Question 1

The pre-Keynesian or classical economic theory viewed the long-run aggregate supply curve for the economy to be:

Accepted Answer

A)  horizontal at the full-employment level of real GDP. 
B)  positively sloped at the full-employment level of real GDP. 
C)  vertical at the full-employment level of real GDP. 
D)  backward bending at the full-employment level of real GDP. 
A)  horizontal at the full-employment level of real GDP. 
B)  positively sloped at the full-employment level of real GDP. 
C)  vertical at the full-employment level of real GDP. 
D)  backward bending at the full-employment level of real GDP.

Question 2

The aggregate supply curve will shift to the right when the:

Accepted Answer

A)  amount of labor in the society decreases. 
B)  capital stock of the society shrinks. 
C)  amount of natural resources in the society gets smaller. 
D)  amount of labor in the society increases. 
A)  amount of labor in the society decreases. 
B)  capital stock of the society shrinks. 
C)  amount of natural resources in the society gets smaller. 
D)  amount of labor in the society increases.

Question 3

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 4

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 5

Exhibit 10-4 Aggregate supply and demand curves
 
In Exhibit 10-4, point E2 represents:

Accepted Answer

A)  real GDP above full-employment GDP. 
B)  real GDP that equals full-employment GDP. 
C)  a depression. 
D)  real GDP below full-employment GDP. 
A)  real GDP above full-employment GDP. 
B)  real GDP that equals full-employment GDP. 
C)  a depression. 
D)  real GDP below full-employment GDP.

Question 6

The full employment level of real GDP can be represented on an aggregate supply and demand diagram as a(n):

Accepted Answer

A)  vertical line. 
B)  upward-sloping line. 
C)  horizontal line. 
D)  downward-sloping line. 
A)  vertical line. 
B)  upward-sloping line. 
C)  horizontal line. 
D)  downward-sloping line.

Question 7

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 8

Other factors held constant, a decrease in resource 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 9

When price level in the United States rises,

Accepted Answer

A)  there is a increased demand for borrowed money. 
B)  producers' demand for new machinery increases, contributing to an increase in aggregate demand. 
C)  Americans tend to buy more foreign goods and services. 
D)  the French, Canadians, and Japanese would find our exports more attractive. 
A)  there is a increased demand for borrowed money. 
B)  producers' demand for new machinery increases, contributing to an increase in aggregate demand. 
C)  Americans tend to buy more foreign goods and services. 
D)  the French, Canadians, and Japanese would find our exports more attractive.

Question 10

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

Question 11

When the CPI is 300, a real GDP of $8 trillion is demanded in a given year. If the CPI is 250, which of the following could be the real GDP demanded?

Accepted Answer

A)  $10 trillion 
B)  $8 trillion 
C)  $6 trillion 
D)  $4 trillion 
A)  $10 trillion 
B)  $8 trillion 
C)  $6 trillion 
D)  $4 trillion

Question 12

According to classical theory, if the aggregate demand curve decreased and the economy experienced unemployment, then:

Accepted Answer

A)  the economy would remain in this condition indefinitely. 
B)  the government must increase spending to restore full employment. 
C)  prices and wages would fall quickly to restore full employment. 
D)  the supply of money would increase until the economy returned to full employment. 
A)  the economy would remain in this condition indefinitely. 
B)  the government must increase spending to restore full employment. 
C)  prices and wages would fall quickly to restore full employment. 
D)  the supply of money would increase until the economy returned to full employment.

Question 13

When the price level falls, the total quantities of goods and services demanded:

Accepted Answer

A)  decrease. 
B)  stay the same. 
C)  increase. 
D)  increases and then decreases. 
A)  decrease. 
B)  stay the same. 
C)  increase. 
D)  increases and then decreases.

Question 14

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 15

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 16

The aggregate demand curve shows how real GDP purchased varies with changes in:

Accepted Answer

A)  unemployment. 
B)  the price of a particular good. 
C)  the overall price level. 
D)  the interest rate. 
A)  unemployment. 
B)  the price of a particular good. 
C)  the overall price level. 
D)  the interest rate.

Question 17

Which of the following will most likely cause an increase in the aggregate supply curve?

Accepted Answer

A)  a reduction in the general level of prices 
B)  an increase in the general level of prices 
C)  an improvement in technology that substantially reduces the cost of generating energy 
D)  an increase in taxes that makes it more expensive for Americans to import crude oil 
A)  a reduction in the general level of prices 
B)  an increase in the general level of prices 
C)  an improvement in technology that substantially reduces the cost of generating energy 
D)  an increase in taxes that makes it more expensive for Americans to import crude oil

Question 18

Suppose the economy is on the intermediate range of the aggregate supply curve. Which of the following would reduce both real GDP and the price level?

Accepted Answer

A)  a decrease in aggregate supply 
B)  an increase in aggregate supply 
C)  a decrease in aggregate demand 
D)  an increase in aggregate demand 
A)  a decrease in aggregate supply 
B)  an increase in aggregate supply 
C)  a decrease in aggregate demand 
D)  an increase in aggregate demand

Question 19

How are demand-pull and cost-push inflation reflected in terms of the AD-AS model?

Accepted Answer

Demand-pull inflation is reflected as a

Question 20

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.

Exam 20: Aggregate Demand and Supply

The pre-Keynesian or classical economic theory viewed the long-run aggregate supply curve for the economy to be:

The aggregate supply curve will shift to the right when the:

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?

Which of the following is true , other things equal?

Exhibit 10-4 Aggregate supply and demand curves In Exhibit 10-4, point E2 represents:

The full employment level of real GDP can be represented on an aggregate supply and demand diagram as a(n):

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

Other factors held constant, a decrease in resource prices will shift the aggregate:

When price level in the United States rises,

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

When the CPI is 300, a real GDP of $8 trillion is demanded in a given year. If the CPI is 250, which of the following could be the real GDP demanded?

According to classical theory, if the aggregate demand curve decreased and the economy experienced unemployment, then:

When the price level falls, the total quantities of goods and services demanded:

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?

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

The aggregate demand curve shows how real GDP purchased varies with changes in:

Which of the following will most likely cause an increase in the aggregate supply curve?

Suppose the economy is on the intermediate range of the aggregate supply curve. Which of the following would reduce both real GDP and the price level?

How are demand-pull and cost-push inflation reflected in terms of the AD-AS model?

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:

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 10-4 Aggregate supply and demand curves In Exhibit 10-4, point E₂ represents:

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?

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