Question 1

The real output of the economy under conditions of full employment

Accepted Answer

A)  is long-run aggregate supply. 
B)  is long-run aggregate demand. 
C)  happens only when there is no inflation. 
D)  is determined by the real-balance effect. 
A)  is long-run aggregate supply. 
B)  is long-run aggregate demand. 
C)  happens only when there is no inflation. 
D)  is determined by the real-balance effect.

Question 2

At each price level, the aggregate demand curve indicates

Accepted Answer

A)  the nominal value of total production of goods and services domestic income that will be produced. 
B)  the total amount of real planned expenditures. 
C)  the nominal Gross Domestic Product (GDP) that will be produced. 
D)  the total amount of real Gross Domestic Product (GDP) that will be produced. 
A)  the nominal value of total production of goods and services domestic income that will be produced. 
B)  the total amount of real planned expenditures. 
C)  the nominal Gross Domestic Product (GDP) that will be produced. 
D)  the total amount of real Gross Domestic Product (GDP) that will be produced.

Question 3

Other things being equal, the economy's aggregate demand curve shows that

Accepted Answer

A)  as the price level falls, total planned expenditures fall as well. 
B)  a change in the general price level causes the curve to shift. 
C)  a change in the general price level causes a change in the quantity of final goods and services purchased. 
D)  real Gross Domestic Product (GDP) and the price level are not related. 
A)  as the price level falls, total planned expenditures fall as well. 
B)  a change in the general price level causes the curve to shift. 
C)  a change in the general price level causes a change in the quantity of final goods and services purchased. 
D)  real Gross Domestic Product (GDP) and the price level are not related.

Question 4

The total of all planned production for the economy is

Accepted Answer

A)  aggregate supply. 
B)  aggregate demand. 
C)  endowments. 
D)  real-balance effect. 
A)  aggregate supply. 
B)  aggregate demand. 
C)  endowments. 
D)  real-balance effect.

Question 5

If aggregate demand is stable and there is economic growth, the economy will experience

Accepted Answer

A)  secular degeneration. 
B)  secular deflation. 
C)  secular decline. 
D)  secular depreciation. 
A)  secular degeneration. 
B)  secular deflation. 
C)  secular decline. 
D)  secular depreciation.

Question 6

When interest rates rise,

Accepted Answer

A)  borrowing costs increase, and total planned real expenditures decline. 
B)  borrowing costs increase and total planned real expenditures increase. 
C)  borrowing costs decline, and total planned real expenditures increase. 
D)  borrowing costs decline, and total planned real expenditures decline. 
A)  borrowing costs increase, and total planned real expenditures decline. 
B)  borrowing costs increase and total planned real expenditures increase. 
C)  borrowing costs decline, and total planned real expenditures increase. 
D)  borrowing costs decline, and total planned real expenditures decline.

Question 7

What would likely happen to the long-run aggregate supply curve if the U.S. federal government increases marginal tax rates on wages?

Accepted Answer

A)  The LRAS curve would shift rightward. 
B)  The LRAS curve would shift leftward. 
C)  The LRAS curve would remain stable while the AD curve would shift leftward. 
D)  The LRAS curve would remain stable while the AD curve would shift rightward. 
A)  The LRAS curve would shift rightward. 
B)  The LRAS curve would shift leftward. 
C)  The LRAS curve would remain stable while the AD curve would shift leftward. 
D)  The LRAS curve would remain stable while the AD curve would shift rightward.

Question 8

What determines the total value of aggregate demand for U.S. real GDP?

Accepted Answer

A)  the spending decisions of consumers, firms, and governments 
B)  the Congressional Budget Office 
C)  the Federal Reserve Board 
D)  Wall Street 
A)  the spending decisions of consumers, firms, and governments 
B)  the Congressional Budget Office 
C)  the Federal Reserve Board 
D)  Wall Street

Question 9

The long run aggregate supply curve is vertical because

Accepted Answer

A)  the production possibilities curve is vertical. 
B)  the aggregate demand curve is downward sloping. 
C)  technology increases at a constant rate. 
D)  a change in the level of prices will have no effect on real output in the long-run. 
A)  the production possibilities curve is vertical. 
B)  the aggregate demand curve is downward sloping. 
C)  technology increases at a constant rate. 
D)  a change in the level of prices will have no effect on real output in the long-run.

Question 10

A price level increase tends to reduce net exports, thereby reducing the amount of real goods and services purchased in the United States. Economists refer to this phenomenon as

Accepted Answer

A)  the wealth effect. 
B)  the barrier effect. 
C)  the open-economy effect. 
D)  the Gross Domestic Product (GDP) effect. 
A)  the wealth effect. 
B)  the barrier effect. 
C)  the open-economy effect. 
D)  the Gross Domestic Product (GDP) effect.

Question 11

When total planned real expenditures change due to the changes in net exports, this is known as 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 12

Which of these questions does aggregate demand help us answer? I. What determines the total amount of our output that individuals, firms, governments and foreigners want to buy?
II) What is the economy's long-run real Gross Domestic Product (GDP)?
III) What determines the economy's equilibrium price level and the rate of inflation?

Accepted Answer

A)  I only 
B)  I and II 
C)  II and III 
D)  I and III 
A)  I only 
B)  I and II 
C)  II and III 
D)  I and III

Question 13

What is measured on the vertical axis of the aggregate demand graph?

Accepted Answer

A)  nominal income 
B)  real GDP per year 
C)  the price level 
D)  unemployment 
A)  nominal income 
B)  real GDP per year 
C)  the price level 
D)  unemployment

Question 14

The level of real GDP identified by the long-run aggregate supply curve is

Accepted Answer

A)  the full-employment level of real GDP. 
B)  the level of GDP at which each business firm is experiencing growth in sales. 
C)  the level of GDP at which each industry is experiencing growth in sales. 
D)  the level of GDP at which no one is below the poverty line. 
A)  the full-employment level of real GDP. 
B)  the level of GDP at which each business firm is experiencing growth in sales. 
C)  the level of GDP at which each industry is experiencing growth in sales. 
D)  the level of GDP at which no one is below the poverty line.

Question 15

The total of all planned real expenditures in the economy is called

Accepted Answer

A)  aggregate demand. 
B)  aggregate spending. 
C)  aggregate GDP. 
D)  aggregate consumption. 
A)  aggregate demand. 
B)  aggregate spending. 
C)  aggregate GDP. 
D)  aggregate consumption.

Question 16

The open economy effect refers to the fact that

Accepted Answer

A)  the position and shape of the long run aggregate supply curve is partially due to the fact that we import goods. 
B)  the aggregate supply curve shifts when the economy grows. 
C)  the slope of the aggregate demand curve is partially explained by the reduction in the desire to buy fewer U.S. goods by U.S. residents and foreign residents as a result of a higher price level. 
D)  the immigration policies of the United States are disruptive to labor markets. 
A)  the position and shape of the long run aggregate supply curve is partially due to the fact that we import goods. 
B)  the aggregate supply curve shifts when the economy grows. 
C)  the slope of the aggregate demand curve is partially explained by the reduction in the desire to buy fewer U.S. goods by U.S. residents and foreign residents as a result of a higher price level. 
D)  the immigration policies of the United States are disruptive to labor markets.

Question 17

What could cause a decrease in the price level and simultaneously an increase in GDP similar to the 1920s in the United States?

Accepted Answer

A)  an increase in interest rates 
B)  a decrease in consumer confidence 
C)  an increase in productivity 
D)  a decrease in interest rates 
A)  an increase in interest rates 
B)  a decrease in consumer confidence 
C)  an increase in productivity 
D)  a decrease in interest rates

Question 18

Which of the following will result in secular deflation?

Accepted Answer

A)  A one-time rightward shift of the aggregate demand curve. 
B)  Continuous rightward shifts of the aggregate demand curve. 
C)  A one-time rightward shift of the long-run aggregate supply curve. 
D)  Continuous rightward shifts of the long-run aggregate supply curve. 
A)  A one-time rightward shift of the aggregate demand curve. 
B)  Continuous rightward shifts of the aggregate demand curve. 
C)  A one-time rightward shift of the long-run aggregate supply curve. 
D)  Continuous rightward shifts of the long-run aggregate supply curve.

Question 19

Suppose a country has no trade with other countries and people can borrow as many funds as they want at the current interest rate. An increase in the price level will generate

Accepted Answer

A)  a decrease in total planned real expenditures because of the real-balance effect. 
B)  a decrease in total planned real expenditures because of the open-economy effect and the indirect effect. 
C)  a decrease in total planned real expenditures because the real-balance effect will be stronger than the indirect effect and the open-economy effect. 
D)  a decrease in total planned real expenditures because the indirect effect will be stronger than the real-balance effect. 
A)  a decrease in total planned real expenditures because of the real-balance effect. 
B)  a decrease in total planned real expenditures because of the open-economy effect and the indirect effect. 
C)  a decrease in total planned real expenditures because the real-balance effect will be stronger than the indirect effect and the open-economy effect. 
D)  a decrease in total planned real expenditures because the indirect effect will be stronger than the real-balance effect.

Question 20

Which one of the following is NOT a component of aggregate demand?

Accepted Answer

A)  merchandise inventories 
B)  consumption spending 
C)  investment expenditures 
D)  government purchases 
A)  merchandise inventories 
B)  consumption spending 
C)  investment expenditures 
D)  government purchases

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

The real output of the economy under conditions of full employment

At each price level, the aggregate demand curve indicates

Other things being equal, the economy's aggregate demand curve shows that

The total of all planned production for the economy is

If aggregate demand is stable and there is economic growth, the economy will experience

When interest rates rise,

What would likely happen to the long-run aggregate supply curve if the U.S. federal government increases marginal tax rates on wages?

What determines the total value of aggregate demand for U.S. real GDP?

The long run aggregate supply curve is vertical because

A price level increase tends to reduce net exports, thereby reducing the amount of real goods and services purchased in the United States. Economists refer to this phenomenon as

When total planned real expenditures change due to the changes in net exports, this is known as the

What is measured on the vertical axis of the aggregate demand graph?

The level of real GDP identified by the long-run aggregate supply curve is

The total of all planned real expenditures in the economy is called

The open economy effect refers to the fact that

What could cause a decrease in the price level and simultaneously an increase in GDP similar to the 1920s in the United States?

Which of the following will result in secular deflation?

Suppose a country has no trade with other countries and people can borrow as many funds as they want at the current interest rate. An increase in the price level will generate

Which one of the following is NOT a component of aggregate demand?

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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