Question 1

Exhibit 14-5 Aggregate demand curves
  
-In Exhibit 14-5,which one of the following could cause the U.S.aggregate demand curve to move from AD₃ to AD₂?

Accepted Answer

A)  Greater resource availability. 
B)  Nonfluctuating resource availability. 
C)  A recession in Japan. 
D)  An increase in government grants for AIDS awareness programs. 
E)  An expectation that future income will rise. 
A)  Greater resource availability. 
B)  Nonfluctuating resource availability. 
C)  A recession in Japan. 
D)  An increase in government grants for AIDS awareness programs. 
E)  An expectation that future income will rise. C

Question 2

The classical economists believe that prices and wages quickly adjust to keep the economy operating at full employment.

Accepted Answer

A) True 
 B)False  True

Question 3

As prices rise,people will buy fewer goods and services because:

Accepted Answer

A)  the interest rate has declined. 
B)  aggregate demand has increased. 
C)  the purchasing power of the fixed quantity of money has declined. 
D)  the income of households has increased. 
A)  the interest rate has declined. 
B)  aggregate demand has increased. 
C)  the purchasing power of the fixed quantity of money has declined. 
D)  the income of households has increased. C

Question 4

The aggregate supply curve is vertical in the Keynesian range.

Accepted Answer

A) True 
 B)False

Question 5

Along the classical or vertical range of the aggregate supply curve,an increase in the aggregate demand curve will increase:

Accepted Answer

A)  both the price level and real GDP. 
B)  only real GDP. 
C)  only the price level. 
D)  real GDP and reduce the price level. 
A)  both the price level and real GDP. 
B)  only real GDP. 
C)  only the price level. 
D)  real GDP and reduce the price level.

Question 6

The Keynesian range of the aggregate supply curve applies when the economy is at or near full employment.

Accepted Answer

A) True 
 B)False

Question 7

Exhibit 14-1 Aggregate supply curve
  
-In Exhibit 14-1,there are plenty of idle resources and no upward pressure on prices in:

Accepted Answer

A)  the segment labeled ab. 
B)  the segment labeled bc. 
C)  the segment labeled cd. 
D)  both segment bc and segment cd. 
E)  the entire curve. 
A)  the segment labeled ab. 
B)  the segment labeled bc. 
C)  the segment labeled cd. 
D)  both segment bc and segment cd. 
E)  the entire curve.

Question 8

The real balances effect is caused by an inverse relationship between the price level and the real value of financial assets with fixed nominal value.

Accepted Answer

A) True 
 B)False

Question 9

The classical economists believed there was no role for government to play in restoring full employment.

Accepted Answer

A) True 
 B)False

Question 10

The vertical portion of the aggregate supply curve shows that at full employment an increase in the price level will:

Accepted Answer

A)  not alter the economy's full-employment real GDP. 
B)  increase the economy's full-employment real GDP. 
C)  reduce the quantity of goods and services purchasers will demand. 
D)  improve the overall efficiency of resource use. 
A)  not alter the economy's full-employment real GDP. 
B)  increase the economy's full-employment real GDP. 
C)  reduce the quantity of goods and services purchasers will demand. 
D)  improve the overall efficiency of resource use.

Question 11

How will an increase in the world price of crude oil influence the economy of an oil-importing country such as the United States?

Accepted Answer

A)  Aggregate supply will decrease, leading to a decrease in real GDP. 
B)  Aggregate supply will increase, leading to an increase in real GDP. 
C)  Aggregate supply will increase, leading to an increase in prices and smaller GDP. 
D)  A change in the price of an imported good will not affect the domestic economy of an oil-importing country. 
A)  Aggregate supply will decrease, leading to a decrease in real GDP. 
B)  Aggregate supply will increase, leading to an increase in real GDP. 
C)  Aggregate supply will increase, leading to an increase in prices and smaller GDP. 
D)  A change in the price of an imported good will not affect the domestic economy of an oil-importing country.

Question 12

Gradual adjustment of prices and wages to an increase in the aggregate demand curve implies that the aggregate supply curve is:

Accepted Answer

A)  horizontal. 
B)  vertical. 
C)  upward sloping but not vertical. 
D)  downward sloping. 
A)  horizontal. 
B)  vertical. 
C)  upward sloping but not vertical. 
D)  downward sloping.

Question 13

An increase in regulation will shift the aggregate:

Accepted Answer

A)  demand curve leftward. 
B)  supply curve rightward. 
C)  supply curve leftward. 
D)  demand curve rightward. 
A)  demand curve leftward. 
B)  supply curve rightward. 
C)  supply curve leftward. 
D)  demand curve rightward.

Question 14

Suppose an increase in government spending stimulates real GDP without affecting the price level.What is the relevant range of the aggregate supply curve in this case?

Accepted Answer

A)  The classical range. 
B)  The intermediate range. 
C)  The Keynesian range. 
D)  The monetarist range. 
A)  The classical range. 
B)  The intermediate range. 
C)  The Keynesian range. 
D)  The monetarist range.

Question 15

The aggregate demand curve is downward sloping.

Accepted Answer

A) True 
 B)False

Question 16

Suppose workers become pessimistic about their future employment,which causes them to save more and spend less.If the economy is on the intermediate range of the aggregate supply curve,then:

Accepted Answer

A)  both real GDP and the price level will fall. 
B)  real GDP will fall and the price level will rise. 
C)  real GDP will rise and the price level will fall. 
D)  real GDP and the price level will rise. 
A)  both real GDP and the price level will fall. 
B)  real GDP will fall and the price level will rise. 
C)  real GDP will rise and the price level will fall. 
D)  real GDP and the price level will rise.

Question 17

Which of the following is a range on the eclectic or general view of the aggregate supply curve?

Accepted Answer

A)  Keynesian range. 
B)  Intermediate range. 
C)  Classical range. 
D)  All of the above. 
A)  Keynesian range. 
B)  Intermediate range. 
C)  Classical range. 
D)  All of the above.

Question 18

Which of the following will increase aggregate demand in the United States?

Accepted Answer

A)  A higher price level. 
B)  An increase in the real interest rate. 
C)  An increase in wealth due to a substantial appreciation in the value of stocks. 
D)  A decrease in real income in Japan and Western Europe. 
A)  A higher price level. 
B)  An increase in the real interest rate. 
C)  An increase in wealth due to a substantial appreciation in the value of stocks. 
D)  A decrease in real income in Japan and Western Europe.

Question 19

Exhibit 14-6 Aggregate supply curve
  
-In Exhibit 14-6,the economy's employment potential is fully exhausted at:

Accepted Answer

A)  GDP = $1,000 billion. 
B)  GDP = $1,100 billion. 
C)  GDP = $1,200 billion. 
D)  GDP slightly above $1,200 billion. 
E)  the employment potential is never fully exhausted. 
A)  GDP = $1,000 billion. 
B)  GDP = $1,100 billion. 
C)  GDP = $1,200 billion. 
D)  GDP slightly above $1,200 billion. 
E)  the employment potential is never fully exhausted.

Question 20

According to classical theory,if the aggregate demand curve decreased and the economy experienced unemployment,then:

Accepted Answer

A)  the economy would remain in this condition indefinitely. 
B)  the government must increase spending to restore full employment. 
C)  prices and wages would fall quickly to restore full employment. 
D)  the supply of money would increase until the economy returned to full employment. 
A)  the economy would remain in this condition indefinitely. 
B)  the government must increase spending to restore full employment. 
C)  prices and wages would fall quickly to restore full employment. 
D)  the supply of money would increase until the economy returned to full employment.

Exam 14: Aggregate Demand and Supply

Exhibit 14-5 Aggregate demand curves -In Exhibit 14-5,which one of the following could cause the U.S.aggregate demand curve to move from AD₃ to AD₂?

The classical economists believe that prices and wages quickly adjust to keep the economy operating at full employment.

As prices rise,people will buy fewer goods and services because:

The aggregate supply curve is vertical in the Keynesian range.

Along the classical or vertical range of the aggregate supply curve,an increase in the aggregate demand curve will increase:

The Keynesian range of the aggregate supply curve applies when the economy is at or near full employment.

Exhibit 14-1 Aggregate supply curve -In Exhibit 14-1,there are plenty of idle resources and no upward pressure on prices in:

The real balances effect is caused by an inverse relationship between the price level and the real value of financial assets with fixed nominal value.

The classical economists believed there was no role for government to play in restoring full employment.

The vertical portion of the aggregate supply curve shows that at full employment an increase in the price level will:

How will an increase in the world price of crude oil influence the economy of an oil-importing country such as the United States?

Gradual adjustment of prices and wages to an increase in the aggregate demand curve implies that the aggregate supply curve is:

An increase in regulation will shift the aggregate:

Suppose an increase in government spending stimulates real GDP without affecting the price level.What is the relevant range of the aggregate supply curve in this case?

The aggregate demand curve is downward sloping.

Suppose workers become pessimistic about their future employment,which causes them to save more and spend less.If the economy is on the intermediate range of the aggregate supply curve,then:

Which of the following is a range on the eclectic or general view of the aggregate supply curve?

Which of the following will increase aggregate demand in the United States?

Exhibit 14-6 Aggregate supply curve -In Exhibit 14-6,the economy's employment potential is fully exhausted at:

According to classical theory,if the aggregate demand curve decreased and the economy experienced unemployment,then:

Introducing the Economic Way of Thinking

A: Appendix: Applying Graphs to Economics

Production Possibilities,Opportunity Cost,and Economic Growth

Part 1: Market Demand and Supply

Part 2: Market Demand and Supply

Markets in Action

Price Elasticity of Demand

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets and Income Distribution

Gross Domestic Product

Business Cycles and Unemployment

Inflation

A: Appendix: The Self-Correcting Aggregate Demand and Supply Model

Fiscal Policy

The Public Sector

Federal Deficits,Surpluses,and the National Debt

Money and the Federal Reserve System

Money Creation

Monetary Policy

A: Appendix: Policy Disputes Using the Self-Correcting Aggregate Demand and Supply Model

International Trade and Finance

Economies in Transition

Growth and the Less-Developed Countries

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