Question 1

An increase in the amount of physical capital will cause

Accepted Answer

A)  an increase in both aggregate demand and real GDP, but have no effect on the price level. 
B)  aggregate demand and aggregate supply to increase by the same amounts, causing real GDP to increase and the price level to remain constant. 
C)  an increase in both aggregate supply and real GDP, but have no effect on the price level. 
D)  an increase in both aggregate supply and real GDP and a reduction in the price level. 
A)  an increase in both aggregate demand and real GDP, but have no effect on the price level. 
B)  aggregate demand and aggregate supply to increase by the same amounts, causing real GDP to increase and the price level to remain constant. 
C)  an increase in both aggregate supply and real GDP, but have no effect on the price level. 
D)  an increase in both aggregate supply and real GDP and a reduction in the price level.

Question 2

-Refer to the above figure. If the price level is 80,

Accepted Answer

A)  the total planned real expenditures by individuals, businesses, and the government are less than total planned production by firms. 
B)  the total planned real expenditures by individuals, businesses, and the government exceed total planned production by firms. 
C)  the economy will have economic growth and the new equilibrium price level will be 80. 
D)  the aggregate demand curve will automatically shift leading to a stable equilibrium. 
A)  the total planned real expenditures by individuals, businesses, and the government are less than total planned production by firms. 
B)  the total planned real expenditures by individuals, businesses, and the government exceed total planned production by firms. 
C)  the economy will have economic growth and the new equilibrium price level will be 80. 
D)  the aggregate demand curve will automatically shift leading to a stable equilibrium.

Question 3

An aggregate demand curve

Accepted Answer

A)  shifts to the right when the price level increases and to the left when the price level falls. 
B)  shifts to the right when any non-price-level factor increases total planned real spending. 
C)  shifts to the right when population decreases and shifts to the left when population increases. 
D)  does not shift, unlike individual or market demand curves. 
A)  shifts to the right when the price level increases and to the left when the price level falls. 
B)  shifts to the right when any non-price-level factor increases total planned real spending. 
C)  shifts to the right when population decreases and shifts to the left when population increases. 
D)  does not shift, unlike individual or market demand curves.

Question 4

In an economy in which aggregate demand is stable and a period of sustained and significant productivity growth occurs, there will be

Accepted Answer

A)  secular deflation. 
B)  secular inflation. 
C)  a constant price level. 
D)  a shift of aggregate supply to the left. 
A)  secular deflation. 
B)  secular inflation. 
C)  a constant price level. 
D)  a shift of aggregate supply to the left.

Question 5

Economic growth is represented on the aggregate supply model by a

Accepted Answer

A)  shift in the long-run aggregate supply curve to the left. 
B)  shift in the long-run aggregate supply curve to the right. 
C)  shift in the short-run aggregate supply curve to the left. 
D)  shift in the short-run aggregate supply curve to the right. 
A)  shift in the long-run aggregate supply curve to the left. 
B)  shift in the long-run aggregate supply curve to the right. 
C)  shift in the short-run aggregate supply curve to the left. 
D)  shift in the short-run aggregate supply curve to the right.

Question 6

One reason that the aggregate demand curve slopes downward is because

Accepted Answer

A)  higher price levels increase real wealth and consumption. 
B)  higher price levels reduce net exports. 
C)  higher price levels reduce interest rates. 
D)  higher price levels increase investment. 
A)  higher price levels increase real wealth and consumption. 
B)  higher price levels reduce net exports. 
C)  higher price levels reduce interest rates. 
D)  higher price levels increase investment.

Question 7

The real-balance effect refers to

Accepted Answer

A)  the economy's response to interest rate changes. 
B)  the change in the value of cash balances due to price level changes. 
C)  the change in net exports. 
D)  the economy's ability to balance recession and expansion. 
A)  the economy's response to interest rate changes. 
B)  the change in the value of cash balances due to price level changes. 
C)  the change in net exports. 
D)  the economy's ability to balance recession and expansion.

Question 8

Long-run aggregate supply reflects

Accepted Answer

A)  total production in the economy at full employment. 
B)  total spending in the economy at full employment. 
C)  both production and spending in the economy. 
D)  only foreign production from U.S. subsidiaries. 
A)  total production in the economy at full employment. 
B)  total spending in the economy at full employment. 
C)  both production and spending in the economy. 
D)  only foreign production from U.S. subsidiaries.

Question 9

Long-run aggregate supply is

Accepted Answer

A)  the sum of planned expenditures by consumers and firms. 
B)  the level of output that occurs when the economy is operating on the production possibilities curve. 
C)  downward sloping. 
D)  upward sloping. 
A)  the sum of planned expenditures by consumers and firms. 
B)  the level of output that occurs when the economy is operating on the production possibilities curve. 
C)  downward sloping. 
D)  upward sloping.

Question 10

A fall in the price level

Accepted Answer

A)  increases the real value of money balances, which causes borrowing to decrease, leading to a decrease in investment and total planned real expenditures. 
B)  causes exports to rise and imports to fall, leading to an increase in total planned real expenditures. 
C)  leads to an increase in total planned real expenditures because of the indirect effect. 
D)  causes total planned real expenditures to increase as long as the fall is less than the fall in the price level in other countries. 
A)  increases the real value of money balances, which causes borrowing to decrease, leading to a decrease in investment and total planned real expenditures. 
B)  causes exports to rise and imports to fall, leading to an increase in total planned real expenditures. 
C)  leads to an increase in total planned real expenditures because of the indirect effect. 
D)  causes total planned real expenditures to increase as long as the fall is less than the fall in the price level in other countries.

Question 11

Suppose that an economy is initially producing at the full-employment level of output. Now suppose there is a reduction in the money supply. Other things being equal we can expect

Accepted Answer

A)  supply-side inflation. 
B)  demand-side inflation. 
C)  cost-pull inflation. 
D)  deflation. 
A)  supply-side inflation. 
B)  demand-side inflation. 
C)  cost-pull inflation. 
D)  deflation.

Question 12

If your income stays the same and the price level increases, you will buy fewer goods and services due to the

Accepted Answer

A)  interest rate effect. 
B)  real-balance effect. 
C)  open economy effect. 
D)  aggregate balances effect. 
A)  interest rate effect. 
B)  real-balance effect. 
C)  open economy effect. 
D)  aggregate balances effect.

Question 13

Long-run aggregate supply is

Accepted Answer

A)  the possible combinations of real GDP and inputs after full adjustments have been made. 
B)  the extraction of natural resources. 
C)  the real production of goods and services after full adjustments have been made. 
D)  all of the physical and human resources in the economy. 
A)  the possible combinations of real GDP and inputs after full adjustments have been made. 
B)  the extraction of natural resources. 
C)  the real production of goods and services after full adjustments have been made. 
D)  all of the physical and human resources in the economy.

Question 14

Other things being equal, appreciation of the dollar

Accepted Answer

A)  increases aggregate demand in the United States, and may increase aggregate supply by reducing the prices of imported resources. 
B)  increases aggregate demand in the United States, and may decrease aggregate supply by reducing the prices of imported resources. 
C)  decreases aggregate demand in the United States, and may increase aggregate supply by reducing the prices of imported resources. 
D)  decreases aggregate demand in the United States, and may decrease aggregate supply by increasing the prices of imported resources. 
A)  increases aggregate demand in the United States, and may increase aggregate supply by reducing the prices of imported resources. 
B)  increases aggregate demand in the United States, and may decrease aggregate supply by reducing the prices of imported resources. 
C)  decreases aggregate demand in the United States, and may increase aggregate supply by reducing the prices of imported resources. 
D)  decreases aggregate demand in the United States, and may decrease aggregate supply by increasing the prices of imported resources.

Question 15

How is economic growth graphically depicted?

Accepted Answer

A)  The aggregate demand curve shifts to the left. 
B)  Aggregate demand shifts to the right. 
C)  Short-run aggregate supply shifts left. 
D)  The long-run aggregate supply curve shifts right. 
A)  The aggregate demand curve shifts to the left. 
B)  Aggregate demand shifts to the right. 
C)  Short-run aggregate supply shifts left. 
D)  The long-run aggregate supply curve shifts right.

Question 16

If you have $5000 and the GDP deflator decreases from 100 to 80

Accepted Answer

A)  the $5000 will buy 20 percent less of the goods and services produced by society. 
B)  the $5000 will buy 20 percent more of the goods and services produced by society. 
C)  the value of the $5000 decreases. 
D)  the value of the $5000 remains constant. 
A)  the $5000 will buy 20 percent less of the goods and services produced by society. 
B)  the $5000 will buy 20 percent more of the goods and services produced by society. 
C)  the value of the $5000 decreases. 
D)  the value of the $5000 remains constant.

Question 17

A reduction the amount of oil (a resource) will tend to cause which of the following?

Accepted Answer

A)  a reduction in output and a reduction in the price level 
B)  a reduction in output with no change in the price level 
C)  a reduction in output and an increase in the price level 
D)  an increase in the price level and no change in output if accompanied by an increase in the money supply 
A)  a reduction in output and a reduction in the price level 
B)  a reduction in output with no change in the price level 
C)  a reduction in output and an increase in the price level 
D)  an increase in the price level and no change in output if accompanied by an increase in the money supply

Question 18

The aggregate supply curve shows

Accepted Answer

A)  the total of all planned production for an economy. 
B)  the various quantities of goods consumers will purchase. 
C)  that real GDP can only increase when the price level increases. 
D)  what an economy can produce if resource prices are constant. 
A)  the total of all planned production for an economy. 
B)  the various quantities of goods consumers will purchase. 
C)  that real GDP can only increase when the price level increases. 
D)  what an economy can produce if resource prices are constant.

Question 19

Economic growth will be associated with a constant price level when

Accepted Answer

A)  the increase in aggregate demand exactly equals the increase in long-run aggregate supply. 
B)  the increase in aggregate demand is more than the increase in long-run aggregate supply. 
C)  the increase in aggregate demand is less than the increase in long-run aggregate supply. 
D)  the increase in aggregate demand is accompanied by a reduction in short-run aggregate supply. 
A)  the increase in aggregate demand exactly equals the increase in long-run aggregate supply. 
B)  the increase in aggregate demand is more than the increase in long-run aggregate supply. 
C)  the increase in aggregate demand is less than the increase in long-run aggregate supply. 
D)  the increase in aggregate demand is accompanied by a reduction in short-run aggregate supply.

Question 20

The long-run aggregate supply when resources are fully employed

Accepted Answer

A)  has no relationship with the production possibilities curve. 
B)  will always be associated with a point outside the production possibilities curve. 
C)  will always be associated with a point on the production possibilities curve. 
D)  is determined by demand. 
A)  has no relationship with the production possibilities curve. 
B)  will always be associated with a point outside the production possibilities curve. 
C)  will always be associated with a point on the production possibilities curve. 
D)  is determined by demand.

Exam 10: Real GDP and the Price Level in the Long Run

An increase in the amount of physical capital will cause

-Refer to the above figure. If the price level is 80,

An aggregate demand curve

In an economy in which aggregate demand is stable and a period of sustained and significant productivity growth occurs, there will be

Economic growth is represented on the aggregate supply model by a

One reason that the aggregate demand curve slopes downward is because

The real-balance effect refers to

Long-run aggregate supply reflects

Long-run aggregate supply is

A fall in the price level

Suppose that an economy is initially producing at the full-employment level of output. Now suppose there is a reduction in the money supply. Other things being equal we can expect

If your income stays the same and the price level increases, you will buy fewer goods and services due to the

Long-run aggregate supply is

Other things being equal, appreciation of the dollar

How is economic growth graphically depicted?

If you have $5000 and the GDP deflator decreases from 100 to 80

A reduction the amount of oil (a resource) will tend to cause which of the following?

The aggregate supply curve shows

Economic growth will be associated with a constant price level when

The long-run aggregate supply when resources are fully employed

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Measuring the Economys Performance

Global Economic Growth and Development

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money, Banking, and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Demand and Supply Elasticity

Consumer Choice

Rents, Profits, and the Financial Environment of Business

The Firm: Cost and Output Determination

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Regulation and Antitrust Policy in a Globalized Economy

The Labor Market: Demand, Supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, Poverty, and Health Care

Environmental Economics

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

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