Question 1

__________ would cause a leftward shift of the aggregate demand curve.

Accepted Answer

A)  An increase in real wealth 
B)  An increase in expected income 
C)  A decrease in foreign income 
D)  An increase in the expected price level 
E)  A decrease in the value of the dollar 
A)  An increase in real wealth 
B)  An increase in expected income 
C)  A decrease in foreign income 
D)  An increase in the expected price level 
E)  A decrease in the value of the dollar C

Question 2

When the price level rises and U.S.goods become relatively more expensive than foreign goods,there will be:

Accepted Answer

A)  a rightward shift of the aggregate demand curve. 
B)  a leftward shift of the aggregate demand curve. 
C)  an upward movement along the aggregate demand curve. 
D)  a downward movement along the aggregate demand curve. 
E)  a downward movement along the aggregate supply curve. 
A)  a rightward shift of the aggregate demand curve. 
B)  a leftward shift of the aggregate demand curve. 
C)  an upward movement along the aggregate demand curve. 
D)  a downward movement along the aggregate demand curve. 
E)  a downward movement along the aggregate supply curve. C

Question 3

Explain how a change in real wealth can sometimes cause a movement along the aggregate demand curve and how sometimes it can cause a shift of the aggregate demand curve.

Accepted Answer

Real wealth can change for different reasons.When a change in the price level causes real wealth to change,this causes a movement along the aggregate demand curve.When a change in housing or stock market values causes a change in real wealth,this will be reflected in a shift of the aggregate demand curve.

Question 4

Which of the following would cause an upward movement along the aggregate demand curve?

Accepted Answer

A)  There is an increase in expected income. 
B)  An increase in the price level increases the value of real wealth. 
C)  An increase in housing prices increases the value of real wealth. 
D)  The value of the dollar increases. 
E)  There is an increase in the expected price level. 
A)  There is an increase in expected income. 
B)  An increase in the price level increases the value of real wealth. 
C)  An increase in housing prices increases the value of real wealth. 
D)  The value of the dollar increases. 
E)  There is an increase in the expected price level.

Question 5

Explain and illustrate how the short-run and long-run equilibrium levels of output and the price level are affected by successful efforts by the government to reduce the budget deficit.

Accepted Answer

To reduce the budget deficit,the governm

Question 6

According to the interest rate effect,an increase in the price level leads to __________ in the interest rate,and therefore to __________ in the quantity of aggregate demand.

Accepted Answer

A)  no change; no change 
B)  a rise; a fall 
C)  a rise; a rise 
D)  a fall; a fall 
E)  a fall; a rise 
A)  no change; no change 
B)  a rise; a fall 
C)  a rise; a rise 
D)  a fall; a fall 
E)  a fall; a rise

Question 7

The aggregate demand curve illustrates the:

Accepted Answer

A)  positive relationship between the price level and the quantity demanded of real gross domestic product (GDP). 
B)  positive relationship between the price level and the quantity demanded of nominal GDP. 
C)  inverse relationship between the price level and the quantity demanded of real GDP. 
D)  inverse relationship between the price level and the quantity demanded of nominal GDP. 
E)  positive relationship between the level of spending and the level of real GDP. 
A)  positive relationship between the price level and the quantity demanded of real gross domestic product (GDP). 
B)  positive relationship between the price level and the quantity demanded of nominal GDP. 
C)  inverse relationship between the price level and the quantity demanded of real GDP. 
D)  inverse relationship between the price level and the quantity demanded of nominal GDP. 
E)  positive relationship between the level of spending and the level of real GDP.

Question 8

When a change in the price level leads to a change in the quantity of net exports demanded,it is called the:

Accepted Answer

A)  international trade effect. 
B)  export effect. 
C)  import effect. 
D)  net export effect. 
E)  interest rate effect. 
A)  international trade effect. 
B)  export effect. 
C)  import effect. 
D)  net export effect. 
E)  interest rate effect.

Question 9

A supply shock is defined as:

Accepted Answer

A)  a decrease in full employment output. 
B)  a surprise event that changes the firm's production costs. 
C)  a reduction in aggregate demand that has a negative impact on the firm's revenue. 
D)  a sudden upward movement along the short-run aggregate supply curve. 
E)  an attempt by employees to negotiate a wage increase. 
A)  a decrease in full employment output. 
B)  a surprise event that changes the firm's production costs. 
C)  a reduction in aggregate demand that has a negative impact on the firm's revenue. 
D)  a sudden upward movement along the short-run aggregate supply curve. 
E)  an attempt by employees to negotiate a wage increase.

Question 10

Refer to the following figure to answer the next two questions.
  
-An increase in aggregate demand is harmful because:

Accepted Answer

A)  workers with sticky wages are paying more for goods and services. 
B)  firms have sticky input prices and earn less profit. 
C)  unemployment rises. 
D)  output has risen above the full employment level. 
E)  wages will have to fall in the long run. 
A)  workers with sticky wages are paying more for goods and services. 
B)  firms have sticky input prices and earn less profit. 
C)  unemployment rises. 
D)  output has risen above the full employment level. 
E)  wages will have to fall in the long run.

Question 11

Which of the following would affect both short-run and long-run aggregate supply?

Accepted Answer

A)  a supply shock 
B)  menu costs 
C)  money illusion 
D)  technological change 
E)  a change in the general price level 
A)  a supply shock 
B)  menu costs 
C)  money illusion 
D)  technological change 
E)  a change in the general price level

Question 12

Menu costs help to explain:

Accepted Answer

A)  the negative slope of the aggregate demand curve. 
B)  the negative slope of the aggregate supply curve. 
C)  the positive slope of the short-run aggregate supply curve. 
D)  why the long-run aggregate supply curve is vertical. 
E)  why the long-run aggregate supply curve is horizontal. 
A)  the negative slope of the aggregate demand curve. 
B)  the negative slope of the aggregate supply curve. 
C)  the positive slope of the short-run aggregate supply curve. 
D)  why the long-run aggregate supply curve is vertical. 
E)  why the long-run aggregate supply curve is horizontal.

Question 13

The long run is best defined as a period of time such that:

Accepted Answer

A)  more than one year has passed. 
B)  more than five years have passed. 
C)  some prices have adjusted. 
D)  all prices have adjusted. 
E)  all firms are maximizing profit. 
A)  more than one year has passed. 
B)  more than five years have passed. 
C)  some prices have adjusted. 
D)  all prices have adjusted. 
E)  all firms are maximizing profit.

Question 14

An increase in expected future prices causes:

Accepted Answer

A)  an increase in short-run aggregate supply. 
B)  a decrease in short-run aggregate supply. 
C)  a supply shock. 
D)  an upward movement along the aggregate supply curve. 
E)  menu costs. 
A)  an increase in short-run aggregate supply. 
B)  a decrease in short-run aggregate supply. 
C)  a supply shock. 
D)  an upward movement along the aggregate supply curve. 
E)  menu costs.

Question 15

An increase in short-run aggregate supply immediately leads to:

Accepted Answer

A)  an increase in real wealth and a shift of the aggregate demand curve. 
B)  an increase in real wealth and a movement along the aggregate demand curve. 
C)  a shift of the aggregate demand curve caused by menu costs. 
D)  a shift of the aggregate demand curve caused by money illusion. 
E)  an increase in money illusion and a movement along the aggregate demand curve. 
A)  an increase in real wealth and a shift of the aggregate demand curve. 
B)  an increase in real wealth and a movement along the aggregate demand curve. 
C)  a shift of the aggregate demand curve caused by menu costs. 
D)  a shift of the aggregate demand curve caused by money illusion. 
E)  an increase in money illusion and a movement along the aggregate demand curve.

Question 16

Suppose a hurricane destroys 20% of the capital stock in a country.In the long run,output will _________ and the price level will _________.

Accepted Answer

A)  decrease; decrease 
B)  decrease; increase 
C)  decrease; remain unchanged 
D)  remain unchanged; remain unchanged 
E)  remain unchanged; increase 
A)  decrease; decrease 
B)  decrease; increase 
C)  decrease; remain unchanged 
D)  remain unchanged; remain unchanged 
E)  remain unchanged; increase

Question 17

A technological advance leads to a shift in:

Accepted Answer

A)  only short-run aggregate supply. 
B)  only long-run aggregate supply. 
C)  neither short-run nor long-run aggregate supply. 
D)  both short-run and long-run aggregate supply. 
E)  only aggregate demand. 
A)  only short-run aggregate supply. 
B)  only long-run aggregate supply. 
C)  neither short-run nor long-run aggregate supply. 
D)  both short-run and long-run aggregate supply. 
E)  only aggregate demand.

Question 18

How does the wealth effect explain the slope of the aggregate demand curve?

Accepted Answer

A rise in the price level will reduce th

Question 19

Refer to the following figure to answer the next five questions.
  
-Based on the figure,starting at point A,if there is an increase in the price of oil,then in the short run we move to point __________ and in the long run to point __________.

Accepted Answer

A)  F; E 
B)  F; A 
C)  D; C 
D)  D; A 
E)  B; E 
A)  F; E 
B)  F; A 
C)  D; C 
D)  D; A 
E)  B; E

Question 20

A fall in the price level that causes a change in the real value of wealth results in:

Accepted Answer

A)  a downward movement along the aggregate demand curve. 
B)  an upward movement along the aggregate demand curve. 
C)  a rightward shift of the demand curve. 
D)  a leftward shift of the demand curve. 
E)  no change in the quantity of aggregate demand. 
A)  a downward movement along the aggregate demand curve. 
B)  an upward movement along the aggregate demand curve. 
C)  a rightward shift of the demand curve. 
D)  a leftward shift of the demand curve. 
E)  no change in the quantity of aggregate demand.

__________ would cause a leftward shift of the aggregate demand curve.

When the price level rises and U.S.goods become relatively more expensive than foreign goods,there will be:

Explain how a change in real wealth can sometimes cause a movement along the aggregate demand curve and how sometimes it can cause a shift of the aggregate demand curve.

Which of the following would cause an upward movement along the aggregate demand curve?

Explain and illustrate how the short-run and long-run equilibrium levels of output and the price level are affected by successful efforts by the government to reduce the budget deficit.

According to the interest rate effect,an increase in the price level leads to in the interest rate,and therefore to in the quantity of aggregate demand.

The aggregate demand curve illustrates the:

When a change in the price level leads to a change in the quantity of net exports demanded,it is called the:

A supply shock is defined as:

Refer to the following figure to answer the next two questions. -An increase in aggregate demand is harmful because:

Which of the following would affect both short-run and long-run aggregate supply?

Menu costs help to explain:

The long run is best defined as a period of time such that:

An increase in expected future prices causes:

An increase in short-run aggregate supply immediately leads to:

Suppose a hurricane destroys 20% of the capital stock in a country.In the long run,output will _ and the price level will _.

A technological advance leads to a shift in:

How does the wealth effect explain the slope of the aggregate demand curve?

Refer to the following figure to answer the next five questions. -Based on the figure,starting at point A,if there is an increase in the price of oil,then in the short run we move to point and in the long run to point .

A fall in the price level that causes a change in the real value of wealth results in:

The Five Foundations of Economics

Model Building and Gains From Trade

The Market at Work: Supply and Demand

Price Controls

The Efficiency of Markets and the Costs of Taxation

Introduction to Macroeconomics and Gross Domestic Product

Unemployment

The Price Level and Inflation

Savings, interest Rates, and the Market for Loanable Funds

Financial Markets and Securities

Economic Growth and the Wealth of Nations

Growth Theory

The Great Recession, the Great Depression, and Great Macroeconomic Debates

Federal Budgets: the Tools of Fiscal Policy

Fiscal Policy

Money and the Federal Reserve

Monetary Policy

International Trade

International Finance

Filters

Exam 13: The Aggregate Demandaggregate Supply Model

__________ would cause a leftward shift of the aggregate demand curve.

When the price level rises and U.S.goods become relatively more expensive than foreign goods,there will be:

Explain how a change in real wealth can sometimes cause a movement along the aggregate demand curve and how sometimes it can cause a shift of the aggregate demand curve.

Which of the following would cause an upward movement along the aggregate demand curve?

Explain and illustrate how the short-run and long-run equilibrium levels of output and the price level are affected by successful efforts by the government to reduce the budget deficit.

According to the interest rate effect,an increase in the price level leads to __________ in the interest rate,and therefore to __________ in the quantity of aggregate demand.

The aggregate demand curve illustrates the:

When a change in the price level leads to a change in the quantity of net exports demanded,it is called the:

A supply shock is defined as:

Refer to the following figure to answer the next two questions. -An increase in aggregate demand is harmful because:

Which of the following would affect both short-run and long-run aggregate supply?

Menu costs help to explain:

The long run is best defined as a period of time such that:

An increase in expected future prices causes:

An increase in short-run aggregate supply immediately leads to:

Suppose a hurricane destroys 20% of the capital stock in a country.In the long run,output will _________ and the price level will _________.

A technological advance leads to a shift in:

How does the wealth effect explain the slope of the aggregate demand curve?

Refer to the following figure to answer the next five questions. -Based on the figure,starting at point A,if there is an increase in the price of oil,then in the short run we move to point __________ and in the long run to point __________.

A fall in the price level that causes a change in the real value of wealth results in:

The Five Foundations of Economics

Model Building and Gains From Trade

The Market at Work: Supply and Demand

Price Controls

The Efficiency of Markets and the Costs of Taxation

Introduction to Macroeconomics and Gross Domestic Product

Unemployment

The Price Level and Inflation

Savings, interest Rates, and the Market for Loanable Funds

Financial Markets and Securities

Economic Growth and the Wealth of Nations

Growth Theory

The Great Recession, the Great Depression, and Great Macroeconomic Debates

Federal Budgets: the Tools of Fiscal Policy

Fiscal Policy

Money and the Federal Reserve

Monetary Policy

International Trade

International Finance

Filters

According to the interest rate effect,an increase in the price level leads to in the interest rate,and therefore to in the quantity of aggregate demand.

Suppose a hurricane destroys 20% of the capital stock in a country.In the long run,output will _ and the price level will _.

Refer to the following figure to answer the next five questions. -Based on the figure,starting at point A,if there is an increase in the price of oil,then in the short run we move to point and in the long run to point .