Question 1

Which of the following is likely to increase investment in an economy?

Accepted Answer

A) A decreased demand for investment goods 
B) A fall in the real interest rate 
C) A rise in the real interest rate 
D) An increase in business tax 
E) A surplus of goods and services 
A) A decreased demand for investment goods 
B) A fall in the real interest rate 
C) A rise in the real interest rate 
D) An increase in business tax 
E) A surplus of goods and services

Question 2

Which of the following does not explain why the aggregate demand curve is negatively sloped?

Accepted Answer

A) The misperception effect 
B) The open economy effect 
C) The real wealth effect 
D) The interest rate effect 
E) The substitution effect 
A) The misperception effect 
B) The open economy effect 
C) The real wealth effect 
D) The interest rate effect 
E) The substitution effect

Question 3

A disaster that destroys a large part of the agricultural output of a country will not change long-run aggregate supply, while a disaster that destroys the capital stock in a major city will reduce long-run aggregate supply.

Accepted Answer

A) True 
 B)False

Question 4

Along the long-run aggregate supply curve, the level of real GDP supplied:

Accepted Answer

A) does not change with increases in the price level. 
B) increases with increases in the price level. 
C) decreases with decreases in the price level. 
D) decreases with increases in the level of investment. 
E) increases with decreases in the level of investment. 
A) does not change with increases in the price level. 
B) increases with increases in the price level. 
C) decreases with decreases in the price level. 
D) decreases with increases in the level of investment. 
E) increases with decreases in the level of investment.

Question 5

The long-run level of real GDP changes whenever the aggregate demand curve shifts.

Accepted Answer

A) True 
 B)False

Question 6

The short-run aggregate supply curve of an industry would be vertical if:

Accepted Answer

A) input prices were fixed in the short run. 
B) the demand for final goods was fixed in the short run. 
C) there was no profit effect or misperception effect. 
D) an increase in output price decreased the output of the industry. 
E) output price was fixed in the short run. 
A) input prices were fixed in the short run. 
B) the demand for final goods was fixed in the short run. 
C) there was no profit effect or misperception effect. 
D) an increase in output price decreased the output of the industry. 
E) output price was fixed in the short run.

Question 7

Figure 13-5 shows the short-run macroeconomic equilibrium of an economy. Which of the following will happen in the short run if there is an increase in aggregate demand?Figure 13-5

Accepted Answer

A) The creation of an inflationary gap 
B) The creation of a recessionary gap 
C) The restoration of the economy to its long-run equilibrium 
D) A fall in the aggregate price level 
E) An increase in the level of unemployment in the economy 
A) The creation of an inflationary gap 
B) The creation of a recessionary gap 
C) The restoration of the economy to its long-run equilibrium 
D) A fall in the aggregate price level 
E) An increase in the level of unemployment in the economy

Question 8

Which of the following is true of the efficiency wage model?

Accepted Answer

A) According to the efficiency wage model, wages should increase as the productivity of workers increases with experience. 
B) According to the efficiency wage model, market wages should always be lower than the efficiency wage. 
C) In the efficiency wage model, employers pay their employees a wage equal to the equilibrium wage as a means to increase efficiency. 
D) In the efficiency wage model, employers pay their employees a wage less than the equilibrium wage to cut costs. 
E) In the efficiency wage model, employers pay their employees a wage more than the equilibrium wage as a means to increase their productivities. 
A) According to the efficiency wage model, wages should increase as the productivity of workers increases with experience. 
B) According to the efficiency wage model, market wages should always be lower than the efficiency wage. 
C) In the efficiency wage model, employers pay their employees a wage equal to the equilibrium wage as a means to increase efficiency. 
D) In the efficiency wage model, employers pay their employees a wage less than the equilibrium wage to cut costs. 
E) In the efficiency wage model, employers pay their employees a wage more than the equilibrium wage as a means to increase their productivities.

Question 9

A technological advancement that increases the productivity of an input will lead to:​

Accepted Answer

A) a leftward shift in the short-run aggregate supply curve and a rightward shift in the long-run aggregate supply curve. 
B) a rightward shift in the short-run aggregate supply curve and a leftward shift in the long-run aggregate supply curve. 
C) a leftward shift in the short-run aggregate supply curve, but no shift in the long-run aggregate supply curve. 
D) a change in the slope of the short-run aggregate supply curve and a rightward shift in the long-run aggregate supply curve. 
E) a rightward shift in both the short-run aggregate supply curve and the long-run aggregate supply curve. 
A) a leftward shift in the short-run aggregate supply curve and a rightward shift in the long-run aggregate supply curve. 
B) a rightward shift in the short-run aggregate supply curve and a leftward shift in the long-run aggregate supply curve. 
C) a leftward shift in the short-run aggregate supply curve, but no shift in the long-run aggregate supply curve. 
D) a change in the slope of the short-run aggregate supply curve and a rightward shift in the long-run aggregate supply curve. 
E) a rightward shift in both the short-run aggregate supply curve and the long-run aggregate supply curve.

Question 10

What are the major factors that determine investment, and what impact does each have on aggregate demand?

Accepted Answer

Answers will vary. The important factors

Question 11

The long run refers to:

Accepted Answer

A) a time period long enough for the prices of both output and inputs to adjust to changes in the economy. 
B) any time period of more than a year. 
C) a time period in which input prices can change but output prices have not had time to adjust. 
D) a time period in which output prices can change but input prices have not had time to adjust. 
E) a time period in which a firm's output doubles. 
A) a time period long enough for the prices of both output and inputs to adjust to changes in the economy. 
B) any time period of more than a year. 
C) a time period in which input prices can change but output prices have not had time to adjust. 
D) a time period in which output prices can change but input prices have not had time to adjust. 
E) a time period in which a firm's output doubles.

Question 12

Figure 13-10 shows the short-run macroeconomic equilibrium of an economy. Suppose the economy is currently at Point A. As the economy adjusts from short-run equilibrium to long-run equilibrium, _____.Figure 13-10​

Accepted Answer

A) the price level and real GDP would rise 
B) the price level would rise and real GDP would fall 
C) the price level and real GDP would fall 
D) the price level would fall and real GDP would rise 
E) short-run aggregate demand will decrease 
A) the price level and real GDP would rise 
B) the price level would rise and real GDP would fall 
C) the price level and real GDP would fall 
D) the price level would fall and real GDP would rise 
E) short-run aggregate demand will decrease

Question 13

The aggregate demand curve reflects:

Accepted Answer

A) the total amount of real goods and services that an individual wants to purchase in a given period. 
B) the total amount of real goods and services that an individual will purchase in his or her lifetime. 
C) the inverse relationship between the price level and nominal GDP demand in an economy. 
D) the total amount of real goods and services that a firm wants to purchase in a given period. 
E) the total amount of real goods and services that all the groups in an economy want to purchase in a given period. 
A) the total amount of real goods and services that an individual wants to purchase in a given period. 
B) the total amount of real goods and services that an individual will purchase in his or her lifetime. 
C) the inverse relationship between the price level and nominal GDP demand in an economy. 
D) the total amount of real goods and services that a firm wants to purchase in a given period. 
E) the total amount of real goods and services that all the groups in an economy want to purchase in a given period.

Question 14

Cost-push inflation is caused by:

Accepted Answer

A) an increase in aggregate demand. 
B) a decrease in aggregate demand. 
C) an increase in aggregate supply. 
D) a decrease in aggregate supply. 
E) optimism among the consumers. 
A) an increase in aggregate demand. 
B) a decrease in aggregate demand. 
C) an increase in aggregate supply. 
D) a decrease in aggregate supply. 
E) optimism among the consumers.

Question 15

The short-run aggregate supply curve is drawn with:

Accepted Answer

A) the price level on the vertical axis and real GDP on the horizontal axis. 
B) the price level on the vertical axis and nominal GDP on the horizontal axis. 
C) nominal GDP on the vertical axis and real GDP on the horizontal axis. 
D) real GDP on the horizontal axis and the rate of unemployment on the vertical axis. 
E) real GDP on the vertical axis and nominal GDP on the horizontal axis. 
A) the price level on the vertical axis and real GDP on the horizontal axis. 
B) the price level on the vertical axis and nominal GDP on the horizontal axis. 
C) nominal GDP on the vertical axis and real GDP on the horizontal axis. 
D) real GDP on the horizontal axis and the rate of unemployment on the vertical axis. 
E) real GDP on the vertical axis and nominal GDP on the horizontal axis.

Question 16

Demand-pull inflation is caused by:

Accepted Answer

A) an increase in aggregate demand. 
B) a decrease in aggregate demand. 
C) an increase in short-run aggregate supply. 
D) a decrease in short-run aggregate supply. 
E) pessimism among the consumers. 
A) an increase in aggregate demand. 
B) a decrease in aggregate demand. 
C) an increase in short-run aggregate supply. 
D) a decrease in short-run aggregate supply. 
E) pessimism among the consumers.

Question 17

One explanation for an upward-sloping short-run aggregate supply curve is the misperception effect, which is based on:

Accepted Answer

A) producers' tendency of increasing supply when they observe falling profit margins with increasing price level. 
B) producers' tendency of increasing supply when they observe rising costs of production with decreasing price level. 
C) producers' tendency of increasing supply when they observe fixed wage labor contracts. 
D) producers' tendency of increasing supply when they observe a rise in prices. 
E) producers' tendency of increasing supply when they observe a fall in prices. 
A) producers' tendency of increasing supply when they observe falling profit margins with increasing price level. 
B) producers' tendency of increasing supply when they observe rising costs of production with decreasing price level. 
C) producers' tendency of increasing supply when they observe fixed wage labor contracts. 
D) producers' tendency of increasing supply when they observe a rise in prices. 
E) producers' tendency of increasing supply when they observe a fall in prices.

Question 18

Which of the following would be true if the federal government increased military purchases and state and local governments decreased their road building budgets at the same time?

Accepted Answer

A) Aggregate demand would increase because only federal government purchases affect aggregate demand. 
B) Aggregate demand would decrease because only state and local government purchases affect aggregate demand. 
C) Aggregate demand would increase if the change in federal purchases were smaller than the change in state and local purchases. 
D) Aggregate demand would decrease because military purchases are usually larger than state and local governments' road building budgets. 
E) Aggregate demand would remain the same because federal purchases do not affect it. 
A) Aggregate demand would increase because only federal government purchases affect aggregate demand. 
B) Aggregate demand would decrease because only state and local government purchases affect aggregate demand. 
C) Aggregate demand would increase if the change in federal purchases were smaller than the change in state and local purchases. 
D) Aggregate demand would decrease because military purchases are usually larger than state and local governments' road building budgets. 
E) Aggregate demand would remain the same because federal purchases do not affect it.

Question 19

Which of the following will lead to a shift in the long-run aggregate supply curve of an economy?

Accepted Answer

A) The discovery of a new mineral ore in the country 
B) A change in wage rates 
C) A change in oil prices 
D) An advancement in technology 
E) An earthquake in the country 
A) The discovery of a new mineral ore in the country 
B) A change in wage rates 
C) A change in oil prices 
D) An advancement in technology 
E) An earthquake in the country

Question 20

In an open economy, as the price level increases, the quantity demanded of domestic goods _____, resulting in a(n) _____ in the quantity of real GDP demanded.

Accepted Answer

A) increases; decrease​ 
B) increases; increase 
C) decreases; decrease 
D) decreases; increase 
E) remains constant; increase 
A) increases; decrease​ 
B) increases; increase 
C) decreases; decrease 
D) decreases; increase 
E) remains constant; increase

Which of the following is likely to increase investment in an economy?

Which of the following does not explain why the aggregate demand curve is negatively sloped?

A disaster that destroys a large part of the agricultural output of a country will not change long-run aggregate supply, while a disaster that destroys the capital stock in a major city will reduce long-run aggregate supply.

Along the long-run aggregate supply curve, the level of real GDP supplied:

The long-run level of real GDP changes whenever the aggregate demand curve shifts.

The short-run aggregate supply curve of an industry would be vertical if:

Figure 13-5 shows the short-run macroeconomic equilibrium of an economy. Which of the following will happen in the short run if there is an increase in aggregate demand?Figure 13-5

Which of the following is true of the efficiency wage model?

A technological advancement that increases the productivity of an input will lead to:

What are the major factors that determine investment, and what impact does each have on aggregate demand?

The long run refers to:

Figure 13-10 shows the short-run macroeconomic equilibrium of an economy. Suppose the economy is currently at Point A. As the economy adjusts from short-run equilibrium to long-run equilibrium, _____.Figure 13-10

The aggregate demand curve reflects:

Cost-push inflation is caused by:

The short-run aggregate supply curve is drawn with:

Demand-pull inflation is caused by:

One explanation for an upward-sloping short-run aggregate supply curve is the misperception effect, which is based on:

Which of the following would be true if the federal government increased military purchases and state and local governments decreased their road building budgets at the same time?

Which of the following will lead to a shift in the long-run aggregate supply curve of an economy?

In an open economy, as the price level increases, the quantity demanded of domestic goods _, resulting in a(n) _ in the quantity of real GDP demanded.

The Role and Method of Economics

The Economic Way of Thinking

Supply and Demand

Using Supply and Demand

Market Failure and Public Choice

Production and Costs

Firms in Perfectly Competitive Markets

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets, Income Distribution, and Poverty

Introduction to Macroeconomics: Unemployment, Inflation, and Economic Fluctuations

Economic Growth

Fiscal Policy

Monetary Institutions

The Federal Reserve and Monetary Policy

Issues in Macroeconomic Theory and Policy

International Economics

Filters

Exam 13: Aggregate Demand and Aggregate Supply

Which of the following is likely to increase investment in an economy?

Which of the following does not explain why the aggregate demand curve is negatively sloped?

A disaster that destroys a large part of the agricultural output of a country will not change long-run aggregate supply, while a disaster that destroys the capital stock in a major city will reduce long-run aggregate supply.

Along the long-run aggregate supply curve, the level of real GDP supplied:

The long-run level of real GDP changes whenever the aggregate demand curve shifts.

The short-run aggregate supply curve of an industry would be vertical if:

Figure 13-5 shows the short-run macroeconomic equilibrium of an economy. Which of the following will happen in the short run if there is an increase in aggregate demand?Figure 13-5

Which of the following is true of the efficiency wage model?

A technological advancement that increases the productivity of an input will lead to:​

What are the major factors that determine investment, and what impact does each have on aggregate demand?

The long run refers to:

Figure 13-10 shows the short-run macroeconomic equilibrium of an economy. Suppose the economy is currently at Point A. As the economy adjusts from short-run equilibrium to long-run equilibrium, _____.Figure 13-10​

The aggregate demand curve reflects:

Cost-push inflation is caused by:

The short-run aggregate supply curve is drawn with:

Demand-pull inflation is caused by:

One explanation for an upward-sloping short-run aggregate supply curve is the misperception effect, which is based on:

Which of the following would be true if the federal government increased military purchases and state and local governments decreased their road building budgets at the same time?

Which of the following will lead to a shift in the long-run aggregate supply curve of an economy?

In an open economy, as the price level increases, the quantity demanded of domestic goods _____, resulting in a(n) _____ in the quantity of real GDP demanded.

The Role and Method of Economics

The Economic Way of Thinking

Supply and Demand

Using Supply and Demand

Market Failure and Public Choice

Production and Costs

Firms in Perfectly Competitive Markets

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets, Income Distribution, and Poverty

Introduction to Macroeconomics: Unemployment, Inflation, and Economic Fluctuations

Economic Growth

Fiscal Policy

Monetary Institutions

The Federal Reserve and Monetary Policy

Issues in Macroeconomic Theory and Policy

International Economics

Filters

A technological advancement that increases the productivity of an input will lead to:

Figure 13-10 shows the short-run macroeconomic equilibrium of an economy. Suppose the economy is currently at Point A. As the economy adjusts from short-run equilibrium to long-run equilibrium, _____.Figure 13-10

In an open economy, as the price level increases, the quantity demanded of domestic goods _, resulting in a(n) _ in the quantity of real GDP demanded.