Question 1

Other things equal,if the international value of the dollar were to depreciate,the:

Accepted Answer

A)  aggregate demand curve would remain fixed in place. 
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 remain fixed in place. 
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 2

Aggregate demand decreases and real output falls but the price level remains the same.Which factor most likely contributes to downward price inflexibility?

Accepted Answer

A)  the multiplier effect 
B)  the wealth effect 
C)  fear of price wars 
D)  business taxes 
A)  the multiplier effect 
B)  the wealth effect 
C)  fear of price wars 
D)  business taxes

Question 3

Suppose the full-employment level of real output (Q)for a hypothetical economy is $500 and that the price level (P)initially is 100.Use the following short-run aggregate supply schedules to answer the next question.
  
-Refer to the information above.If the price level unexpectedly declines from 100 to 75,the level of real output in the short run will:

Accepted Answer

A)  rise from $500 to $560. 
B)  fall from $500 to $440. 
C)  fall from $560 to $500. 
D)  rise from $440 to $500. 
A)  rise from $500 to $560. 
B)  fall from $500 to $440. 
C)  fall from $560 to $500. 
D)  rise from $440 to $500.

Question 4

Assume that an initial change in spending of $10 billion results in a rightward shift in aggregate demand that increases real GDP by $40 billion.The multiplier is:

Accepted Answer

A)  $10 billion. 
B)  $40 billion. 
C)  4 
D)  5 
A)  $10 billion. 
B)  $40 billion. 
C)  4 
D)  5

Question 5

All else equal,an increase in imports will shift the aggregate expenditures curve:

Accepted Answer

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

Question 6

List four government tax or spending policy options that would shift the short-run aggregate supply curve rightward.

Accepted Answer

Some possible answers are tax cuts or re

Question 7

-Refer to the above diagram.When output decreases from Q1 and the price level increases from P1,then this change will:

Accepted Answer

A)  be caused by a shift in the aggregate supply curve from AS1 to AS3. 
B)  be caused by a shift in the aggregate supply curve from AS2 to AS1. 
C)  result in a movement along the aggregate demand curve from e2 to e1. 
D)  result in a movement along the aggregate demand curve from e1 to e2. 
A)  be caused by a shift in the aggregate supply curve from AS1 to AS3. 
B)  be caused by a shift in the aggregate supply curve from AS2 to AS1. 
C)  result in a movement along the aggregate demand curve from e2 to e1. 
D)  result in a movement along the aggregate demand curve from e1 to e2.

Question 8

-Refer to the above diagram.If aggregate supply shifts from AS1 to AS3,then real domestic output will:

Accepted Answer

A)  increase and the price level will increase. 
B)  increase and the price level will decrease. 
C)  decrease and the price level will increase. 
D)  decrease and the price level will decrease. 
A)  increase and the price level will increase. 
B)  increase and the price level will decrease. 
C)  decrease and the price level will increase. 
D)  decrease and the price level will decrease.

Question 9

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 10

The aggregate demand curve is:

Accepted Answer

A)  vertical if full employment exists. 
B)  horizontal when there is considerable unemployment in the economy. 
C)  downward sloping because of the interest-rate,real balances,and foreign trade effects. 
D)  downward sloping because production costs decrease as real output increases. 
A)  vertical if full employment exists. 
B)  horizontal when there is considerable unemployment in the economy. 
C)  downward sloping because of the interest-rate,real balances,and foreign trade effects. 
D)  downward sloping because production costs decrease as real output increases.

Question 11

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.
-Refer to the above information.All else being equal,if the price of each input increased from $4 to $6,productivity would:

Accepted Answer

A)  fall from 2 to 3. 
B)  fall from .50 to .33. 
C)  rise from 1 to 2. 
D)  remain unchanged. 
A)  fall from 2 to 3. 
B)  fall from .50 to .33. 
C)  rise from 1 to 2. 
D)  remain unchanged.

Question 12

Which of the diagrams below best portrays the effects of an increase in consumer spending?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
A)  A 
B)  B 
C)  C 
D)  D

Question 13

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.
-Refer to the above 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)  demand curve to shift to the right. 
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)  demand curve to shift to the right.

Question 14

-Which of the above diagrams best portrays the effects of declines in the incomes of other major nations with whom we trade?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
A)  A 
B)  B 
C)  C 
D)  D

Question 15

Cost-push inflation is characterized by a(n):

Accepted Answer

A)  increase in aggregate supply and a decrease in aggregate demand. 
B)  increase in aggregate demand and no change in aggregate supply. 
C)  decrease in aggregate supply and no change in aggregate demand. 
D)  decrease in both aggregate supply and aggregate demand. 
A)  increase in aggregate supply and a decrease in aggregate demand. 
B)  increase in aggregate demand and no change in aggregate supply. 
C)  decrease in aggregate supply and no change in aggregate demand. 
D)  decrease in both aggregate supply and aggregate demand.

Question 16

Suppose the full-employment level of real output (Q)for a hypothetical economy is $500 and that the price level (P)initially is 100.Use the following short-run aggregate supply schedules to answer the next question.
  
-Refer to the information above.In the long run,a fall in the price level from 100 to 75 will:

Accepted Answer

A)  decrease real output from $500 to $440. 
B)  increase real output from $500 to $620. 
C)  change the aggregate supply schedule from (a)to (c)and produce an equilibrium level of real output of $500. 
D)  change the aggregate supply schedule from (a)to (b)and produce an equilibrium level of real output of $500. 
A)  decrease real output from $500 to $440. 
B)  increase real output from $500 to $620. 
C)  change the aggregate supply schedule from (a)to (c)and produce an equilibrium level of real output of $500. 
D)  change the aggregate supply schedule from (a)to (b)and produce an equilibrium level of real output of $500.

Question 17

An increase in consumer wealth will decrease aggregate demand.

Accepted Answer

A) True 
 B)False

Question 18

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

Accepted Answer

A)  why the aggregate demand curve is downward sloping. 
B)  why the aggregate supply curve is upward sloping. 
C)  shifts in the aggregate demand curve. 
D)  shifts in the aggregate supply curve. 
A)  why the aggregate demand curve is downward sloping. 
B)  why the aggregate supply curve is upward sloping. 
C)  shifts in the aggregate demand curve. 
D)  shifts in the aggregate supply curve.

Question 19

The following table is for a particular country in which C is consumption expenditures,IS1U1B1gS1U1B0 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 the other questions.
  
-Which of the following is incorrect?

Accepted Answer

A)  As the Canadian price level rises,Canadian goods become relatively more expensive so that its exports fall and its imports rise. 
B)  As the price level falls,the demand for money declines,the interest rate declines,and interest rate-sensitive spending increases. 
C)  When the price level increases,real balances increase,businesses and households find themselves wealthier and therefore increase their spending. 
D)  Given aggregate demand,an increase in aggregate supply increases real output and,assuming downward flexible prices,reduces the price level. 
A)  As the Canadian price level rises,Canadian goods become relatively more expensive so that its exports fall and its imports rise. 
B)  As the price level falls,the demand for money declines,the interest rate declines,and interest rate-sensitive spending increases. 
C)  When the price level increases,real balances increase,businesses and households find themselves wealthier and therefore increase their spending. 
D)  Given aggregate demand,an increase in aggregate supply increases real output and,assuming downward flexible prices,reduces the price level.

Question 20

The following table is for a particular country in which C is consumption expenditures,IS1U1B1gS1U1B0 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 the other questions.
  
-Refer to the above table.If the equilibrium level of real GDP is $43 billion in this country,its level of consumption will be:

Accepted Answer

A)  $18 billion. 
B)  $20 billion. 
C)  $22 billion. 
D)  $26 billion. 
A)  $18 billion. 
B)  $20 billion. 
C)  $22 billion. 
D)  $26 billion.

Other things equal,if the international value of the dollar were to depreciate,the:

Aggregate demand decreases and real output falls but the price level remains the same.Which factor most likely contributes to downward price inflexibility?

Assume that an initial change in spending of $10 billion results in a rightward shift in aggregate demand that increases real GDP by $40 billion.The multiplier is:

All else equal,an increase in imports will shift the aggregate expenditures curve:

List four government tax or spending policy options that would shift the short-run aggregate supply curve rightward.

-Refer to the above diagram.When output decreases from Q₁ and the price level increases from P₁,then this change will:

-Refer to the above diagram.If aggregate supply shifts from AS₁ to AS₃,then real domestic output will:

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

The aggregate demand curve is:

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. -Refer to the above information.All else being equal,if the price of each input increased from $4 to $6,productivity would:

Which of the diagrams below best portrays the effects of an increase in consumer spending?

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. -Refer to the above information.Given an increase in input price from $4 to $6,we would expect the aggregate:

-Which of the above diagrams best portrays the effects of declines in the incomes of other major nations with whom we trade?

Cost-push inflation is characterized by a(n):

An increase in consumer wealth will decrease aggregate demand.

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

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Governments Role and Government Failure

An Introduction to Macroeconomics

Measuring the Economys Output

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

The Aggregate Expenditures Model

Fiscal Policy, Deficits, Surpluses, and Debt

Money, Banking, and Money Creation

Interest Rates and Monetary Policy

Long-Run Macroeconomic Adjustments

International Trade

Exchange Rates and the Balance of Payments

Filters

Exam 12: Aggregate Demand and Aggregate Supply

Other things equal,if the international value of the dollar were to depreciate,the:

Aggregate demand decreases and real output falls but the price level remains the same.Which factor most likely contributes to downward price inflexibility?

Assume that an initial change in spending of $10 billion results in a rightward shift in aggregate demand that increases real GDP by $40 billion.The multiplier is:

All else equal,an increase in imports will shift the aggregate expenditures curve:

List four government tax or spending policy options that would shift the short-run aggregate supply curve rightward.

-Refer to the above diagram.When output decreases from Q1 and the price level increases from P1,then this change will:

-Refer to the above diagram.If aggregate supply shifts from AS1 to AS3,then real domestic output will:

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

The aggregate demand curve is:

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. -Refer to the above information.All else being equal,if the price of each input increased from $4 to $6,productivity would:

Which of the diagrams below best portrays the effects of an increase in consumer spending?

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. -Refer to the above information.Given an increase in input price from $4 to $6,we would expect the aggregate:

-Which of the above diagrams best portrays the effects of declines in the incomes of other major nations with whom we trade?

Cost-push inflation is characterized by a(n):

An increase in consumer wealth will decrease aggregate demand.

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

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Governments Role and Government Failure

An Introduction to Macroeconomics

Measuring the Economys Output

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

The Aggregate Expenditures Model

Fiscal Policy, Deficits, Surpluses, and Debt

Money, Banking, and Money Creation

Interest Rates and Monetary Policy

Long-Run Macroeconomic Adjustments

International Trade

Exchange Rates and the Balance of Payments

Filters

-Refer to the above diagram.When output decreases from Q₁ and the price level increases from P₁,then this change will:

-Refer to the above diagram.If aggregate supply shifts from AS₁ to AS₃,then real domestic output will: