Question 1

If wages do not fully adjust to changes in prices,the aggregate supply curve is vertical.

Accepted Answer

A) True 
 B)False

Question 2

When the economy is producing at full capacity,the aggregate supply curve becomes

Accepted Answer

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

Question 3

Refer to the information provided in Figure 12.4 below to answer the questions that follow.   Figure 12.4
-Refer to Figure 12.4.Suppose the economy is at Point A,an increase in aggregate demand moves the economy to Point

Accepted Answer

A) E. 
B) B. 
C) C. 
D) D. 
A) E. 
B) B. 
C) C. 
D) D.

Question 4

If input prices change at exactly the same rate as output prices,the aggregate supply curve will be vertical.

Accepted Answer

A) True 
 B)False

Question 5

When the general price level rises,

Accepted Answer

A) consumption falls as a result of the real wealth effect. 
B) consumption increases as a result of the multiplier effect. 
C) investment rises as a result of the real wealth effect. 
D) investment rises as a result of the multiplier effect. 
A) consumption falls as a result of the real wealth effect. 
B) consumption increases as a result of the multiplier effect. 
C) investment rises as a result of the real wealth effect. 
D) investment rises as a result of the multiplier effect.

Question 6

The level of aggregate output that can be sustained in the long run without inflation is known as

Accepted Answer

A) nominal output. 
B) real output. 
C) money output. 
D) potential output. 
A) nominal output. 
B) real output. 
C) money output. 
D) potential output.

Question 7

Potential output is the most that can be produced in an economy at a particular point in time.

Accepted Answer

A) True 
 B)False

Question 8

Coal is used as a source of energy in many manufacturing processes.Assume a long strike by coal miners reduced the supply of coal and increased the price of coal.This would cause

Accepted Answer

A) the short-run aggregate supply curve to shift to the right. 
B) the short-run aggregate supply curve to become flatter. 
C) the short-run aggregate supply curve to shift to the left. 
D) the short-run aggregate supply curve to become nearly vertical at all levels of output. 
A) the short-run aggregate supply curve to shift to the right. 
B) the short-run aggregate supply curve to become flatter. 
C) the short-run aggregate supply curve to shift to the left. 
D) the short-run aggregate supply curve to become nearly vertical at all levels of output.

Question 9

Refer to the information provided in Figure 12.5 below to answer the questions that follow.   Figure 12.5
-Refer to Figure 12.5.An increase in the price level shifts the ________ to the ________.

Accepted Answer

A) Fed rule;right 
B) IS curve;right 
C) IS curve;left 
D) Fed rule;left 
A) Fed rule;right 
B) IS curve;right 
C) IS curve;left 
D) Fed rule;left

Question 10

An increase in the price level cause aggregate demand to increase.

Accepted Answer

A) True 
 B)False

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

Which of the following would cause the short-run aggregate supply curve to shift to the right?

Accepted Answer

A) higher energy prices 
B) an increase in taxes 
C) increases in government regulation 
D) retired workers reentering the labor force 
A) higher energy prices 
B) an increase in taxes 
C) increases in government regulation 
D) retired workers reentering the labor force

Question 13

Refer to the information provided in Figure 12.4 below to answer the questions that follow.   Figure 12.4
-Refer to Figure 12.4.During the 1990s,many firms in the United States were investing in new capital.If the economy was originally at Point A,this would have caused a movement to Point

Accepted Answer

A) E. 
B) B. 
C) C. 
D) D. 
A) E. 
B) B. 
C) C. 
D) D.

Question 14

If there is an increase in the percentage of employees whose wages adjust automatically with changes in the price level,the aggregate supply curve will become

Accepted Answer

A) steeper. 
B) flatter. 
C) horizontal. 
D) vertical. 
A) steeper. 
B) flatter. 
C) horizontal. 
D) vertical.

Question 15

To increase output the government could adopt policies that

Accepted Answer

A) increase aggregate supply and aggregate demand. 
B) decrease aggregate supply and aggregate demand. 
C) increase aggregate supply and decrease aggregate demand. 
D) decrease aggregate supply and increase aggregate demand. 
A) increase aggregate supply and aggregate demand. 
B) decrease aggregate supply and aggregate demand. 
C) increase aggregate supply and decrease aggregate demand. 
D) decrease aggregate supply and increase aggregate demand.

Question 16

If input prices changed at exactly the same rate as output prices,the aggregate supply curve would be

Accepted Answer

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

Question 17

A higher interest rate increases both planned investment and consumption spending.

Accepted Answer

A) True 
 B)False

Question 18

The quantity of aggregate output demanded will fall if

Accepted Answer

A) government spending increases. 
B) the price level increases. 
C) Aggregate supply increases. 
D) net taxes are reduced. 
A) government spending increases. 
B) the price level increases. 
C) Aggregate supply increases. 
D) net taxes are reduced.

Question 19

The graph that shows the relationship between the aggregate quantity of output supplied by all the firms in an economy and the overall price level is

Accepted Answer

A) the aggregate supply curve. 
B) the aggregate production function. 
C) the production possibilities frontier. 
D) the aggregate demand curve. 
A) the aggregate supply curve. 
B) the aggregate production function. 
C) the production possibilities frontier. 
D) the aggregate demand curve.

Question 20

The slope of the IS curve is ________ and the slope of the Fed rule is ________.

Accepted Answer

A) positive;positive 
B) positive;negative 
C) negative;positive 
D) negative;negative 
A) positive;positive 
B) positive;negative 
C) negative;positive 
D) negative;negative

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

If wages do not fully adjust to changes in prices,the aggregate supply curve is vertical.

When the economy is producing at full capacity,the aggregate supply curve becomes

Refer to the information provided in Figure 12.4 below to answer the questions that follow. Figure 12.4 -Refer to Figure 12.4.Suppose the economy is at Point A,an increase in aggregate demand moves the economy to Point

If input prices change at exactly the same rate as output prices,the aggregate supply curve will be vertical.

When the general price level rises,

The level of aggregate output that can be sustained in the long run without inflation is known as

Potential output is the most that can be produced in an economy at a particular point in time.

Coal is used as a source of energy in many manufacturing processes.Assume a long strike by coal miners reduced the supply of coal and increased the price of coal.This would cause

Refer to the information provided in Figure 12.5 below to answer the questions that follow. Figure 12.5 -Refer to Figure 12.5.An increase in the price level shifts the ________ to the ________.

An increase in the price level cause aggregate demand to increase.

To decrease output the government could

Which of the following would cause the short-run aggregate supply curve to shift to the right?

Refer to the information provided in Figure 12.4 below to answer the questions that follow. Figure 12.4 -Refer to Figure 12.4.During the 1990s,many firms in the United States were investing in new capital.If the economy was originally at Point A,this would have caused a movement to Point

If there is an increase in the percentage of employees whose wages adjust automatically with changes in the price level,the aggregate supply curve will become

To increase output the government could adopt policies that

If input prices changed at exactly the same rate as output prices,the aggregate supply curve would be

A higher interest rate increases both planned investment and consumption spending.

The quantity of aggregate output demanded will fall if

The graph that shows the relationship between the aggregate quantity of output supplied by all the firms in an economy and the overall price level is

The slope of the IS curve is ________ and the slope of the Fed rule is ________.

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

Refer to the information provided in Figure 12.5 below to answer the questions that follow. Figure 12.5 -Refer to Figure 12.5.An increase in the price level shifts the to the .

The slope of the IS curve is and the slope of the Fed rule is .