Question 1

An increase in wealth from a substantial increase in stock prices will move the economy along a fixed aggregate demand curve.

Accepted Answer

A) True 
 B)False

Question 2

The determinants of aggregate demand:

Accepted Answer

A)  explain why the aggregate demand curve is downsloping. 
B)  explain shifts in the aggregate demand curve. 
C)  demonstrate why real output and the price level are inversely related. 
D)  include input prices and resource productivity. 
A)  explain why the aggregate demand curve is downsloping. 
B)  explain shifts in the aggregate demand curve. 
C)  demonstrate why real output and the price level are inversely related. 
D)  include input prices and resource productivity.

Question 3

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. The per-unit cost of production in the economy described is:

Accepted Answer

A)  $.50. 
B)  $1. 
C)  $2. 
D)  $5. 
A)  $.50. 
B)  $1. 
C)  $2. 
D)  $5.

Question 4

If aggregate demand decreases,and as a result,real output and employment decline but the price level remains unchanged,it is most likely that:

Accepted Answer

A)  the money supply has declined. 
B)  the price level is inflexible downward and a recession has occurred. 
C)  cost-push inflation has occurred. 
D)  productivity has declined. 
A)  the money supply has declined. 
B)  the price level is inflexible downward and a recession has occurred. 
C)  cost-push inflation has occurred. 
D)  productivity has declined.

Question 5

The interest-rate effect suggests that:

Accepted Answer

A)  a decrease in the supply of money will increase interest rates and reduce interest-sensitive consumption and investment spending. 
B)  an increase in the price level will increase the demand for money,reduce interest rates,and decrease consumption and investment spending. 
C)  an increase in the price level will increase the demand for money,increase interest rates,and decrease consumption and investment spending. 
D)  an increase in the price level will decrease the demand for money,reduce interest rates,and increase consumption and investment spending. 
A)  a decrease in the supply of money will increase interest rates and reduce interest-sensitive consumption and investment spending. 
B)  an increase in the price level will increase the demand for money,reduce interest rates,and decrease consumption and investment spending. 
C)  an increase in the price level will increase the demand for money,increase interest rates,and decrease consumption and investment spending. 
D)  an increase in the price level will decrease the demand for money,reduce interest rates,and increase consumption and investment spending.

Question 6

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.If this nation's equilibrium price level is 125,its net exports will be:

Accepted Answer

A)  minus $4 billion. 
B)  minus $2 billion. 
C)  zero. 
D)  $2 billion. 
A)  minus $4 billion. 
B)  minus $2 billion. 
C)  zero. 
D)  $2 billion.

Question 7

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.If equilibrium real GDP is $31 billion,the equilibrium price level will be:

Accepted Answer

A)  128. 
B)  125. 
C)  122. 
D)  119. 
A)  128. 
B)  125. 
C)  122. 
D)  119.

Question 8

The aggregate supply curve (short run)is upsloping because:

Accepted Answer

A)  wages and other resource prices match changes in the price level. 
B)  the price level is flexible upward but inflexible downward. 
C)  per-unit production costs rise as the economy moves toward and beyond its full-employment real output. 
D)  wages and other resource prices are flexible upward but inflexible downward. 
A)  wages and other resource prices match changes in the price level. 
B)  the price level is flexible upward but inflexible downward. 
C)  per-unit production costs rise as the economy moves toward and beyond its full-employment real output. 
D)  wages and other resource prices are flexible upward but inflexible downward.

Question 9

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.A decrease in the interest rate not caused by a change in the price level would:

Accepted Answer

A)  increase the values in column (3)and increase aggregate demand. 
B)  decrease the values in column (3)and increase aggregate demand. 
C)  increase the values in column (2)and decrease aggregate demand. 
D)  decrease the values in column (2)and decrease aggregate demand. 
A)  increase the values in column (3)and increase aggregate demand. 
B)  decrease the values in column (3)and increase aggregate demand. 
C)  increase the values in column (2)and decrease aggregate demand. 
D)  decrease the values in column (2)and decrease aggregate demand.

Question 10

Graphically,the full-employment,low-inflation,rapid-growth economy of the last half of the 1990s is depicted by a:

Accepted Answer

A)  rightward shift of the aggregate demand curve along a fixed aggregate supply curve. 
B)  rightward shift of the aggregate supply curve along a fixed aggregate demand curve. 
C)  rightward shift of the aggregate demand curve and a rightward shift of the aggregate supply curve. 
D)  leftward shift of the aggregate demand curve and a leftward shift of the aggregate supply curve. 
A)  rightward shift of the aggregate demand curve along a fixed aggregate supply curve. 
B)  rightward shift of the aggregate supply curve along a fixed aggregate demand curve. 
C)  rightward shift of the aggregate demand curve and a rightward shift of the aggregate supply curve. 
D)  leftward shift of the aggregate demand curve and a leftward shift of the aggregate supply curve.

Question 11

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.If the amounts of GDP supplied at the price levels shown (in descending order)are $27,$25,$22,$18,and $13,the equilibrium price level will be:

Accepted Answer

A)  128. 
B)  125. 
C)  122. 
D)  119. 
A)  128. 
B)  125. 
C)  122. 
D)  119.

Question 12

Answer the question on the basis of the following information.An economy is employing 2 units of capital,5 units of raw materials,and 8 units of labor to produce its total output of 640 units.Each unit of capital costs $10;each unit of raw materials,$4;and each unit of labor,$3. Refer to the information.If the per-unit price of raw materials rises from $4 to $8 and all else remains constant,the per-unit cost of production will rise by about:

Accepted Answer

A)  100 percent. 
B)  50 percent. 
C)  40 percent. 
D)  30 percent. 
A)  100 percent. 
B)  50 percent. 
C)  40 percent. 
D)  30 percent.

Question 13

An economy's aggregate demand curve shifts leftward or rightward by more than changes in initial spending because of the:

Accepted Answer

A)  net export effect. 
B)  wealth effect. 
C)  real-balances effect. 
D)  multiplier effect. 
A)  net export effect. 
B)  wealth effect. 
C)  real-balances effect. 
D)  multiplier effect.

Question 14

In which of the following sets of circumstances can we confidently expect inflation?

Accepted Answer

A)  Aggregate supply and aggregate demand both increase. 
B)  Aggregate supply and aggregate demand both decrease. 
C)  Aggregate supply decreases and aggregate demand increases. 
D)  Aggregate supply increases and aggregate demand decreases. 
A)  Aggregate supply and aggregate demand both increase. 
B)  Aggregate supply and aggregate demand both decrease. 
C)  Aggregate supply decreases and aggregate demand increases. 
D)  Aggregate supply increases and aggregate demand decreases.

Question 15

The shape of the immediate-short-run aggregate supply curve implies that:

Accepted Answer

A)  total output depends on the volume of spending. 
B)  increases in aggregate demand are inflationary. 
C)  output prices are flexible,but input prices are not. 
D)  government cannot bring an economy out of a recession by increasing spending. 
A)  total output depends on the volume of spending. 
B)  increases in aggregate demand are inflationary. 
C)  output prices are flexible,but input prices are not. 
D)  government cannot bring an economy out of a recession by increasing spending.

Question 16

The greater the upward slope of the AS curve,the larger is the realized multiplier effect of a change in investment spending.

Accepted Answer

A) True 
 B)False

Question 17

Other things equal,a decrease in the real interest rate will:

Accepted Answer

A)  expand investment and shift the AD curve to the left. 
B)  expand investment and shift the AD curve to the right. 
C)  reduce investment and shift the AD curve to the left. 
D)  reduce investment and shift the AD curve to the right. 
A)  expand investment and shift the AD curve to the left. 
B)  expand investment and shift the AD curve to the right. 
C)  reduce investment and shift the AD curve to the left. 
D)  reduce investment and shift the AD curve to the right.

Question 18

The short-run aggregate supply curve represents circumstances where:

Accepted Answer

A)  both input and output prices are fixed. 
B)  both input and output prices are flexible. 
C)  input prices are fixed,but output prices are flexible. 
D)  input prices are flexible,but output prices are fixed. 
A)  both input and output prices are fixed. 
B)  both input and output prices are flexible. 
C)  input prices are fixed,but output prices are flexible. 
D)  input prices are flexible,but output prices are fixed.

Question 19

Other things equal,an improvement in productivity will:

Accepted Answer

A)  shift the aggregate demand curve to the left. 
B)  shift the aggregate supply curve to the left. 
C)  shift the aggregate supply curve to the right. 
D)  increase the price level. 
A)  shift the aggregate demand curve to the left. 
B)  shift the aggregate supply curve to the left. 
C)  shift the aggregate supply curve to the right. 
D)  increase the price level.

Question 20

The factors that affect the amounts that consumers,businesses,government,and foreigners wish to purchase at each price level are the:

Accepted Answer

A)  real-balances,interest-rate,and foreign purchases effects. 
B)  determinants of aggregate supply. 
C)  determinants of aggregate demand. 
D)  sole determinants of the equilibrium price level and the equilibrium real output. 
A)  real-balances,interest-rate,and foreign purchases effects. 
B)  determinants of aggregate supply. 
C)  determinants of aggregate demand. 
D)  sole determinants of the equilibrium price level and the equilibrium real output.

An increase in wealth from a substantial increase in stock prices will move the economy along a fixed aggregate demand curve.

The determinants of aggregate demand:

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. The per-unit cost of production in the economy described is:

If aggregate demand decreases,and as a result,real output and employment decline but the price level remains unchanged,it is most likely that:

The interest-rate effect suggests that:

The aggregate supply curve (short run)is upsloping because:

Graphically,the full-employment,low-inflation,rapid-growth economy of the last half of the 1990s is depicted by a:

An economy's aggregate demand curve shifts leftward or rightward by more than changes in initial spending because of the:

In which of the following sets of circumstances can we confidently expect inflation?

The shape of the immediate-short-run aggregate supply curve implies that:

The greater the upward slope of the AS curve,the larger is the realized multiplier effect of a change in investment spending.

Other things equal,a decrease in the real interest rate will:

The short-run aggregate supply curve represents circumstances where:

Other things equal,an improvement in productivity will:

The factors that affect the amounts that consumers,businesses,government,and foreigners wish to purchase at each price level are the:

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

An increase in wealth from a substantial increase in stock prices will move the economy along a fixed aggregate demand curve.

The determinants of aggregate demand:

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. The per-unit cost of production in the economy described is:

If aggregate demand decreases,and as a result,real output and employment decline but the price level remains unchanged,it is most likely that:

The interest-rate effect suggests that:

The aggregate supply curve (short run)is upsloping because:

Graphically,the full-employment,low-inflation,rapid-growth economy of the last half of the 1990s is depicted by a:

An economy's aggregate demand curve shifts leftward or rightward by more than changes in initial spending because of the:

In which of the following sets of circumstances can we confidently expect inflation?

The shape of the immediate-short-run aggregate supply curve implies that:

The greater the upward slope of the AS curve,the larger is the realized multiplier effect of a change in investment spending.

Other things equal,a decrease in the real interest rate will:

The short-run aggregate supply curve represents circumstances where:

Other things equal,an improvement in productivity will:

The factors that affect the amounts that consumers,businesses,government,and foreigners wish to purchase at each price level are the:

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