Question 1

With output and input prices fixed,the immediate short run aggregate supply curve is:

Accepted Answer

A)  vertical. 
B)  upward sloping. 
C)  horizontal. 
D)  downward sloping. 
A)  vertical. 
B)  upward sloping. 
C)  horizontal. 
D)  downward sloping.

Question 2

In the table below are aggregate demand and aggregate supply schedules.
  
(a)Suppose in Year 1,aggregate demand is shown in columns (1)and (2)in the above table and short-run aggregate supply is shown in columns (1)and (4)in the above table.What will be the equilibrium level of real GDP and the equilibrium price level?
(b)Suppose in Year 2,aggregate demand changes and is now shown in columns (1)and (3).What will be the new equilibrium level of real GDP and the new equilibrium price level?
(c)Suppose in Year 3,aggregate demand changes and is now shown again in columns (1)and (2).What will be the new level of real GDP and the new price level if prices and wages are completely flexible downward?
(d)Suppose in Year 3,aggregate demand changes and is now shown again in columns (1)and (2).What will be the new level of real GDP and the new price level if prices and wages are completely inflexible downward?

Accepted Answer

(a)Real GDP will be $1,700 and the pric

Question 3

Which would most likely shift the aggregate supply curve? A change in:

Accepted Answer

A)  consumer expectations. 
B)  government spending. 
C)  excess capacity in business. 
D)  prices of imported resources. 
A)  consumer expectations. 
B)  government spending. 
C)  excess capacity in business. 
D)  prices of imported resources.

Question 4

Some economists argue that it is easier to resolve demand-pull inflation than cost-push inflation.Use the aggregate demand-aggregate supply (short-run)model to explain this assertion.

Accepted Answer

To address demand-pull inflation,the gov

Question 5

How is the immediate short-run aggregate supply curve sloped? Explain.

Accepted Answer

The immediate short-run aggreg

Question 6

Refer to the diagram below.A shift in the aggregate demand curve from AD1 to AD0 might be caused by a(n):

Accepted Answer

A)  decrease in aggregate supply. 
B)  decrease in the amount of output supplied. 
C)  increase in investment spending. 
D)  decrease in net export spending. 
A)  decrease in aggregate supply. 
B)  decrease in the amount of output supplied. 
C)  increase in investment spending. 
D)  decrease in net export spending.

Question 7

-Refer to the above diagram.When AD1 shifts to AD2,then at P1Q3 output demanded will:

Accepted Answer

A)  equal output supplied. 
B)  exceed output supplied. 
C)  be less than output supplied. 
D)  be at stable full-employment GDP. 
A)  equal output supplied. 
B)  exceed output supplied. 
C)  be less than output supplied. 
D)  be at stable full-employment GDP.

Question 8

Shifts in the aggregate supply curve are caused by changes in:

Accepted Answer

A)  consumption spending. 
B)  the quantity of real output demanded. 
C)  the quantity of real output supplied. 
D)  one or more of the determinants of aggregate supply. 
A)  consumption spending. 
B)  the quantity of real output demanded. 
C)  the quantity of real output supplied. 
D)  one or more of the determinants of aggregate supply.

Question 9

A decrease in taxes will cause a(n):

Accepted Answer

A)  decrease in the quantity of real domestic output demanded. 
B)  increase in the quantity of real domestic output demanded. 
C)  increase in aggregate demand. 
D)  decrease in aggregate demand. 
A)  decrease in the quantity of real domestic output demanded. 
B)  increase in the quantity of real domestic output demanded. 
C)  increase in aggregate demand. 
D)  decrease in aggregate demand.

Question 10

Which effect best explains the downward slope of the aggregate demand curve?

Accepted Answer

A)  a multiplier effect 
B)  an income effect 
C)  a substitution effect 
D)  a real-balances effect 
A)  a multiplier effect 
B)  an income effect 
C)  a substitution effect 
D)  a real-balances effect

Question 11

A change in aggregate supply would be caused by a change in:

Accepted Answer

A)  the price level. 
B)  aggregate demand. 
C)  an aggregate supply determinant. 
D)  the quantity of real output supplied. 
A)  the price level. 
B)  aggregate demand. 
C)  an aggregate supply determinant. 
D)  the quantity of real output supplied.

Question 12

An economy is employing 2 units of capital,5 units of raw materials,and 8 units of labour to produce its total output of 640 units.Each unit of capital costs $10,each unit of raw materials,$4,and each unit of labour,$3.
-Refer to the above information.As a result of the change indicated in the previous question,the aggregate:

Accepted Answer

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

Question 13

The short-run aggregate supply curve is upward-sloping because:

Accepted Answer

A)  of the interest-rate effect. 
B)  higher price levels create incentives to expand output when resource prices remain constant. 
C)  of the net export effect. 
D)  higher price levels create an expectation among producers of still higher price levels. 
A)  of the interest-rate effect. 
B)  higher price levels create incentives to expand output when resource prices remain constant. 
C)  of the net export effect. 
D)  higher price levels create an expectation among producers of still higher price levels.

Question 14

An expected decline in the prices of consumer goods will:

Accepted Answer

A)  decrease aggregate demand. 
B)  increase the quantity of real domestic output demanded. 
C)  increase aggregate demand. 
D)  decrease the quantity of real domestic output demanded. 
A)  decrease aggregate demand. 
B)  increase the quantity of real domestic output demanded. 
C)  increase aggregate demand. 
D)  decrease the quantity of real domestic output demanded.

Question 15

Refer to the diagram below.Assume that nominal wages initially are set on the basis of the price level P2 and that the economy initially is operating at its full-employment level of output Qf.In the short run,cost-push inflation could best be shown as:

Accepted Answer

A)  a leftward shift of aggregate supply from AS2 to AS3. 
B)  a move from b to c on AS2. 
C)  a move from b to c to d. 
D)  a move from b to f to d. 
A)  a leftward shift of aggregate supply from AS2 to AS3. 
B)  a move from b to c on AS2. 
C)  a move from b to c to d. 
D)  a move from b to f to d.

Question 16

-Refer to the above diagram.Assume that nominal wages initially are set on the basis of the price level P2 and that the economy initially is operating at its full-employment level of output Qf.In the long run,an increase in the price level from P2 to P3 will:

Accepted Answer

A)  increase real output from Qf to Q2. 
B)  change aggregate supply from AS2 to AS1. 
C)  decrease real output from Q2 to Q1. 
D)  not change the level of real output. 
A)  increase real output from Qf to Q2. 
B)  change aggregate supply from AS2 to AS1. 
C)  decrease real output from Q2 to Q1. 
D)  not change the level of real output.

Question 17

A decrease in government spending will cause a(n):

Accepted Answer

A)  increase in the quantity of real domestic output demanded. 
B)  decrease in the quantity of real domestic output demanded. 
C)  decrease in aggregate demand. 
D)  increase in aggregate demand. 
A)  increase in the quantity of real domestic output demanded. 
B)  decrease in the quantity of real domestic output demanded. 
C)  decrease in aggregate demand. 
D)  increase in aggregate demand.

Question 18

Which would be considered to be one of the factors that shift the aggregate supply curve? A change in:

Accepted Answer

A)  consumer spending. 
B)  net export spending. 
C)  government regulation. 
D)  profit expectations on investment projects. 
A)  consumer spending. 
B)  net export spending. 
C)  government regulation. 
D)  profit expectations on investment projects.

Question 19

The aggregate demand curve:

Accepted Answer

A)  is upward sloping because a higher price level is necessary to make production profitable as production costs rise. 
B)  is downward sloping 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 which will be purchased at each possible price level. 
A)  is upward sloping because a higher price level is necessary to make production profitable as production costs rise. 
B)  is downward sloping 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 which will be purchased at each possible price level.

Question 20

Other things being equal,the higher the price level,the lower the level of domestic output purchased.This occurs because of:

Accepted Answer

A)  the real-balances effect. 
B)  consumer spending on capital goods. 
C)  the full-employment-unemployment rate. 
D)  the sensitivity to demand-pull inflation. 
A)  the real-balances effect. 
B)  consumer spending on capital goods. 
C)  the full-employment-unemployment rate. 
D)  the sensitivity to demand-pull inflation.

With output and input prices fixed,the immediate short run aggregate supply curve is:

Which would most likely shift the aggregate supply curve? A change in:

Some economists argue that it is easier to resolve demand-pull inflation than cost-push inflation.Use the aggregate demand-aggregate supply (short-run)model to explain this assertion.

How is the immediate short-run aggregate supply curve sloped? Explain.

Refer to the diagram below.A shift in the aggregate demand curve from AD₁ to AD₀ might be caused by a(n):

-Refer to the above diagram.When AD₁ shifts to AD₂,then at P₁Q₃ output demanded will:

Shifts in the aggregate supply curve are caused by changes in:

A decrease in taxes will cause a(n):

Which effect best explains the downward slope of the aggregate demand curve?

A change in aggregate supply would be caused by a change in:

The short-run aggregate supply curve is upward-sloping because:

An expected decline in the prices of consumer goods will:

Refer to the diagram below.Assume that nominal wages initially are set on the basis of the price level P₂ and that the economy initially is operating at its full-employment level of output Q_f.In the short run,cost-push inflation could best be shown as:

-Refer to the above diagram.Assume that nominal wages initially are set on the basis of the price level P₂ and that the economy initially is operating at its full-employment level of output Q_f.In the long run,an increase in the price level from P₂ to P₃ will:

A decrease in government spending will cause a(n):

Which would be considered to be one of the factors that shift the aggregate supply curve? A change in:

The aggregate demand curve:

Other things being equal,the higher the price level,the lower the level of domestic output purchased.This occurs because of:

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

With output and input prices fixed,the immediate short run aggregate supply curve is:

Which would most likely shift the aggregate supply curve? A change in:

Some economists argue that it is easier to resolve demand-pull inflation than cost-push inflation.Use the aggregate demand-aggregate supply (short-run)model to explain this assertion.

How is the immediate short-run aggregate supply curve sloped? Explain.

Refer to the diagram below.A shift in the aggregate demand curve from AD1 to AD0 might be caused by a(n):

-Refer to the above diagram.When AD1 shifts to AD2,then at P1Q3 output demanded will:

Shifts in the aggregate supply curve are caused by changes in:

A decrease in taxes will cause a(n):

Which effect best explains the downward slope of the aggregate demand curve?

A change in aggregate supply would be caused by a change in:

The short-run aggregate supply curve is upward-sloping because:

An expected decline in the prices of consumer goods will:

Refer to the diagram below.Assume that nominal wages initially are set on the basis of the price level P2 and that the economy initially is operating at its full-employment level of output Qf.In the short run,cost-push inflation could best be shown as:

-Refer to the above diagram.Assume that nominal wages initially are set on the basis of the price level P2 and that the economy initially is operating at its full-employment level of output Qf.In the long run,an increase in the price level from P2 to P3 will:

A decrease in government spending will cause a(n):

Which would be considered to be one of the factors that shift the aggregate supply curve? A change in:

The aggregate demand curve:

Other things being equal,the higher the price level,the lower the level of domestic output purchased.This occurs because of:

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 diagram below.A shift in the aggregate demand curve from AD₁ to AD₀ might be caused by a(n):

-Refer to the above diagram.When AD₁ shifts to AD₂,then at P₁Q₃ output demanded will:

Refer to the diagram below.Assume that nominal wages initially are set on the basis of the price level P₂ and that the economy initially is operating at its full-employment level of output Q_f.In the short run,cost-push inflation could best be shown as:

-Refer to the above diagram.Assume that nominal wages initially are set on the basis of the price level P₂ and that the economy initially is operating at its full-employment level of output Q_f.In the long run,an increase in the price level from P₂ to P₃ will: