Question 1

Each point on the IS curve represents ________ in the goods market for the given interest rate.

Accepted Answer

A)  maximum investment 
B)  an equilibrium point 
C)  a positive relationship between the price level and aggregate output 
D)  minimum pricing 
A)  maximum investment 
B)  an equilibrium point 
C)  a positive relationship between the price level and aggregate output 
D)  minimum pricing

Question 2

Related to the Economics in Practice on p. 227: In the simple "Keynesian" view, the economy has a

Accepted Answer

A)  clearly defined capacity. 
B)  set price level. 
C)  downward sloping aggregate supply curve. 
D)  horizontal aggregate demand curve. 
A)  clearly defined capacity. 
B)  set price level. 
C)  downward sloping aggregate supply curve. 
D)  horizontal aggregate demand curve.

Question 3

The aggregate demand curve shows a ________ relationship between ________ and aggregate output ________.

Accepted Answer

A)  positive; the interest rate; demanded 
B)  negative; the price level; supplied 
C)  positive; the price level; demanded 
D)  negative; the price level; demanded 
A)  positive; the interest rate; demanded 
B)  negative; the price level; supplied 
C)  positive; the price level; demanded 
D)  negative; the price level; demanded

Question 4

Other things being equal, the more wealth households have, the more they consume.

Accepted Answer

A) True 
 B)False

Question 5

A movement down the aggregate supply curve is caused by a(n)

Accepted Answer

A)  decrease in aggregate supply. 
B)  increase in aggregate supply. 
C)  decrease in the price level. 
D)  increase in the price level. 
A)  decrease in aggregate supply. 
B)  increase in aggregate supply. 
C)  decrease in the price level. 
D)  increase in the price level.

Question 6

Refer to the information provided in Figure 11.8 below to answer the questions that follow.   Figure 11.8
-Refer to Figure 11.8. This economy cannot continue to produce Y1 (or at point B. because

Accepted Answer

A)  the price of raw material and wages will increase shifting the aggregate supply curve to AS1. 
B)  the price of inputs will decrease, shifting the aggregate supply curve to AS2. 
C)  the price of raw material will increase, shifting the aggregate demand curve to AD2. 
D)  all of the above 
A)  the price of raw material and wages will increase shifting the aggregate supply curve to AS1. 
B)  the price of inputs will decrease, shifting the aggregate supply curve to AS2. 
C)  the price of raw material will increase, shifting the aggregate demand curve to AD2. 
D)  all of the above

Question 7

If a decrease in the price level does increase the real value of wealth, this is a reason for the downward slope of the aggregate demand curve.

Accepted Answer

A) True 
 B)False

Question 8

To increase 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 9

The Federal Reserve's policy to ________ means that the Fed decreases the interest rate when output is low.

Accepted Answer

A)  "inherit the wind" 
B)  "stand upwind" 
C)  "be dust in the wind" 
D)  "lean against the wind" 
A)  "inherit the wind" 
B)  "stand upwind" 
C)  "be dust in the wind" 
D)  "lean against the wind"

Question 10

An increase in the price of a key input in production, like oil, increases aggregate supply.

Accepted Answer

A) True 
 B)False

Question 11

The level of aggregate output demanded falls when the price level rises, because the resulting increase in the interest rate will lead to

Accepted Answer

A)  higher investment spending and higher consumption spending. 
B)  lower investment spending and higher consumption spending. 
C)  higher investment spending and lower consumption spending. 
D)  lower investment spending and lower consumption spending. 
A)  higher investment spending and higher consumption spending. 
B)  lower investment spending and higher consumption spending. 
C)  higher investment spending and lower consumption spending. 
D)  lower investment spending and lower consumption spending.

Question 12

Which of the following shifts the short-run aggregate supply curve?

Accepted Answer

A)  a change in the price level 
B)  a change in the price of oil 
C)  a change in short-run aggregate demand 
D)  all of the above 
A)  a change in the price level 
B)  a change in the price of oil 
C)  a change in short-run aggregate demand 
D)  all of the above

Question 13

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 14

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

Accepted Answer

A) True 
 B)False

Question 15

Aggregate output demanded will rise if

Accepted Answer

A)  government spending decreases. 
B)  the price level decreases. 
C)  aggregate supply decreases. 
D)  net taxes are increased. 
A)  government spending decreases. 
B)  the price level decreases. 
C)  aggregate supply decreases. 
D)  net taxes are increased.

Question 16

Increases in pollution regulations would

Accepted Answer

A)  increase aggregate demand. 
B)  decrease short-run aggregate supply. 
C)  decrease aggregate demand. 
D)  increase short-run aggregate supply. 
A)  increase aggregate demand. 
B)  decrease short-run aggregate supply. 
C)  decrease aggregate demand. 
D)  increase short-run aggregate supply.

Question 17

An increase in the price level is likely to increase the aggregate amount of output supplied in the short run because

Accepted Answer

A)  interest rate is high in the short-run. 
B)  wages are sticky in the short-run. 
C)  wages change in the short-run. 
D)  the aggregate supply curve is vertical in the short-run. 
A)  interest rate is high in the short-run. 
B)  wages are sticky in the short-run. 
C)  wages change in the short-run. 
D)  the aggregate supply curve is vertical in the short-run.

Question 18

The level of aggregate output demanded rises when the price level falls, because the resulting decrease in the interest rate will lead to

Accepted Answer

A)  higher investment spending and higher consumption spending. 
B)  lower investment spending and higher consumption spending. 
C)  higher investment spending and lower consumption spending. 
D)  lower investment spending and lower consumption spending. 
A)  higher investment spending and higher consumption spending. 
B)  lower investment spending and higher consumption spending. 
C)  higher investment spending and lower consumption spending. 
D)  lower investment spending and lower consumption spending.

Question 19

Refer to the information provided in Figure 11.5 below to answer the questions that follow.   Figure 11.5
-Refer to Figure 11.5. An increase in government spending shifts the ________ to the ________.

Accepted Answer

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

Question 20

Other things equal, a decrease in the price level ________ the equilibrium interest rate and ________ equilibrium output.

Accepted Answer

A)  increases; increases 
B)  increases; decreases 
C)  decreases; increases 
D)  decreases; decreases 
A)  increases; increases 
B)  increases; decreases 
C)  decreases; increases 
D)  decreases; decreases

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

Each point on the IS curve represents ________ in the goods market for the given interest rate.

Related to the Economics in Practice on p. 227: In the simple "Keynesian" view, the economy has a

The aggregate demand curve shows a ________ relationship between ________ and aggregate output ________.

Other things being equal, the more wealth households have, the more they consume.

A movement down the aggregate supply curve is caused by a(n)

Refer to the information provided in Figure 11.8 below to answer the questions that follow. Figure 11.8 -Refer to Figure 11.8. This economy cannot continue to produce Y1 (or at point B. because

If a decrease in the price level does increase the real value of wealth, this is a reason for the downward slope of the aggregate demand curve.

To increase output the government could

The Federal Reserve's policy to ________ means that the Fed decreases the interest rate when output is low.

An increase in the price of a key input in production, like oil, increases aggregate supply.

The level of aggregate output demanded falls when the price level rises, because the resulting increase in the interest rate will lead to

Which of the following shifts the short-run aggregate supply curve?

To increase output the government could adopt policies that

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

Aggregate output demanded will rise if

Increases in pollution regulations would

An increase in the price level is likely to increase the aggregate amount of output supplied in the short run because

The level of aggregate output demanded rises when the price level falls, because the resulting decrease in the interest rate will lead to

Refer to the information provided in Figure 11.5 below to answer the questions that follow. Figure 11.5 -Refer to Figure 11.5. An increase in government spending shifts the ________ to the ________.

Other things equal, a decrease in the price level ________ the equilibrium interest rate and ________ equilibrium output.

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

The aggregate demand curve shows a relationship between and aggregate output .

Refer to the information provided in Figure 11.8 below to answer the questions that follow. Figure 11.8 -Refer to Figure 11.8. This economy cannot continue to produce Y₁ (or at point B. because

Refer to the information provided in Figure 11.5 below to answer the questions that follow. Figure 11.5 -Refer to Figure 11.5. An increase in government spending shifts the to the .

Other things equal, a decrease in the price level the equilibrium interest rate and equilibrium output.