Question 1

What pattern would you observe in an economy in which aggregate demand is increasing but in which long-run aggregate supply remained the same?

Accepted Answer

A) secular deflation 
B) inflation accompanied by no change in real GDP 
C) inflation accompanied by declines in real GDP 
D) a decline in consumption spending 
A) secular deflation 
B) inflation accompanied by no change in real GDP 
C) inflation accompanied by declines in real GDP 
D) a decline in consumption spending

Question 2

An increase in total planned real expenditures that is caused by a factor other than the price level will lead to the

Accepted Answer

A) aggregate supply curve shifting to the right. 
B) aggregate demand curve shifting to the right. 
C) aggregate supply curve shifting to the left. 
D) aggregate demand curve shifting to the left. 
A) aggregate supply curve shifting to the right. 
B) aggregate demand curve shifting to the right. 
C) aggregate supply curve shifting to the left. 
D) aggregate demand curve shifting to the left.

Question 3

What causes the long-run aggregate supply curve to shift right?

Accepted Answer

A) economic growth 
B) inflation 
C) unemployment 
D) scarcity 
A) economic growth 
B) inflation 
C) unemployment 
D) scarcity

Question 4

The values on the axes of the long-run aggregate supply diagram are

Accepted Answer

A) real GDP per year and the price level. 
B) nominal GDP and the price level. 
C) real GDP and interest rates. 
D) real GDP and nominal GDP. 
A) real GDP per year and the price level. 
B) nominal GDP and the price level. 
C) real GDP and interest rates. 
D) real GDP and nominal GDP.

Question 5

A rightward shift of long-run aggregate supply without any change in aggregate demand

Accepted Answer

A) will leave real GDP unchanged. 
B) results in a lower price level. 
C) increases the price level without any change in real GDP. 
D) increases the price level along with an increase in real GDP. 
A) will leave real GDP unchanged. 
B) results in a lower price level. 
C) increases the price level without any change in real GDP. 
D) increases the price level along with an increase in real GDP.

Question 6

What determines the total value of aggregate demand for U.S. real GDP?

Accepted Answer

A) the spending decisions of consumers, firms, and governments 
B) the Congressional Budget Office 
C) the Federal Reserve Board 
D) Wall Street 
A) the spending decisions of consumers, firms, and governments 
B) the Congressional Budget Office 
C) the Federal Reserve Board 
D) Wall Street

Question 7

When total planned real expenditures change due to changes in the cost of borrowing that result from variations in the price level, this is known as the

Accepted Answer

A) interest rate effect. 
B) real-balance effect. 
C) open economy effect. 
D) aggregate balances effect. 
A) interest rate effect. 
B) real-balance effect. 
C) open economy effect. 
D) aggregate balances effect.

Question 8

The interest rate effect suggests that

Accepted Answer

A) an increase in the price level decreases the interest rate, which causes businesses and consumers to reduce desired spending. 
B) an increase in the price level increases the interest rate, which causes businesses and consumers to reduce desired spending. 
C) a decrease in the price level decreases the interest rate, which causes businesses and consumers to reduce desired spending. 
D) an increase in the price level increases the money supply, which causes businesses and consumers to increase desired spending. 
A) an increase in the price level decreases the interest rate, which causes businesses and consumers to reduce desired spending. 
B) an increase in the price level increases the interest rate, which causes businesses and consumers to reduce desired spending. 
C) a decrease in the price level decreases the interest rate, which causes businesses and consumers to reduce desired spending. 
D) an increase in the price level increases the money supply, which causes businesses and consumers to increase desired spending.

Question 9

The full-employment level of GDP is

Accepted Answer

A) endowments. 
B) long-run aggregate demand. 
C) long-run aggregate supply. 
D) economic growth. 
A) endowments. 
B) long-run aggregate demand. 
C) long-run aggregate supply. 
D) economic growth.

Question 10

What is the shape of the long-run aggregate supply curve?
 Why?

Accepted Answer

The long-run aggregate supply curve is v

Question 11

How can a country experience economic growth and stable prices?

Accepted Answer

A country can experience economic growth

Question 12

What could cause a decrease in the price level and simultaneously an increase in GDP similar to the 1920s in the United States?

Accepted Answer

A) an increase in interest rates 
B) a decrease in consumer confidence 
C) an increase in productivity 
D) a decrease in interest rates 
A) an increase in interest rates 
B) a decrease in consumer confidence 
C) an increase in productivity 
D) a decrease in interest rates

Question 13

The shape of the aggregate demand curve does not tell us anything about how the total dollar value of spending will ultimately be divided between output and prices. For this we need

Accepted Answer

A) information about the standard of living in the country. 
B) information that only the Consumers' Price Index can provide. 
C) an aggregate supply curve. 
D) to know how far from the origin the aggregate demand curve is. 
A) information about the standard of living in the country. 
B) information that only the Consumers' Price Index can provide. 
C) an aggregate supply curve. 
D) to know how far from the origin the aggregate demand curve is.

Question 14

Higher interest rates tend to

Accepted Answer

A) reduce the total planned spending on goods and services. 
B) lower the costs of building new plants and equipment. 
C) increase the quantity demanded of goods and services. 
D) make it less costly for people to buy houses and cars. 
A) reduce the total planned spending on goods and services. 
B) lower the costs of building new plants and equipment. 
C) increase the quantity demanded of goods and services. 
D) make it less costly for people to buy houses and cars.

Question 15

According to the real-balance effect, an increase in the price level will

Accepted Answer

A) leave total planned real expenditures unchanged since the price level of all goods has increased. 
B) decrease total planned real expenditures because of an increase in interest rates. 
C) lead to a corresponding increase in total planned real expenditures since businesses are now earning higher profits. 
D) decrease total planned real expenditures as a result of a decrease in the real value of money balances. 
A) leave total planned real expenditures unchanged since the price level of all goods has increased. 
B) decrease total planned real expenditures because of an increase in interest rates. 
C) lead to a corresponding increase in total planned real expenditures since businesses are now earning higher profits. 
D) decrease total planned real expenditures as a result of a decrease in the real value of money balances.

Question 16

Economic growth can be thought of as

Accepted Answer

A) an increase in the price level. 
B) a decrease in the price level. 
C) an increase in long-run aggregate supply. 
D) an increase in aggregate demand. 
A) an increase in the price level. 
B) a decrease in the price level. 
C) an increase in long-run aggregate supply. 
D) an increase in aggregate demand.

Question 17

The total of all planned production for the entire economy is known as

Accepted Answer

A) aggregate expenditures. 
B) aggregate demand. 
C) aggregate supply. 
D) aggregate inflation. 
A) aggregate expenditures. 
B) aggregate demand. 
C) aggregate supply. 
D) aggregate inflation.

Question 18

The long run aggregate supply curve (LRAS)also represents

Accepted Answer

A) the full-information level of output. 
B) the full-employment level of output. 
C) the full-adjustment level of output. 
D) all of the above. 
A) the full-information level of output. 
B) the full-employment level of output. 
C) the full-adjustment level of output. 
D) all of the above.

Question 19

An increase in the U.S. price level causes a

Accepted Answer

A) shift of the U.S. aggregate demand curve to the right. 
B) shift of the U.S. aggregate demand curve to the left. 
C) movement up the U.S. aggregate demand curve. 
D) movement down the U.S. aggregate demand curve. 
A) shift of the U.S. aggregate demand curve to the right. 
B) shift of the U.S. aggregate demand curve to the left. 
C) movement up the U.S. aggregate demand curve. 
D) movement down the U.S. aggregate demand curve.

Question 20

If consumers' confidence in the economy rises

Accepted Answer

A) aggregate demand will shift leftward and the price level will rise. 
B) aggregate demand will shift leftward and the price level will fall. 
C) aggregate demand will shift rightward and the price level will rise. 
D) aggregate demand will shift rightward and the price level will fall. 
A) aggregate demand will shift leftward and the price level will rise. 
B) aggregate demand will shift leftward and the price level will fall. 
C) aggregate demand will shift rightward and the price level will rise. 
D) aggregate demand will shift rightward and the price level will fall.

What pattern would you observe in an economy in which aggregate demand is increasing but in which long-run aggregate supply remained the same?

An increase in total planned real expenditures that is caused by a factor other than the price level will lead to the

What causes the long-run aggregate supply curve to shift right?

The values on the axes of the long-run aggregate supply diagram are

A rightward shift of long-run aggregate supply without any change in aggregate demand

What determines the total value of aggregate demand for U.S. real GDP?

When total planned real expenditures change due to changes in the cost of borrowing that result from variations in the price level, this is known as the

The interest rate effect suggests that

The full-employment level of GDP is

What is the shape of the long-run aggregate supply curve? Why?

How can a country experience economic growth and stable prices?

What could cause a decrease in the price level and simultaneously an increase in GDP similar to the 1920s in the United States?

The shape of the aggregate demand curve does not tell us anything about how the total dollar value of spending will ultimately be divided between output and prices. For this we need

Higher interest rates tend to

According to the real-balance effect, an increase in the price level will

Economic growth can be thought of as

The total of all planned production for the entire economy is known as

The long run aggregate supply curve (LRAS)also represents

An increase in the U.S. price level causes a

If consumers' confidence in the economy rises

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Global Economic Growth and Development

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money Banking and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

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Exam 9: Real GDP and the Price Level in the Long Run

What pattern would you observe in an economy in which aggregate demand is increasing but in which long-run aggregate supply remained the same?

An increase in total planned real expenditures that is caused by a factor other than the price level will lead to the

What causes the long-run aggregate supply curve to shift right?

The values on the axes of the long-run aggregate supply diagram are

A rightward shift of long-run aggregate supply without any change in aggregate demand

What determines the total value of aggregate demand for U.S. real GDP?

When total planned real expenditures change due to changes in the cost of borrowing that result from variations in the price level, this is known as the

The interest rate effect suggests that

The full-employment level of GDP is

What is the shape of the long-run aggregate supply curve? Why?

How can a country experience economic growth and stable prices?

What could cause a decrease in the price level and simultaneously an increase in GDP similar to the 1920s in the United States?

The shape of the aggregate demand curve does not tell us anything about how the total dollar value of spending will ultimately be divided between output and prices. For this we need

Higher interest rates tend to

According to the real-balance effect, an increase in the price level will

Economic growth can be thought of as

The total of all planned production for the entire economy is known as

The long run aggregate supply curve (LRAS)also represents

An increase in the U.S. price level causes a

If consumers' confidence in the economy rises

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Global Economic Growth and Development

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money Banking and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters