Question 1

The Federal Reserve's policy to "lean against the wind" means that

Accepted Answer

A) interest rates are decreased as the economy expands. 
B) reserve requirements are decreased as the economy expands. 
C) reserve requirements are decreased significantly during an economic expansion. 
D) interest rates are increased gradually as the economy expands. 
A) interest rates are decreased as the economy expands. 
B) reserve requirements are decreased as the economy expands. 
C) reserve requirements are decreased significantly during an economic expansion. 
D) interest rates are increased gradually as the economy expands.

Question 2

The aggregate supply curve

Accepted Answer

A) is the sum of the individual supply curves in the economy. 
B) is a market supply curve. 
C) embodies the same logic that lies behind an individual firm's supply curve. 
D) relates output with the price level. 
A) is the sum of the individual supply curves in the economy. 
B) is a market supply curve. 
C) embodies the same logic that lies behind an individual firm's supply curve. 
D) relates output with the price level.

Question 3

Refer to the information provided in Figure 12.6 below to answer the questions that follow.
   Figure 12.6
-Refer to Figure 12.6.Which of the following will,unambiguously,decrease the price level?

Accepted Answer

A) an increase in government spending and an increase in costs 
B) an increase in government spending and a decrease in costs 
C) a decrease in government spending and an increase in costs 
D) a decrease in government spending and a decrease in costs 
A) an increase in government spending and an increase in costs 
B) an increase in government spending and a decrease in costs 
C) a decrease in government spending and an increase in costs 
D) a decrease in government spending and a decrease in costs

Question 4

The IS curve shows combinations of output and interest rates consistent with equilibrium in the goods market.

Accepted Answer

A) True 
 B)False

Question 5

Refer to the information provided in Figure 12.6 below to answer the questions that follow.
   Figure 12.6
-Refer to Figure 12.6.Suppose the equilibrium output is initially $600 billion.A decrease in wages and an increase in government spending will,for sure,increase

Accepted Answer

A) both the equilibrium output and the price level. 
B) the price level. 
C) equilibrium output. 
D) equilibrium output and decrease the price level. 
A) both the equilibrium output and the price level. 
B) the price level. 
C) equilibrium output. 
D) equilibrium output and decrease the price level.

Question 6

If ________ equilibrium output ________,the price level rises.

Accepted Answer

A) actual; is below potential GDP 
B) potential; is equal to actual GDP 
C) potential; exceeds actual GDP 
D) actual; exceeds potential GDP 
A) actual; is below potential GDP 
B) potential; is equal to actual GDP 
C) potential; exceeds actual GDP 
D) actual; exceeds potential GDP

Question 7

Which of the following equations represents equilibrium in the goods market?

Accepted Answer

A) AE = I(r) 
B) Y = AD + AS 
C) Y = S + I 
D) AE = C + I + G 
A) AE = I(r) 
B) Y = AD + AS 
C) Y = S + I 
D) AE = C + I + G

Question 8

When the interest rate is high,planned investment is ________ so output is ________.

Accepted Answer

A) high; high 
B) high; low 
C) low; high 
D) low; low 
A) high; high 
B) high; low 
C) low; high 
D) low; low

Question 9

The aggregate demand curve shows that at higher price levels the total quantity of output demanded is greater.

Accepted Answer

A) True 
 B)False

Question 10

Potential output is equal to

Accepted Answer

A) long run aggregate demand. 
B) short-run aggregate demand. 
C) short-run aggregate supply. 
D) long-run aggregate supply. 
A) long run aggregate demand. 
B) short-run aggregate demand. 
C) short-run aggregate supply. 
D) long-run aggregate supply.

Question 11

To decrease output the government could

Accepted Answer

A) adopt policies that discourage immigration and increase government spending. 
B) adopt policies that encourage immigration and decrease government spending. 
C) adopt policies that encourage technological advancement and increase government spending. 
D) adopt policies that discourage technological advancement and decrease government spending. 
A) adopt policies that discourage immigration and increase government spending. 
B) adopt policies that encourage immigration and decrease government spending. 
C) adopt policies that encourage technological advancement and increase government spending. 
D) adopt policies that discourage technological advancement and decrease government spending.

Question 12

Refer to the information provided in Figure 12.5 below to answer the questions that follow.
   Figure 12.5
-Refer to Figure 12.5.Which of the following combinations would definitely increase the equilibrium interest rate?

Accepted Answer

A) government spending increases and the price level increases 
B) government spending increases and the price level decreases 
C) government spending decreases and the price level increases 
D) government spending decreases and the price level decreases 
A) government spending increases and the price level increases 
B) government spending increases and the price level decreases 
C) government spending decreases and the price level increases 
D) government spending decreases and the price level decreases

Question 13

A movement down the aggregate supply curve is caused by a(n)

Accepted Answer

A) decrease in aggregate supply. 
B) increase in aggregate supply. 
C) decrease in the price level. 
D) increase in the price level. 
A) decrease in aggregate supply. 
B) increase in aggregate supply. 
C) decrease in the price level. 
D) increase in the price level.

Question 14

The aggregate demand curve shows a ________ relationship between ________ and aggregate output ________.

Accepted Answer

A) positive; the interest rate; demanded 
B) negative; the price level; supplied 
C) positive; the price level; demanded 
D) negative; the price level; demanded 
A) positive; the interest rate; demanded 
B) negative; the price level; supplied 
C) positive; the price level; demanded 
D) negative; the price level; demanded

Question 15

Other things equal,an increase in government spending ________ the equilibrium interest rate and ________ equilibrium output.

Accepted Answer

A) increases; increases 
B) increases; decreases 
C) decreases; increases 
D) decreases; decreases 
A) increases; increases 
B) increases; decreases 
C) decreases; increases 
D) decreases; decreases

Question 16

Refer to the information provided in Figure 12.6 below to answer the questions that follow.
   Figure 12.6
-Refer to Figure 12.6.Suppose the equilibrium output is initially $600 billion.An oil embargo would probably

Accepted Answer

A) increase both the equilibrium output and the price level. 
B) decrease the equilibrium output and increase the price level. 
C) increase the equilibrium output and decrease the price level. 
D) decrease both the equilibrium output and the price level. 
A) increase both the equilibrium output and the price level. 
B) decrease the equilibrium output and increase the price level. 
C) increase the equilibrium output and decrease the price level. 
D) decrease both the equilibrium output and the price level.

Question 17

To decrease the price level the government could

Accepted Answer

A) adopt policies that discourage immigration and increase government spending. 
B) adopt policies that encourage immigration and decrease government spending. 
C) adopt policies that encourage technological advancement and increase government spending. 
D) adopt policies that discourage technological advancement and decrease government spending. 
A) adopt policies that discourage immigration and increase government spending. 
B) adopt policies that encourage immigration and decrease government spending. 
C) adopt policies that encourage technological advancement and increase government spending. 
D) adopt policies that discourage technological advancement and decrease government spending.

Question 18

A decrease in the price level raises the real value of wealth.

Accepted Answer

A) True 
 B)False

Question 19

An increase in aggregate demand when the economy is operating at high levels of output is likely to result in

Accepted Answer

A) a large increase in both output and the overall price level. 
B) an increase in the overall price level but little or no increase in output. 
C) an increase in output but little or no increase in the overall price level. 
D) little or no increase in either output or the overall price level. 
A) a large increase in both output and the overall price level. 
B) an increase in the overall price level but little or no increase in output. 
C) an increase in output but little or no increase in the overall price level. 
D) little or no increase in either output or the overall price level.

Question 20

Refer to the information provided in Figure 12.8 below to answer the questions that follow.
   Figure 12.8
-Refer to Figure 12.8.This economy cannot continue to produce Y1 (or at point  B)because

Accepted Answer

A) the price of raw material and wages will increase shifting the aggregate supply curve to AS1. 
B) the price of inputs will decrease,shifting the aggregate supply curve to AS2. 
C) the price of raw material will increase,shifting the aggregate demand curve to AD2. 
D) all of the above 
A) the price of raw material and wages will increase shifting the aggregate supply curve to AS1. 
B) the price of inputs will decrease,shifting the aggregate supply curve to AS2. 
C) the price of raw material will increase,shifting the aggregate demand curve to AD2. 
D) all of the above

Exam 12: The Determination of Aggregate Output, the Price Level, and the Interest Rate

The Federal Reserve's policy to "lean against the wind" means that

The aggregate supply curve

Refer to the information provided in Figure 12.6 below to answer the questions that follow. Figure 12.6 -Refer to Figure 12.6.Which of the following will,unambiguously,decrease the price level?

The IS curve shows combinations of output and interest rates consistent with equilibrium in the goods market.

Refer to the information provided in Figure 12.6 below to answer the questions that follow. Figure 12.6 -Refer to Figure 12.6.Suppose the equilibrium output is initially $600 billion.A decrease in wages and an increase in government spending will,for sure,increase

If ________ equilibrium output ________,the price level rises.

Which of the following equations represents equilibrium in the goods market?

When the interest rate is high,planned investment is ________ so output is ________.

The aggregate demand curve shows that at higher price levels the total quantity of output demanded is greater.

Potential output is equal to

To decrease output the government could

Refer to the information provided in Figure 12.5 below to answer the questions that follow. Figure 12.5 -Refer to Figure 12.5.Which of the following combinations would definitely increase the equilibrium interest rate?

A movement down the aggregate supply curve is caused by a(n)

The aggregate demand curve shows a ________ relationship between ________ and aggregate output ________.

Other things equal,an increase in government spending ________ the equilibrium interest rate and ________ equilibrium output.

Refer to the information provided in Figure 12.6 below to answer the questions that follow. Figure 12.6 -Refer to Figure 12.6.Suppose the equilibrium output is initially $600 billion.An oil embargo would probably

To decrease the price level the government could

A decrease in the price level raises the real value of wealth.

An increase in aggregate demand when the economy is operating at high levels of output is likely to result in

Refer to the information provided in Figure 12.8 below to answer the questions that follow. Figure 12.8 -Refer to Figure 12.8.This economy cannot continue to produce Y1 (or at point B)because

The Scope and Method of Economics

The Economic Problem: Scarcity and Choice

Demand,supply,and Market Equilibrium

Demand and Supply Applications

Introduction to Macroeconomics

Measuring National Output and National Income

Unemployment,inflation,and Long-Run Growth

Aggregate Expenditure and Equilibrium Output

The Government and Fiscal Policy

The Money Supply and the Federal Reserve System

Money Demand and the Equilibrium Interest Rate

Policy Effects and Costs Shocks in the Asad Model

The Labor Market in the Macroeconomy

Financial Crises, stabilization, and Deficits

Household and Firm Behavior in the Macroeconomy: a Further Look

Long-Run Growth

Alternative Views in Macroeconomics

International Trade, comparative Advantage, and Protectionism

Open-Economy Macroeconomics: the Balance of Payments and Exchange Rates

Economic Growth in Developing and Transitional Economies

Filters

If equilibrium output ,the price level rises.

When the interest rate is high,planned investment is so output is .

The aggregate demand curve shows a relationship between and aggregate output .

Other things equal,an increase in government spending the equilibrium interest rate and equilibrium output.

Refer to the information provided in Figure 12.8 below to answer the questions that follow. Figure 12.8 -Refer to Figure 12.8.This economy cannot continue to produce Y₁ (or at point B)because