Question 1

An increase in the price level will cause a decrease in the aggregate amount of output supplied.

Accepted Answer

A) True 
 B)False  False

Question 2

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 D

Question 3

________ shifts the Fed rule to the left.

Accepted Answer

A)  An increase in government spending 
B)  A decrease in government spending 
C)  A decrease in the price level 
D)  An increase in the Z factors 
A)  An increase in government spending 
B)  A decrease in government spending 
C)  A decrease in the price level 
D)  An increase in the Z factors D

Question 4

Refer to the information provided in Figure 11.3 below to answer the questions that follow.   Figure 11.3
-Refer to Figure 11.3. A decrease in aggregate supply is represented by

Accepted Answer

A)  a movement from Point B to Point A along AS1. 
B)  a movement from Point B to Point C along AS1. 
C)  a shift from AS1 to AS2. 
D)  a shift from AS1 to AS0. 
A)  a movement from Point B to Point A along AS1. 
B)  a movement from Point B to Point C along AS1. 
C)  a shift from AS1 to AS2. 
D)  a shift from AS1 to AS0.

Question 5

Refer to the information provided in Figure 11.3 below to answer the questions that follow.   Figure 11.3
-Refer to Figure 11.3. An increase in aggregate supply is represented by

Accepted Answer

A)  a movement from Point B to Point A along AS1. 
B)  a movement from Point B to Point C along AS1. 
C)  a shift from AS1 to AS2. 
D)  a shift from AS1 to AS0. 
A)  a movement from Point B to Point A along AS1. 
B)  a movement from Point B to Point C along AS1. 
C)  a shift from AS1 to AS2. 
D)  a shift from AS1 to AS0.

Question 6

If the combination r = 5% and Y = $450 billion is on the IS curve, we know that the combination r = 5% and Y = $300 billion would represent

Accepted Answer

A)  the IS curve shifting to the right. 
B)  the IS curve shifting to the left. 
C)  a movement up the IS curve. 
D)  a movement down the IS curve. 
A)  the IS curve shifting to the right. 
B)  the IS curve shifting to the left. 
C)  a movement up the IS curve. 
D)  a movement down the IS curve.

Question 7

Refer to the information provided in Figure 11.4 below to answer the questions that follow.   Figure 11.4
-Refer to Figure 11.4. 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 8

An increase in the price level shifts the IS curve to the left.

Accepted Answer

A) True 
 B)False

Question 9

If government spending increases, then the IS curve shifts to the right.

Accepted Answer

A) True 
 B)False

Question 10

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 11

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 12

If the combination r = 6% and Y = $500 billion is on the LM curve, we know that the combination r = 4% and Y = $500 billion would represent

Accepted Answer

A)  the Fed rule shifting to the right. 
B)  the Fed rule shifting to the left. 
C)  a movement up the Fed rule. 
D)  a movement down the Fed rule. 
A)  the Fed rule shifting to the right. 
B)  the Fed rule shifting to the left. 
C)  a movement up the Fed rule. 
D)  a movement down the Fed rule.

Question 13

The long-run aggregate supply curve is vertical if

Accepted Answer

A)  wages and other costs fully adjust to changes in prices in the long-run. 
B)  the government follows optimal fiscal policy. 
C)  technology is fixed. 
D)  the Fed follows optimal monetary policy. 
A)  wages and other costs fully adjust to changes in prices in the long-run. 
B)  the government follows optimal fiscal policy. 
C)  technology is fixed. 
D)  the Fed follows optimal monetary policy.

Question 14

If wages and other costs fully adjust to changes in prices in the long run, the long-run aggregate supply curve is

Accepted Answer

A)  vertical. 
B)  horizontal. 
C)  positively sloped. 
D)  negatively sloped. 
A)  vertical. 
B)  horizontal. 
C)  positively sloped. 
D)  negatively sloped.

Question 15

To decrease output the government could

Accepted Answer

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

Question 16

When the economy is producing ________, the aggregate supply curve becomes vertical.

Accepted Answer

A)  below full capacity 
B)  beyond full capacity 
C)  at full capacity 
D)  at negative capacity 
A)  below full capacity 
B)  beyond full capacity 
C)  at full capacity 
D)  at negative capacity

Question 17

Refer to the information provided in Figure 11.1 below to answer the questions that follow.   Figure 11.1
-Refer to Figure 11.1. Between the output levels of $1,000 billion and $1,500 billion, the relationship between the price level and output is

Accepted Answer

A)  constant. 
B)  negative. 
C)  positive. 
D)  indeterminate. 
A)  constant. 
B)  negative. 
C)  positive. 
D)  indeterminate.

Question 18

Output in the short run is determined by which of the following factors when an economy operates at full employment?

Accepted Answer

A)  demand 
B)  the labor force 
C)  supply 
D)  the price level 
A)  demand 
B)  the labor force 
C)  supply 
D)  the price level

Question 19

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 20

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

Exam 11: The Determination of Aggregate Output, the Price Level, and the Interest Rate

An increase in the price level will cause a decrease in the aggregate amount of output supplied.

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

________ shifts the Fed rule to the left.

Refer to the information provided in Figure 11.3 below to answer the questions that follow. Figure 11.3 -Refer to Figure 11.3. A decrease in aggregate supply is represented by

Refer to the information provided in Figure 11.3 below to answer the questions that follow. Figure 11.3 -Refer to Figure 11.3. An increase in aggregate supply is represented by

If the combination r = 5% and Y = $450 billion is on the IS curve, we know that the combination r = 5% and Y = $300 billion would represent

Refer to the information provided in Figure 11.4 below to answer the questions that follow. Figure 11.4 -Refer to Figure 11.4. 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

An increase in the price level shifts the IS curve to the left.

If government spending increases, then the IS curve shifts to the right.

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

To decrease the price level the government could

If the combination r = 6% and Y = $500 billion is on the LM curve, we know that the combination r = 4% and Y = $500 billion would represent

The long-run aggregate supply curve is vertical if

If wages and other costs fully adjust to changes in prices in the long run, the long-run aggregate supply curve is

To decrease output the government could

When the economy is producing ________, the aggregate supply curve becomes vertical.

Refer to the information provided in Figure 11.1 below to answer the questions that follow. Figure 11.1 -Refer to Figure 11.1. Between the output levels of $1,000 billion and $1,500 billion, the relationship between the price level and output is

Output in the short run is determined by which of the following factors when an economy operates at full employment?

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

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

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

Money, the Federal Reserve, and the Interest Rate

Policy Effects and Cost 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 Economies

Critical Thinking About Research

Filters

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