Question 1

Which of the following will not shift the aggregate demand cure to the left?

Accepted Answer

A)  Consumers become more optimistic about the future. 
B)  Government spending decreases. 
C)  Business optimism decreases. 
D)  Consumers become pessimistic about the future. 
A)  Consumers become more optimistic about the future. 
B)  Government spending decreases. 
C)  Business optimism decreases. 
D)  Consumers become pessimistic about the future.

Question 2

When the aggregate demand curve shifts to the right,intersecting the aggregate supply curve on its upward-sloping or vertical segment,

Accepted Answer

A)  demand-pull inflation occurs. 
B)  cost-push inflation occurs. 
C)  stagflation occurs. 
D)  deflation occurs. 
E)  the shift pulls the price level down. 
A)  demand-pull inflation occurs. 
B)  cost-push inflation occurs. 
C)  stagflation occurs. 
D)  deflation occurs. 
E)  the shift pulls the price level down.

Question 3

The aggregate demand curve is downward sloping because:

Accepted Answer

A)  an increase in the price level will cause an increase in spending. 
B)  at lower price levels, real wealth decreases, causing a decrease in the quantities of goods and services demanded. 
C)  at lower price levels, interest rates decrease, causing a decrease in the quantities of goods and services demanded. 
D)  at lower price levels, exports increase, causing an increase in real GDP. 
E)  increases in the price level do not affect people's real wealth. 
A)  an increase in the price level will cause an increase in spending. 
B)  at lower price levels, real wealth decreases, causing a decrease in the quantities of goods and services demanded. 
C)  at lower price levels, interest rates decrease, causing a decrease in the quantities of goods and services demanded. 
D)  at lower price levels, exports increase, causing an increase in real GDP. 
E)  increases in the price level do not affect people's real wealth.

Question 4

Which of the following helps explain why real GDP is inversely related to the price level within the framework of the AD-AS model?

Accepted Answer

A)  As prices fall, domestic consumers have an incentive to buy more of the cheaper goods and services. 
B)  As prices fall, the monetary authorities will have to increase the money supply, which will lead to an increase in the quantity of goods and services purchased. 
C)  As prices fall, the government will have to reduce taxes, which will lead to an increase in the quantity of goods and services purchased. 
D)  As prices fall, the wealth of people holding the fixed quantity of money increases, causing them to expand their purchases of goods and services. 
A)  As prices fall, domestic consumers have an incentive to buy more of the cheaper goods and services. 
B)  As prices fall, the monetary authorities will have to increase the money supply, which will lead to an increase in the quantity of goods and services purchased. 
C)  As prices fall, the government will have to reduce taxes, which will lead to an increase in the quantity of goods and services purchased. 
D)  As prices fall, the wealth of people holding the fixed quantity of money increases, causing them to expand their purchases of goods and services.

Question 5

The concurrent problems of inflation and unemployment are termed:

Accepted Answer

A)  depression. 
B)  downturn. 
C)  deflation. 
D)  demand-pull inflation. 
E)  stagflation. 
A)  depression. 
B)  downturn. 
C)  deflation. 
D)  demand-pull inflation. 
E)  stagflation.

Question 6

The net exports effect is the inverse relationship between net exports and the ____ of an economy.

Accepted Answer

A)  potential real GDP 
B)  chain-price deflator 
C)  price level 
D)  consumption spending 
A)  potential real GDP 
B)  chain-price deflator 
C)  price level 
D)  consumption spending

Question 7

Exhibit 14-3 Aggregate supply and demand curves
  
-In Exhibit 14-3,the change in equilibrium from E₁ to E₂ represents:

Accepted Answer

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

Question 8

The aggregate demand curve:

Accepted Answer

A)  shows the level of real GDP purchased in the economy at different possible price levels during a period of time. 
B)  shows the level of real GDP produced in the economy at different possible price levels during a period of time. 
C)  shifts to the left whenever there is an increase in aggregate expenditures. 
D)  slopes upward. 
A)  shows the level of real GDP purchased in the economy at different possible price levels during a period of time. 
B)  shows the level of real GDP produced in the economy at different possible price levels during a period of time. 
C)  shifts to the left whenever there is an increase in aggregate expenditures. 
D)  slopes upward.

Question 9

During the Great Depression of the 1930s,the aggregate demand curve intersected the aggregate supply curve in:

Accepted Answer

A)  the horizontal portion of the aggregate supply curve. 
B)  the upward-sloping part of the aggregate supply curve. 
C)  the vertical portion of the aggregate supply curve. 
D)  the early years in the horizontal portion, but in the later years in the vertical portion. 
E)  the early years in the vertical portion, but in the later years in the horizontal portion. 
A)  the horizontal portion of the aggregate supply curve. 
B)  the upward-sloping part of the aggregate supply curve. 
C)  the vertical portion of the aggregate supply curve. 
D)  the early years in the horizontal portion, but in the later years in the vertical portion. 
E)  the early years in the vertical portion, but in the later years in the horizontal portion.

Question 10

The aggregate demand curve is drawn downward-sloping,because increases in the price level cause decreases in:

Accepted Answer

A)  unemployment. 
B)  total spending (real GDP). 
C)  households' savings. 
D)  the value of the dollar. 
A)  unemployment. 
B)  total spending (real GDP). 
C)  households' savings. 
D)  the value of the dollar.

Question 11

Greater entrepreneurship in the economy will shift the aggregate:

Accepted Answer

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

Question 12

The aggregate demand curve shows how real GDP purchased varies with changes in:

Accepted Answer

A)  unemployment. 
B)  output. 
C)  the price level. 
D)  the interest rate. 
A)  unemployment. 
B)  output. 
C)  the price level. 
D)  the interest rate.

Question 13

The aggregate supply curve is defined as:

Accepted Answer

A)  net national product. 
B)  the sum of wages, rent, interest, and profits. 
C)  the real GDP produced at different price levels. 
D)  the total dollar value of household expenditures. 
A)  net national product. 
B)  the sum of wages, rent, interest, and profits. 
C)  the real GDP produced at different price levels. 
D)  the total dollar value of household expenditures.

Question 14

Discuss the three ranges of the aggregate supply (AS)curve.What could cause the AS curve to shift to the left? What impact would a leftward shift of the AS curve have on the economy?

Accepted Answer

The Keynesian range is the horizontal ra

Question 15

According to Keynesian theory,if equilibrium real GDP is below the full-employment level,then an increase in aggregate demand will result in which of the following changes in equilibrium?

Accepted Answer

A)  Real GDP will rise, but the price level will remain constant. 
B)  Real GDP and the price level will both rise. 
C)  Real GDP will remain unchanged but the price level will rise. 
D)  None of the above. 
A)  Real GDP will rise, but the price level will remain constant. 
B)  Real GDP and the price level will both rise. 
C)  Real GDP will remain unchanged but the price level will rise. 
D)  None of the above.

Question 16

Which of the following events is the most likely to create stagflation?

Accepted Answer

A)  An increase in the money supply. 
B)  A reduction in the amount spent on national defense. 
C)  A doubling of oil prices. 
D)  A decrease in investment spending. 
A)  An increase in the money supply. 
B)  A reduction in the amount spent on national defense. 
C)  A doubling of oil prices. 
D)  A decrease in investment spending.

Question 17

The aggregate supply curve is vertical at the level of real GDP that corresponds to the natural rate of unemployment.

Accepted Answer

A) True 
 B)False

Question 18

The full employment level of real GDP can be represented on an aggregate supply and demand diagram as a(n):

Accepted Answer

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

Question 19

When the supply of credit is fixed,an increase in the price level stimulates the demand for credit,which in turn reduces consumption and investment spending.This argument is called the:

Accepted Answer

A)  real balances effect. 
B)  interest-rate effect. 
C)  net exports effect. 
D)  substitution effect. 
A)  real balances effect. 
B)  interest-rate effect. 
C)  net exports effect. 
D)  substitution effect.

Question 20

Exhibit 14-7 Aggregate supply and demand curves
  
-In Exhibit 14-7,choosing to operate the economy at GDP = $1200 billion and P = 110 would be opting for an economy of:

Accepted Answer

A)  moderate unemployment with inflation. 
B)  full employment without inflation. 
C)  full employment with inflation. 
D)  high unemployment and high inflation. 
E)  moderate cyclical unemployment without inflation. 
A)  moderate unemployment with inflation. 
B)  full employment without inflation. 
C)  full employment with inflation. 
D)  high unemployment and high inflation. 
E)  moderate cyclical unemployment without inflation.

Exam 14: Aggregate Demand and Supply

Which of the following will not shift the aggregate demand cure to the left?

When the aggregate demand curve shifts to the right,intersecting the aggregate supply curve on its upward-sloping or vertical segment,

The aggregate demand curve is downward sloping because:

Which of the following helps explain why real GDP is inversely related to the price level within the framework of the AD-AS model?

The concurrent problems of inflation and unemployment are termed:

The net exports effect is the inverse relationship between net exports and the ____ of an economy.

Exhibit 14-3 Aggregate supply and demand curves -In Exhibit 14-3,the change in equilibrium from E₁ to E₂ represents:

The aggregate demand curve:

During the Great Depression of the 1930s,the aggregate demand curve intersected the aggregate supply curve in:

The aggregate demand curve is drawn downward-sloping,because increases in the price level cause decreases in:

Greater entrepreneurship in the economy will shift the aggregate:

The aggregate demand curve shows how real GDP purchased varies with changes in:

The aggregate supply curve is defined as:

Discuss the three ranges of the aggregate supply (AS)curve.What could cause the AS curve to shift to the left? What impact would a leftward shift of the AS curve have on the economy?

According to Keynesian theory,if equilibrium real GDP is below the full-employment level,then an increase in aggregate demand will result in which of the following changes in equilibrium?

Which of the following events is the most likely to create stagflation?

The aggregate supply curve is vertical at the level of real GDP that corresponds to the natural rate of unemployment.

The full employment level of real GDP can be represented on an aggregate supply and demand diagram as a(n):

When the supply of credit is fixed,an increase in the price level stimulates the demand for credit,which in turn reduces consumption and investment spending.This argument is called the:

Exhibit 14-7 Aggregate supply and demand curves -In Exhibit 14-7,choosing to operate the economy at GDP = $1200 billion and P = 110 would be opting for an economy of:

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