Question 1

The interest rate effect that helps explain the slope of the aggregate demand curve arises because

Accepted Answer

A) interest rates and total planned real expenditures are unrelated. 
B) an increase in the price level lead to decreases in interest rates, which induces more borrowing and hence raises planned real expenditures. 
C) an increase in the price level boosts interest rates, which discourages borrowing and hence reduces planned real expenditures. 
D) a decrease in the price level boosts interest rates, which discourages borrowing and hence frees up income for more planned real expenditures. 
A) interest rates and total planned real expenditures are unrelated. 
B) an increase in the price level lead to decreases in interest rates, which induces more borrowing and hence raises planned real expenditures. 
C) an increase in the price level boosts interest rates, which discourages borrowing and hence reduces planned real expenditures. 
D) a decrease in the price level boosts interest rates, which discourages borrowing and hence frees up income for more planned real expenditures.

Question 2

The long run aggregate supply curve is vertical because

Accepted Answer

A) the production possibilities curve is vertical. 
B) the aggregate demand curve is downward sloping. 
C) technology increases at a constant rate. 
D) a change in the level of prices will have no effect on real output in the long-run. 
A) the production possibilities curve is vertical. 
B) the aggregate demand curve is downward sloping. 
C) technology increases at a constant rate. 
D) a change in the level of prices will have no effect on real output in the long-run.

Question 3

Other things being equal, a depreciation of the dollar

Accepted Answer

A) increases aggregate demand in the United States, and may increase aggregate supply by reducing the prices of imported resources. 
B) increases aggregate demand in the United States, and may decrease aggregate supply by increasing the prices of imported resources. 
C) decreases aggregate demand in the United States, and may increase aggregate supply by reducing the prices of imported resources. 
D) decreases aggregate demand in the United States, and may decrease aggregate supply by increasing the prices of imported resources. 
A) increases aggregate demand in the United States, and may increase aggregate supply by reducing the prices of imported resources. 
B) increases aggregate demand in the United States, and may decrease aggregate supply by increasing the prices of imported resources. 
C) decreases aggregate demand in the United States, and may increase aggregate supply by reducing the prices of imported resources. 
D) decreases aggregate demand in the United States, and may decrease aggregate supply by increasing the prices of imported resources.

Question 4

Decreases in interest rates have made it less costly to finance purchases of new houses. What impact will this have on U.S. aggregate demand?

Accepted Answer

A) None. A nation's aggregate demand is not affected by changes in interest rates. 
B) U.S. aggregate demand will remain unchanged. 
C) U.S. aggregate demand will decrease. 
D) The U.S. aggregate demand curve will shift to the right. 
A) None. A nation's aggregate demand is not affected by changes in interest rates. 
B) U.S. aggregate demand will remain unchanged. 
C) U.S. aggregate demand will decrease. 
D) The U.S. aggregate demand curve will shift to the right.

Question 5

If there are steady decreases in aggregate supply, the economy will experience

Accepted Answer

A) a slow decrease in price levels. 
B) demand-side inflation. 
C) an expansionary gap. 
D) supply-side inflation. 
A) a slow decrease in price levels. 
B) demand-side inflation. 
C) an expansionary gap. 
D) supply-side inflation.

Question 6

What is measured on the vertical axis of the aggregate demand graph?

Accepted Answer

A) nominal income 
B) real GDP per year 
C) the price level 
D) unemployment 
A) nominal income 
B) real GDP per year 
C) the price level 
D) unemployment

Question 7

Supply-side inflation could be caused by which of the following?

Accepted Answer

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

Question 8

The long-run aggregate supply curve is

Accepted Answer

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

Question 9

Which of the following explains why the aggregate demand curve is downward sloping?

Accepted Answer

A) the interest rate effect 
B) the real-balance effect 
C) the open economy effect 
D) all of the above 
A) the interest rate effect 
B) the real-balance effect 
C) the open economy effect 
D) all of the above

Question 10

Other things being equal, the economy's aggregate demand curve shows that

Accepted Answer

A) as the price level falls, total planned expenditures fall as well. 
B) a change in the general price level causes the curve to shift. 
C) a change in the general price level causes a change in the quantity of final goods and services purchased. 
D) real Gross Domestic Product (GDP)and the price level are not related. 
A) as the price level falls, total planned expenditures fall as well. 
B) a change in the general price level causes the curve to shift. 
C) a change in the general price level causes a change in the quantity of final goods and services purchased. 
D) real Gross Domestic Product (GDP)and the price level are not related.

Question 11

If the price level increases,

Accepted Answer

A) the buying power of your checking account falls. 
B) the buying power of your checking accounts rises with it. 
C) there is no effect on buying power. 
D) the economy tends to grow faster. 
A) the buying power of your checking account falls. 
B) the buying power of your checking accounts rises with it. 
C) there is no effect on buying power. 
D) the economy tends to grow faster.

Question 12

Which of these questions does aggregate demand help us answer?
I. What determines the total amount of our output that individuals, firms, governments and foreigners want to buy?
II. What is the economy's long-run real Gross Domestic Product (GDP)?
III. What determines the economy's equilibrium price level and the rate of inflation?

Accepted Answer

A) I only 
B) I and II 
C) II and III 
D) I and III 
A) I only 
B) I and II 
C) II and III 
D) I and III

Question 13

The aggregate supply curve shows

Accepted Answer

A) the total of all planned production for an economy. 
B) the various quantities of goods consumers will purchase. 
C) that real GDP can only increase when the price level increases. 
D) what an economy can produce if resource prices are constant. 
A) the total of all planned production for an economy. 
B) the various quantities of goods consumers will purchase. 
C) that real GDP can only increase when the price level increases. 
D) what an economy can produce if resource prices are constant.

Question 14

All of the following are components of aggregate demand EXCEPT

Accepted Answer

A) consumption spending. 
B) government purchases. 
C) the level of technology. 
D) net foreign spending on domestic production. 
A) consumption spending. 
B) government purchases. 
C) the level of technology. 
D) net foreign spending on domestic production.

Question 15

When the price level increases, total planned real expenditures on goods and services falls. All of the following are responsible EXCEPT

Accepted Answer

A) the substitution effect. 
B) the real-balance effect. 
C) the interest rate effect. 
D) the open economy effect. 
A) the substitution effect. 
B) the real-balance effect. 
C) the interest rate effect. 
D) the open economy effect.

Question 16

As the capital stock grows and technology improves, we would expect the long-run aggregate supply curve to

Accepted Answer

A) shift right. 
B) shift left. 
C) remain the same. 
D) first shift right, then shift left. 
A) shift right. 
B) shift left. 
C) remain the same. 
D) first shift right, then shift left.

Question 17

Other things being equal, the lower planned real expenditures along an aggregate demand curve are, the

Accepted Answer

A) more the production possibilities cure shifts to the left. 
B) lower the price level. 
C) higher the price level. 
D) lower the level of endowments. 
A) more the production possibilities cure shifts to the left. 
B) lower the price level. 
C) higher the price level. 
D) lower the level of endowments.

Question 18

Demand-side inflation occurs when

Accepted Answer

A) increases in aggregate demand are not matched by increases in aggregate supply. 
B) increases in aggregate supply outstrip increases in aggregate demand. 
C) aggregate demand falls more rapidly than aggregate supply. 
D) long-run aggregate demand rises faster than short-run aggregate supply. 
A) increases in aggregate demand are not matched by increases in aggregate supply. 
B) increases in aggregate supply outstrip increases in aggregate demand. 
C) aggregate demand falls more rapidly than aggregate supply. 
D) long-run aggregate demand rises faster than short-run aggregate supply.

Question 19

The interest rate effect is part of the reason

Accepted Answer

A) the short-run aggregate supply curve is upward sloping. 
B) the long-run aggregate supply curve is vertical. 
C) the aggregate demand curve is upward sloping. 
D) the aggregate demand curve is downward sloping. 
A) the short-run aggregate supply curve is upward sloping. 
B) the long-run aggregate supply curve is vertical. 
C) the aggregate demand curve is upward sloping. 
D) the aggregate demand curve is downward sloping.

Question 20

Which of the following is NOT a reason for the slope of the aggregate demand curve?

Accepted Answer

A) the substitution effect 
B) the real balance effect 
C) the interest rate effect 
D) the open-economy effect 
A) the substitution effect 
B) the real balance effect 
C) the interest rate effect 
D) the open-economy effect

The interest rate effect that helps explain the slope of the aggregate demand curve arises because

The long run aggregate supply curve is vertical because

Other things being equal, a depreciation of the dollar

Decreases in interest rates have made it less costly to finance purchases of new houses. What impact will this have on U.S. aggregate demand?

If there are steady decreases in aggregate supply, the economy will experience

What is measured on the vertical axis of the aggregate demand graph?

Supply-side inflation could be caused by which of the following?

The long-run aggregate supply curve is

Which of the following explains why the aggregate demand curve is downward sloping?

Other things being equal, the economy's aggregate demand curve shows that

If the price level increases,

The aggregate supply curve shows

All of the following are components of aggregate demand EXCEPT

When the price level increases, total planned real expenditures on goods and services falls. All of the following are responsible EXCEPT

As the capital stock grows and technology improves, we would expect the long-run aggregate supply curve to

Other things being equal, the lower planned real expenditures along an aggregate demand curve are, the

Demand-side inflation occurs when

The interest rate effect is part of the reason

Which of the following is NOT a reason for the slope of the aggregate demand curve?

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

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

The interest rate effect that helps explain the slope of the aggregate demand curve arises because

The long run aggregate supply curve is vertical because

Other things being equal, a depreciation of the dollar

Decreases in interest rates have made it less costly to finance purchases of new houses. What impact will this have on U.S. aggregate demand?

If there are steady decreases in aggregate supply, the economy will experience

What is measured on the vertical axis of the aggregate demand graph?

Supply-side inflation could be caused by which of the following?

The long-run aggregate supply curve is

Which of the following explains why the aggregate demand curve is downward sloping?

Other things being equal, the economy's aggregate demand curve shows that

If the price level increases,

The aggregate supply curve shows

All of the following are components of aggregate demand EXCEPT

When the price level increases, total planned real expenditures on goods and services falls. All of the following are responsible EXCEPT

As the capital stock grows and technology improves, we would expect the long-run aggregate supply curve to

Other things being equal, the lower planned real expenditures along an aggregate demand curve are, the

Demand-side inflation occurs when

The interest rate effect is part of the reason

Which of the following is NOT a reason for the slope of the aggregate demand curve?

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