Question 1

To determine short-run equilibrium in the economy, we use an aggregate supply curve that is:

Accepted Answer

A) downward-sloping. 
B) vertical. 
C) upward-sloping. 
D) horizontal. 
E) parabolic. 
A) downward-sloping. 
B) vertical. 
C) upward-sloping. 
D) horizontal. 
E) parabolic.

Question 2

Assume that the aggregate demand increases while the short-run aggregate supply decreases.The result is a(n):

Accepted Answer

A) increase in both equilibrium real GDP and the price level. 
B) decrease in equilibrium real GDP and an increase in the price level. 
C) decrease in both equilibrium real GDP and the price level. 
D) decrease in equilibrium real GDP, while the price level remains fixed. 
E) increase in the price level, while the change in equilibrium real GDP is ambiguous. 
A) increase in both equilibrium real GDP and the price level. 
B) decrease in equilibrium real GDP and an increase in the price level. 
C) decrease in both equilibrium real GDP and the price level. 
D) decrease in equilibrium real GDP, while the price level remains fixed. 
E) increase in the price level, while the change in equilibrium real GDP is ambiguous.

Question 3

The intersection of the aggregate demand and the aggregate supply curve defines the equilibrium level of _____ and the price level.

Accepted Answer

A) real interest rate 
B) nominal interest rate 
C) nominal GDP 
D) real GDP 
E) unemployment 
A) real interest rate 
B) nominal interest rate 
C) nominal GDP 
D) real GDP 
E) unemployment

Question 4

Other things equal, an increase in aggregate demand will result in:

Accepted Answer

A) an economic expansion. 
B) higher unemployment and a lower equilibrium price level. 
C) an economic recession. 
D) a decrease in equilibrium real GDP and an increase in the equilibrium level of prices. 
E) decreased economic welfare. 
A) an economic expansion. 
B) higher unemployment and a lower equilibrium price level. 
C) an economic recession. 
D) a decrease in equilibrium real GDP and an increase in the equilibrium level of prices. 
E) decreased economic welfare.

Question 5

Each of the panels given below represents the short-run equilibrium in the U.S.economy.The Aggregate Demand and Aggregate Supply curves in each panel responds to various economic changes. Figure 8.1   Refer to Figure 8.1.Which of the graphs in the figure best describes the impact of a generalized more optimistic view of the future by consumers?

Accepted Answer

A) Panel A 
B) Panel B 
C) Panel C 
D) Panel D 
E) Panel E 
A) Panel A 
B) Panel B 
C) Panel C 
D) Panel D 
E) Panel E

Question 6

In the Keynesian case, an increase in aggregate demand results in an increase in both the price level and equilibrium real GDP.

Accepted Answer

A) True 
 B)False

Question 7

If the aggregate supply curve is vertical, then shifts in aggregate demand will not change aggregate output.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is true of the aggregate supply curve?

Accepted Answer

A) It shows the inverse relationship between prices and national output. 
B) It shows the positive relationship between the price level and the supply of all goods produced in the economy. 
C) It shows the amount of real GDP consumed at different price levels. 
D) It is a negatively sloped curve that shows the relationship between the price level and the cost of production of firms in the economy. 
E) It shows the positive relationship between price and quantity supplied of an individual good. 
A) It shows the inverse relationship between prices and national output. 
B) It shows the positive relationship between the price level and the supply of all goods produced in the economy. 
C) It shows the amount of real GDP consumed at different price levels. 
D) It is a negatively sloped curve that shows the relationship between the price level and the cost of production of firms in the economy. 
E) It shows the positive relationship between price and quantity supplied of an individual good.

Question 9

An increase in aggregate demand due to higher foreign income will cause:

Accepted Answer

A) domestic equilibrium GDP to increase. 
B) domestic equilibrium GDP to decrease. 
C) domestic prices to fall. 
D) foreign prices to fall. 
E) foreign equilibrium GDP to fall. 
A) domestic equilibrium GDP to increase. 
B) domestic equilibrium GDP to decrease. 
C) domestic prices to fall. 
D) foreign prices to fall. 
E) foreign equilibrium GDP to fall.

Question 10

Aggregate demand represents the _____ at alternative price levels.

Accepted Answer

A) total spending in the economy 
B) total saving in the economy 
C) total investment in the economy 
D) total output of the economy 
E) total money supply in the economy 
A) total spending in the economy 
B) total saving in the economy 
C) total investment in the economy 
D) total output of the economy 
E) total money supply in the economy

Question 11

Each of the panels given below represents the short-run equilibrium in the U.S.economy.The Aggregate Demand and Aggregate Supply curves in each panel responds to various economic changes. Figure 8.1   Refer to Figure 8.1.Which of the graphs in the figure best describes the impact of lower real income in Germany on U.S.equilibrium real GDP and the U.S.equilibrium price level?

Accepted Answer

A) Panel A 
B) Panel B 
C) Panel C 
D) Panel D 
E) Panel E 
A) Panel A 
B) Panel B 
C) Panel C 
D) Panel D 
E) Panel E

Question 12

Identify the correct statement.

Accepted Answer

A) Aggregate demand alone determines equilibrium price and output. 
B) Aggregate supply alone determines equilibrium price and output. 
C) Aggregate demand and aggregate supply determine equilibrium price and output. 
D) Aggregate demand shows the positive relationship between price level and real GDP. 
E) Aggregate supply shows the negative relationship between price level and real GDP 
A) Aggregate demand alone determines equilibrium price and output. 
B) Aggregate supply alone determines equilibrium price and output. 
C) Aggregate demand and aggregate supply determine equilibrium price and output. 
D) Aggregate demand shows the positive relationship between price level and real GDP. 
E) Aggregate supply shows the negative relationship between price level and real GDP

Question 13

The wealth effect, the interest rate effect, and the international trade effect account for the:

Accepted Answer

A) positive slope of the short-run aggregate supply curve. 
B) the shape of the long-run aggregate supply curve. 
C) positive slope of the aggregate demand curve. 
D) negative slope of the aggregate demand curve. 
E) negative slope of the short-run aggregate supply curve. 
A) positive slope of the short-run aggregate supply curve. 
B) the shape of the long-run aggregate supply curve. 
C) positive slope of the aggregate demand curve. 
D) negative slope of the aggregate demand curve. 
E) negative slope of the short-run aggregate supply curve.

Question 14

In the short-run, an increase in the average price level will cause:

Accepted Answer

A) demand for the good to increase but total production to decline. 
B) profits to rise and, thus, total production to increase. 
C) interest rates to fall and thus total production to decline. 
D) input costs to fall and, thus, total production to rise. 
E) input costs to fall and, thus, total production to decline. 
A) demand for the good to increase but total production to decline. 
B) profits to rise and, thus, total production to increase. 
C) interest rates to fall and thus total production to decline. 
D) input costs to fall and, thus, total production to rise. 
E) input costs to fall and, thus, total production to decline.

Question 15

Which of the following explains the effect of prices on profits in the short-run?

Accepted Answer

A) The direct relationship between aggregate quantity demanded and national output. 
B) The direct relationship between aggregate quantity supplied and the price level. 
C) The inverse relationship between aggregate quantity demanded and national output. 
D) The inverse relationship between aggregate quantity supplied and profits. 
E) The inverse relationship between aggregate quantity supplied and national output. 
A) The direct relationship between aggregate quantity demanded and national output. 
B) The direct relationship between aggregate quantity supplied and the price level. 
C) The inverse relationship between aggregate quantity demanded and national output. 
D) The inverse relationship between aggregate quantity supplied and profits. 
E) The inverse relationship between aggregate quantity supplied and national output.

Question 16

Identify the correct statement.

Accepted Answer

A) Investment is positively related to the interest rate. 
B) Investment spending in an economy is stimulated by new production technology. 
C) Investment is positively related to excess capacity. 
D) Investment spending is positively related to the cost of capital goods. 
E) Investment is negatively related to the rate of government spending. 
A) Investment is positively related to the interest rate. 
B) Investment spending in an economy is stimulated by new production technology. 
C) Investment is positively related to excess capacity. 
D) Investment spending is positively related to the cost of capital goods. 
E) Investment is negatively related to the rate of government spending.

Question 17

Which of the following is most likely to lead to an inward shift of the aggregate demand curve?

Accepted Answer

A) A decrease in the prices of raw materials 
B) A decline in foreign price levels 
C) A decline in the domestic price level 
D) An optimistic expectation about the economy's performance in the near future 
E) A decrease in foreign income 
A) A decrease in the prices of raw materials 
B) A decline in foreign price levels 
C) A decline in the domestic price level 
D) An optimistic expectation about the economy's performance in the near future 
E) A decrease in foreign income

Question 18

Other things equal, investment spending will increase when:

Accepted Answer

A) interest rates are lowered. 
B) firms operate under full capacity. 
C) corporate taxes are increased. 
D) capacity utilization is low. 
E) the cost of capital rises. 
A) interest rates are lowered. 
B) firms operate under full capacity. 
C) corporate taxes are increased. 
D) capacity utilization is low. 
E) the cost of capital rises.

Question 19

The movement of the vertical _____ curve to the _____ reflects the increase in potential output on account of the development of new technologies and increase in the quantity and quality of resources.

Accepted Answer

A) long-run aggregate supply;right 
B) short-run aggregate supply;right 
C) short-run aggregate demand;left 
D) long-run aggregate demand curve;left 
E) long-run aggregate supply;left 
A) long-run aggregate supply;right 
B) short-run aggregate supply;right 
C) short-run aggregate demand;left 
D) long-run aggregate demand curve;left 
E) long-run aggregate supply;left

Question 20

The short-run aggregate supply curve will shift to the left if:

Accepted Answer

A) there is a significant increase in worker productivity. 
B) workers on fixed-wage contracts expect higher inflation. 
C) the price of raw materials decreases. 
D) the price of capital goods rises. 
E) wages fall in anticipation of higher prices. 
A) there is a significant increase in worker productivity. 
B) workers on fixed-wage contracts expect higher inflation. 
C) the price of raw materials decreases. 
D) the price of capital goods rises. 
E) wages fall in anticipation of higher prices.

Exam 11: Macroeconomic Equilibrium: Aggregate Demand and Supply

To determine short-run equilibrium in the economy, we use an aggregate supply curve that is:

Assume that the aggregate demand increases while the short-run aggregate supply decreases.The result is a(n):

The intersection of the aggregate demand and the aggregate supply curve defines the equilibrium level of _____ and the price level.

Other things equal, an increase in aggregate demand will result in:

In the Keynesian case, an increase in aggregate demand results in an increase in both the price level and equilibrium real GDP.

If the aggregate supply curve is vertical, then shifts in aggregate demand will not change aggregate output.

Which of the following is true of the aggregate supply curve?

An increase in aggregate demand due to higher foreign income will cause:

Aggregate demand represents the _____ at alternative price levels.

Identify the correct statement.

The wealth effect, the interest rate effect, and the international trade effect account for the:

In the short-run, an increase in the average price level will cause:

Which of the following explains the effect of prices on profits in the short-run?

Identify the correct statement.

Which of the following is most likely to lead to an inward shift of the aggregate demand curve?

Other things equal, investment spending will increase when:

The movement of the vertical _____ curve to the _____ reflects the increase in potential output on account of the development of new technologies and increase in the quantity and quality of resources.

The short-run aggregate supply curve will shift to the left if:

Economics: The World Around You

Choice, Opportunity Costs, and Specialization

Markets, Demand and Supply, and the Price System

The Market System and the Private and Public Sector

Elasticity: Demand and Supply

National Income Accounting

an Introduction to the Foreign Exchange Market and the Balance of Payments

Consumer Choice

Supply: The Costs of Doing Business

Unemployment and Inflation

Profit Maximization

Aggregate Expenditures

Perfect Competition

Income and Expenditures Equilibrium

Monopoly

Fiscal Policy

Monopolistic Competition and Oligopoly

Antitrust and Regulation

Money and Banking

Market Failures, Government Failures, and Rent Seeking

Monetary Policy

Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

Resource Markets

Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

The Labor Market

Capital Markets

Economic Growth

Development Economics

the Land Market and Natural Resources

Aging, Social Security and Health Care

Globalization

Elasticity: Demand and Supply

Income Distribution, Poverty and Government Policy

World Trade Equilibrium

Consumer Choice

International Trade Restrictions

World Trade Equilibrium

Exchange Rates and Financial Links Between Countries

International Trade Restrictions

Supply: the Costs of Doing Business

Exchange Rates and Financial Links Between Countries

Profit Maximization

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Antitrust and Regulation

Market Failures, Government Failures, and Rent Seeking

Resource Markets

The Labor Market

Capital Markets

The Land Market and Natural Resources

Aging, Social Security and Health Care

Income Distribution, Poverty and Government Policy

World Trade Equilibrium

International Trade Restrictions

Exchange Rates and Financial Links Between Countries

Filters

The movement of the vertical _ curve to the _ reflects the increase in potential output on account of the development of new technologies and increase in the quantity and quality of resources.