Question 1

The equilibrium price level and equilibrium level of real GDP occur at the intersection of the aggregate demand curve and the aggregate supply curve.

Accepted Answer

A) True 
 B)False

Question 2

Degree of Excess Capacity Answer the question based on the accompanying list of factors that are related to the aggregate demand curve.A change in net export spending would most likely be caused by changes in

Accepted Answer

A) 2 and 3. 
B) 5 and 6. 
C) 7 and 8. 
D) 6 and 9.

Question 3

The economy experiences a decrease in the price level and an increase in real domestic output.Which is a likely explanation?

Accepted Answer

A) Consumer incomes and the quantity of labor have decreased. 
B) Business costs and wage rates have decreased. 
C) The prices of imported resources have increased. 
D) National income abroad has increased.

Question 4

The aggregate demand curve is

Accepted Answer

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 5

A decrease in per-unit production costs will shift the aggregate supply curve leftward.

Accepted Answer

A) True 
 B)False

Question 6

In the accompanying table for a particular country, C is consumption expenditures, Ig is gross investment expenditures, G is government expenditures, X is exports, and M is imports.All figures are in billions of dollars.If the amounts of GDP supplied at the price levels shown (in descending order) are $27, $25, $22, $18, and $13, the equilibrium price level will be

Accepted Answer

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

Question 7

If productivity increases, then the per-unit production cost decreases.

Accepted Answer

A) True 
 B)False

Question 8

An increase in input productivity will

Accepted Answer

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 9

The foreign purchases, interest rate, and real-balances effects explain why the

Accepted Answer

A) aggregate demand curve is downward sloping. 
B) aggregate demand curve may shift to the left or right. 
C) economy will adjust toward equilibrium. 
D) aggregate expenditures schedule may shift up or down.

Question 10

In the accompanying table for a particular country, C is consumption expenditures, Ig is gross investment expenditures, G is government expenditures, X is exports, and M is imports.All figures are in billions of dollars.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

Accepted Answer

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

Question 11

Profit Expectations on Investments Answer the question based on the accompanying list of items related to aggregate demand or aggregate supply.Changes in which two factors would most likely cause a change in aggregate demand?

Accepted Answer

A) 1 and 5 
B) 3 and 10 
C) 5 and 7 
D) 8 and 9

Question 12

A change in business taxes and regulation can affect production costs and aggregate supply.

Accepted Answer

A) True 
 B)False

Question 13

The following factors explain the inverse relationship between the price level and the total demand for output, except

Accepted Answer

A) a substitution effect. 
B) a real-balances effect. 
C) an interest-rate effect. 
D) a foreign-purchases effect.

Question 14

The U.S.economy was able to achieve full employment with relative price level stability between 1996 and 2000 because

Accepted Answer

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

Question 15

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.The level of productivity is

Accepted Answer

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

Question 16

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

Accepted Answer

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

Question 17

The aggregate supply curve (short run)

Accepted Answer

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 18

Changes in the national incomes of our trading partners would directly impact our

Accepted Answer

A) consumption. 
B) exports. 
C) imports. 
D) government spending.

Question 19

The determinants of aggregate demand

Accepted Answer

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 20

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

Accepted Answer

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.

Exam 32: Aggregate Demand and Aggregate Supply

The equilibrium price level and equilibrium level of real GDP occur at the intersection of the aggregate demand curve and the aggregate supply curve.

Degree of Excess Capacity Answer the question based on the accompanying list of factors that are related to the aggregate demand curve.A change in net export spending would most likely be caused by changes in

The economy experiences a decrease in the price level and an increase in real domestic output.Which is a likely explanation?

The aggregate demand curve is

A decrease in per-unit production costs will shift the aggregate supply curve leftward.

If productivity increases, then the per-unit production cost decreases.

An increase in input productivity will

The foreign purchases, interest rate, and real-balances effects explain why the

Profit Expectations on Investments Answer the question based on the accompanying list of items related to aggregate demand or aggregate supply.Changes in which two factors would most likely cause a change in aggregate demand?

A change in business taxes and regulation can affect production costs and aggregate supply.

The following factors explain the inverse relationship between the price level and the total demand for output, except

The U.S.economy was able to achieve full employment with relative price level stability between 1996 and 2000 because

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.The level of productivity is

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

The aggregate supply curve (short run)

Changes in the national incomes of our trading partners would directly impact our

The determinants of aggregate demand

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