Question 1

Exhibit 10-6 Aggregate supply curve
 
In Exhibit 10-6, when the economy moves from a GDP of $1,000 billion to a GDP of $1,100 billion,

Accepted Answer

A)  higher wages will lower the cost of producing goods. 
B)  real GDP and employment both increase, but only under conditions of constant prices. 
C)  real GDP increases and employment decreases, but only under conditions of price level increases. 
D)  real GDP and employment both increase, but only under conditions of price level increases. 
A)  higher wages will lower the cost of producing goods. 
B)  real GDP and employment both increase, but only under conditions of constant prices. 
C)  real GDP increases and employment decreases, but only under conditions of price level increases. 
D)  real GDP and employment both increase, but only under conditions of price level increases.

Question 2

Exhibit 10-7 Aggregate supply and demand curves
 
In Exhibit 10-7, if aggregate demand increases from AD1 to AD2,

Accepted Answer

A)  output and prices will increase. 
B)  output and prices will decrease. 
C)  output alone will increase. 
D)  prices alone will increase. 
A)  output and prices will increase. 
B)  output and prices will decrease. 
C)  output alone will increase. 
D)  prices alone will increase.

Question 3

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 4

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 5

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 6

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 7

The real balances effect predicts that higher prices:

Accepted Answer

A)  make people worse off by reducing the value of their wealth, leading them to save more and spend less. 
B)  make people worse off by reducing the value of their wealth, leading them to save less and spend more. 
C)  make people better off by increasing the value of their wealth, leading them to save less and spend more. 
D)  increase borrowing, leading to higher interest rates and less investment. 
A)  make people worse off by reducing the value of their wealth, leading them to save more and spend less. 
B)  make people worse off by reducing the value of their wealth, leading them to save less and spend more. 
C)  make people better off by increasing the value of their wealth, leading them to save less and spend more. 
D)  increase borrowing, leading to higher interest rates and less investment.

Question 8

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 9

Exhibit 10-4 Aggregate supply and demand curves
 
As the economy moves to the right from E1 to E2 in Exhibit 10-4 along the upward-sloping aggregate supply curve the:

Accepted Answer

A)  unemployment rate rises. 
B)  unemployment rate falls. 
C)  inflation rate falls. 
D)  full employment GDP is realized. 
A)  unemployment rate rises. 
B)  unemployment rate falls. 
C)  inflation rate falls. 
D)  full employment GDP is realized.

Question 10

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 11

Aggregate demand's downward-sloping character reflects three principal influences as shown in which of the following?

Accepted Answer

A)  People's desire to maintain real wealth holdings, the interest rate, and international trade. 
B)  People's desire to increase the price level, the interest rate, and the economic growth effect. 
C)  The interest rate, the economic growth effect, and international trade. 
D)  Cost-pull inflation, demand-pull inflation, and the need to maintain real wealth holdings. 
A)  People's desire to maintain real wealth holdings, the interest rate, and international trade. 
B)  People's desire to increase the price level, the interest rate, and the economic growth effect. 
C)  The interest rate, the economic growth effect, and international trade. 
D)  Cost-pull inflation, demand-pull inflation, and the need to maintain real wealth holdings.

Question 12

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.

Question 13

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

Question 14

Which of the following would shift the aggregate demand curve to the left?

Accepted Answer

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

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

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 17

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 overall price level. 
D)  horizontal axis measures the overall price level. 
A)  aggregate supply curve is horizontal at full-employment real GDP. 
B)  vertical axis measures real GDP. 
C)  vertical axis measures the overall price level. 
D)  horizontal axis measures the overall price level.

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. 
A)  demand to shift rightward. 
B)  demand to shift leftward. 
C)  supply to shift rightward. 
D)  supply to shift leftward.

Question 19

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. 
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.

Question 20

Exhibit 10-8 Aggregate demand and supply
 
In Exhibit 10-8, when aggregate demand shifts from AD4 to AD5, the economy experiences:

Accepted Answer

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

Exam 20: Aggregate Demand and Supply

Exhibit 10-6 Aggregate supply curve In Exhibit 10-6, when the economy moves from a GDP of $1,000 billion to a GDP of $1,100 billion,

Exhibit 10-7 Aggregate supply and demand curves In Exhibit 10-7, if aggregate demand increases from AD1 to AD2,

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

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

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

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

The real balances effect predicts that higher prices:

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

Exhibit 10-4 Aggregate supply and demand curves As the economy moves to the right from E1 to E2 in Exhibit 10-4 along the upward-sloping aggregate supply curve the:

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

Aggregate demand's downward-sloping character reflects three principal influences as shown in which of the following?

The aggregate demand curve indicates the relationship between:

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

Which of the following would shift the aggregate demand curve to the left?

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?

The aggregate supply curve indicates the:

In the aggregate demand and supply model, the:

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:

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

Exhibit 10-8 Aggregate demand and supply In Exhibit 10-8, when aggregate demand shifts from AD4 to AD5, the economy experiences:

Introducing the Economic Way of Thinking

Production Possibilities Opportunity Cost and Economic Growth

Market Demand and Supply

Markets in Action

Price Elasticity of Demand and Supply

Consumer Choice Theory

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets

Income Distribution Poverty and Discrimination

Antitrust and Regulation

Environmental Economics

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

Understanding Direct and Inverse Relationships between Variables

Filters

Exhibit 10-7 Aggregate supply and demand curves In Exhibit 10-7, if aggregate demand increases from AD₁ to AD₂,

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

Exhibit 10-4 Aggregate supply and demand curves As the economy moves to the right from E₁ to E₂ in Exhibit 10-4 along the upward-sloping aggregate supply curve the:

Exhibit 10-8 Aggregate demand and supply In Exhibit 10-8, when aggregate demand shifts from AD₄ to AD₅, the economy experiences: