Question 1

What are the four components of aggregate demand?

Accepted Answer

The answer of What are the four components of aggregate...

Question 2

If the supply of money increases, the long-run aggregate supply curve suggests that output will not change but the price level will.

Accepted Answer

A) True 
 B)False

Question 3

Assuming a long-run aggregate supply curve, a decrease in consumer confidence results in ________ in output and ________ in price level.

Accepted Answer

A)  a decrease; no change 
B)  no change; a decrease 
C)  a decrease; a decrease 
D)  an increase; no change

Question 4

If the government increases its purchases of goods and services by $3,000 and the MPC is 0.8, GDP and income will eventually increase by

Accepted Answer

A)  $2,400. 
B)  $6,000. 
C)  $15,000. 
D)  $24,000.

Question 5

If home prices are falling, consumers purchasing a home will find their purchasing power of money has increased. This benefit to consumers is called the

Accepted Answer

A)  inflation effect. 
B)  wealth effect. 
C)  home equity effect. 
D)  multiplier effect.

Question 6

In modern economies

Accepted Answer

A)  all prices are very flexible. 
B)  some prices are very flexible while others are not. 
C)  no prices are very flexible. 
D)  prices become less flexible as they increase.

Question 7

A supply shock is an ________ event that shifts the aggregate ________ curve.

Accepted Answer

A)  internal; supply 
B)  external; supply 
C)  internal; demand 
D)  external; demand

Question 8

Prices that adjust slowly are

Accepted Answer

A)  custom prices. 
B)  auction prices. 
C)  flexible prices. 
D)  heavy prices.

Question 9

Aggregate demand and aggregate supply must be combined to determine the price level and the "real" GDP.

Accepted Answer

A) True 
 B)False

Question 10

The long-run aggregate supply curve is horizontal.

Accepted Answer

A) True 
 B)False

Question 11

Aggregate demand is the total demand for intermediate goods and services in an entire economy.

Accepted Answer

A) True 
 B)False

Question 12

If potential output exceeds actual output, ________ shifts downward over time.

Accepted Answer

A)  the short-run AS curve 
B)  the short-run AD curve 
C)  the long-run AS curve 
D)  the long-run AD curve

Question 13

Identify three key factors that can cause a shift in the aggregate demand curve.

Accepted Answer

The answer of Identify three key factors that can cause...

Question 14

What three effects can alter the aggregate demand curve?

Accepted Answer

The answer of What three effects can alter the aggregate...

Question 15

If the multiplier = 2.5, the MPC would be

Accepted Answer

A)  0.25. 
B)  0.4. 
C)  0.6. 
D)  0.75.

Question 16

Assuming a long-run aggregate supply curve, an increase in the money supply results in ________ in output and ________ in price level.

Accepted Answer

A)  a decrease; a decrease 
B)  an increase; no change 
C)  a decrease; no change 
D)  no change; an increase

Question 17

What are supply shocks? Explain what effect adverse and favorable supply shocks have on the supply curve.

Accepted Answer

The answer of What are supply shocks? Explain what effect...

Question 18

Prices of industrial products and wages tend to be the most "flexible."

Accepted Answer

A) True 
 B)False

Question 19

Which of the following types of workers might have wages that change quickly?

Accepted Answer

A)  unskilled, low-wage workers 
B)  union workers 
C)  employees of state and local governments 
D)  movie stars and rock stars

Question 20

Recall the Application about the behavior of prices in retail catalogs to answer the following question(s). Economist Anil Kashyap of the University of Chicago examined the prices of 12 selected goods from L.L. Bean, REI, and The Orvis Company, Inc. Kashyap tracked the prices from the companies' catalogs which were reissued every six months.
-Even though the catalogs listed in the Application were reissued every six months, the prices which were tracked in these retail catalogs

Accepted Answer

A)  were typically fixed for a year or more. 
B)  changed every month. 
C)  tended to fall during periods of high inflation. 
D)  were not listed due to low rates of inflation.

Exam 14: Aggregate Demand and Aggregate Supply

What are the four components of aggregate demand?

If the supply of money increases, the long-run aggregate supply curve suggests that output will not change but the price level will.

Assuming a long-run aggregate supply curve, a decrease in consumer confidence results in in output and in price level.

If the government increases its purchases of goods and services by $3,000 and the MPC is 0.8, GDP and income will eventually increase by

If home prices are falling, consumers purchasing a home will find their purchasing power of money has increased. This benefit to consumers is called the

In modern economies

A supply shock is an event that shifts the aggregate curve.

Prices that adjust slowly are

Aggregate demand and aggregate supply must be combined to determine the price level and the "real" GDP.

The long-run aggregate supply curve is horizontal.

Aggregate demand is the total demand for intermediate goods and services in an entire economy.

If potential output exceeds actual output, ________ shifts downward over time.

Identify three key factors that can cause a shift in the aggregate demand curve.

What three effects can alter the aggregate demand curve?

If the multiplier = 2.5, the MPC would be

Assuming a long-run aggregate supply curve, an increase in the money supply results in in output and in price level.

What are supply shocks? Explain what effect adverse and favorable supply shocks have on the supply curve.

Prices of industrial products and wages tend to be the most "flexible."

Which of the following types of workers might have wages that change quickly?