Question 1

In the long run,persistent inflation in the United States is caused by

Accepted Answer

A) leftward shifts in both the long-run aggregate supply curve and in the aggregate demand curve. 
B) rightward shifts in the long-run aggregate supply curve and the leftward shift of the aggregate demand curve. 
C) a faster rightward shift of the aggregate demand curve than the rightward shift of the long-run aggregate supply curve. 
D) leftward shifts in the aggregate demand curve while the position of the long-run supply curve is unchanged. 
A) leftward shifts in both the long-run aggregate supply curve and in the aggregate demand curve. 
B) rightward shifts in the long-run aggregate supply curve and the leftward shift of the aggregate demand curve. 
C) a faster rightward shift of the aggregate demand curve than the rightward shift of the long-run aggregate supply curve. 
D) leftward shifts in the aggregate demand curve while the position of the long-run supply curve is unchanged.

Question 2

Which of these questions does aggregate demand help us answer? I.What determines the total amount of our output that individuals,firms,governments and foreigners want to buy?
II.What is the economy's long-run real Gross Domestic Product (GDP)?
III.What determines the economy's equilibrium price level and the rate of inflation?

Accepted Answer

A) I only 
B) I and II 
C) II and III 
D) I and III 
A) I only 
B) I and II 
C) II and III 
D) I and III

Question 3

Which of the following would likely result in a shift of the aggregate demand curve to the right?

Accepted Answer

A) a tax cut 
B) a decrease in job security 
C) a rise in the real interest rate 
D) a decrease in the quantity of money in circulation 
A) a tax cut 
B) a decrease in job security 
C) a rise in the real interest rate 
D) a decrease in the quantity of money in circulation

Question 4

An increase in the money supply will cause which of the following to occur?

Accepted Answer

A) a rightward shift of the aggregate supply curve 
B) a leftward shift of the aggregate demand curve 
C) a leftward shift of the aggregate supply curve 
D) a rightward shift of the aggregate demand curve 
A) a rightward shift of the aggregate supply curve 
B) a leftward shift of the aggregate demand curve 
C) a leftward shift of the aggregate supply curve 
D) a rightward shift of the aggregate demand curve

Question 5

The interest rate effect suggests that

Accepted Answer

A) an increase in the price level decreases the interest rate,which causes businesses and consumers to reduce desired spending. 
B) an increase in the price level increases the interest rate,which causes businesses and consumers to reduce desired spending. 
C) a decrease in the price level decreases the interest rate,which causes businesses and consumers to reduce desired spending. 
D) an increase in the price level increases the money supply,which causes businesses and consumers to increase desired spending. 
A) an increase in the price level decreases the interest rate,which causes businesses and consumers to reduce desired spending. 
B) an increase in the price level increases the interest rate,which causes businesses and consumers to reduce desired spending. 
C) a decrease in the price level decreases the interest rate,which causes businesses and consumers to reduce desired spending. 
D) an increase in the price level increases the money supply,which causes businesses and consumers to increase desired spending.

Question 6

Which of the following is NOT true about the aggregate demand curve?

Accepted Answer

A) The production possibilities curve determines the slope of the aggregate demand curve. 
B) The aggregate demand curve shows total planned real expenditures at different price levels. 
C) Changes in the economic conditions in other countries will lead to a shift of the aggregate demand curve. 
D) The aggregate demand curve considers the entire circular flow of income. 
A) The production possibilities curve determines the slope of the aggregate demand curve. 
B) The aggregate demand curve shows total planned real expenditures at different price levels. 
C) Changes in the economic conditions in other countries will lead to a shift of the aggregate demand curve. 
D) The aggregate demand curve considers the entire circular flow of income.

Question 7

The U.S.economy has had persistent inflation in recent decades.A possible explanation for the inflation is that

Accepted Answer

A) there have been decreases in the growth rate while aggregate demand has remained unchanged. 
B) there have been increases in the growth rate while aggregate demand has remained unchanged. 
C) there have been decreases in aggregate demand while aggregate supply has remained unchanged. 
D) growth in aggregate demand has been greater than growth in aggregate supply. 
A) there have been decreases in the growth rate while aggregate demand has remained unchanged. 
B) there have been increases in the growth rate while aggregate demand has remained unchanged. 
C) there have been decreases in aggregate demand while aggregate supply has remained unchanged. 
D) growth in aggregate demand has been greater than growth in aggregate supply.

Question 8

What is the interest rate effect of an increase in the price level?

Accepted Answer

Higher price levels indirectly increase

Question 9

What would happen in an economy if total planned production exceeded total planned real expenditures?

Accepted Answer

A) Inventories would be depleted,and firms would tend to lower prices. 
B) Inventories would accumulate,and firms would tend to lower prices. 
C) Inventories would be depleted,and firms would tend to raise prices. 
D) Inventories would accumulate,and firms would tend to raise prices. 
A) Inventories would be depleted,and firms would tend to lower prices. 
B) Inventories would accumulate,and firms would tend to lower prices. 
C) Inventories would be depleted,and firms would tend to raise prices. 
D) Inventories would accumulate,and firms would tend to raise prices.

Question 10

What is the real-balance effect of an increase in the price level?

Accepted Answer

The real-balance effect is the change in

Question 11

-In the above figure,a movement from point A to point B can be explained by

Accepted Answer

A) an decrease in the quantity of money in circulation. 
B) a decrease in the real value of cash balances. 
C) the decrease in interest rates. 
D) the increase in exports to the foreign sector. 
A) an decrease in the quantity of money in circulation. 
B) a decrease in the real value of cash balances. 
C) the decrease in interest rates. 
D) the increase in exports to the foreign sector.

Question 12

The U.S.has experienced inflation every year since 1959 due to

Accepted Answer

A) a sustained decrease in aggregate demand. 
B) a sustained increase in aggregate demand accompanied by an even larger decrease in LRAS. 
C) a sustained decrease in aggregate supply. 
D) a sustained increase in aggregate supply accompanied by an even larger increase in aggregate demand. 
A) a sustained decrease in aggregate demand. 
B) a sustained increase in aggregate demand accompanied by an even larger decrease in LRAS. 
C) a sustained decrease in aggregate supply. 
D) a sustained increase in aggregate supply accompanied by an even larger increase in aggregate demand.

Question 13

The aggregate demand curve has

Accepted Answer

A) no relationship between the price level and real GDP. 
B) a negative relationship between the price level and real GDP. 
C) a positive relationship between the price level and real GDP. 
D) a positive relationship between the price level and nominal GDP. 
A) no relationship between the price level and real GDP. 
B) a negative relationship between the price level and real GDP. 
C) a positive relationship between the price level and real GDP. 
D) a positive relationship between the price level and nominal GDP.

Question 14

Secular deflation occurs when

Accepted Answer

A) there is no economic growth and aggregate demand falls. 
B) aggregate demand increases at the same time there is no economic growth. 
C) aggregate demand remains unchanged while economic growth increases long-run aggregate supply. 
D) both aggregate demand and aggregate supply are shifting left. 
A) there is no economic growth and aggregate demand falls. 
B) aggregate demand increases at the same time there is no economic growth. 
C) aggregate demand remains unchanged while economic growth increases long-run aggregate supply. 
D) both aggregate demand and aggregate supply are shifting left.

Question 15

Supply side inflation can be caused by

Accepted Answer

A) a continual increase in aggregate supply while aggregate demand remains unchanged. 
B) a continual decrease in aggregate supply while aggregate demand remains unchanged. 
C) a continual decrease in aggregate supply while aggregate demand has significant decreases. 
D) a continual increase in aggregate demand while aggregate supply remains unchanged. 
A) a continual increase in aggregate supply while aggregate demand remains unchanged. 
B) a continual decrease in aggregate supply while aggregate demand remains unchanged. 
C) a continual decrease in aggregate supply while aggregate demand has significant decreases. 
D) a continual increase in aggregate demand while aggregate supply remains unchanged.

Question 16

The aggregate demand curve would shift to the right as a result of

Accepted Answer

A) a drop in the price level. 
B) tax increases. 
C) an increase in the U.S.real interest rate. 
D) a decrease in the amount of money in circulation. 
A) a drop in the price level. 
B) tax increases. 
C) an increase in the U.S.real interest rate. 
D) a decrease in the amount of money in circulation.

Question 17

What is one implication of the real-balance effect?

Accepted Answer

A) The part of your wealth that you hold in the form of cash loses some of its value as the price level rises. 
B) When the price level rises,people have an incentive to work harder in order to earn a higher income. 
C) When the price level falls,most consumers reallocate their spending so as to have an equal balance between necessities and luxuries. 
D) Aggregate demand and aggregate supply can never reach long-run equilibrium. 
A) The part of your wealth that you hold in the form of cash loses some of its value as the price level rises. 
B) When the price level rises,people have an incentive to work harder in order to earn a higher income. 
C) When the price level falls,most consumers reallocate their spending so as to have an equal balance between necessities and luxuries. 
D) Aggregate demand and aggregate supply can never reach long-run equilibrium.

Question 18

-Refer to the above figure.If the price level is 80,

Accepted Answer

A) the total planned real expenditures by individuals,businesses,and the government are less than total planned production by firms. 
B) the total planned real expenditures by individuals,businesses,and the government exceed total planned production by firms. 
C) the economy will have economic growth and the new equilibrium price level will be 80. 
D) the aggregate demand curve will automatically shift leading to a stable equilibrium. 
A) the total planned real expenditures by individuals,businesses,and the government are less than total planned production by firms. 
B) the total planned real expenditures by individuals,businesses,and the government exceed total planned production by firms. 
C) the economy will have economic growth and the new equilibrium price level will be 80. 
D) the aggregate demand curve will automatically shift leading to a stable equilibrium.

Question 19

Which of the following will NOT cause a leftward shift in the Long-Run Aggregate Supply curve?

Accepted Answer

A) a net outflow of human capital 
B) a reduction in the amount of oil 
C) a reduction in the amount of capital 
D) a reduction in government spending 
A) a net outflow of human capital 
B) a reduction in the amount of oil 
C) a reduction in the amount of capital 
D) a reduction in government spending

Question 20

A persistently declining price level resulting from economic growth and unchanged aggregate demand is called

Accepted Answer

A) demand-side deflation. 
B) supply-side deflation. 
C) ozian deflation. 
D) secular deflation. 
A) demand-side deflation. 
B) supply-side deflation. 
C) ozian deflation. 
D) secular deflation.

In the long run,persistent inflation in the United States is caused by

Which of the following would likely result in a shift of the aggregate demand curve to the right?

An increase in the money supply will cause which of the following to occur?

The interest rate effect suggests that

Which of the following is NOT true about the aggregate demand curve?

The U.S.economy has had persistent inflation in recent decades.A possible explanation for the inflation is that

What is the interest rate effect of an increase in the price level?

What would happen in an economy if total planned production exceeded total planned real expenditures?

What is the real-balance effect of an increase in the price level?

-In the above figure,a movement from point A to point B can be explained by

The U.S.has experienced inflation every year since 1959 due to

The aggregate demand curve has

Secular deflation occurs when

Supply side inflation can be caused by

The aggregate demand curve would shift to the right as a result of

What is one implication of the real-balance effect?

-Refer to the above figure.If the price level is 80,

Which of the following will NOT cause a leftward shift in the Long-Run Aggregate Supply curve?

A persistently declining price level resulting from economic growth and unchanged aggregate demand is called

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, inflation, and Deflation

Measuring the Economys Performance

Global Economic Growth and Development

Classical and Keynesian Macro Analyses

Consumption, real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money, banking, and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters

Exam 10: Real GDP and the Price Level in the Long Run

In the long run,persistent inflation in the United States is caused by

Which of the following would likely result in a shift of the aggregate demand curve to the right?

An increase in the money supply will cause which of the following to occur?

The interest rate effect suggests that

Which of the following is NOT true about the aggregate demand curve?

The U.S.economy has had persistent inflation in recent decades.A possible explanation for the inflation is that

What is the interest rate effect of an increase in the price level?

What would happen in an economy if total planned production exceeded total planned real expenditures?

What is the real-balance effect of an increase in the price level?

-In the above figure,a movement from point A to point B can be explained by

The U.S.has experienced inflation every year since 1959 due to

The aggregate demand curve has

Secular deflation occurs when

Supply side inflation can be caused by

The aggregate demand curve would shift to the right as a result of

What is one implication of the real-balance effect?

-Refer to the above figure.If the price level is 80,

Which of the following will NOT cause a leftward shift in the Long-Run Aggregate Supply curve?

A persistently declining price level resulting from economic growth and unchanged aggregate demand is called

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, inflation, and Deflation

Measuring the Economys Performance

Global Economic Growth and Development

Classical and Keynesian Macro Analyses

Consumption, real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money, banking, and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters