Question 1

-Refer to the above diagram. If aggregate supply shifts from AS1 to AS2, then the price level will:

Accepted Answer

A)  increase and real domestic output will increase. 
B)  decrease and real domestic output will increase. 
C)  increase and real domestic output will decrease. 
D)  decrease and real domestic output will decrease. 
A)  increase and real domestic output will increase. 
B)  decrease and real domestic output will increase. 
C)  increase and real domestic output will decrease. 
D)  decrease and real domestic output will decrease.

Question 2

Which one of the following would increase per unit production cost and therefore shift the aggregate supply curve to the left?

Accepted Answer

A)  a reduction in business taxes 
B)  an increase in the number of resources used in production 
C)  an increase in the price of imported resources 
D)  deregulation of industry 
A)  a reduction in business taxes 
B)  an increase in the number of resources used in production 
C)  an increase in the price of imported resources 
D)  deregulation of industry

Question 3

In terms of aggregate supply, in the immediate short run:

Accepted Answer

A)  the price level is variable. 
B)  real output is fixed. 
C)  nominal wages are variable. 
D)  both input prices and output prices are fixed. 
A)  the price level is variable. 
B)  real output is fixed. 
C)  nominal wages are variable. 
D)  both input prices and output prices are fixed.

Question 4

When the price level decreases:

Accepted Answer

A)  the demand for money falls and the interest rate falls. 
B)  holders of financial assets with fixed money values decrease their spending. 
C)  holders of financial assets with fixed money values have less purchasing power. 
D)  there is a decrease in consumer spending that is sensitive to changes in interest rates. 
A)  the demand for money falls and the interest rate falls. 
B)  holders of financial assets with fixed money values decrease their spending. 
C)  holders of financial assets with fixed money values have less purchasing power. 
D)  there is a decrease in consumer spending that is sensitive to changes in interest rates.

Question 5

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 6

A fall in real interest rates will reduce aggregate demand.

Accepted Answer

A) True 
 B)False

Question 7

The real-balances effect indicates that:

Accepted Answer

A)  an increase in the price level will increase the demand for money, increase interest rates, and reduce consumption and investment spending. 
B)  a lower price level will decrease the real value of many financial assets and therefore reduce spending. 
C)  a higher price level will increase the real value of many financial assets and therefore increase spending. 
D)  a higher price level will decrease the real value of many financial assets and therefore reduce spending. 
A)  an increase in the price level will increase the demand for money, increase interest rates, and reduce consumption and investment spending. 
B)  a lower price level will decrease the real value of many financial assets and therefore reduce spending. 
C)  a higher price level will increase the real value of many financial assets and therefore increase spending. 
D)  a higher price level will decrease the real value of many financial assets and therefore reduce spending.

Question 8

The long run aggregate supply:

Accepted Answer

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

Question 9

Collective bargaining agreements that prohibit wage cuts for the duration of the contract contribute to:

Accepted Answer

A)  a wealth effect. 
B)  a multiplier effect. 
C)  an increase in aggregate supply. 
D)  a price level that is inflexible downward. 
A)  a wealth effect. 
B)  a multiplier effect. 
C)  an increase in aggregate supply. 
D)  a price level that is inflexible downward.

Question 10

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.
  
-Refer to the above table. The interest rate effect of changes in the price level is shown by columns:

Accepted Answer

A)  (1) and (4) of the table. 
B)  (5) and (6) of the table. 
C)  (1) and (3) of the table. 
D)  (2) and (4) of the table. 
A)  (1) and (4) of the table. 
B)  (5) and (6) of the table. 
C)  (1) and (3) of the table. 
D)  (2) and (4) of the table.

Question 11

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 12

A movement upward along an existing aggregate demand curve that changes the price level is equivalent to a(n):

Accepted Answer

A)  decrease in aggregate demand. 
B)  increase in aggregate demand. 
C)  upward shift in the aggregate expenditures schedule. 
D)  downward shift in the aggregate expenditures schedule. 
A)  decrease in aggregate demand. 
B)  increase in aggregate demand. 
C)  upward shift in the aggregate expenditures schedule. 
D)  downward shift in the aggregate expenditures schedule.

Question 13

-Refer to the above diagram. If equilibrium real output is Q2, then:

Accepted Answer

A)  aggregate demand is AD1. 
B)  the equilibrium price level is P1. 
C)  producers will supply output level Q1. 
D)  the equilibrium price level is P2. 
A)  aggregate demand is AD1. 
B)  the equilibrium price level is P1. 
C)  producers will supply output level Q1. 
D)  the equilibrium price level is P2.

Question 14

An increase in the price level, other things equal, will shift the:

Accepted Answer

A)  consumption, investment, and net exports schedules of the aggregate expenditures model downward. 
B)  consumption, investment, and net exports schedules of the aggregate expenditures model upward. 
C)  consumption, and investment schedules of the aggregate expenditures model upward, but the net exports schedule downward. 
D)  consumption, and net exports schedules of the aggregate expenditures model upward, but the investment schedule downward. 
A)  consumption, investment, and net exports schedules of the aggregate expenditures model downward. 
B)  consumption, investment, and net exports schedules of the aggregate expenditures model upward. 
C)  consumption, and investment schedules of the aggregate expenditures model upward, but the net exports schedule downward. 
D)  consumption, and net exports schedules of the aggregate expenditures model upward, but the investment schedule downward.

Question 15

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 16

Refer to the diagram below. Suppose that aggregate demand increased from AD1 to AD2. For the price level to stay constant:

Accepted Answer

A)  the aggregate supply curve would have to shift rightward. 
B)  the aggregate supply curve would have to shift leftward. 
C)  real domestic output would have to remain constant. 
D)  the aggregate supply curve would have to be vertical. 
A)  the aggregate supply curve would have to shift rightward. 
B)  the aggregate supply curve would have to shift leftward. 
C)  real domestic output would have to remain constant. 
D)  the aggregate supply curve would have to be vertical.

Question 17

The foreign trade effect:

Accepted Answer

A)  shifts the aggregate demand curve rightward. 
B)  shifts the aggregate demand curve leftward. 
C)  shifts the aggregate supply curve rightward. 
D)  does none of the above. 
A)  shifts the aggregate demand curve rightward. 
B)  shifts the aggregate demand curve leftward. 
C)  shifts the aggregate supply curve rightward. 
D)  does none of the above.

Question 18

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 19

Wage contracts, efficiency wages, and the minimum wage are explanations for why:

Accepted Answer

A)  competition results in price wars. 
B)  wages tend to be inflexible downward. 
C)  the aggregate demand curve slopes downward. 
D)  there is little support for the existence of a real-balances effect. 
A)  competition results in price wars. 
B)  wages tend to be inflexible downward. 
C)  the aggregate demand curve slopes downward. 
D)  there is little support for the existence of a real-balances effect.

Question 20

In deriving the aggregate demand curve from the aggregate expenditures model we note that:

Accepted Answer

A)  the wealth or real balances effect is irrelevant to both models. 
B)  a change in the price level will have no impact on the aggregate expenditures schedule. 
C)  an increase (decrease) in the price level shifts the aggregate expenditures schedule upward (downward). 
D)  an increase (decrease) in the price level shifts the aggregate expenditures schedule downward (upward). 
A)  the wealth or real balances effect is irrelevant to both models. 
B)  a change in the price level will have no impact on the aggregate expenditures schedule. 
C)  an increase (decrease) in the price level shifts the aggregate expenditures schedule upward (downward). 
D)  an increase (decrease) in the price level shifts the aggregate expenditures schedule downward (upward).

-Refer to the above diagram. If aggregate supply shifts from AS₁ to AS₂, then the price level will:

Which one of the following would increase per unit production cost and therefore shift the aggregate supply curve to the left?

In terms of aggregate supply, in the immediate short run:

When the price level decreases:

An expected decline in the prices of consumer goods will:

A fall in real interest rates will reduce aggregate demand.

The real-balances effect indicates that:

The long run aggregate supply:

Collective bargaining agreements that prohibit wage cuts for the duration of the contract contribute to:

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

A movement upward along an existing aggregate demand curve that changes the price level is equivalent to a(n):

-Refer to the above diagram. If equilibrium real output is Q₂, then:

An increase in the price level, other things equal, will shift the:

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

Refer to the diagram below. Suppose that aggregate demand increased from AD₁ to AD₂. For the price level to stay constant:

The foreign trade effect:

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

Wage contracts, efficiency wages, and the minimum wage are explanations for why:

In deriving the aggregate demand curve from the aggregate expenditures model we note that:

Limits, Alternatives, and Choices

The Market System and the Circular Flow

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

Financial Economics

Long-Run Macroeconomic Adjustments

International Trade

Exchange Rates and the Balance of Payments

Filters

Exam 10: Aggregate Demand and Aggregate Supply

-Refer to the above diagram. If aggregate supply shifts from AS1 to AS2, then the price level will:

Which one of the following would increase per unit production cost and therefore shift the aggregate supply curve to the left?

In terms of aggregate supply, in the immediate short run:

When the price level decreases:

An expected decline in the prices of consumer goods will:

A fall in real interest rates will reduce aggregate demand.

The real-balances effect indicates that:

The long run aggregate supply:

Collective bargaining agreements that prohibit wage cuts for the duration of the contract contribute to:

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

A movement upward along an existing aggregate demand curve that changes the price level is equivalent to a(n):

-Refer to the above diagram. If equilibrium real output is Q2, then:

An increase in the price level, other things equal, will shift the:

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

Refer to the diagram below. Suppose that aggregate demand increased from AD1 to AD2. For the price level to stay constant:

The foreign trade effect:

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

Wage contracts, efficiency wages, and the minimum wage are explanations for why:

In deriving the aggregate demand curve from the aggregate expenditures model we note that:

Limits, Alternatives, and Choices

The Market System and the Circular Flow

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

Financial Economics

Long-Run Macroeconomic Adjustments

International Trade

Exchange Rates and the Balance of Payments

Filters

-Refer to the above diagram. If aggregate supply shifts from AS₁ to AS₂, then the price level will:

-Refer to the above diagram. If equilibrium real output is Q₂, then:

Refer to the diagram below. Suppose that aggregate demand increased from AD₁ to AD₂. For the price level to stay constant: