Question 1

Which of the following is the main cause of the persistent inflation that we have experienced in the United States?

Accepted Answer

A)  Supply-side inflationary factors. 
B)  Demand-side inflationary factors. 
C)  A combination of supply- and demand-side inflationary factors. 
D)  Supply-side secularity factors. 
A)  Supply-side inflationary factors. 
B)  Demand-side inflationary factors. 
C)  A combination of supply- and demand-side inflationary factors. 
D)  Supply-side secularity factors.

Question 2

A persistently declining price level resulting from economic growth and unchanged aggregate demand is called

Accepted Answer

A)  demand-side deflation. 
B)  supply-side deflation. 
C)  ozian deflation. 
D)  secular deflation. 
A)  demand-side deflation. 
B)  supply-side deflation. 
C)  ozian deflation. 
D)  secular deflation.

Question 3

If you have $1,000 and the Gross Domestic Product (GDP) deflator increases from 100 to 120, then

Accepted Answer

A)  the $1,000 will buy 20 percent less of the goods and services produced by society. 
B)  the $1,000 will buy 20 percent more of the goods and services produced by society. 
C)  the value of the $1,000 increases. 
D)  you will be able to buy fewer goods, but the real value of those goods will increase. 
A)  the $1,000 will buy 20 percent less of the goods and services produced by society. 
B)  the $1,000 will buy 20 percent more of the goods and services produced by society. 
C)  the value of the $1,000 increases. 
D)  you will be able to buy fewer goods, but the real value of those goods will increase.

Question 4

The long-run aggregate supply curve is

Accepted Answer

A)  horizontal at the full-employment level of real Gross Domestic Product (GDP). 
B)  vertical at the full-employment level of real Gross Domestic Product (GDP). 
C)  sloping upward due to the effects of price level changes on real Gross Domestic Product (GDP). 
D)  the same as the short run aggregate supply (SRAS) curve. 
A)  horizontal at the full-employment level of real Gross Domestic Product (GDP). 
B)  vertical at the full-employment level of real Gross Domestic Product (GDP). 
C)  sloping upward due to the effects of price level changes on real Gross Domestic Product (GDP). 
D)  the same as the short run aggregate supply (SRAS) curve.

Question 5

When the production possibilities curve shifts outward,

Accepted Answer

A)  the long-run aggregate supply curve shifts to the left. 
B)  the long-run aggregate supply curve is unchanged. 
C)  the price level rises in the long run. 
D)  the long-run aggregate supply curve shifts to the right. 
A)  the long-run aggregate supply curve shifts to the left. 
B)  the long-run aggregate supply curve is unchanged. 
C)  the price level rises in the long run. 
D)  the long-run aggregate supply curve shifts to the right.

Question 6

-In the above figure, a movement from point B to point C could be explained by

Accepted Answer

A)  an increase in the price level. 
B)  a decrease in the quantity of money in circulation. 
C)  increased government spending. 
D)  the real-balance effect. 
A)  an increase in the price level. 
B)  a decrease in the quantity of money in circulation. 
C)  increased government spending. 
D)  the real-balance effect.

Question 7

According to the interest rate effect, an increase in the price level, if other factors are held constant, will lead to

Accepted Answer

A)  a reduction in total real spending on interest-rate-sensitive goods. 
B)  an increase in the stock of real wealth held by the public. 
C)  an outward shift of the aggregate demand curve. 
D)  an increase in the real interest rate. 
A)  a reduction in total real spending on interest-rate-sensitive goods. 
B)  an increase in the stock of real wealth held by the public. 
C)  an outward shift of the aggregate demand curve. 
D)  an increase in the real interest rate.

Question 8

An increase in the amount of money in circulation would cause a

Accepted Answer

A)  shift of the aggregate demand curve to the right. 
B)  shift of the aggregate demand curve to the left. 
C)  movement up the aggregate demand curve. 
D)  movement down the aggregate demand curve. 
A)  shift of the aggregate demand curve to the right. 
B)  shift of the aggregate demand curve to the left. 
C)  movement up the aggregate demand curve. 
D)  movement down the aggregate demand curve.

Question 9

The real-balance effect indicates that at higher price levels

Accepted Answer

A)  the real value of money holdings fall, resulting in decreased spending. 
B)  the real value of money holdings increase, resulting in increased saving. 
C)  the purchasing power of money will increase. 
D)  the value of the dollar will increase. 
A)  the real value of money holdings fall, resulting in decreased spending. 
B)  the real value of money holdings increase, resulting in increased saving. 
C)  the purchasing power of money will increase. 
D)  the value of the dollar will increase.

Question 10

All of the following would cause the aggregate demand curve to shift EXCEPT

Accepted Answer

A)  a rise in real interest rates. 
B)  an increase in taxes. 
C)  improvements in economic conditions in other countries. 
D)  a decrease in the price level. 
A)  a rise in real interest rates. 
B)  an increase in taxes. 
C)  improvements in economic conditions in other countries. 
D)  a decrease in the price level.

Question 11

The intersection of aggregate demand and long-run aggregate supply identify the price level at which total planned

Accepted Answer

A)  real expenditures equal actual nominal GDP. 
B)  real expenditures equal total planned production. 
C)  export spending equals total planned import spending. 
D)  government spending equals total planned tax revenues. 
A)  real expenditures equal actual nominal GDP. 
B)  real expenditures equal total planned production. 
C)  export spending equals total planned import spending. 
D)  government spending equals total planned tax revenues.

Question 12

Total planned expenditures for domestically produced goods and services consist of

Accepted Answer

A)  government spending, business spending, and import spending only. 
B)  consumer spending, business spending, and net export spending only 
C)  consumer spending, business spending, government spending, and net export spending 
D)  consumer spending, business spending, government spending, and import spending. 
A)  government spending, business spending, and import spending only. 
B)  consumer spending, business spending, and net export spending only 
C)  consumer spending, business spending, government spending, and net export spending 
D)  consumer spending, business spending, government spending, and import spending.

Question 13

The shape of the aggregate demand curve does not tell us anything about how the total dollar value of spending will ultimately be divided between output and prices. For this we need

Accepted Answer

A)  information about the standard of living in the country. 
B)  information that only the Consumers' Price Index can provide. 
C)  an aggregate supply curve. 
D)  to know how far from the origin the aggregate demand curve is. 
A)  information about the standard of living in the country. 
B)  information that only the Consumers' Price Index can provide. 
C)  an aggregate supply curve. 
D)  to know how far from the origin the aggregate demand curve is.

Question 14

The long-run aggregate supply curve shifts right at the same time as

Accepted Answer

A)  the Laffer curve shifts upward. 
B)  the production possibilities curve shifts outward. 
C)  the production possibilities curve shifts inward. 
D)  the inflation rate increases. 
A)  the Laffer curve shifts upward. 
B)  the production possibilities curve shifts outward. 
C)  the production possibilities curve shifts inward. 
D)  the inflation rate increases.

Question 15

What pattern would you observe in an economy in which aggregate demand is increasing but in which long-run aggregate supply remained the same?

Accepted Answer

A)  secular deflation 
B)  inflation accompanied by no change in real GDP 
C)  inflation accompanied by declines in real GDP 
D)  a decline in consumption spending 
A)  secular deflation 
B)  inflation accompanied by no change in real GDP 
C)  inflation accompanied by declines in real GDP 
D)  a decline in consumption spending

Question 16

What is one implication of the real-balance effect?

Accepted Answer

A)  The part of your wealth that you hold in the form of cash loses some of its value as the price level rises. 
B)  When the price level rises, people have an incentive to work harder in order to earn a higher income. 
C)  When the price level falls, most consumers reallocate their spending so as to have an equal balance between necessities and luxuries. 
D)  Aggregate demand and aggregate supply can never reach long-run equilibrium. 
A)  The part of your wealth that you hold in the form of cash loses some of its value as the price level rises. 
B)  When the price level rises, people have an incentive to work harder in order to earn a higher income. 
C)  When the price level falls, most consumers reallocate their spending so as to have an equal balance between necessities and luxuries. 
D)  Aggregate demand and aggregate supply can never reach long-run equilibrium.

Question 17

The full-employment level of GDP is

Accepted Answer

A)  endowments. 
B)  long-run aggregate demand. 
C)  long-run aggregate supply. 
D)  economic growth. 
A)  endowments. 
B)  long-run aggregate demand. 
C)  long-run aggregate supply. 
D)  economic growth.

Question 18

When talking about aggregate supply, it is necessary to

Accepted Answer

A)  focus on the short run. 
B)  focus on the long run. 
C)  distinguish between the long-run aggregate supply curve and the short-run aggregate supply curve. 
D)  distinguish between the long-run aggregate supply curve and the long run aggregate demand curve when all adjustments to price level changes have been made. 
A)  focus on the short run. 
B)  focus on the long run. 
C)  distinguish between the long-run aggregate supply curve and the short-run aggregate supply curve. 
D)  distinguish between the long-run aggregate supply curve and the long run aggregate demand curve when all adjustments to price level changes have been made.

Question 19

Total planned real expenditures measured along the aggregate demand curve are made up of

Accepted Answer

A)  consumption spending, investment spending, government spending, and net export spending. 
B)  consumption spending, income, government spending, and net export spending. 
C)  consumption spending, saving, investment spending, and government spending. 
D)  consumption spending, factor payments, investment spending, and net export spending. 
A)  consumption spending, investment spending, government spending, and net export spending. 
B)  consumption spending, income, government spending, and net export spending. 
C)  consumption spending, saving, investment spending, and government spending. 
D)  consumption spending, factor payments, investment spending, and net export spending.

Question 20

What has caused persistent inflation in the United States?

Accepted Answer

A)  The nation's long-run aggregate supply curve has shifted to the left. 
B)  Supply-side inflation 
C)  A decrease in labor productivity 
D)  None of the above 
A)  The nation's long-run aggregate supply curve has shifted to the left. 
B)  Supply-side inflation 
C)  A decrease in labor productivity 
D)  None of the above

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

Which of the following is the main cause of the persistent inflation that we have experienced in the United States?

A persistently declining price level resulting from economic growth and unchanged aggregate demand is called

If you have $1,000 and the Gross Domestic Product (GDP) deflator increases from 100 to 120, then

The long-run aggregate supply curve is

When the production possibilities curve shifts outward,

-In the above figure, a movement from point B to point C could be explained by

According to the interest rate effect, an increase in the price level, if other factors are held constant, will lead to

An increase in the amount of money in circulation would cause a

The real-balance effect indicates that at higher price levels

All of the following would cause the aggregate demand curve to shift EXCEPT

The intersection of aggregate demand and long-run aggregate supply identify the price level at which total planned

Total planned expenditures for domestically produced goods and services consist of

The shape of the aggregate demand curve does not tell us anything about how the total dollar value of spending will ultimately be divided between output and prices. For this we need

The long-run aggregate supply curve shifts right at the same time as

What pattern would you observe in an economy in which aggregate demand is increasing but in which long-run aggregate supply remained the same?

What is one implication of the real-balance effect?

The full-employment level of GDP is

When talking about aggregate supply, it is necessary to

Total planned real expenditures measured along the aggregate demand curve are made up of

What has caused persistent inflation in the United States?

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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