Question 1

In the United States during the 1960s,government spending dramatically increased to fight the Vietnam War,which resulted in:

Accepted Answer

A)  demand-pull inflation. 
B)  cost-push inflation. 
C)  a disinflationary recession. 
D)  stagflation. 
A)  demand-pull inflation. 
B)  cost-push inflation. 
C)  a disinflationary recession. 
D)  stagflation.

Question 2

Which of the following is not a component of the aggregate demand curve?

Accepted Answer

A)  Government spending (G). 
B)  Investment (I). 
C)  Consumption (
C) . 
D)  Net exports (X-M). 
E)  Saving. 
A)  Government spending (G). 
B)  Investment (I). 
C)  Consumption (
C) . 
D)  Net exports (X-M). 
E)  Saving.

Question 3

Which of the following is true,other things equal?

Accepted Answer

A)  A reduction in prices will increase the real wealth of those holding a fixed quantity of money. 
B)  A reduction in prices will lead to a decline in net exports. 
C)  A reduction in prices will increase the scarcity of money, raise the real interest rate, and, thereby, encourage investment and consumption. 
D)  A reduction in prices will increase profit margins and, thereby, stimulate additional investment. 
A)  A reduction in prices will increase the real wealth of those holding a fixed quantity of money. 
B)  A reduction in prices will lead to a decline in net exports. 
C)  A reduction in prices will increase the scarcity of money, raise the real interest rate, and, thereby, encourage investment and consumption. 
D)  A reduction in prices will increase profit margins and, thereby, stimulate additional investment.

Question 4

Which of the following could be expected to shift the aggregate demand curve?

Accepted Answer

A)  An increase in government spending. 
B)  Consumption spending decreases. 
C)  Net exports fall. 
D)  All of the above. 
A)  An increase in government spending. 
B)  Consumption spending decreases. 
C)  Net exports fall. 
D)  All of the above.

Question 5

Which of the following correctly describes the aggregate supply curve?

Accepted Answer

A)  A curve that shows the level of real GDP demanded at different possible price levels. 
B)  A curve that shows the level of real GDP produced at different possible price levels. 
C)  A curve that shows the level of quantity supplied by firms in a market at different possible prices, such as the supply of oranges in the oranges market. 
D)  None of the above. 
A)  A curve that shows the level of real GDP demanded at different possible price levels. 
B)  A curve that shows the level of real GDP produced at different possible price levels. 
C)  A curve that shows the level of quantity supplied by firms in a market at different possible prices, such as the supply of oranges in the oranges market. 
D)  None of the above.

Question 6

If a new method for obtaining oil from dry oil fields is found,then we will see:

Accepted Answer

A)  the AS curve shift to the left. 
B)  a movement to the left along the AD curve. 
C)  the AD curve shift to the left. 
D)  the AD curve shift to the right. 
E)  the AS curve shift to the right. 
A)  the AS curve shift to the left. 
B)  a movement to the left along the AD curve. 
C)  the AD curve shift to the left. 
D)  the AD curve shift to the right. 
E)  the AS curve shift to the right.

Question 7

When the economy is operating well below capacity,an increase in spending tends to be reflected primarily in a(n):

Accepted Answer

A)  lower level of employment. 
B)  increase in price. 
C)  lower level of output. 
D)  higher level of output and employment. 
E)  increase in business failures. 
A)  lower level of employment. 
B)  increase in price. 
C)  lower level of output. 
D)  higher level of output and employment. 
E)  increase in business failures.

Question 8

Which of the following could not be expected to shift the aggregate demand curve?

Accepted Answer

A)  Net exports fall. 
B)  Consumption spending decreases. 
C)  An increase in government spending. 
D)  A change in real GDP. 
A)  Net exports fall. 
B)  Consumption spending decreases. 
C)  An increase in government spending. 
D)  A change in real GDP.

Question 9

Other factors held constant,a decrease in resource prices will shift the aggregate:

Accepted Answer

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

Question 10

The interest rate effect predicts that higher prices:

Accepted Answer

A)  make it more expensive to borrow, leading to higher interest rates and less investment. 
B)  make people worse off by reducing the value of their wealth, leading them to save more and spend less. 
C)  decrease borrowing, leading to higher interest rates and less investment. 
D)  decrease borrowing, leading to lower interest rates and more investment. 
E)  increase borrowing, leading to higher interest rates and less investment. 
A)  make it more expensive to borrow, leading to higher interest rates and less investment. 
B)  make people worse off by reducing the value of their wealth, leading them to save more and spend less. 
C)  decrease borrowing, leading to higher interest rates and less investment. 
D)  decrease borrowing, leading to lower interest rates and more investment. 
E)  increase borrowing, leading to higher interest rates and less investment.

Question 11

Along the Keynesian range of the aggregate supply curve,higher aggregate demand fails to stimulate output and only causes inflation.

Accepted Answer

A) True 
 B)False

Question 12

Exhibit 14-7 Aggregate supply and demand curves
  
-In Exhibit 14-7,if aggregate demand increases from AD₁ to AD₂,

Accepted Answer

A)  output and prices will increase. 
B)  output and prices will decrease. 
C)  output alone will increase. 
D)  prices alone will decrease. 
E)  prices alone will increase. 
A)  output and prices will increase. 
B)  output and prices will decrease. 
C)  output alone will increase. 
D)  prices alone will decrease. 
E)  prices alone will increase.

Question 13

Suppose the economy is on the intermediate range of the aggregate supply curve.Which of the following would reduce both real GDP and the price level?

Accepted Answer

A)  A decrease in aggregate supply. 
B)  An increase in aggregate supply. 
C)  A decrease in aggregate demand. 
D)  An increase in aggregate demand. 
A)  A decrease in aggregate supply. 
B)  An increase in aggregate supply. 
C)  A decrease in aggregate demand. 
D)  An increase in aggregate demand.

Question 14

Demand-pull inflation is caused by:

Accepted Answer

A)  an increase in aggregate demand. 
B)  an decrease in aggregate demand. 
C)  an increase in aggregate supply. 
D)  an decrease in aggregate supply. 
A)  an increase in aggregate demand. 
B)  an decrease in aggregate demand. 
C)  an increase in aggregate supply. 
D)  an decrease in aggregate supply.

Question 15

Exhibit 14-8 Aggregate demand and supply
  
-In Exhibit 14-8,if aggregate demand shifts from AD₃ to AD₂,real GDP will:

Accepted Answer

A)  fall from $7.0 to $4.0, and the price level will not change. 
B)  not change, and the price level will fall from 120 to 100. 
C)  fall from $7.0 to $3.0, and the price level will fall from 120 to 100. 
D)  fall from $8.0 to $4.0, and the price level will fall from 120 to 100. 
E)  fall from $7.0 to $4.0, and the price level will fall from 120 to 100. 
A)  fall from $7.0 to $4.0, and the price level will not change. 
B)  not change, and the price level will fall from 120 to 100. 
C)  fall from $7.0 to $3.0, and the price level will fall from 120 to 100. 
D)  fall from $8.0 to $4.0, and the price level will fall from 120 to 100. 
E)  fall from $7.0 to $4.0, and the price level will fall from 120 to 100.

Question 16

An increase in input prices will cause the aggregate supply curve to shift rightward.

Accepted Answer

A) True 
 B)False

Question 17

Exhibit 14-3 Aggregate supply and demand curves
  
-A shift in the aggregate supply curve in Exhibit 14-3 from AS₁ to AS₂ would be caused by a(n):

Accepted Answer

A)  increase in consumer spending. 
B)  increase in input prices. 
C)  decrease in input prices. 
D)  decrease in real output. 
A)  increase in consumer spending. 
B)  increase in input prices. 
C)  decrease in input prices. 
D)  decrease in real output.

Question 18

Exhibit 14-4 Aggregate supply and demand curves
  
-The increase in the price level as the economy moves from E₁ to E₂ in Exhibit 14-4 represents:

Accepted Answer

A)  cost-push inflation. 
B)  demand-shock inflation. 
C)  wage push inflation. 
D)  demand-pull inflation. 
A)  cost-push inflation. 
B)  demand-shock inflation. 
C)  wage push inflation. 
D)  demand-pull inflation.

Question 19

The aggregate supply curve shows the relationship between the price level and the level of real GDP produced by the nation's economy.

Accepted Answer

A) True 
 B)False

Question 20

Along the intermediate 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.

Exam 14: Aggregate Demand and Supply

In the United States during the 1960s,government spending dramatically increased to fight the Vietnam War,which resulted in:

Which of the following is not a component of the aggregate demand curve?

Which of the following is true,other things equal?

Which of the following could be expected to shift the aggregate demand curve?

Which of the following correctly describes the aggregate supply curve?

If a new method for obtaining oil from dry oil fields is found,then we will see:

When the economy is operating well below capacity,an increase in spending tends to be reflected primarily in a(n):

Which of the following could not be expected to shift the aggregate demand curve?

Other factors held constant,a decrease in resource prices will shift the aggregate:

The interest rate effect predicts that higher prices:

Along the Keynesian range of the aggregate supply curve,higher aggregate demand fails to stimulate output and only causes inflation.

Exhibit 14-7 Aggregate supply and demand curves -In Exhibit 14-7,if aggregate demand increases from AD₁ to AD₂,

Suppose the economy is on the intermediate range of the aggregate supply curve.Which of the following would reduce both real GDP and the price level?

Demand-pull inflation is caused by:

Exhibit 14-8 Aggregate demand and supply -In Exhibit 14-8,if aggregate demand shifts from AD₃ to AD₂,real GDP will:

An increase in input prices will cause the aggregate supply curve to shift rightward.

Exhibit 14-3 Aggregate supply and demand curves -A shift in the aggregate supply curve in Exhibit 14-3 from AS₁ to AS₂ would be caused by a(n):

Exhibit 14-4 Aggregate supply and demand curves -The increase in the price level as the economy moves from E₁ to E₂ in Exhibit 14-4 represents:

The aggregate supply curve shows the relationship between the price level and the level of real GDP produced by the nation's economy.

Along the intermediate range of the aggregate supply curve,an increase in the aggregate demand curve will increase:

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

Filters