Question 1

The following list contains factors that are related to the aggregate demand curve.
1) Household expectations
2) Profit expectations
3) Degree of excess capacity
4) Personal income tax rates
5) Exchange rates
6) National income abroad
7) Government spending
8) Household wealth
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Refer to the above information. A change in net export spending would most likely be caused by changes in:

Accepted Answer

A)  2 and 3. 
B)  4 and 7. 
C)  1 and 8. 
D)  5 and 6.

Question 2

- Refer to the above graph. At price level P1:

Accepted Answer

A)  the quantity of output supplied is constant. 
B)  the quantity of output supplied is equal to the quantity of output demanded. 
C)  the quantity of output supplied is greater than the quantity of output demanded. 
D)  the quantity of output supplied is less than the quantity of output demanded.

Question 3

The amount of real domestic output that will be purchased at each possible price level is best shown by the:

Accepted Answer

A)  aggregate supply curve. 
B)  aggregate demand curve. 
C)  aggregate expenditures model. 
D)  difference between real and nominal GDP.

Question 4

The table shows the aggregate demand and aggregate supply schedule for a hypothetical economy.
 Refer to the above table. Using the original data from the table, if the quantity of real domestic output demanded increased by $3000 and the quantity of real domestic output supplied increased by $1000 at each price level, the new equilibrium price level and quantity of real domestic output would be:

Accepted Answer

A)  350 and $8000. 
B)  300 and $9000. 
C)  250 and $8000. 
D)  200 and $7000.

Question 5

- Refer to the above diagram. When output increases from Q1 and the price level decreases from P1, this change will:

Accepted Answer

A)  be caused by a shift in the aggregate supply curve from AS1 to AS2. 
B)  be caused by a shift in the aggregate supply curve from AS1 to AS3. 
C)  result in a movement along the aggregate demand curve from e1 to e2. 
D)  result in a movement along the aggregate demand curve from e3 to e1.

Question 6

The following list contains items that are related to aggregate demand and/or aggregate supply.
1) Government Spending
2) Consumer Expectations
3) Degree of Excess capacity
4) Personal Income Tax Rates
5) Productivity
6) National Income Abroad
7) Business Taxes
8) Domestic Resource Availability
9) Price of Imported Products
10) Profit Expectations on Investments
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Refer to the above list. Changes in which combination of factors best explain why the aggregate supply curve would shift?

Accepted Answer

A)  1 and 2 
B)  2 and 10 
C)  3 and 6 
D)  7 and 8

Question 7

If the multiplier is 4 and the desired increase in real GDP is $200 billion, the initial change in spending required to achieve that goal:

Accepted Answer

A)  is $50 billion. 
B)  is $800 billion. 
C)  is $200 billion. 
D)  cannot be determined.

Question 8

- Refer to the above graph. At price level P2:

Accepted Answer

A)  the quantity of output supplied is constant. 
B)  the quantity of output supplied is equal to the quantity of output demanded. 
C)  the quantity of output supplied is greater than the quantity of output demanded. 
D)  the quantity of output supplied is less than the quantity of output demanded.

Question 9

An increase in government spending will cause a(n):

Accepted Answer

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

Question 10

A decrease in aggregate demand will have no effect on the real equilibrium GDP of the economy and will lower its price level in the long run.

Accepted Answer

A) True 
 B)False

Question 11

When national income in other nations decreases, aggregate:

Accepted Answer

A)  demand increases. 
B)  demand decreases. 
C)  supply increases. 
D)  supply decreases.

Question 12

Refer to the above graph. Which factor will shift AD1 to AD2?

Accepted Answer

A)  The real-balances effect. 
B)  An increase in productivity. 
C)  The foreign purchase effect. 
D)  An increase in investment spending.

Question 13

A rise in prices of imported resources will cause aggregate:

Accepted Answer

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

Question 14

If the prices of imported resources decrease, then this event would most likely:

Accepted Answer

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

Question 15

One reason why the aggregate supply curve might shift to the left is that:

Accepted Answer

A)  consumer incomes have increased. 
B)  per-unit production costs have increased. 
C)  government spending has increased. 
D)  businesses have become more optimistic.

Question 16

Which event would most likely increase aggregate demand?

Accepted Answer

A)  A depreciation of the dollar. 
B)  An appreciation of the dollar. 
C)  A decrease in the national incomes in foreign nations. 
D)  A decrease in the price level that results in a foreign purchases effect.

Question 17

Below the full-employment level of output, per-unit production costs rise and firms must receive higher product prices for them to be profitable.

Accepted Answer

A) True 
 B)False

Question 18

-Refer to the above graph. Which line shows the full-employment output for the economy?

Accepted Answer

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

Question 19

The aggregate demand curve is the relationship between the:

Accepted Answer

A)  price level and the sales of producers. 
B)  price level and the purchasing of real domestic output. 
C)  price level and the distribution of real domestic output. 
D)  real domestic output bought and the real domestic output sold.

Question 20

A decrease in net exports will cause a(n):

Accepted Answer

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

Exam 12: Aggregate Demand and Aggregate Supply

- Refer to the above graph. At price level P₁:

The amount of real domestic output that will be purchased at each possible price level is best shown by the:

- Refer to the above diagram. When output increases from Q₁ and the price level decreases from P₁, this change will: