Deck 8: Aggregate Demand and Aggregate Supply

Question 1

When domestic prices rise

A)people buy fewer imported goods.
B)exports fall.
C)exports rise.
D)interest sensitive consumption rises.

Answer 1

B

Question 2

When domestic prices rise

A)the buying power of cash assets rises.
B)interest sensitive consumption falls because interest rates rise.
C)exports rise.
D)business investment rises because interest rates fall.

Answer 2

B

Question 3

The Keynesian, Classical and Intermediate ranges apply to the

A)shape of the individual market supply curve.
B)the slope of the individual market demand curve.
C)the shape of the aggregate supply curve.
D)the slope of the aggregate demand curve.

Answer 3

C

Question 4

A decrease in government spending will cause

A)AD to increase (move to the right).
B)AD to decrease (move to the left).
C)AS to increase (move to down and to the right).
D)AS to decrease (move to up and to the left).

Question 5

The aggregate supply-aggregate demand diagram relates various levels of

A)production of two different goods.
B)all prices as measured by the CPI and production as measured by real GDP.
C)imports and exports of goods against exchange rates.
D)the price and quantity of a particular good.

Question 6

When domestic prices rise

A)people buy fewer imported goods.
B)people buy more imported goods.
C)exports rise.
D)interest sensitive consumption rises.

Question 7

The interest rate effect, the real balance effect and the foreign purchases effect suggests that the aggregate demand curve is

A)downward sloping.
B)horizontal.
C)vertical.
D)shaped as a backward L.

Question 8

When domestic prices rise

A)the buying power of cash assets falls.
B)interest sensitive consumption rises.
C)exports rise.
D)business investment rises because interest rates fall.

Question 9

The rationale for exchange rates determining AD is with

A)stronger dollar exports will fall AD will rise
B)stronger dollar imports will fall AD will rise.
C)weaker dollar exports will fall AD will rise.
D)weaker dollar imports will fall AD will rise.

Question 10

Any event that creates a "crisis in confidence" is likely to lead to

A)higher aggregate prices.
B)lower aggregate prices.
C)higher aggregate output.
D)inflation.

Question 11

Which of the following is not a reason for the aggregate demand curve to be downward sloping?

A)Foreign purchases effect
B)Interest rate effect
C)Real balance effect
D)Diminishing marginal utility

Question 12

When domestic prices rise

A)people buy fewer imported goods.
B)exports fall.
C)exports rise.
D)business investment rises because interest rates fall.

Question 13

The rationale for interest rates determining AD is with lower interest rates

A)firms will borrow more to invest.
B)consumers will borrow less to buy durables.
C)consumers will borrow more to buy durables.
D)firms will borrow more to invest and consumers will borrow more to buy durables.

Question 14

An increase in government spending will cause

A)AD to increase (move to the right).
B)AD to decrease (move to the left).
C)AS to increase (move to down and to the right).
D)AS to decrease (move to up and to the left).

Question 15

The aggregate demand curve is downward sloping because of the

A)foreign purchases effect.
B)interest rate effect.
C)real balance effect.
D)all of the options are correct.

Question 16

An increase in taxes will cause

A)AD to increase (move to the right).
B)AD to decrease (move to the left).
C)AS to increase (move to down and to the right).
D)AS to decrease (move to up and to the left).

Question 17

A decrease in taxes will cause

A)AD to increase (move to the right).
B)AD to decrease (move to the left).
C)AS to increase (move to down and to the right).
D)AS to decrease (move to up and to the left).

Question 18

The aggregate supply-aggregate demand diagram models

A)the behavior of individual consumers.
B)the behavior of individual firms.
C)the economy as a whole.
D)the interaction of producers and consumers for a particular good or service.

Question 19

An increase in interest rates will cause

A)AD to increase (move to the right).
B)AD to decrease (move to the left).
C)AS to increase (move to down and to the right).
D)AS to decrease (move to up and to the left).

Question 20

When domestic prices rise

A)the buying power of cash assets rise.
B)interest sensitive consumption rises.
C)exports rise.
D)business investment falls because interest rates rise.

Question 21

An increase in regulation will cause

A)AD to increase (move to the right).
B)AD to decrease (move to the left).
C)AS to increase (move to down and to the right).
D)AS to decrease (move to up and to the left).

Question 22

A decrease in regulation will cause

A)AD to increase (move to the right).
B)AD to decrease (move to the left).
C)AS to increase (move to down and to the right).
D)AS to decrease (move to up and to the left).

Question 23

An increase in productivity will cause

A)AD to increase (move to the right).
B)AD to decrease (move to the left).
C)AS to increase (move to down and to the right).
D)AS to decrease (move to up and to the left).

Question 24

A decrease in productivity will cause

A)AD to increase (move to the right).
B)AD to decrease (move to the left).
C)AS to increase (move to down and to the right).
D)AS to decrease (move to up and to the left).

Question 25

A decrease in government spending will immediately shift

A)aggregate demand to the right.
B)aggregate demand to the left.
C)aggregate supply to the right.
D)aggregate supply to the left.

Question 26

An increase in interest rates will immediately shift

A)aggregate demand to the right.
B)aggregate demand to the left.
C)aggregate supply to the right.
D)aggregate supply to the left.

Question 27

A decrease in confidence will cause

A)AD to increase (move to the right).
B)AD to decrease (move to the left).
C)AS to increase (move to down and to the right).
D)AS to decrease (move to up and to the left).

Question 28

A decrease in taxes will immediately shift

A)aggregate demand to the right.
B)aggregate demand to the left.
C)aggregate supply to the right.
D)aggregate supply to the left.

Question 29

A decrease in interest rates will cause

A)AD to increase (move to the right).
B)AD to decrease (move to the left).
C)AS to increase (move to down and to the right).
D)AS to decrease (move to up and to the left).

Question 30

An increase in government spending will immediately shift

A)aggregate demand to the right.
B)aggregate demand to the left.
C)aggregate supply to the right.
D)aggregate supply to the left.

Question 31

An increase in confidence will cause

A)AD to increase (move to the right).
B)AD to decrease (move to the left).
C)AS to increase (move to down and to the right).
D)AS to decrease (move to up and to the left).

Question 32

A weakening of the dollar will immediately shift

A)aggregate demand to the right.
B)aggregate demand to the left.
C)aggregate supply to the right.
D)aggregate supply to the left.

Question 33

An increase in taxes will immediately shift

A)aggregate demand to the right.
B)aggregate demand to the left.
C)aggregate supply to the right.
D)aggregate supply to the left.

Question 34

A decrease in interest rates will immediately shift

A)aggregate demand to the right.
B)aggregate demand to the left.
C)aggregate supply to the right.
D)aggregate supply to the left.

Question 35

An increase in confidence will immediately shift

A)aggregate demand to the right.
B)aggregate demand to the left.
C)aggregate supply to the right.
D)aggregate supply to the left.

Question 36

An increase in input prices will

A)aggregate demand to the right.
B)aggregate demand to the left.
C)aggregate supply to the right.
D)aggregate supply to the left.

Question 37

A decrease in confidence will immediately shift

A)aggregate demand to the right.
B)aggregate demand to the left.
C)aggregate supply to the right.
D)aggregate supply to the left.

Question 38

A strengthening of the dollar will immediately shift

A)aggregate demand to the right.
B)aggregate demand to the left.
C)aggregate supply to the right.
D)aggregate supply to the left.

Question 39

A decrease in input prices will cause

A)AD to increase (move to the right).
B)AD to decrease (move to the left).
C)AS to increase (move to down and to the right).
D)AS to decrease (move to up and to the left).

Question 40

An increase in input prices will cause

A)AD to increase (move to the right).
B)AD to decrease (move to the left).
C)AS to increase (move to down and to the right).
D)AS to decrease (move to up and to the left).

Question 41

An increase in worker productivity will

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

Question 42

Referring to the Aggregate Demand - Aggregate Supply diagram in Figure 8.1, which box should be filled with the label AS for the aggregate supply curve?

A)Box 1
B)Box 2
C)Box 3
D)Box 4

Question 43

Disagreements about the shape of the aggregate supply curve focus on the degree of _________ in the economy.

A)unemployment
B)inflation
C)fraud
D)confidence

Question 44

Use the Aggregate Supply - Aggregate Demand model to determine which of the following will lead to higher aggregate output

A)a tax increase.
B)a cut in interest rates.
C)a spike in world oil prices.
D)a cut in government spending.

Question 45

The notion of the "classical range" was one of the basic parts of the

A)supply curve.
B)present value curve.
C)aggregate demand curve.
D)aggregate supply curve.

Question 46

In the Aggregate Demand - Aggregate Supply diagram in Figure 8.1, Box 2 should be filled with

A)PI* for macroeconomic equilibrium Price Index.
B)RGDP* for macroeconomic equilibrium Real Gross Domestic Product.
C)AS for Aggregate Supply.
D)AD for Aggregate Demand.

Question 47

Referring to the Aggregate Demand - Aggregate Supply diagram in Figure 8.1, which box should be filled with the label PI* for the macroeconomic equilibrium level of the price index?

A)Box 1
B)Box 2
C)Box 5
D)Box 6

Question 48

The notion of the "interest rate effect" was one of the basic reasons behind the downward sloping nature of the

A)supply curve.
B)present value curve.
C)aggregate demand curve.
D)aggregate supply curve.

Question 49

Referring to the Aggregate Demand - Aggregate Supply diagram in Figure 8.1, which box should be filled with the label RGDP* for the macroeconomic equilibrium level of Real Gross Domestic Product?

A)Box 1
B)Box 2
C)Box 5
D)Box 6

Question 50

Referring to the Aggregate Demand - Aggregate Supply diagram in Figure 8.1, which box should be filled with the label RGDP for the Real Gross Domestic Product?

A)Box 1
B)Box 2
C)Box 3
D)Box 6

Question 51

An increase in government regulation will shift

A)aggregate demand to the right.
B)aggregate demand to the left.
C)aggregate supply to the right.
D)aggregate supply to the left.

Question 52

A decrease in productivity will shift

A)aggregate demand to the right.
B)aggregate demand to the left.
C)aggregate supply to the right.
D)aggregate supply to the left.

Question 53

A decrease in government regulation will shift

A)aggregate demand to the right.
B)aggregate demand to the left.
C)aggregate supply to the right.
D)aggregate supply to the left.

Question 54

Referring to the Aggregate Demand - Aggregate Supply diagram in Figure 8.1, which box should be filled with the label PI for "price index?"

A)Box 1
B)Box 4
C)Box 5
D)Box 6

Question 55

In the Aggregate Demand - Aggregate Supply diagram in Figure 8.1, Box 1 should be filled with

A)PI for Price Index.
B)RGDP for Real Gross Domestic Product.
C)AS for Aggregate Supply.
D)AD for Aggregate Demand.

Question 56

An increase in productivity will shift

A)aggregate demand to the right.
B)aggregate demand to the left.
C)aggregate supply to the right.
D)aggregate supply to the left.

Question 57

A decrease in input prices will shift

A)aggregate demand to the right.
B)aggregate demand to the left.
C)aggregate supply to the right.
D)aggregate supply to the left.

Question 58

The use of a backward-L shaped aggregate supply curve allows us to ________ in a way that other shapes would not.

A)consider various levels of prices
B)consider different macroeconomic points of view
C)deal with shifting curves
D)create an equilibrium

Question 59

Use the Aggregate Supply- Aggregate Demand model to determine which of the following will lead to higher prices

A)a tax increase.
B)an increase in interest rates.
C)a fall in world oil prices.
D)an increase in government spending.

Question 60

Referring to the Aggregate Demand - Aggregate Supply diagram in Figure 8.1, which box should be filled with the label AD for the aggregate demand curve?

A)Box 1
B)Box 2
C)Box 3
D)Box 4

Question 61

In the Aggregate Demand - Aggregate Supply diagram in Figure 8.1, Box 4 should be filled with

A)PI for Price Index.
B)RGDP for Real Gross Domestic Product.
C)AS for Aggregate Supply.
D)AD for Aggregate Demand.

Question 62

Suppose as a reaction to terrorist attacks the U.S. government were to create a new branch of the military employing 1,000,000 new service men and women to monitor malls, large sporting events, and infrastructure (bridges, dams, refineries, etc.)Hiring and paying these people would likely

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

Question 63

Which of the following will increase macroeconomic equilibrium prices?

A)a decrease in government spending.
B)a decrease in productivity.
C)an increase in taxes.
D)a decrease in input prices.

Question 64

Which of the following will increase macroeconomic equilibrium real gross domestic product?

A)a decrease in government spending.
B)a decrease in productivity.
C)a decrease in taxes.
D)an increase in input prices.

Question 65

Which of the following will increase macroeconomic equilibrium prices?

A)a decrease in government spending.
B)an increase in productivity.
C)a decrease in taxes.
D)a decrease in input prices.

Question 66

Which of the following will increase macroeconomic equilibrium real gross domestic product?

A)an increase in government spending.
B)a decrease in productivity.
C)an increase in taxes.
D)an increase in input prices.

Question 67

If, in response to a weak employment picture, a law was passed to increase the number of lanes on all interstate highways by at least one lane this would likely

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

Question 68

Which of the following will increase macroeconomic equilibrium prices?

A)a decrease in government spending.
B)an increase in productivity.
C)an increase in taxes.
D)an increase in input prices.

Question 69

Which of the following will increase macroeconomic equilibrium prices?

A)an increase in government spending.
B)an increase in productivity.
C)an increase in taxes.
D)a decrease in input prices.

Question 70

In reaction to the terrorist attacks of September 11, 2001 the Federal Reserve moved to lower interest rates. This was intended to

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

Question 71

If there was a significant find of natural gas in a readily accessible location in the U.S. this would likely

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

Question 72

Suppose the U.S. was to experience a series of terrorists' attacks aimed at keeping consumers away from large shopping areas. Suppose further that the primary effect is for consumer confidence to decrease, this would likely

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

Question 73

Under the George W. Bush Administration, federal income taxes were cut twice and boosted defense spending substantially. Taken together these actions are likely to have

A)increased aggregate demand.
B)increased aggregate supply.
C)decreased aggregate demand.
D)decreased aggregate supply.

Question 74

In the Aggregate Demand - Aggregate Supply diagram in Figure 8.1, Box 6 should be filled with

A)PI for Price Index.
B)RGDP for Real Gross Domestic Product.
C)AS for Aggregate Supply.
D)AD for Aggregate Demand.

Question 75

Which of the following will increase macroeconomic equilibrium real gross domestic product?

A)a decrease in government spending.
B)a decrease in productivity.
C)an increase in taxes.
D)a decrease in input prices.

Question 76

In the Aggregate Demand - Aggregate Supply diagram in Figure 8.1, Box 3 should be filled with

A)PI for Price Index.
B)RGDP for Real Gross Domestic Product.
C)AS for Aggregate Supply.
D)AD for Aggregate Demand.

Question 77

Suppose the U.S. was to experience a series of terrorists' attacks aimed at the electricity grid. This would likely

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

Question 78

Which of the following will increase macroeconomic equilibrium real gross domestic product?

A)a decrease in government spending.
B)an increase in productivity.
C)an increase in taxes.
D)an increase in input prices.

Question 79

In the Aggregate Demand - Aggregate Supply diagram in Figure 8.1, Box 5 should be filled with

A)PI* for macroeconomic equilibrium Price Index.
B)RGDP* for macroeconomic equilibrium Real Gross Domestic Product.
C)AS for Aggregate Supply.
D)AD for Aggregate Demand.

Question 80

If Iraq were to become a stable oil producing friend of the U.S., this would likely

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