Question 1

What are the four components of spending that determine aggregate demand?

Accepted Answer

Consumption, investment, government purchases, and net exports.

Question 2

Aggregate demand is composed of consumption, _________, government expenditures, and net exports.

Accepted Answer

investment

Question 3

The real-balance effect partially explains

Accepted Answer

A)   the downward slope of aggregate demand.
B)   the upward slope of aggregate supply.
C)   the behavior of firms in response to increases in wages.
D)   the behavior of firms in response to changes in selling prices of their products. A

Question 4

An increase in government spending

Accepted Answer

A)   leads to an increase in aggregate supply.
B)   leads to a decrease in aggregate supply.
C)   leads to an increase in aggregate demand.
D)   leads to a decrease in aggregate demand.

Question 5

An increase in aggregate demand will cause a decrease in aggregate supply.

Accepted Answer

A) True 
 B)False

Question 6

A shift in aggregate supply will change the equilibrium level of real output.

Accepted Answer

A) True 
 B)False

Question 7

The aggregate demand curve

Accepted Answer

A)   tells us what the employment level will be for any given level of output.
B)   tells us what portion of output is exported.
C)   tells us what portion of consumption goods are imported
D)   cannot tell us how the total dollar values of spending will ultimately be divided between output and prices.

Question 8

An increase in the exchange value of the dollar will

Accepted Answer

A)   decrease aggregate demand, thereby decreasing the price level.
B)   decrease aggregate demand, thereby increasing the price level.
C)   increase aggregate demand, thereby decreasing the price level.
D)   increase aggregate demand, thereby increasing the price level.

Question 9

Aggregate demand shows the relationship between

Accepted Answer

A)   the rate of inflation and the level of imports.
B)   the interest rate and the level of exports.
C)   the price level and the level of real output.
D)   the level of real cash balances and wages.

Question 10

Which two markets are represented in the circular flow model?

Accepted Answer

The answer of Which two markets are represented in the...

Question 11

How is aggregate demand affected if taxes increase?

Accepted Answer

The answer of How is aggregate demand affected if taxes...

Question 12

Increases in aggregate supply result in

Accepted Answer

A)   an increase in the price level and a reduction in real output.
B)   an increase in the price level and an increase in real output.
C)   a decrease in the price level and a reduction in real output.
D)   a decrease in the price level and an increase in real output.

Question 13

A change in the exchange value of the dollar most directly affects

Accepted Answer

A)   government employees.
B)   corporate employees.
C)   aggregate demand.
D)   aggregate supply.

Question 14

Which of the following would decrease aggregate demand?

Accepted Answer

A)   An increase in the relative price of domestic goods versus foreign goods
B)   A decrease in the foreign exchange value of the dollar
C)   A decrease in taxes
D)   An improvement in consumer confidence

Question 15

The circular flow diagram depicts the flow of income and output between

Accepted Answer

A)   labor and management.
B)   the service sector and the manufacturing sector.
C)   businesses and households.
D)   agriculture and manufacturing.

Question 16

How does increased economic uncertainty affect aggregate demand?

Accepted Answer

The answer of How does increased economic uncertainty affect aggregate...

Question 17

When the economy is in equilibrium,

Accepted Answer

A)   the labor force participation rate is 100 percent.
B)   planned spending equals planned output.
C)   politicians are aware of the concerns of the average consumer.
D)   real output is divided equally between consumption goods and investment goods.

Question 18

If economic conditions improve in other countries, aggregate demand in the U. S. will _________ .

Accepted Answer

The answer of If economic conditions improve in other countries,...

Question 19

The real balance effect explains the upward slope of aggregate supply.

Accepted Answer

A) True 
 B)False

Question 20

How is aggregate demand affected if overall consumer confidence improves?

Accepted Answer

The answer of How is aggregate demand affected if overall...

Exam 11: Aggregate Demand and Supply

What are the four components of spending that determine aggregate demand?

Aggregate demand is composed of consumption, _________, government expenditures, and net exports.

The real-balance effect partially explains

An increase in government spending

An increase in aggregate demand will cause a decrease in aggregate supply.

A shift in aggregate supply will change the equilibrium level of real output.

The aggregate demand curve

An increase in the exchange value of the dollar will

Aggregate demand shows the relationship between

Which two markets are represented in the circular flow model?

How is aggregate demand affected if taxes increase?

Increases in aggregate supply result in

A change in the exchange value of the dollar most directly affects

Which of the following would decrease aggregate demand?

The circular flow diagram depicts the flow of income and output between

How does increased economic uncertainty affect aggregate demand?

When the economy is in equilibrium,

If economic conditions improve in other countries, aggregate demand in the U. S. will _________ .

The real balance effect explains the upward slope of aggregate supply.

How is aggregate demand affected if overall consumer confidence improves?