Question 1

The net exports effect is the inverse relationship between net exports and the ____ of an economy.

Accepted Answer

A)  potential real GDP 
B)  chain-price deflator 
C)  price level 
D)  consumption spending 
A)  potential real GDP 
B)  chain-price deflator 
C)  price level 
D)  consumption spending

Question 2

Exhibit 14A-1 Aggregate demand and supply model
 
Beginning from short-run equilibrium at point E2 in Exhibit 10A-1, the economy's movement to a new position of long-run equilibrium would best be described as:

Accepted Answer

A)  a movement along the AD 2  curve with a shift in the SRAS 1  curve. 
B)  a movement along the SRAS 2  curve with a shift in the AD 2  curve. 
C)   a shift in the LRAS curve to an intersection at E 1 . 
D)  no shift of any kind. 
A)  a movement along the AD 2  curve with a shift in the SRAS 1  curve. 
B)  a movement along the SRAS 2  curve with a shift in the AD 2  curve. 
C)   a shift in the LRAS curve to an intersection at E 1 . 
D)  no shift of any kind.

Question 3

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 4

Why does the aggregate demand (AD) curve slope downward? What could cause the AD curve to shift to the right? What impact would a rightward shift of the AD curve have on the economy?

Accepted Answer

The AD curve slopes downward because of

Question 5

An explanation for why the short-run aggregate supply curve is upward-sloping is because:

Accepted Answer

A)  the quantity of real output supplied is inversely related to the aggregate supply curve. 
B)  nominal incomes are fixed. 
C)  the capital-output ratio is fixed. 
D)  an increase in price will increase the marginal aggregate output. 
A)  the quantity of real output supplied is inversely related to the aggregate supply curve. 
B)  nominal incomes are fixed. 
C)  the capital-output ratio is fixed. 
D)  an increase in price will increase the marginal aggregate output.

Question 6

To illustrate the classical argument that "supply creates its own demand," the aggregate supply curve should be drawn:

Accepted Answer

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

Question 7

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 8

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 9

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 10

One reason for the short-run aggregate supply curve (SRAS) is:

Accepted Answer

A)  a fixed CPI market basket. 
B)  perfect knowledge of workers. 
C)  fixed-wage contracts. 
D)  the upward-sloping production function. 
A)  a fixed CPI market basket. 
B)  perfect knowledge of workers. 
C)  fixed-wage contracts. 
D)  the upward-sloping production function.

Question 11

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 12

In the long run, wages and prices are considered to be:

Accepted Answer

A)  fixed. 
B)   sticky. 
C)  flexible. 
D)  unstable. 
A)  fixed. 
B)   sticky. 
C)  flexible. 
D)  unstable.

Question 13

Along the short-run supply curve (SRAS), a decrease in the aggregate demand curve will decrease:

Accepted Answer

A)  both the price level and real GDP. 
B)  real GDP without raising the price level. 
C)  the price level without affecting real GDP. 
D)  the price level but increase real GDP . 
A)  both the price level and real GDP. 
B)  real GDP without raising the price level. 
C)  the price level without affecting real GDP. 
D)  the price level but increase real GDP .

Question 14

Economic growth is represented by a:

Accepted Answer

A)  leftward shift of a production possibilities curve. 
B)  rightward shift of the long-run aggregate supply curve (LRAS). 
C)  horizontal long-run aggregate supply curve (LRAS). 
D)  downward shift of an aggregate production function. 
A)  leftward shift of a production possibilities curve. 
B)  rightward shift of the long-run aggregate supply curve (LRAS). 
C)  horizontal long-run aggregate supply curve (LRAS). 
D)  downward shift of an aggregate production function.

Question 15

Exhibit 14-7 Aggregate supply and demand curves
 
In Exhibit 14-7, 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 16

Exhibit 14-7 Aggregate supply and demand curves
 
At point A in Exhibit 14-7, the aggregate demand AD2 and the aggregate supply curve 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.

The net exports effect is the inverse relationship between net exports and the ____ of an economy.

Exhibit 14A-1 Aggregate demand and supply model Beginning from short-run equilibrium at point E₂ in Exhibit 10A-1, the economy's movement to a new position of long-run equilibrium would best be described as:

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

Why does the aggregate demand (AD) curve slope downward? What could cause the AD curve to shift to the right? What impact would a rightward shift of the AD curve have on the economy?

An explanation for why the short-run aggregate supply curve is upward-sloping is because:

To illustrate the classical argument that "supply creates its own demand," the aggregate supply curve should be drawn:

In the aggregate demand and supply model, the:

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

A reduction in regulation will shift the aggregate:

One reason for the short-run aggregate supply curve (SRAS) is:

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

In the long run, wages and prices are considered to be:

Along the short-run supply curve (SRAS), a decrease in the aggregate demand curve will decrease:

Economic growth is represented by a:

Exhibit 14-7 Aggregate supply and demand curves In Exhibit 14-7, if aggregate demand increases from AD₁ to AD₂,

Exhibit 14-7 Aggregate supply and demand curves At point A in Exhibit 14-7, the aggregate demand AD₂ and the aggregate supply curve reflect an economy in which

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

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets and Income Distribution

Gross Domestic Product

Business Cycles and Unemployment

Inflation

Fiscal Policy

The Public Sector

Federal Deficits Surpluses and the National Debt

Money and the Federal Reserve System

Money Creation

Monetary Policy

International Trade and Finance

Economies in Transition

Growth and the Less Developed Countries

Filters

Exam 14: Aggregate Demand and Supply

The net exports effect is the inverse relationship between net exports and the ____ of an economy.

Exhibit 14A-1 Aggregate demand and supply model Beginning from short-run equilibrium at point E2 in Exhibit 10A-1, the economy's movement to a new position of long-run equilibrium would best be described as:

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

Why does the aggregate demand (AD) curve slope downward? What could cause the AD curve to shift to the right? What impact would a rightward shift of the AD curve have on the economy?

An explanation for why the short-run aggregate supply curve is upward-sloping is because:

To illustrate the classical argument that "supply creates its own demand," the aggregate supply curve should be drawn:

In the aggregate demand and supply model, the:

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

A reduction in regulation will shift the aggregate:

One reason for the short-run aggregate supply curve (SRAS) is:

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

In the long run, wages and prices are considered to be:

Along the short-run supply curve (SRAS), a decrease in the aggregate demand curve will decrease:

Economic growth is represented by a:

Exhibit 14-7 Aggregate supply and demand curves In Exhibit 14-7, if aggregate demand increases from AD1 to AD2,

Exhibit 14-7 Aggregate supply and demand curves At point A in Exhibit 14-7, the aggregate demand AD2 and the aggregate supply curve reflect an economy in which

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

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets and Income Distribution

Gross Domestic Product

Business Cycles and Unemployment

Inflation

Fiscal Policy

The Public Sector

Federal Deficits Surpluses and the National Debt

Money and the Federal Reserve System

Money Creation

Monetary Policy

International Trade and Finance

Economies in Transition

Growth and the Less Developed Countries

Filters

Exhibit 14A-1 Aggregate demand and supply model Beginning from short-run equilibrium at point E₂ in Exhibit 10A-1, the economy's movement to a new position of long-run equilibrium would best be described as:

Exhibit 14-7 Aggregate supply and demand curves In Exhibit 14-7, if aggregate demand increases from AD₁ to AD₂,

Exhibit 14-7 Aggregate supply and demand curves At point A in Exhibit 14-7, the aggregate demand AD₂ and the aggregate supply curve reflect an economy in which