Question 1

Which of the following statements is correct?

Accepted Answer

A) The price level does not effect the level of real GDP demanded. 
B) The lower the price level, the greater the quantity of real GDP demanded 
C) The lower the price level, the more the aggregate demand curve shifts rightward. 
D) The lower the price level, the more the aggregate demand curve shifts leftward. 
E) The higher the price level, the more the aggregate demand curve shifts rightward. 
A) The price level does not effect the level of real GDP demanded. 
B) The lower the price level, the greater the quantity of real GDP demanded 
C) The lower the price level, the more the aggregate demand curve shifts rightward. 
D) The lower the price level, the more the aggregate demand curve shifts leftward. 
E) The higher the price level, the more the aggregate demand curve shifts rightward.

Question 2

A rise in the price level brings a ________ in the real wage rate that ________ profits which leads to ________ production.

Accepted Answer

A) rise; reduces; decreasing 
B) rise; reduces; increasing 
C) fall; increases; increasing 
D) rise; increases; decreasing 
E) fall; decreases; decreasing 
A) rise; reduces; decreasing 
B) rise; reduces; increasing 
C) fall; increases; increasing 
D) rise; increases; decreasing 
E) fall; decreases; decreasing

Question 3

State how each of the following affect the aggregate demand curve.
a. The price level increases.
b. Consumers expect higher inflation in the future.
c. The exchange rate rises.
d. Foreign income decreases.

Accepted Answer

a. There is a movement upward along the

Question 4

The government passes a law which doubles the wages of all workers. Aggregate supply will ________, and real GDP will ________, and the price level will ________.

Accepted Answer

A) increase; remain the same; increase. 
B) remain the same; increase; increase. 
C) increase; increase; remain the same. 
D) decrease; increase; increase. 
E) decrease; decrease; increase. 
A) increase; remain the same; increase. 
B) remain the same; increase; increase. 
C) increase; increase; remain the same. 
D) decrease; increase; increase. 
E) decrease; decrease; increase.

Question 5

The figure above shows the aggregate demand curve.
-The aggregate demand curve in the figure above shifts rightward if

Accepted Answer

A) potential GDP increases. 
B) the money wage rate falls. 
C) taxes are hiked. 
D) government expenditure decreases. 
E) the expected future profit increases so that investment increases. 
A) potential GDP increases. 
B) the money wage rate falls. 
C) taxes are hiked. 
D) government expenditure decreases. 
E) the expected future profit increases so that investment increases.

Question 6

Increases in the quantity of money can start a ________ inflation and an increase in government expenditure can start a ________ inflation.

Accepted Answer

A) demand-pull; demand-pull 
B) demand-pull; cost-push 
C) cost-push; cost-push 
D) cost-push; demand-pull 
E) None of the above are correct because increases in the quantity of money are necessary to continue an inflation but cannot start an inflation. 
A) demand-pull; demand-pull 
B) demand-pull; cost-push 
C) cost-push; cost-push 
D) cost-push; demand-pull 
E) None of the above are correct because increases in the quantity of money are necessary to continue an inflation but cannot start an inflation.

Question 7

A tax cut ________ aggregate demand and ________.

Accepted Answer

A) decreases; shifts the AD curve rightward 
B) increases; shifts the AD curve leftward 
C) increases; shifts the AD curve rightward 
D) decreases; shifts the AD curve leftward 
E) does not change; does not shift the AD curve 
A) decreases; shifts the AD curve rightward 
B) increases; shifts the AD curve leftward 
C) increases; shifts the AD curve rightward 
D) decreases; shifts the AD curve leftward 
E) does not change; does not shift the AD curve

Question 8

Aggregate demand ________ and shifts the AD curve ________ when ________.

Accepted Answer

A) decreases; leftward; the price level rises 
B) increases; leftward; taxes increase 
C) increases; rightward; foreign incomes increase 
D) decreases; rightward; government expenditure increases 
E) increases; rightward; taxes increase 
A) decreases; leftward; the price level rises 
B) increases; leftward; taxes increase 
C) increases; rightward; foreign incomes increase 
D) decreases; rightward; government expenditure increases 
E) increases; rightward; taxes increase

Question 9

How does an increase in the price level affect the aggregate quantity of goods and services demanded?

Accepted Answer

An increase in the price level decreases

Question 10

A fall in the money wage rate ________ aggregate supply and ________.

Accepted Answer

A) decreases; shifts the AS curve rightward 
B) increases; shifts the AS curve leftward 
C) increases; shifts the AS curve rightward 
D) decreases; shifts the AS curve leftward 
E) does not change; does not shift the AS curve 
A) decreases; shifts the AS curve rightward 
B) increases; shifts the AS curve leftward 
C) increases; shifts the AS curve rightward 
D) decreases; shifts the AS curve leftward 
E) does not change; does not shift the AS curve

Question 11

A rise in the money wage rate shifts the

Accepted Answer

A) AD curve rightward. 
B) AD curve leftward. 
C) AS curve rightward. 
D) AS curve leftward. 
E) potential GDP curve rightward. 
A) AD curve rightward. 
B) AD curve leftward. 
C) AS curve rightward. 
D) AS curve leftward. 
E) potential GDP curve rightward.

Question 12

At a peak in the business cycle, the macroeconomic equilibrium is ________ the level of potential real GDP.

Accepted Answer

A) greater than 
B) equal to 
C) less than 
D) falling below 
E) None of the above answers is always correct because the relationship depends on whether the previous phase of the business cycle had been a recession or an expansion. 
A) greater than 
B) equal to 
C) less than 
D) falling below 
E) None of the above answers is always correct because the relationship depends on whether the previous phase of the business cycle had been a recession or an expansion.

Question 13

For a demand-pull inflation to persist requires persistent increases in

Accepted Answer

A) tax rates. 
B) the real wage rate. 
C) real GDP. 
D) the quantity of money. 
E) government expenditures. 
A) tax rates. 
B) the real wage rate. 
C) real GDP. 
D) the quantity of money. 
E) government expenditures.

Question 14

If people's expectations about future income improve so they think their future income will be higher than previously believed, then the AD curve

Accepted Answer

A) will not change until income actually rises. 
B) will shift leftward because people will spend less now. 
C) will shift rightward because people will increase spending now. 
D) and the AS curve will both shift leftward because people will increase their saving. 
E) will not shift, but potential GDP will increase. 
A) will not change until income actually rises. 
B) will shift leftward because people will spend less now. 
C) will shift rightward because people will increase spending now. 
D) and the AS curve will both shift leftward because people will increase their saving. 
E) will not shift, but potential GDP will increase.

Question 15

In the figure above, the economy is at an equilibrium with real GDP of $13 trillion and a price level of 110. As the economy moves toward its ultimate equilibrium, the ________ curve shifts ________.

Accepted Answer

A) aggregate supply; leftward 
B) aggregate supply; rightward 
C) aggregate demand; rightward 
D) aggregate demand; leftward 
E) potential GDP; leftward 
A) aggregate supply; leftward 
B) aggregate supply; rightward 
C) aggregate demand; rightward 
D) aggregate demand; leftward 
E) potential GDP; leftward

Question 16

An increase in the price level leads to

Accepted Answer

A) an upward movement along the aggregate supply curve. 
B) a downward movement along the aggregate supply curve. 
C) a leftward shift of the aggregate supply curve. 
D) a rightward shift of the aggregate supply curve. 
E) neither a movement along the aggregate supply curve nor a shift of the aggregate supply curve. 
A) an upward movement along the aggregate supply curve. 
B) a downward movement along the aggregate supply curve. 
C) a leftward shift of the aggregate supply curve. 
D) a rightward shift of the aggregate supply curve. 
E) neither a movement along the aggregate supply curve nor a shift of the aggregate supply curve.

Question 17

-What is the current equilibrium price level and real GDP for the economy illustrated in the figure above?
 Does this economy have an inflationary gap, a recessionary gap, or neither?
 As it adjusts toward full employment, which curve shifts?
 What is the equilibrium real GDP and price level that the economy will ultimately reach?

Accepted Answer

The equilibrium is where the aggregate d

Question 18

The slope of the aggregate supply curve shows that the ________ the price level, the ________.

Accepted Answer

A) higher; greater is the quantity of real GDP supplied 
B) higher; smaller is the quantity of real GDP supplied 
C) lower; greater is the quantity of real GDP supplied 
D) higher; is the quantity of potential GDP supplied 
E) lower; is the quantity of potential GDP supplied 
A) higher; greater is the quantity of real GDP supplied 
B) higher; smaller is the quantity of real GDP supplied 
C) lower; greater is the quantity of real GDP supplied 
D) higher; is the quantity of potential GDP supplied 
E) lower; is the quantity of potential GDP supplied

Question 19

The figure above shows aggregate demand curves.
-Based on the figure above, the aggregate demand curve will shift from AD₀ to AD₁ when

Accepted Answer

A) potential GDP increases. 
B) the price level falls. 
C) the price level rises. 
D) government expenditure decreases. 
E) the Federal Reserve lowers the interest rate. 
A) potential GDP increases. 
B) the price level falls. 
C) the price level rises. 
D) government expenditure decreases. 
E) the Federal Reserve lowers the interest rate.

Question 20

A crisis in the Middle East drastically raises the price of petroleum. If the aggregate demand curve does not shift, then aggregate supply will ________, real GDP will ________, and the price level will ________.

Accepted Answer

A) increase; remain the same; increase 
B) decrease; decrease; increase 
C) increase; increase; increase 
D) remain the same; increase; increase 
E) decrease; remain the same; decrease 
A) increase; remain the same; increase 
B) decrease; decrease; increase 
C) increase; increase; increase 
D) remain the same; increase; increase 
E) decrease; remain the same; decrease

Which of the following statements is correct?

A rise in the price level brings a in the real wage rate that profits which leads to production.

State how each of the following affect the aggregate demand curve. a. The price level increases. b. Consumers expect higher inflation in the future. c. The exchange rate rises. d. Foreign income decreases.

The government passes a law which doubles the wages of all workers. Aggregate supply will , and real GDP will , and the price level will .

The figure above shows the aggregate demand curve. -The aggregate demand curve in the figure above shifts rightward if

Increases in the quantity of money can start a inflation and an increase in government expenditure can start a inflation.

A tax cut aggregate demand and .

Aggregate demand and shifts the AD curve when .

How does an increase in the price level affect the aggregate quantity of goods and services demanded?

A fall in the money wage rate aggregate supply and .

A rise in the money wage rate shifts the

At a peak in the business cycle, the macroeconomic equilibrium is ________ the level of potential real GDP.

For a demand-pull inflation to persist requires persistent increases in

If people's expectations about future income improve so they think their future income will be higher than previously believed, then the AD curve

In the figure above, the economy is at an equilibrium with real GDP of $13 trillion and a price level of 110. As the economy moves toward its ultimate equilibrium, the curve shifts .

An increase in the price level leads to

The slope of the aggregate supply curve shows that the the price level, the .

The figure above shows aggregate demand curves. -Based on the figure above, the aggregate demand curve will shift from AD₀ to AD₁ when

A crisis in the Middle East drastically raises the price of petroleum. If the aggregate demand curve does not shift, then aggregate supply will , real GDP will , and the price level will .

Getting Started

The Us and Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Global Markets in Action

Externalities: Pollution, Education, and Health Care

Production and Cost

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Gdp: a Measure of Total Production and Income

Jobs and Unemployment

The Cpi and the Cost of Living

Potential Gdp and Economic Growth

Money and the Monetary System

Fiscal Policy and Monetary Policy

Filters

Exam 19: Aggregate Supply and Aggregate Demand

Which of the following statements is correct?

A rise in the price level brings a ________ in the real wage rate that ________ profits which leads to ________ production.

State how each of the following affect the aggregate demand curve. a. The price level increases. b. Consumers expect higher inflation in the future. c. The exchange rate rises. d. Foreign income decreases.

The government passes a law which doubles the wages of all workers. Aggregate supply will ________, and real GDP will ________, and the price level will ________.

The figure above shows the aggregate demand curve. -The aggregate demand curve in the figure above shifts rightward if

Increases in the quantity of money can start a ________ inflation and an increase in government expenditure can start a ________ inflation.

A tax cut ________ aggregate demand and ________.

Aggregate demand ________ and shifts the AD curve ________ when ________.

How does an increase in the price level affect the aggregate quantity of goods and services demanded?

A fall in the money wage rate ________ aggregate supply and ________.

A rise in the money wage rate shifts the

At a peak in the business cycle, the macroeconomic equilibrium is ________ the level of potential real GDP.

For a demand-pull inflation to persist requires persistent increases in

If people's expectations about future income improve so they think their future income will be higher than previously believed, then the AD curve

In the figure above, the economy is at an equilibrium with real GDP of $13 trillion and a price level of 110. As the economy moves toward its ultimate equilibrium, the ________ curve shifts ________.

An increase in the price level leads to

The slope of the aggregate supply curve shows that the ________ the price level, the ________.

The figure above shows aggregate demand curves. -Based on the figure above, the aggregate demand curve will shift from AD₀ to AD₁ when

A crisis in the Middle East drastically raises the price of petroleum. If the aggregate demand curve does not shift, then aggregate supply will ________, real GDP will ________, and the price level will ________.

Getting Started

The Us and Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Global Markets in Action

Externalities: Pollution, Education, and Health Care

Production and Cost

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Gdp: a Measure of Total Production and Income

Jobs and Unemployment

The Cpi and the Cost of Living

Potential Gdp and Economic Growth

Money and the Monetary System

Fiscal Policy and Monetary Policy

Filters

A rise in the price level brings a in the real wage rate that profits which leads to production.

The government passes a law which doubles the wages of all workers. Aggregate supply will , and real GDP will , and the price level will .

Increases in the quantity of money can start a inflation and an increase in government expenditure can start a inflation.

A tax cut aggregate demand and .

Aggregate demand and shifts the AD curve when .

A fall in the money wage rate aggregate supply and .

In the figure above, the economy is at an equilibrium with real GDP of $13 trillion and a price level of 110. As the economy moves toward its ultimate equilibrium, the curve shifts .

The slope of the aggregate supply curve shows that the the price level, the .

A crisis in the Middle East drastically raises the price of petroleum. If the aggregate demand curve does not shift, then aggregate supply will , real GDP will , and the price level will .