Question 1

Suppose the demand for hot dogs decreases. In the short run, firms that produce hot dogs will experience a fall in prices, which will induce them to

Accepted Answer

A)  increase production and increase the number of workers. 
B)  decrease production and increase the number of workers. 
C)  decrease production and reduce the number of workers. 
D)  increase production and reduce the number of workers. 
A)  increase production and increase the number of workers. 
B)  decrease production and increase the number of workers. 
C)  decrease production and reduce the number of workers. 
D)  increase production and reduce the number of workers.

Question 2

Assuming the price level has not changed, how would an increase in the aggregate demand affect real GDP?

Accepted Answer

A)  It decreases. 
B)  It increases. 
C)  It only changes with changes in imports. 
D)  It only changes with changes in exports. 
A)  It decreases. 
B)  It increases. 
C)  It only changes with changes in imports. 
D)  It only changes with changes in exports.

Question 3

Which of the following curves reflects the idea that in the long run, output is determined only by the factors of production and given technology?

Accepted Answer

A)  the aggregate demand curve 
B)  the market supply curve 
C)  the long-run aggregate supply curve 
D)  the Keynesian aggregate supply curve 
A)  the aggregate demand curve 
B)  the market supply curve 
C)  the long-run aggregate supply curve 
D)  the Keynesian aggregate supply curve

Question 4

If actual output exceeds potential output, the short-run aggregate supply curve shifts downward over time.

Accepted Answer

A) True 
 B)False

Question 5

The price system always works instantaneously.

Accepted Answer

A) True 
 B)False

Question 6

The aggregate demand curve is

Accepted Answer

A)  downward sloping. 
B)  upward sloping. 
C)  a vertical line at potential output. 
D)  a horizontal line at the current price level. 
A)  downward sloping. 
B)  upward sloping. 
C)  a vertical line at potential output. 
D)  a horizontal line at the current price level.

Question 7

Aggregate demand will be affected by the purchasing power of money.

Accepted Answer

A) True 
 B)False

Question 8

The price system works in an economy on a day-to-day basis to match the desires of consumers with the output from producers.

Accepted Answer

A) True 
 B)False

Question 9

The marginal propensity to save (MPS) is the

Accepted Answer

A)  amount of saving that is later consumed. 
B)  fraction of additional income that is saved. 
C)  part of consumption spending that does not depend on income. 
D)  total amount of income that is saved. 
A)  amount of saving that is later consumed. 
B)  fraction of additional income that is saved. 
C)  part of consumption spending that does not depend on income. 
D)  total amount of income that is saved.

Question 10

In the short run, the price level is determined primarily by the supply of goods.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following causes a movement along the aggregate demand curve?

Accepted Answer

A)  a fall in wages 
B)  an increase in the price level 
C)  an increase in government spending 
D)  an increase in the money supply 
A)  a fall in wages 
B)  an increase in the price level 
C)  an increase in government spending 
D)  an increase in the money supply

Question 12

Recall the Application about the factors involved in causing recessions, and the causes of recessions in the United States from 1893 to 1990 to answer the following question(s).
-According to this Application, the recessions in 1973 and 1979 were caused by

Accepted Answer

A)  supply shocks. 
B)  deflation. 
C)  foreign monetary developments. 
D)  arbitrage losses in the foreign exchange market. 
A)  supply shocks. 
B)  deflation. 
C)  foreign monetary developments. 
D)  arbitrage losses in the foreign exchange market.

Question 13

Decreases in taxes shift the aggregate demand curve to the right.

Accepted Answer

A) True 
 B)False

Question 14

The long-run aggregate supply curve is

Accepted Answer

A)  downward sloping. 
B)  upward sloping. 
C)  a vertical line at potential output. 
D)  a horizontal line at the current price level. 
A)  downward sloping. 
B)  upward sloping. 
C)  a vertical line at potential output. 
D)  a horizontal line at the current price level.

Question 15

To determine the equilibrium price level and equilibrium level of real GDP, the aggregate demand and aggregate supply must

Accepted Answer

A)  be considered separately. 
B)  intersect. 
C)  be disregarded. 
D)  be considered as a multiplier. 
A)  be considered separately. 
B)  intersect. 
C)  be disregarded. 
D)  be considered as a multiplier.

Question 16

Draw an aggregate supply and aggregate demand graph which shows the economy producing an output which exceeds potential output in the short run, and the adjustment that will occur as the economy adjusts to long-run equilibrium.

Accepted Answer

In the short run, the economy is at the

Question 17

When consumers spend and buy things regardless of their level of income, this is known as

Accepted Answer

A)  bad financial management. 
B)  living the good life. 
C)  autonomous consumption spending. 
D)  using credit to its maximum. 
A)  bad financial management. 
B)  living the good life. 
C)  autonomous consumption spending. 
D)  using credit to its maximum.

Question 18

The purchasing power of money decreases as the price level increases.

Accepted Answer

A) True 
 B)False

Question 19

Assuming a long-run aggregate supply curve, a decrease in government spending results in ________ in output and ________ in price level.

Accepted Answer

A)  no change; an increase 
B)  no change; a decrease 
C)  a decrease; a decrease 
D)  an increase; no change 
A)  no change; an increase 
B)  no change; a decrease 
C)  a decrease; a decrease 
D)  an increase; no change

Question 20

Figure 14.2
-Refer to Figure 14.2. A movement from point c to point b could be caused by a simultaneous ________ and ________.

Accepted Answer

A)  decrease in government spending; decrease in the price of oil 
B)  decrease in taxes; increase in the price of oil 
C)  increase in taxes; decrease in government spending 
D)  increase in government spending; increase in the money supply 
A)  decrease in government spending; decrease in the price of oil 
B)  decrease in taxes; increase in the price of oil 
C)  increase in taxes; decrease in government spending 
D)  increase in government spending; increase in the money supply

Suppose the demand for hot dogs decreases. In the short run, firms that produce hot dogs will experience a fall in prices, which will induce them to

Assuming the price level has not changed, how would an increase in the aggregate demand affect real GDP?

Which of the following curves reflects the idea that in the long run, output is determined only by the factors of production and given technology?

If actual output exceeds potential output, the short-run aggregate supply curve shifts downward over time.

The price system always works instantaneously.

The aggregate demand curve is

Aggregate demand will be affected by the purchasing power of money.

The price system works in an economy on a day-to-day basis to match the desires of consumers with the output from producers.

The marginal propensity to save (MPS) is the

In the short run, the price level is determined primarily by the supply of goods.

Which of the following causes a movement along the aggregate demand curve?

Recall the Application about the factors involved in causing recessions, and the causes of recessions in the United States from 1893 to 1990 to answer the following question(s). -According to this Application, the recessions in 1973 and 1979 were caused by

Decreases in taxes shift the aggregate demand curve to the right.

The long-run aggregate supply curve is

To determine the equilibrium price level and equilibrium level of real GDP, the aggregate demand and aggregate supply must

Draw an aggregate supply and aggregate demand graph which shows the economy producing an output which exceeds potential output in the short run, and the adjustment that will occur as the economy adjusts to long-run equilibrium.

When consumers spend and buy things regardless of their level of income, this is known as

The purchasing power of money decreases as the price level increases.

Assuming a long-run aggregate supply curve, a decrease in government spending results in in output and in price level.

Figure 14.2 -Refer to Figure 14.2. A movement from point c to point b could be caused by a simultaneous and .

Introduction: What Is Economics

The Key Principles of Economics

Demand, Supply, and Market Equilibrium

Elasticity: A Measure of Responsiveness

Production Technology and Cost

Perfect Competition

Monopoly and Price Discrimination

Market Entry, Monopolistic Competition, and Oligopoly

Imperfect Information, External Benefits, and External Costs

The Labor Market and the Distribution of Income

Measuring a Nations Production and Income

Unemployment and Inflation

Why Do Economies Grow

Fiscal Policy

Money and the Banking System

Monetary Policy and Inflation

International Trade and Finance

Filters

Exam 14: Aggregate Demand and Aggregate Supply

Suppose the demand for hot dogs decreases. In the short run, firms that produce hot dogs will experience a fall in prices, which will induce them to

Assuming the price level has not changed, how would an increase in the aggregate demand affect real GDP?

Which of the following curves reflects the idea that in the long run, output is determined only by the factors of production and given technology?

If actual output exceeds potential output, the short-run aggregate supply curve shifts downward over time.

The price system always works instantaneously.

The aggregate demand curve is

Aggregate demand will be affected by the purchasing power of money.

The price system works in an economy on a day-to-day basis to match the desires of consumers with the output from producers.

The marginal propensity to save (MPS) is the

In the short run, the price level is determined primarily by the supply of goods.

Which of the following causes a movement along the aggregate demand curve?

Recall the Application about the factors involved in causing recessions, and the causes of recessions in the United States from 1893 to 1990 to answer the following question(s). -According to this Application, the recessions in 1973 and 1979 were caused by

Decreases in taxes shift the aggregate demand curve to the right.

The long-run aggregate supply curve is

To determine the equilibrium price level and equilibrium level of real GDP, the aggregate demand and aggregate supply must

Draw an aggregate supply and aggregate demand graph which shows the economy producing an output which exceeds potential output in the short run, and the adjustment that will occur as the economy adjusts to long-run equilibrium.

When consumers spend and buy things regardless of their level of income, this is known as

The purchasing power of money decreases as the price level increases.

Assuming a long-run aggregate supply curve, a decrease in government spending results in ________ in output and ________ in price level.

Figure 14.2 -Refer to Figure 14.2. A movement from point c to point b could be caused by a simultaneous ________ and ________.

Introduction: What Is Economics

The Key Principles of Economics

Demand, Supply, and Market Equilibrium

Elasticity: A Measure of Responsiveness

Production Technology and Cost

Perfect Competition

Monopoly and Price Discrimination

Market Entry, Monopolistic Competition, and Oligopoly

Imperfect Information, External Benefits, and External Costs

The Labor Market and the Distribution of Income

Measuring a Nations Production and Income

Unemployment and Inflation

Why Do Economies Grow

Fiscal Policy

Money and the Banking System

Monetary Policy and Inflation

International Trade and Finance

Filters

Assuming a long-run aggregate supply curve, a decrease in government spending results in in output and in price level.

Figure 14.2 -Refer to Figure 14.2. A movement from point c to point b could be caused by a simultaneous and .