Question 1

An increase in the price level will increase the interest rate,which will decrease investment spending and shift aggregate demand to the left.

Accepted Answer

A) True 
 B)False

Question 2

An increase in oil prices is considered a supply shock because it would lead to a shift of the aggregate supply curve.

Accepted Answer

A) True 
 B)False

Question 3

The aggregate demand curve identifies the level of aggregate production corresponding to a change in the price level.

Accepted Answer

A) True 
 B)False

Question 4

The AD curve shifts rightward if taxes decrease.

Accepted Answer

A) True 
 B)False

Question 5

A decrease in oil prices is considered a demand shock because it would lead to a shift of the aggregate demand curve.

Accepted Answer

A) True 
 B)False

Question 6

If a change in investment spending is due to a change in the price level,then the aggregate demand curve will shift.

Accepted Answer

A) True 
 B)False

Question 7

Equilibrium GDP

Accepted Answer

A)  is not affected by nominal wage adjustments 
B)  represents the level of output at which public welfare is maximized 
C)  in the long run is equal to the average of the short-run GDP equilibria 
D)  is influenced by long-run adjustments in the labor market 
E)  falls if aggregate demand increases 
A)  is not affected by nominal wage adjustments 
B)  represents the level of output at which public welfare is maximized 
C)  in the long run is equal to the average of the short-run GDP equilibria 
D)  is influenced by long-run adjustments in the labor market 
E)  falls if aggregate demand increases

Question 8

The increase in world oil prices in 1990 initially

Accepted Answer

A)  caused the AS curve to shift upward as wage rates quickly adjusted 
B)  increased the level of GDP associated with high price levels 
C)  shifted the aggregate expenditure line upward 
D)  caused the AS curve to shift upward due to higher costs per unit of output 
E)  caused the AD curve to shift leftward due to an increasing interest rate 
A)  caused the AS curve to shift upward as wage rates quickly adjusted 
B)  increased the level of GDP associated with high price levels 
C)  shifted the aggregate expenditure line upward 
D)  caused the AS curve to shift upward due to higher costs per unit of output 
E)  caused the AD curve to shift leftward due to an increasing interest rate

Question 9

In the long run,supply shocks

Accepted Answer

A)  are of no concern 
B)  are automatically offset so that the full-employment level of output is restored 
C)  cause the long-run AS curve to shift 
D)  have no effect on the wage rate 
E)  are automatically offset so that output and the price level return to their original values 
A)  are of no concern 
B)  are automatically offset so that the full-employment level of output is restored 
C)  cause the long-run AS curve to shift 
D)  have no effect on the wage rate 
E)  are automatically offset so that output and the price level return to their original values

Question 10

If there is a large increase in the price of oil,which of the following would most likely occur in the short run?

Accepted Answer

A)  The aggregate demand curve shifts upward,the price level rises,and output increases. 
B)  The aggregate supply curve shifts downward,the price level falls,and output increases. 
C)  The aggregate demand curve shifts downward,the price level falls,and output falls. 
D)  The aggregate demand curve shifts upward,output remains unchanged,and the price level rises. 
E)  The aggregate supply curve shifts upward,the price level rises,and output falls. 
A)  The aggregate demand curve shifts upward,the price level rises,and output increases. 
B)  The aggregate supply curve shifts downward,the price level falls,and output increases. 
C)  The aggregate demand curve shifts downward,the price level falls,and output falls. 
D)  The aggregate demand curve shifts upward,output remains unchanged,and the price level rises. 
E)  The aggregate supply curve shifts upward,the price level rises,and output falls.

Question 11

Equilibrium real GDP is

Accepted Answer

A)  independent of the price level 
B)  determined solely in the loanable funds market 
C)  controlled by the Fed 
D)  directly related to the interest rate 
E)  the level of output at which total spending equals total output for a given price level 
A)  independent of the price level 
B)  determined solely in the loanable funds market 
C)  controlled by the Fed 
D)  directly related to the interest rate 
E)  the level of output at which total spending equals total output for a given price level

Question 12

If the Fed conducts an open market sale of bonds,which of the following will happen?

Accepted Answer

A)  The interest rate will decrease,the aggregate expenditure line will shift upward and the aggregate demand curve will shift rightward 
B)  The interest rate will decrease,the aggregate expenditure line will shift downward and the aggregate demand curve will shift rightward 
C)  The interest rate will increase,the aggregate expenditure line will shift downward and the aggregate demand curve will shift leftward 
D)  The interest rate will decrease,the aggregate expenditure line will shift upward and the aggregate demand curve will shift leftward 
E)  The interest rate will increase,the aggregate expenditure line will shift downward and the aggregate demand curve will shift rightward. 
A)  The interest rate will decrease,the aggregate expenditure line will shift upward and the aggregate demand curve will shift rightward 
B)  The interest rate will decrease,the aggregate expenditure line will shift downward and the aggregate demand curve will shift rightward 
C)  The interest rate will increase,the aggregate expenditure line will shift downward and the aggregate demand curve will shift leftward 
D)  The interest rate will decrease,the aggregate expenditure line will shift upward and the aggregate demand curve will shift leftward 
E)  The interest rate will increase,the aggregate expenditure line will shift downward and the aggregate demand curve will shift rightward.

Question 13

The economy's self-correcting mechanism

Accepted Answer

A)  prevents the economy from ever being in disequilibrium 
B)  guides the economy to full employment in the long run 
C)  maintains a steady long-run price level 
D)  is a short-run adjustment process 
E)  is controlled by the Fed 
A)  prevents the economy from ever being in disequilibrium 
B)  guides the economy to full employment in the long run 
C)  maintains a steady long-run price level 
D)  is a short-run adjustment process 
E)  is controlled by the Fed

Question 14

If a new insect invasion devastates crops all across the United States,which of the following would most likely occur in the short run?

Accepted Answer

A)  Unit costs would decrease and the economy would move upward along the aggregate supply curve. 
B)  Unit costs would increase and the aggregate supply curve would shift downward. 
C)  Unit costs would increase and there would be movement along the aggregate supply curve. 
D)  Unit costs would decrease and the aggregate supply curve would shift upward. 
E)  Unit costs would increase and the aggregate supply curve would shift upward. 
A)  Unit costs would decrease and the economy would move upward along the aggregate supply curve. 
B)  Unit costs would increase and the aggregate supply curve would shift downward. 
C)  Unit costs would increase and there would be movement along the aggregate supply curve. 
D)  Unit costs would decrease and the aggregate supply curve would shift upward. 
E)  Unit costs would increase and the aggregate supply curve would shift upward.

Question 15

Nominal wages react slowly to changes in output for the following reasons,except one.Which is the exception?

Accepted Answer

A)  The nominal wage may be fixed and independent of output because of labor contracts that last up to three years. 
B)  The real wage remains constant despite changes in output. 
C)  Firms with a reputation for paying stable nominal wages will find it easier to attract new workers. 
D)  Changing the nominal wage can be costly to firms. 
E)  Nominal wages may be set by slow-moving corporate bureaucracies. 
A)  The nominal wage may be fixed and independent of output because of labor contracts that last up to three years. 
B)  The real wage remains constant despite changes in output. 
C)  Firms with a reputation for paying stable nominal wages will find it easier to attract new workers. 
D)  Changing the nominal wage can be costly to firms. 
E)  Nominal wages may be set by slow-moving corporate bureaucracies.

Question 16

Stagflation is caused by

Accepted Answer

A)  a negative supply shock. 
B)  a positive supply shock. 
C)  a negative demand shock. 
D)  a positive demand shock. 
E)  none of the above. 
A)  a negative supply shock. 
B)  a positive supply shock. 
C)  a negative demand shock. 
D)  a positive demand shock. 
E)  none of the above.

Question 17

Which of the following can lead to stagflation?

Accepted Answer

A)  A decrease in the money supply 
B)  A decrease in autonomous consumption 
C)  A prolonged increase in oil prices 
D)  An increase in government spending 
E)  A decrease in oil prices. 
A)  A decrease in the money supply 
B)  A decrease in autonomous consumption 
C)  A prolonged increase in oil prices 
D)  An increase in government spending 
E)  A decrease in oil prices.

Question 18

Which of the following most accurately describes the aggregate supply curve?

Accepted Answer

A)  It shows the price level associated with firms' unit costs and markups for any level of GDP. 
B)  It is the sum of all individual firms' supply curves. 
C)  It is determined by the federal government. 
D)  It shows firms' unit costs for each level of GDP. 
E)  It shows the equilibrium level of GDP corresponding to each price level. 
A)  It shows the price level associated with firms' unit costs and markups for any level of GDP. 
B)  It is the sum of all individual firms' supply curves. 
C)  It is determined by the federal government. 
D)  It shows firms' unit costs for each level of GDP. 
E)  It shows the equilibrium level of GDP corresponding to each price level.

Question 19

As output increases,a typical firm's unit costs

Accepted Answer

A)  decrease because the firm buys its inputs in large quantities 
B)  increase because the supply of inputs increases 
C)  remain constant 
D)  increase due to the increasing scarcity of resources 
E)  decrease as firms take advantage of diseconomies of scale. 
A)  decrease because the firm buys its inputs in large quantities 
B)  increase because the supply of inputs increases 
C)  remain constant 
D)  increase due to the increasing scarcity of resources 
E)  decrease as firms take advantage of diseconomies of scale.

Question 20

The equilibrium price level

Accepted Answer

A)  determines by how much the AD curve shifts 
B)  is inversely related to the nominal wage rate 
C)  is influenced by the pricing behavior of all the firms in the economy 
D)  is unaffected by changes in resource costs 
E)  is the same thing as the interest rate 
A)  determines by how much the AD curve shifts 
B)  is inversely related to the nominal wage rate 
C)  is influenced by the pricing behavior of all the firms in the economy 
D)  is unaffected by changes in resource costs 
E)  is the same thing as the interest rate

An increase in the price level will increase the interest rate,which will decrease investment spending and shift aggregate demand to the left.

An increase in oil prices is considered a supply shock because it would lead to a shift of the aggregate supply curve.

The aggregate demand curve identifies the level of aggregate production corresponding to a change in the price level.

The AD curve shifts rightward if taxes decrease.

A decrease in oil prices is considered a demand shock because it would lead to a shift of the aggregate demand curve.

If a change in investment spending is due to a change in the price level,then the aggregate demand curve will shift.

Equilibrium GDP

The increase in world oil prices in 1990 initially

In the long run,supply shocks

If there is a large increase in the price of oil,which of the following would most likely occur in the short run?

Equilibrium real GDP is

If the Fed conducts an open market sale of bonds,which of the following will happen?

The economy's self-correcting mechanism

If a new insect invasion devastates crops all across the United States,which of the following would most likely occur in the short run?

Nominal wages react slowly to changes in output for the following reasons,except one.Which is the exception?

Stagflation is caused by

Which of the following can lead to stagflation?

Which of the following most accurately describes the aggregate supply curve?

As output increases,a typical firm's unit costs

The equilibrium price level

What is Economics?

Scarcity, Choice, and Economic Systems

Supply and Demand

Working With Supply and Demand

What Macroeconomics Tries to Explain

Production, Income, and Employment

The Price Level and Inflation

The Classical Long run Model

Economic Growth and Rising Living Standards

Economic Fluctuations

The Short-run Macro Model

Fiscal Policy

Money, Banks, and the Federal Reserve

The Money Market and Monetary Policy

Inflation and Monetary Policy

Exchange Rates and Macroeconomic Policy

Filters

Exam 15: Aggregate Demand and Aggregate Supply

An increase in the price level will increase the interest rate,which will decrease investment spending and shift aggregate demand to the left.

An increase in oil prices is considered a supply shock because it would lead to a shift of the aggregate supply curve.

The aggregate demand curve identifies the level of aggregate production corresponding to a change in the price level.

The AD curve shifts rightward if taxes decrease.

A decrease in oil prices is considered a demand shock because it would lead to a shift of the aggregate demand curve.

If a change in investment spending is due to a change in the price level,then the aggregate demand curve will shift.

Equilibrium GDP

The increase in world oil prices in 1990 initially

In the long run,supply shocks

If there is a large increase in the price of oil,which of the following would most likely occur in the short run?

Equilibrium real GDP is

If the Fed conducts an open market sale of bonds,which of the following will happen?

The economy's self-correcting mechanism

If a new insect invasion devastates crops all across the United States,which of the following would most likely occur in the short run?

Nominal wages react slowly to changes in output for the following reasons,except one.Which is the exception?

Stagflation is caused by

Which of the following can lead to stagflation?

Which of the following most accurately describes the aggregate supply curve?

As output increases,a typical firm's unit costs

The equilibrium price level

What is Economics?

Scarcity, Choice, and Economic Systems

Supply and Demand

Working With Supply and Demand

What Macroeconomics Tries to Explain

Production, Income, and Employment

The Price Level and Inflation

The Classical Long run Model

Economic Growth and Rising Living Standards

Economic Fluctuations

The Short-run Macro Model

Fiscal Policy

Money, Banks, and the Federal Reserve

The Money Market and Monetary Policy

Inflation and Monetary Policy

Exchange Rates and Macroeconomic Policy

Filters