Deck 31: Aggregate Demand and Aggregate Supply

Question 1

If investment decreases by $20 billion and the economy's MPC is .5,the aggregate demand curve will shift:

A) leftward by $40 billion at each price level.
B) rightward by $20 billion at each price level.
C) rightward by $40 billion at each price level.
D) leftward by $20 billion at each price level.

Answer 1

A

Question 2

An increase in net exports will shift the AD curve to the:

A) left by a multiple of the change in investment.
B) left by the same amount as the change in investment.
C) right by the same amount as the change in investment.
D) right by a multiple of the change in investment.

Answer 2

D

Question 3

The interest-rate effect suggests that:

A) a decrease in the supply of money will increase interest rates and reduce interest-sensitive consumption and investment spending.
B) an increase in the price level will increase the demand for money,reduce interest rates,and decrease consumption and investment spending.
C) an increase in the price level will increase the demand for money,increase interest rates,and decrease consumption and investment spending.
D) an increase in the price level will decrease the demand for money,reduce interest rates,and increase consumption and investment spending.

Answer 3

C

Question 4

Other things equal,a decrease in the real interest rate will:

A) expand investment and shift the AD curve to the left.
B) expand investment and shift the AD curve to the right.
C) reduce investment and shift the AD curve to the left.
D) reduce investment and shift the AD curve to the right.

Question 5

The factors that affect the amounts that consumers,businesses,government,and foreigners wish to purchase at each price level are the:

A) real-balances,interest-rate,and foreign purchases effects.
B) determinants of aggregate supply.
C) determinants of aggregate demand.
D) sole determinants of the equilibrium price level and the equilibrium real output.

Question 6

Which one of the following would not shift the aggregate demand curve?

A) A change in the price level.
B) Depreciation of the international value of the dollar.
C) A decline in the interest rate at each possible price level.
D) An increase in personal income tax rates.

Question 7

If investment increases by $10 billion and the economy's MPC is .8,the aggregate demand curve will shift:

A) leftward by $50 billion at each price level.
B) rightward by $10 billion at each price level.
C) rightward by $50 billion at each price level.
D) leftward by $40 billion at each price level.

Question 8

The foreign purchases effect suggests that a decrease in the U.S.price level relative to other countries will:

A) shift the aggregate demand curve leftward.
B) shift the aggregate supply curve leftward.
C) decrease U.S.exports and increase U.S.imports.
D) increase U.S.exports and decrease U.S.imports.

Question 9

The real-balances effect indicates that:

A) an increase in the price level will increase the demand for money,increase interest rates,and reduce consumption and investment spending.
B) a lower price level will decrease the real value of many financial assets and therefore reduce spending.
C) a higher price level will increase the real value of many financial assets and therefore increase spending.
D) a higher price level will decrease the real value of many financial assets and therefore reduce spending.

Question 10

The real-balances,interest-rate,and foreign purchases effects all help explain:

A) why the aggregate demand curve is downsloping.
B) why the aggregate supply curve is upsloping.
C) shifts in the aggregate demand curve.
D) shifts in the aggregate supply curve.

Question 11

The determinants of aggregate demand:

A) explain why the aggregate demand curve is downsloping.
B) explain shifts in the aggregate demand curve.
C) demonstrate why real output and the price level are inversely related.
D) include input prices and resource productivity.

Question 12

A decline in investment will shift the AD curve to the:

A) left by a multiple of the change in investment.
B) left by the same amount as the change in investment.
C) right by the same amount as the change in investment.
D) right by a multiple of the change in investment.

Question 13

The foreign purchases effect suggests that an increase in the U.S.price level relative to other countries will:

A) increase the amount of U.S.real output purchased.
B) increase U.S.imports and decrease U.S.exports.
C) increase both U.S.imports and U.S.exports.
D) decrease both U.S.imports and U.S.exports.

Question 14

The aggregate demand curve is:

A) vertical under conditions of full employment.
B) horizontal when there is considerable unemployment in the economy.
C) downsloping because of the interest-rate,real-balances,and foreign purchases effects.
D) downsloping because production costs decrease as real output rises.

Question 15

Which of the following is incorrect?

A) As the U.S.price level rises,U.S.goods become relatively more expensive so that U.S.exports fall and U.S.imports rise.
B) As the price level falls,the demand for money declines,the interest rate declines,and interest-rate-sensitive spending increases.
C) When the price level increases,real balances increase and businesses and households find themselves wealthier and therefore increase their spending.
D) Given aggregate demand,an increase in aggregate supply increases real output and,assuming downward-flexible prices,reduces the price level.

Question 16

If the price level increases in the United States relative to foreign countries,then American consumers will purchase more foreign goods and fewer U.S.goods.This statement describes:

A) the output effect.
B) the foreign purchases effect.
C) the real-balances effect.
D) the shift-of-spending effect.

Question 17

The foreign purchases effect:

A) shifts the aggregate demand curve rightward.
B) shifts the aggregate demand curve leftward.
C) shifts the aggregate supply curve rightward.
D) moves the economy along a fixed aggregate demand curve.

Question 18

Other things equal,if the national incomes of the major trading partners of the United States were to rise,the U.S.:

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

Question 19

The aggregate demand curve:

A) is upsloping because a higher price level is necessary to make production profitable as production costs rise.
B) is downsloping because production costs decline as real output increases.
C) shows the amount of expenditures required to induce the production of each possible level of real output.
D) shows the amount of real output that will be purchased at each possible price level.

Question 20

An economy's aggregate demand curve shifts leftward or rightward by more than changes in initial spending because of the:

A) net export effect.
B) wealth effect.
C) real-balances effect.
D) multiplier effect.

Question 21

The aggregate supply curve (short run):

A) graphs as a horizontal line.
B) is steeper above the full-employment output than below it.
C) slopes downward and to the right.
D) presumes that changes in wages and other resource prices match changes in the price level.

Question 22

The shape of the immediate-short-run aggregate supply curve implies that:

A) total output depends on the volume of spending.
B) increases in aggregate demand are inflationary.
C) output prices are flexible,but input prices are not.
D) government cannot bring an economy out of a recession by increasing spending.

Question 23

Suppose that real domestic output in an economy is 20 units,the quantity of inputs is 10,and the price of each input is $4.Answer the following question on the basis of this information. The per-unit cost of production in the economy described is:

A) $.50.
B) $1.
C) $2.
D) $5.

Question 24

Suppose that real domestic output in an economy is 20 units,the quantity of inputs is 10,and the price of each input is $4.Answer the following question on the basis of this information. Refer to the information.All else being equal,if the price of each input increased from $4 to $6,productivity would:

A) fall from 2 to 3.
B) fall from .50 to .33.
C) rise from 1 to 2.
D) remain unchanged.

Question 25

Other things equal,if the U.S.dollar were to depreciate,the:

A) aggregate demand curve would remain fixed in place.
B) aggregate supply curve would shift to the left.
C) aggregate supply curve would shift to the right.
D) aggregate demand curve would shift to the left.

Question 26

What percentage of the average U.S.firm's costs are accounted for by wages and salaries?

A) 40.
B) 60.
C) 75.
D) 85.

Question 27

Suppose that technological advancements stimulate $20 billion in additional investment spending.If the MPC = .6,how much will the change in investment increase aggregate demand?

A) $12 billion.
B) $20 billion.
C) $33.3 billion.
D) $50 billion.

Question 28

Suppose that real domestic output in an economy is 20 units,the quantity of inputs is 10,and the price of each input is $4.Answer the following question on the basis of this information. Refer to the information.Given an increase in input price from $4 to $6,we would expect the aggregate:

A) supply curve to shift to the left.
B) supply curve to shift to the right.
C) demand curve to shift to the left.
D) supply and demand curves to both remain unchanged.

Question 29

The immediate-short-run aggregate supply curve is:

A) downsloping.
B) upsloping.
C) vertical.
D) horizontal.

Question 30

Suppose that real domestic output in an economy is 20 units,the quantity of inputs is 10,and the price of each input is $4.Answer the following question on the basis of this information. Refer to the information.The level of productivity is:

A) 20.
B) 10.
C) 5.
D) 2.

Question 31

The aggregate supply curve (short run)is upsloping because:

A) wages and other resource prices match changes in the price level.
B) the price level is flexible upward but inflexible downward.
C) per-unit production costs rise as the economy moves toward and beyond its full-employment real output.
D) wages and other resource prices are flexible upward but inflexible downward.

Question 32

In an effort to avoid recession,the government implements a tax rebate program,effectively cutting taxes for households.We would expect this to:

A) affect neither aggregate supply nor aggregate demand.
B) increase aggregate demand.
C) reduce aggregate demand.
D) reduce aggregate supply.

Question 33

Other things equal,an improvement in productivity will:

A) shift the aggregate demand curve to the left.
B) shift the aggregate supply curve to the left.
C) shift the aggregate supply curve to the right.
D) increase the price level.

Question 34

The aggregate supply curve:

A) is explained by the interest rate,real-balances,and foreign purchases effects.
B) gets steeper as the economy moves from the top of the curve to the bottom of the curve.
C) shows the various amounts of real output that businesses will produce at each price level.
D) is downsloping because real purchasing power increases as the price level falls.

Question 35

Which one of the following would increase per-unit production cost and therefore shift the aggregate supply curve to the left?

A) A reduction in business taxes.
B) Production bottlenecks occurring when producers near full plant capacity.
C) An increase in the price of imported resources.
D) Deregulation of industry.

Question 36

The immediate-short-run aggregate supply curve represents circumstances where:

A) both input and output prices are fixed.
B) both input and output prices are flexible.
C) input prices are fixed,but output prices are flexible.
D) input prices are flexible,but output prices are fixed.

Question 37

The aggregate supply curve (short run):

A) slopes downward and to the right.
B) graphs as a vertical line.
C) slopes upward and to the right.
D) graphs as a horizontal line.

Question 38

A rightward shift in the aggregate supply curve is best explained by an increase in:

A) business taxes.
B) productivity.
C) nominal wages.
D) the price of imported resources.

Question 39

Which of the following would most likely shift the aggregate demand curve to the right?

A) An increase in stock prices that increases consumer wealth.
B) Increased fear that a recession will cause workers to lose their jobs.
C) An increase in personal income tax rates.
D) A reduction in household borrowing because of tighter lending practices.

Question 40

Which of the following would most likely reduce aggregate demand (shift the AD curve to the left)?

A) A reduced amount of excess capacity.
B) Increased government spending on military equipment.
C) An appreciation of the U.S.dollar.
D) Increased consumer optimism regarding future economic conditions.

Question 41

The short-run aggregate supply curve represents circumstances where:

A) both input and output prices are fixed.
B) both input and output prices are flexible.
C) input prices are fixed,but output prices are flexible.
D) input prices are flexible,but output prices are fixed.

Question 42

Answer the question on the basis of the following information.An economy is employing 2 units of capital,5 units of raw materials,and 8 units of labor to produce its total output of 640 units.Each unit of capital costs $10;each unit of raw materials,$4;and each unit of labor,$3. Refer to the information.If the per-unit price of raw materials rises from $4 to $8 and all else remains constant,the aggregate:

A) supply curve would shift to the left.
B) supply curve would shift to the right.
C) demand curve would shift to the left.
D) demand curve would shift to the right.

Question 43

Answer the question on the basis of the following information about the relationship between input quantities and real domestic output in a hypothetical economy: $\begin{array} { c c } \text { Input Quantity } & \text { Real Domestic Output } \\100 & 200 \\150 & 300 \\200 & 400\end{array}$ Refer to the table.If the price of each input is $5,the per-unit cost of production in the economy is:

A) $5.
B) $2.75.
C) $2.50.
D) $.40.

Question 44

Answer the question on the basis of the following information.An economy is employing 2 units of capital,5 units of raw materials,and 8 units of labor to produce its total output of 640 units.Each unit of capital costs $10;each unit of raw materials,$4;and each unit of labor,$3. Refer to the information.The per-unit cost of production in this economy is:

A) $0.05.
B) $0.10.
C) $0.50.
D) $1.00.

Question 45

Answer the question on the basis of the following information about the relationship between input quantities and real domestic output in a hypothetical economy: $\begin{array} { c c } \text { Input Quantity } & \text { Real Domestic Output } \\100 & 200 \\150 & 300 \\200 & 400\end{array}$ Refer to the table.Suppose that the price of each input increased from $5 to $8.The per-unit cost of production in the economy would:

A) rise by $1.50 and the aggregate supply curve would shift to the right.
B) rise by 60 percent and the aggregate supply curve would shift to the left.
C) rise by 60 percent and the aggregate demand curve would shift to the left.
D) fall by $1.50 and the aggregate demand curve would shift to the right.

Question 46

Per-unit production cost is:

A) real output divided by inputs.
B) total input cost divided by units of output.
C) units of output divided by total input cost.
D) a determinant of aggregate demand.

Question 47

Other things equal,a reduction in personal and business taxes can be expected to:

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

Question 48

The determinants of aggregate supply:

A) are consumption,investment,government,and net export spending.
B) explain why real domestic output and the price level are directly related.
C) explain the three distinct ranges of the aggregate supply curve.
D) include resource prices and resource productivity.

Question 49

Which of the following would not shift the aggregate supply curve?

A) An increase in labor productivity.
B) A decline in the price of imported oil.
C) A decline in business taxes.
D) An increase in the price level.

Question 50

The economy's long-run AS curve assumes that wages and other resource prices:

A) eventually rise and fall to match upward or downward changes in the price level.
B) are flexible upward but inflexible downward.
C) rise and fall more rapidly than the price level.
D) are relatively inflexible both upward and downward.

Question 51

Answer the question on the basis of the following aggregate demand and supply schedules for a hypothetical economy: $\begin{array}{c}\begin{array}{c}\text {Amount of Real }\\\underline{\text {Output Demanded}}\\\$ 200 \\300 \\400 \\500 \\600\end{array}\begin{array}{c}\text {Price Level}\\\underline{\text {(Index Value)}}\\300\\250\\200\\150\\100\end{array}\begin{array}{c}\text {Amount of Real}\\\underline{\text {Output Supplied}}\\\$ 500 \\450 \\400 \\300 \\200\end{array}\end{array}$
Refer to the data.The equilibrium price level will be:

A) 150.
B) 200.
C) 250.
D) 300.

Question 52

Answer the question on the basis of the following aggregate demand and supply schedules for a hypothetical economy: $\begin{array}{c}\begin{array}{c}\text {Amount of Real }\\\underline{\text {Output Demanded}}\\\$ 200 \\300 \\400 \\500 \\600\end{array}\begin{array}{c}\text {Price Level}\\\underline{\text {(Index Value)}}\\300\\250\\200\\150\\100\end{array}\begin{array}{c}\text {Amount of Real}\\\underline{\text {Output Supplied}}\\\$ 500 \\450 \\400 \\300 \\200\end{array}\end{array}$ Refer to the data.If the price level is 250 and producers supply $450 of real output:

A) a shortage of real output of $150 will occur.
B) a shortage of real output of $100 will occur.
C) a surplus of real output of $150 will occur.
D) neither a shortage nor a surplus of real output will occur.

Question 53

Productivity measures:

A) real output per unit of input.
B) per-unit production costs.
C) the changes in real wealth caused by price level changes.
D) the amount of capital goods used per worker.

Question 54

Suppose that nominal wages fall and productivity rises in a particular economy.Other things equal,the aggregate:

A) demand curve will shift leftward.
B) supply curve will shift rightward.
C) supply curve will shift leftward.
D) expenditures curve will shift downward.

Question 55

Other things equal,an improvement in productivity will:

A) increase the equilibrium price level.
B) shift the aggregate supply curve to the left.
C) shift the aggregate supply curve to the right.
D) shift the aggregate demand curve to the left.

Question 56

Other things equal,appreciation of the dollar:

A) increases aggregate demand in the United States and may increase aggregate supply by reducing the prices of imported resources.
B) increases aggregate demand in the United States and may decrease aggregate supply by reducing the prices of imported resources.
C) decreases aggregate demand in the United States and may increase aggregate supply by reducing the prices of imported resources.
D) decreases aggregate demand in the United States and may reduce aggregate supply by increasing the prices of imported resources.

Question 57

The equilibrium price level and level of real output occur where:

A) real output is at its highest possible level.
B) exports equal imports.
C) the price level is at its lowest level.
D) the aggregate demand and supply curves intersect.

Question 58

Answer the question on the basis of the following information.An economy is employing 2 units of capital,5 units of raw materials,and 8 units of labor to produce its total output of 640 units.Each unit of capital costs $10;each unit of raw materials,$4;and each unit of labor,$3. Refer to the information.If the per-unit price of raw materials rises from $4 to $8 and all else remains constant,the per-unit cost of production will rise by about:

A) 100 percent.
B) 50 percent.
C) 40 percent.
D) 30 percent.

Question 59

Answer the question on the basis of the following information about the relationship between input quantities and real domestic output in a hypothetical economy: $\begin{array} { c c } \text { Input Quantity } & \text { Real Domestic Output } \\ 100 & 200 \\150 & 300 \\200 & 400\end{array}$ Refer to the table.The level of productivity in the economy is:

A) 2.
B) .5.
C) 4.
D) 200.

Question 60

The economy's long-run aggregate supply curve:

A) slopes upward and to the right.
B) is vertical.
C) is horizontal.
D) slopes downward and to the right.

Question 61

A decrease in aggregate demand will cause a greater decline in real output the:

A) less flexible is the economy's price level.
B) more flexible is the economy's price level.
C) steeper is the economy's AS curve.
D) larger is the economy's marginal propensity to save.

Question 62

If aggregate demand increases and aggregate supply decreases,the price level:

A) will decrease,but real output may increase,decrease,or remain unchanged.
B) will increase,but real output may increase,decrease,or remain unchanged.
C) and real output will both increase.
D) and real output will both decrease.

Question 63

Graphically,demand-pull inflation is shown as a:

A) rightward shift of the AD curve along an upsloping AS curve.
B) leftward shift of the AS curve along a downsloping AD curve.
C) leftward shift of the AS curve along an upsloping AD curve.
D) rightward shift of the AD curve along a downsloping AS curve.

Question 64

Given a fixed upsloping AS curve,a rightward shift of the AD curve will:

A) cause cost-push inflation.
B) increase real output but not the price level.
C) increase the price level but not real output.
D) increase both the price level and real output.

Question 65

Answer the question on the basis of the following aggregate demand and supply schedules for a hypothetical economy: $\begin{array}{c}\begin{array}{c}\text {Amount of Real }\\\underline{\text {Output Demanded}}\\\$ 200 \\300 \\400 \\500 \\600\end{array}\begin{array}{c}\text {Price Level}\\\underline{\text {(Index Value)}}\\300\\250\\200\\150\\100\end{array}\begin{array}{c}\text {Amount of Real}\\\underline{\text {Output Supplied}}\\\$ 500 \\450 \\400 \\300 \\200\end{array}\end{array}$ Refer to the data.If the amount of real output demanded at each price level falls by $200,the equilibrium price level and equilibrium level of real domestic output will fall to:

A) 250 and $200,respectively.
B) 200 and $300,respectively.
C) 150 and $300,respectively.
D) 150 and $200,respectively.

Question 66

If aggregate demand decreases,and as a result,real output and employment decline but the price level remains unchanged,it is most likely that:

A) the money supply has declined.
B) the price level is inflexible downward and a recession has occurred.
C) cost-push inflation has occurred.
D) productivity has declined.

Question 67

Answer the question on the basis of the following aggregate demand and supply schedules for a hypothetical economy: $\begin{array}{c}\begin{array}{c}\text {Amount of Real }\\\underline{\text {Output Demanded}}\\\$ 200 \\300 \\400 \\500 \\600\end{array}\begin{array}{c}\text {Price Level}\\\underline{\text {(Index Value)}}\\300\\250\\200\\150\\100\end{array}\begin{array}{c}\text {Amount of Real}\\\underline{\text {Output Supplied}}\\\$ 500 \\450 \\400 \\300 \\200\end{array}\end{array}$ Refer to the data.If the amount of real output demanded at each price level falls by $200,this might have been caused by:

A) an increase in net exports.
B) a worsening of business expectations.
C) an increase in consumer wealth.
D) a decrease in the personal income tax.

Question 68

Answer the question on the basis of the following table for a particular country in which C is consumption expenditures,I_g is gross investment expenditures,G is government expenditures,X is exports,and M is imports.All figures are in billions of dollars.Each question is independent of other question using the same table,unless otherwise stated. $\begin{array}{c}\begin{array}{c}\underline{\text {Price Level}}\\128 \\125 \\122 \\119 \\116\end{array}\begin{array}{c}\underline{\text {C}} \\ \$ 18 \\20 \\22 \\24 \\26\end{array}\begin{array}{c}\underline{\mathrm{I}_{\mathrm{g}} }\\ \$ 2 \\4 \\6 \\8 \\10\end{array}\begin{array}{c}\underline{\text {G }}\\ \$ 3 \\3 \\3 \\3 \\3\end{array}\begin{array}{c}\underline{\text {X }}\\\$ 1 \\2 \\3 \\4 \\5\end{array}\begin{array}{c}\underline{\text {M}} \\ \$ 5 \\4 \\3 \\2 \\1\end{array}\begin{array}{c}\underline{\text {Real GDP}} \\ \\\\\\ \\\\\end{array}\end{array}$
Refer to the table.The real-balances effect of changes in the price level is:

A) shown by columns (1)and (2)of the table.
B) shown by columns (1)and (5)of the table.
C) shown by columns (1)and (4)of the table.
D) not shown by the data in the table.

Question 69

Graphically,the full-employment,low-inflation,rapid-growth economy of the last half of the 1990s is depicted by a:

A) rightward shift of the aggregate demand curve along a fixed aggregate supply curve.
B) rightward shift of the aggregate supply curve along a fixed aggregate demand curve.
C) rightward shift of the aggregate demand curve and a rightward shift of the aggregate supply curve.
D) leftward shift of the aggregate demand curve and a leftward shift of the aggregate supply curve.

Question 70

Answer the question on the basis of the following table for a particular country in which C is consumption expenditures,I_g is gross investment expenditures,G is government expenditures,X is exports,and M is imports.All figures are in billions of dollars.Each question is independent of other question using the same table,unless otherwise stated. $\begin{array}{c}\begin{array}{c}\underline{\text {Price Level}}\\128 \\125 \\122 \\119 \\116\end{array}\begin{array}{c}\underline{\text {C}} \\ \$ 18 \\20 \\22 \\24 \\26\end{array}\begin{array}{c}\underline{\mathrm{I}_{\mathrm{g}} }\\ \$ 2 \\4 \\6 \\8 \\10\end{array}\begin{array}{c}\underline{\text {G }}\\ \$ 3 \\3 \\3 \\3 \\3\end{array}\begin{array}{c}\underline{\text {X }}\\\$ 1 \\2 \\3 \\4 \\5\end{array}\begin{array}{c}\underline{\text {M}} \\ \$ 5 \\4 \\3 \\2 \\1\end{array}\begin{array}{c}\underline{\text {Real GDP}} \\ \\\\\\ \\\\\end{array}\end{array}$
Refer to the table.If equilibrium real GDP is $31 billion,the equilibrium price level will be:

A) 128.
B) 125.
C) 122.
D) 119.

Question 71

If the dollar price of foreign currencies falls (that is,the dollar appreciates),we would expect:

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

Question 72

Graphically,cost-push inflation is shown as a:

A) leftward shift of the AD curve.
B) rightward shift of the AS curve.
C) leftward shift of the AS curve.
D) rightward shift of the AD curve.

Question 73

If personal taxes were decreased and resource productivity increased simultaneously,the equilibrium:

A) output would necessarily rise.
B) output would necessarily fall.
C) price level would necessarily fall.
D) price level would necessarily rise.

Question 74

Answer the question on the basis of the following table for a particular country in which C is consumption expenditures,I_g is gross investment expenditures,G is government expenditures,X is exports,and M is imports.All figures are in billions of dollars.Each question is independent of other question using the same table,unless otherwise stated. $\begin{array}{c}\begin{array}{c}\underline{\text {Price Level}}\\128 \\125 \\122 \\119 \\116\end{array}\begin{array}{c}\underline{\text {C}} \\ \$ 18 \\20 \\22 \\24 \\26\end{array}\begin{array}{c}\underline{\mathrm{I}_{\mathrm{g}} }\\ \$ 2 \\4 \\6 \\8 \\10\end{array}\begin{array}{c}\underline{\text {G }}\\ \$ 3 \\3 \\3 \\3 \\3\end{array}\begin{array}{c}\underline{\text {X }}\\\$ 1 \\2 \\3 \\4 \\5\end{array}\begin{array}{c}\underline{\text {M}} \\ \$ 5 \\4 \\3 \\2 \\1\end{array}\begin{array}{c}\underline{\text {Real GDP}} \\ \\\\\\ \\\\\end{array}\end{array}$
Refer to the table.If the amounts of GDP supplied at the price levels shown (in descending order)are $45,$43,$40,$37,and $31,the equilibrium level of real GDP will be:

A) $37 billion.
B) $35 billion.
C) $26 billion.
D) $43 billion.

Question 75

An increase in input productivity will:

A) shift the aggregate supply curve leftward.
B) reduce the equilibrium price level,assuming downward flexible prices.
C) reduce the equilibrium real output.
D) reduce aggregate demand.

Question 76

In which of the following sets of circumstances can we confidently expect inflation?

A) Aggregate supply and aggregate demand both increase.
B) Aggregate supply and aggregate demand both decrease.
C) Aggregate supply decreases and aggregate demand increases.
D) Aggregate supply increases and aggregate demand decreases.

Question 77

Answer the question on the basis of the following table for a particular country in which C is consumption expenditures,I_g is gross investment expenditures,G is government expenditures,X is exports,and M is imports.All figures are in billions of dollars.Each question is independent of other question using the same table,unless otherwise stated. $\begin{array}{c}\begin{array}{c}\underline{\text {Price Level}}\\128 \\125 \\122 \\119 \\116\end{array}\begin{array}{c}\underline{\text {C}} \\ \$ 18 \\20 \\22 \\24 \\26\end{array}\begin{array}{c}\underline{\mathrm{I}_{\mathrm{g}} }\\ \$ 2 \\4 \\6 \\8 \\10\end{array}\begin{array}{c}\underline{\text {G }}\\ \$ 3 \\3 \\3 \\3 \\3\end{array}\begin{array}{c}\underline{\text {X }}\\\$ 1 \\2 \\3 \\4 \\5\end{array}\begin{array}{c}\underline{\text {M}} \\ \$ 5 \\4 \\3 \\2 \\1\end{array}\begin{array}{c}\underline{\text {Real GDP}} \\ \\\\\\ \\\\\end{array}\end{array}$
Refer to the table.Which of the following schedules constitutes aggregate demand in this country?

A)
$\begin{array} { l } \underline { P }& \underline { \text { GDP } } \\128&\$19\\125& 25 \\122 & 31 \\119 & 37\\116 & 43 \\\end{array}$
B)
$\begin{array} { l } \underline { P }& \underline { \text { GDP } } \\128&\$23\\125& 27 \\122 & 31 \\119 & 35\\116 &39 \\\end{array}$
C)
$\begin{array} { l } \underline { P }& \underline { \text { GDP } } \\128&\$20\\125& 22 \\122 & 24 \\119 & 26\\116 &28 \\\end{array}$
D)
$\begin{array} { l } \underline { P }& \underline { \text { GDP } } \\128&\$34\\125& 37 \\122 &40 \\119 &43\\116 &46\\\end{array}$

Question 78

Answer the question on the basis of the following table for a particular country in which C is consumption expenditures,I_g is gross investment expenditures,G is government expenditures,X is exports,and M is imports.All figures are in billions of dollars.Each question is independent of other question using the same table,unless otherwise stated. $\begin{array}{c}\begin{array}{c}\underline{\text {Price Level}}\\128 \\125 \\122 \\119 \\116\end{array}\begin{array}{c}\underline{\text {C}} \\ \$ 18 \\20 \\22 \\24 \\26\end{array}\begin{array}{c}\underline{\mathrm{I}_{\mathrm{g}} }\\ \$ 2 \\4 \\6 \\8 \\10\end{array}\begin{array}{c}\underline{\text {G }}\\ \$ 3 \\3 \\3 \\3 \\3\end{array}\begin{array}{c}\underline{\text {X }}\\\$ 1 \\2 \\3 \\4 \\5\end{array}\begin{array}{c}\underline{\text {M}} \\ \$ 5 \\4 \\3 \\2 \\1\end{array}\begin{array}{c}\underline{\text {Real GDP}} \\ \\\\\\ \\\\\end{array}\end{array}$
Refer to the table.The interest-rate effect of changes in the price level is shown by columns:

A) (1)and (4)of the table.
B) (5)and (6)of the table.
C) (1)and (3)of the table.
D) (2)and (4)of the table.

Question 79

A rightward shift of the AD curve in the very flat part of the short-run AS curve will:

A) increase real output by more than the price level.
B) increase the price level by more than real output.
C) reduce real output by more than the price level.
D) reduce the price level by more than real output.

Question 80

A rightward shift of the AD curve in the very steep upper part of the short-run AS curve will:

A) increase real output by more than the price level.
B) increase the price level by more than real output.
C) reduce real output by more than the price level.
D) reduce the price level by more than real output.