Question 1

A negative GDP gap can be caused by either a decrease in aggregate demand or a decrease in aggregate supply.

Accepted Answer

A) True 
 B)False

Question 2

Suppose that real domestic output in an economy is 20 units,the quantity of inputs is 10,and the price of each input is $4.Answer the following question on the basis of this information. Refer to the information.Given an increase in input price from $4 to $6,we would expect the aggregate:

Accepted Answer

A)  supply curve to shift to the left. 
B)  supply curve to shift to the right. 
C)  demand curve to shift to the left. 
D)  supply and demand curves to both remain unchanged. 
A)  supply curve to shift to the left. 
B)  supply curve to shift to the right. 
C)  demand curve to shift to the left. 
D)  supply and demand curves to both remain unchanged.

Question 3

When deriving the aggregate demand (AD)curve from the aggregate expenditures model,an increase in U.S.product prices would cause an increase in:

Accepted Answer

A)  the value of household wealth and lower consumption expenditures. 
B)  interest rates and lower investment expenditures. 
C)  exports and imports. 
D)  U.S.resource prices and an increase in aggregate supply. 
A)  the value of household wealth and lower consumption expenditures. 
B)  interest rates and lower investment expenditures. 
C)  exports and imports. 
D)  U.S.resource prices and an increase in aggregate supply.

Question 4

Answer the question on the basis of the following table for a particular country in which C is consumption expenditures,Ig is gross investment expenditures,G is government expenditures,X is exports,and M is imports.All figures are in billions of dollars.Each question is independent of other question using the same table,unless otherwise stated. $\begin{array}{c}
\begin{array}{c}
\underline{\text {Price Level}}\
128 \
125 \
122 \
119 \
116
\end{array}
\begin{array}{c}
\underline{\text {C}} \
 \$ 18 \
20 \
22 \
24 \
26
\end{array}
\begin{array}{c}
\underline{\mathrm{I}_{\mathrm{g}} }\
 \$ 2 \
4 \
6 \
8 \
10
\end{array}
\begin{array}{c}
\underline{\text {G }}\
 \$ 3 \
3 \
3 \
3 \
3
\end{array}
\begin{array}{c}
\underline{\text {X }}\
\$ 1 \
2 \
3 \
4 \
5
\end{array}
\begin{array}{c}
\underline{\text {M}} \
 \$ 5 \
4 \
3 \
2 \
1
\end{array}
\begin{array}{c}
\underline{\text {Real GDP}} \
 \
\
\
 \
\
\end{array}
\end{array}$
 Refer to the table.Which of the following schedules constitutes aggregate demand in this country?

Accepted Answer

A) 
$\begin{array} { l } 
\underline { P }& \underline { \text { GDP } } \
128&\$19\
125& 25 \
122 & 31 \
119 & 37\
116 & 43 \
\end{array}$ 
B) 
$\begin{array} { l } 
\underline { P }& \underline { \text { GDP } } \
128&\$23\
125& 27 \
122 & 31 \
119 & 35\
116 &39 \
\end{array}$ 
C) 
$\begin{array} { l } 
\underline { P }& \underline { \text { GDP } } \
128&\$20\
125& 22 \
122 & 24 \
119 & 26\
116 &28 \
\end{array}$ 
D) 
$\begin{array} { l } 
\underline { P }& \underline { \text { GDP } } \
128&\$34\
125& 37 \
122 &40 \
119 &43\
116 &46\
\end{array}$ 
A) 
$\begin{array} { l } 
\underline { P }& \underline { \text { GDP } } \
128&\$19\
125& 25 \
122 & 31 \
119 & 37\
116 & 43 \
\end{array}$ 
B) 
$\begin{array} { l } 
\underline { P }& \underline { \text { GDP } } \
128&\$23\
125& 27 \
122 & 31 \
119 & 35\
116 &39 \
\end{array}$ 
C) 
$\begin{array} { l } 
\underline { P }& \underline { \text { GDP } } \
128&\$20\
125& 22 \
122 & 24 \
119 & 26\
116 &28 \
\end{array}$ 
D) 
$\begin{array} { l } 
\underline { P }& \underline { \text { GDP } } \
128&\$34\
125& 37 \
122 &40 \
119 &43\
116 &46\
\end{array}$

Question 5

Answer the question on the basis of the following table for a particular country in which C is consumption expenditures,Ig is gross investment expenditures,G is government expenditures,X is exports,and M is imports.All figures are in billions of dollars.Each question is independent of other question using the same table,unless otherwise stated. $\begin{array}{c}
\begin{array}{c}
\underline{\text {Price Level}}\
128 \
125 \
122 \
119 \
116
\end{array}
\begin{array}{c}
\underline{\text {C}} \
 \$ 18 \
20 \
22 \
24 \
26
\end{array}
\begin{array}{c}
\underline{\mathrm{I}_{\mathrm{g}} }\
 \$ 2 \
4 \
6 \
8 \
10
\end{array}
\begin{array}{c}
\underline{\text {G }}\
 \$ 3 \
3 \
3 \
3 \
3
\end{array}
\begin{array}{c}
\underline{\text {X }}\
\$ 1 \
2 \
3 \
4 \
5
\end{array}
\begin{array}{c}
\underline{\text {M}} \
 \$ 5 \
4 \
3 \
2 \
1
\end{array}
\begin{array}{c}
\underline{\text {Real GDP}} \
 \
\
\
 \
\
\end{array}
\end{array}$
 Refer to the table.The real-balances effect of changes in the price level is:

Accepted Answer

A)  shown by columns (1)and (2)of the table. 
B)  shown by columns (1)and (5)of the table. 
C)  shown by columns (1)and (4)of the table. 
D)  not shown by the data in the table. 
A)  shown by columns (1)and (2)of the table. 
B)  shown by columns (1)and (5)of the table. 
C)  shown by columns (1)and (4)of the table. 
D)  not shown by the data in the table.

Question 6

The real-balances,interest-rate,and foreign purchases effects all help explain:

Accepted Answer

A)  why the aggregate demand curve is downsloping. 
B)  why the aggregate supply curve is upsloping. 
C)  shifts in the aggregate demand curve. 
D)  shifts in the aggregate supply curve. 
A)  why the aggregate demand curve is downsloping. 
B)  why the aggregate supply curve is upsloping. 
C)  shifts in the aggregate demand curve. 
D)  shifts in the aggregate supply curve.

Question 7

The aggregate demand curve:

Accepted Answer

A)  is upsloping because a higher price level is necessary to make production profitable as production costs rise. 
B)  is downsloping because production costs decline as real output increases. 
C)  shows the amount of expenditures required to induce the production of each possible level of real output. 
D)  shows the amount of real output that will be purchased at each possible price level. 
A)  is upsloping because a higher price level is necessary to make production profitable as production costs rise. 
B)  is downsloping because production costs decline as real output increases. 
C)  shows the amount of expenditures required to induce the production of each possible level of real output. 
D)  shows the amount of real output that will be purchased at each possible price level.

Question 8

Answer the question on the basis of the following information about the relationship between input quantities and real domestic output in a hypothetical economy: $\begin{array} { c c } 
\text { Input Quantity } & \text { Real Domestic Output } \
 100 & 200 \
150 & 300 \
200 & 400
\end{array}$ Refer to the table.The level of productivity in the economy is:

Accepted Answer

A)  2. 
B)  .5. 
C)  4. 
D)  200. 
A)  2. 
B)  .5. 
C)  4. 
D)  200.

Question 9

Efficiency wages are:

Accepted Answer

A)  above-market wages that bring forth so much added work effort that per-unit production costs are lower than at market wages. 
B)  wage payments necessary to compensate workers for unpleasant or risky work conditions. 
C)  usually less than market wages. 
D)  relevant to macroeconomics because they explain rightward shifts in aggregate demand. 
A)  above-market wages that bring forth so much added work effort that per-unit production costs are lower than at market wages. 
B)  wage payments necessary to compensate workers for unpleasant or risky work conditions. 
C)  usually less than market wages. 
D)  relevant to macroeconomics because they explain rightward shifts in aggregate demand.

Question 10

Answer the question on the basis of the following aggregate demand and supply schedules for a hypothetical economy: $\begin{array}{c}
\begin{array}{c}
\text {Amount of Real }\
\underline{\text {Output Demanded}}\
\$ 200 \
300 \
400 \
500 \
600
\end{array}
\begin{array}{c}
\text {Price Level}\
\underline{\text {(Index Value)}}\
300\
250\
200\
150\
100
\end{array}
\begin{array}{c}
\text {Amount of Real}\
\underline{\text {Output Supplied}}\
\$ 500 \
450 \
400 \
300 \
200
\end{array}
\end{array}$ Refer to the data.If the price level is 250 and producers supply $450 of real output:

Accepted Answer

A)  a shortage of real output of $150 will occur. 
B)  a shortage of real output of $100 will occur. 
C)  a surplus of real output of $150 will occur. 
D)  neither a shortage nor a surplus of real output will occur. 
A)  a shortage of real output of $150 will occur. 
B)  a shortage of real output of $100 will occur. 
C)  a surplus of real output of $150 will occur. 
D)  neither a shortage nor a surplus of real output will occur.

Question 11

The real-balances effect indicates that inflation makes the public feel wealthier and they therefore spend more out of their current incomes.

Accepted Answer

A) True 
 B)False

Question 12

When aggregate demand declines,some firms may reduce employment rather than wages because wage reductions may:

Accepted Answer

A)  not be possible due to the minimum wage law. 
B)  increase the cost of raising money capital. 
C)  reduce the demands for their products. 
D)  set off a price war. 
A)  not be possible due to the minimum wage law. 
B)  increase the cost of raising money capital. 
C)  reduce the demands for their products. 
D)  set off a price war.

Question 13

An increase in net exports will shift the:

Accepted Answer

A)  aggregate expenditures curve upward and the aggregate demand curve rightward. 
B)  aggregate expenditures curve upward and the aggregate demand curve leftward. 
C)  aggregate expenditures curve downward and the aggregate demand curve rightward. 
D)  aggregate expenditures curve downward and the aggregate demand curve leftward. 
A)  aggregate expenditures curve upward and the aggregate demand curve rightward. 
B)  aggregate expenditures curve upward and the aggregate demand curve leftward. 
C)  aggregate expenditures curve downward and the aggregate demand curve rightward. 
D)  aggregate expenditures curve downward and the aggregate demand curve leftward.

Question 14

Which of the following is a true statement?

Accepted Answer

A)  Firms and resource suppliers generally find it easier to reduce prices than to raise them. 
B)  As the price level increases,interest rates will rise and therefore consumption and investment spending will also rise. 
C)  An initial increase in aggregate demand may cause a further increase in aggregate demand because higher prices mean higher incomes. 
D)  A decline in aggregate demand will primarily affect real output and employment if prices are inflexible downward. 
A)  Firms and resource suppliers generally find it easier to reduce prices than to raise them. 
B)  As the price level increases,interest rates will rise and therefore consumption and investment spending will also rise. 
C)  An initial increase in aggregate demand may cause a further increase in aggregate demand because higher prices mean higher incomes. 
D)  A decline in aggregate demand will primarily affect real output and employment if prices are inflexible downward.

Question 15

In response to the Great Recession,the federal government engaged in significant deficit-funded spending.What was the result of that spending over the first three years?

Accepted Answer

A)  Neither economic growth nor unemployment responded as well as many economists had predicted. 
B)  Economic growth responded in accordance with predictions,but unemployment remained much higher than anticipated. 
C)  Economic growth remained sluggish,but the unemployment rate fell to predicted levels. 
D)  Both economic growth and the unemployment rate responded well,reaching the fiscal policy targets set by the government. 
A)  Neither economic growth nor unemployment responded as well as many economists had predicted. 
B)  Economic growth responded in accordance with predictions,but unemployment remained much higher than anticipated. 
C)  Economic growth remained sluggish,but the unemployment rate fell to predicted levels. 
D)  Both economic growth and the unemployment rate responded well,reaching the fiscal policy targets set by the government.

Question 16

If personal taxes were decreased and resource productivity increased simultaneously,the equilibrium:

Accepted Answer

A)  output would necessarily rise. 
B)  output would necessarily fall. 
C)  price level would necessarily fall. 
D)  price level would necessarily rise. 
A)  output would necessarily rise. 
B)  output would necessarily fall. 
C)  price level would necessarily fall. 
D)  price level would necessarily rise.

Question 17

An increase in business excise taxes will shift the aggregate supply curve leftward.

Accepted Answer

A) True 
 B)False

Question 18

Other things equal,if the national incomes of the major trading partners of the United States were to rise,the U.S.:

Accepted Answer

A)  aggregate demand curve would shift to the right. 
B)  aggregate supply curve would shift to the left. 
C)  aggregate supply curve would shift to the right. 
D)  aggregate demand curve would shift to the left. 
A)  aggregate demand curve would shift to the right. 
B)  aggregate supply curve would shift to the left. 
C)  aggregate supply curve would shift to the right. 
D)  aggregate demand curve would shift to the left.

Question 19

Answer the question on the basis of the following information about the relationship between input quantities and real domestic output in a hypothetical economy: $\begin{array} { c c } 
\text { Input Quantity } & \text { Real Domestic Output } \
100 & 200 \
150 & 300 \
200 & 400
\end{array}$ Refer to the table.Suppose that the price of each input increased from $5 to $8.The per-unit cost of production in the economy would:

Accepted Answer

A)  rise by $1.50 and the aggregate supply curve would shift to the right. 
B)  rise by 60 percent and the aggregate supply curve would shift to the left. 
C)  rise by 60 percent and the aggregate demand curve would shift to the left. 
D)  fall by $1.50 and the aggregate demand curve would shift to the right. 
A)  rise by $1.50 and the aggregate supply curve would shift to the right. 
B)  rise by 60 percent and the aggregate supply curve would shift to the left. 
C)  rise by 60 percent and the aggregate demand curve would shift to the left. 
D)  fall by $1.50 and the aggregate demand curve would shift to the right.

Question 20

What percentage of the average U.S.firm's costs are accounted for by wages and salaries?

Accepted Answer

A)  40. 
B)  60. 
C)  75. 
D)  85. 
A)  40. 
B)  60. 
C)  75. 
D)  85.

A negative GDP gap can be caused by either a decrease in aggregate demand or a decrease in aggregate supply.

Suppose that real domestic output in an economy is 20 units,the quantity of inputs is 10,and the price of each input is $4.Answer the following question on the basis of this information. Refer to the information.Given an increase in input price from $4 to $6,we would expect the aggregate:

When deriving the aggregate demand (AD)curve from the aggregate expenditures model,an increase in U.S.product prices would cause an increase in:

The real-balances,interest-rate,and foreign purchases effects all help explain:

The aggregate demand curve:

Answer the question on the basis of the following information about the relationship between input quantities and real domestic output in a hypothetical economy: Input Quantity Real Domestic Output 100 200 150 300 200 400 Refer to the table.The level of productivity in the economy is:

Efficiency wages are:

The real-balances effect indicates that inflation makes the public feel wealthier and they therefore spend more out of their current incomes.

When aggregate demand declines,some firms may reduce employment rather than wages because wage reductions may:

An increase in net exports will shift the:

Which of the following is a true statement?

In response to the Great Recession,the federal government engaged in significant deficit-funded spending.What was the result of that spending over the first three years?

If personal taxes were decreased and resource productivity increased simultaneously,the equilibrium:

An increase in business excise taxes will shift the aggregate supply curve leftward.

Other things equal,if the national incomes of the major trading partners of the United States were to rise,the U.S.:

What percentage of the average U.S.firm's costs are accounted for by wages and salaries?

Income Inequality Poverty and Discrimination

Health Care

Immigration

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

The Aggregate Expenditures Model

The Balance of Payments, Exchange Rates, and Trade Deficits

Money, Banking, and Financial Institutions

Money Creation

Interest Rates and Monetary Policy

Financial Economics

Extending the Analysis of Aggregate Supply

Current Issues in Macro Theory and Policy

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

The United States and the Global Economy

Filters

Exam 31: Aggregate Demand and Aggregate Supply

A negative GDP gap can be caused by either a decrease in aggregate demand or a decrease in aggregate supply.

Suppose that real domestic output in an economy is 20 units,the quantity of inputs is 10,and the price of each input is $4.Answer the following question on the basis of this information. Refer to the information.Given an increase in input price from $4 to $6,we would expect the aggregate:

When deriving the aggregate demand (AD)curve from the aggregate expenditures model,an increase in U.S.product prices would cause an increase in:

The real-balances,interest-rate,and foreign purchases effects all help explain:

The aggregate demand curve:

Answer the question on the basis of the following information about the relationship between input quantities and real domestic output in a hypothetical economy: Input Quantity Real Domestic Output 100 200 150 300 200 400 Refer to the table.The level of productivity in the economy is:

Efficiency wages are:

The real-balances effect indicates that inflation makes the public feel wealthier and they therefore spend more out of their current incomes.

When aggregate demand declines,some firms may reduce employment rather than wages because wage reductions may:

An increase in net exports will shift the:

Which of the following is a true statement?

In response to the Great Recession,the federal government engaged in significant deficit-funded spending.What was the result of that spending over the first three years?

If personal taxes were decreased and resource productivity increased simultaneously,the equilibrium:

An increase in business excise taxes will shift the aggregate supply curve leftward.

Other things equal,if the national incomes of the major trading partners of the United States were to rise,the U.S.:

What percentage of the average U.S.firm's costs are accounted for by wages and salaries?

Income Inequality Poverty and Discrimination

Health Care

Immigration

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

The Aggregate Expenditures Model

The Balance of Payments, Exchange Rates, and Trade Deficits

Money, Banking, and Financial Institutions

Money Creation

Interest Rates and Monetary Policy

Financial Economics

Extending the Analysis of Aggregate Supply

Current Issues in Macro Theory and Policy

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

The United States and the Global Economy

Filters