Question 1

Cost-push inﬂation is depicted as a rightward shift of the aggregate demand curve along an
upsloping aggregate supply curve.

Accepted Answer

A) True 
 B)False

Question 2

$$\begin{array} { | c | c | c | c | c | c | c | } 
\hline \text { Price Level } & C & I _ { g } & G & X & M & \text { Real GDP } \
\hline 128 & \$ 18 & \$ 2 & \$ 3 & \$ 1 & \$ 5 & \
\hline 125 & 20 & 4 & 3 & 2 & 4 & \
\hline 122 & 22 & 6 & 3 & 3 & 3 & \
\hline 119 & 24 & 8 & 3 & 4 & 2 & \
\hline 116 & 26 & 10 & 3 & 5 & 1 & \
\hline
\end{array}$$ In the accompanying table for a particular country, C is consumption expenditures, $$I _ { g }$$ is gross
Investment expenditures, G is government expenditures, X is exports, and M is imports. All ?gures
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 3

The real-balances effect indicates that inﬂation makes the public feel wealthier and they therefore
spend more out of their current incomes.

Accepted Answer

A) True 
 B)False

Question 4

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D

Question 5

$$\begin{array} { | c | c | c | c | c | c | c | } 
\hline \text { Price Level } & C & I _ { g } & G & X & M & \text { Real GDP } \
\hline 128 & \$ 18 & \$ 2 & \$ 3 & \$ 1 & \$ 5 & \
\hline 125 & 20 & 4 & 3 & 2 & 4 & \
\hline 122 & 22 & 6 & 3 & 3 & 3 & \
\hline 119 & 24 & 8 & 3 & 4 & 2 & \
\hline 116 & 26 & 10 & 3 & 5 & 1 & \
\hline
\end{array}$$ In the accompanying table for a particular country, C is consumption expenditures, $$I _ { g }$$ is gross
Investment expenditures, G is government expenditures, X is exports, and M is imports. All ?gures
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 6

Accepted Answer

A)  an increase in real interest rates 
B)  a decrease in business subsidies 
C)  an increase in input prices 
D)  a decrease in business taxes

Question 7

The determinants of aggregate supply

Accepted Answer

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 8

An increase in the price level, other things equal, will shift the

Accepted Answer

A)  consumption, investment, and net exports schedules of the aggregate expenditures model downward. 
B)  consumption, investment, and net exports schedules of the aggregate expenditures model upward. 
C)  consumption and investment schedules of the aggregate expenditures model upward, but the net exports schedule downward. 
D)  consumption and net exports schedules of the aggregate expenditures model upward, but the investment schedule downward.

Question 9

Cost-push inﬂation can be described as a rightward shift of the aggregate supply curve.

Accepted Answer

A) True 
 B)False

Question 10

If the U.S. dollar appreciates in value relative to foreign currencies, then this will

Accepted Answer

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

Question 11

Real Domestic Output Real Domestic Output Demanded (in Billions) Price Level (Index Value) Supplied
$500 350 $3,500
1,000 300 3,000
1,500 250 2,500
2,000 200 2,000
2,500 150 1,500
3,000 100 1,000
The accompanying table shows the aggregate demand and aggregate supply schedule for a
Hypothetical economy. If the quantity of real domestic output demanded decreased by $500 and
The quantity of real domestic output supplied increased by $500 at each price level, the new
Equilibrium price level and quantity of real domestic output would be

Accepted Answer

A)  150 and $1,500. 
B)  150 and $2,000. 
C)  200 and $2,000. 
D)  250 and $2,000.

Question 12

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

Accepted Answer

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

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

How will a change in productivity increase or decrease aggregate supply?

Accepted Answer

The answer of How will a change in productivity increase...

Question 15

When national income in other nations decreases, aggregate demand in our economy

Accepted Answer

A)  increases because our exports will increase. 
B)  decreases because our exports will decrease. 
C)  increases because our imports will decrease. 
D)  decreases because our imports will increase.

Question 16

If at a particular price level, real output from producers is greater than real output desired by purchasers, then there will be a general

Accepted Answer

A)  surplus and the price level will rise. 
B)  surplus and the price level will fall. 
C)  shortage and the price level will rise. 
D)  shortage and the price level will fall.

Question 17

Accepted Answer

A)  a decrease in the general price level 
B)  an increase in real interest rates 
C)  an increase in national incomes abroad 
D)  a decrease in the value of ﬁnancial assets

Question 18

Accepted Answer

A)  a higher price level. 
B)  an expansion of real output and a stable price level. 
C)  an expansion of real output and a higher price level. 
D)  a decline in real output and a stable price level.

Question 19

The foreign purchases effect

Accepted Answer

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 20

The upward slope of the short-run aggregate supply curve is based on the assumption that

Accepted Answer

A)  wages and other resource prices do not respond to price level changes. 
B)  wages and other resource prices do respond to price level changes. 
C)  prices of outputs do not respond to price level changes. 
D)  prices of inputs are ﬂexible, while prices of outputs are ﬁxed.

Exam 12: Aggregate Demand and Aggregate Supply

Cost-push inﬂation is depicted as a rightward shift of the aggregate demand curve along an upsloping aggregate supply curve.

The real-balances effect indicates that inﬂation makes the public feel wealthier and they therefore spend more out of their current incomes.

The determinants of aggregate supply

An increase in the price level, other things equal, will shift the

Cost-push inﬂation can be described as a rightward shift of the aggregate supply curve.

If the U.S. dollar appreciates in value relative to foreign currencies, then this will

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

How will a change in productivity increase or decrease aggregate supply?

When national income in other nations decreases, aggregate demand in our economy

If at a particular price level, real output from producers is greater than real output desired by purchasers, then there will be a general

The foreign purchases effect

The upward slope of the short-run aggregate supply curve is based on the assumption that