₃ to AD₄, real GDP will:

_ inflation can be explained by an shift in the aggregate _ curve.