Question 1

One of the influences that the world economy has on U.S.aggregate demand comes from changes in

Accepted Answer

A) world opinion. 
B) foreign income. 
C) foreign governments. 
D) world pollution. 
E) foreign aid.

Question 2

If a country is trying to recover from a recent recession,it is unlikely their government officials will decide to ________ because it would ________.

Accepted Answer

A) lower interest rates;decrease aggregate demand 
B) raise interest rates;decrease aggregate demand 
C) raise interest rates;increase aggregate demand 
D) institute a tax cut;increase aggregate demand 
E) increase taxes;increase aggregate demand

Question 3

-In the figure above,as the price level increases,the aggregate demand curve will

Accepted Answer

A) shift from AD1 to AD3. 
B) shift from AD1 to AD2. 
C) not shift,but the aggregate demand curve will change so that it is positively sloped. 
D) not shift. 
E) shift from AD1 to AD3 and then back to AD1.

Question 4

In a persisting demand-pull inflation,

Accepted Answer

A) aggregate supply decreases and aggregate demand increases. 
B) aggregate demand decreases and aggregate supply decreases. 
C) aggregate demand increases and potential GDP decreases. 
D) aggregate supply increases and aggregate demand increases. 
E) None of the above answers is correct.

Question 5

A fall in the money wage rate ________ aggregate supply and ________.

Accepted Answer

A) decreases;shifts the AS curve rightward 
B) increases;shifts the AS curve leftward 
C) increases;shifts the AS curve rightward 
D) decreases;shifts the AS curve leftward 
E) does not change;does not shift the AS curve

Question 6

Demand-pull inflation persists because of

Accepted Answer

A) continuing increases in government expenditures. 
B) continuing increases in the quantity of money. 
C) continuing increases in the real wage rate. 
D) continuing decreases in the money wage rate. 
E) continuing increases in aggregate supply.

Question 7

If the price level doubles,it will

Accepted Answer

A) increase the quantity of money. 
B) have no effect on the buying power of money. 
C) decrease the buying power of money. 
D) increase potential GDP. 
E) decrease potential GDP.

Question 8

The AD curve is a graph depicting the

Accepted Answer

A) relationship between the price level and the quantity of real GDP supplied. 
B) business cycle during expansions and recessions. 
C) relationship between the price level and the quantity of real GDP demanded. 
D) relationship between the price level and potential GDP. 
E) relationship between the aggregate quantity of real GDP demanded and the aggregate quantity of real GDP supplied.

Question 9

The aggregate supply curve shows the relationship between

Accepted Answer

A) potential GDP and the price level. 
B) potential GDP and real GDP. 
C) the quantity of real GDP supplied and the price level. 
D) the quantity of real GDP supplied and the interest rate. 
E) potential GDP and the aggregate demand curve.

Question 10

An increase in the quantity of money ________ aggregate demand and ________.

Accepted Answer

A) increases;shifts the aggregate demand curve rightward 
B) increases;shifts the aggregate demand curve leftward 
C) decreases;shifts the aggregate demand curve rightward 
D) decreases;shifts the aggregate demand curve leftward 
E) increases;rotates the aggregate demand curve so it is steeper

Question 11

A change in the price level

Accepted Answer

A) shifts the aggregate supply curve rightward. 
B) shifts the potential GDP line. 
C) shifts the aggregate supply curve leftward. 
D) changes the quantity of real GDP supplied. 
E) shifts the aggregate demand curve leftward.

Question 12

During the late 1960s,U.S.defense spending increased as the United States fought in Vietnam.This increase in government expenditure on goods and services most likely created

Accepted Answer

A) a recessionary gap. 
B) an inflationary gap. 
C) a decrease in aggregate supply. 
D) a decrease in aggregate demand because consumers' expenditures decreased. 
E) an increase in potential GDP.

Question 13

The economy is at full employment and then aggregate demand increases.Describe what happens as an immediate result of the increase in aggregate demand.Describe how the economy adjusts back to full employment.

Accepted Answer

The answer of The economy is at full employment and...

Question 14

Potential GDP increased from 4.7 trillion to 16.6 trillion between 1970 and 2013 resulting in economic growth.Also,during this time ________ occurred because ________.

Accepted Answer

A) inflation;aggregate demand decreased by more than potential GDP 
B) stagflation;aggregate demand increased by more than potential GDP 
C) deflation;aggregate demand increased by more than potential GDP 
D) inflation;aggregate demand increased by more than potential GDP 
E) inflation;aggregate demand increased by less than potential GDP

Question 15

Other things remaining the same,an increase in the price level

Accepted Answer

A) increases aggregate supply. 
B) decreases aggregate supply. 
C) increases the quantity of real GDP supplied. 
D) decreases the quantity of real GDP supplied. 
E) neither changes aggregate supply nor changes the quantity of real GDP supplied.

Question 16

Which of the following could result in a recession?

Accepted Answer

A) a rise in the price of oil 
B) an increase in investment 
C) a tax cut 
D) an increase in the quantity of money 
E) an increase in government expenditures on goods and services

Question 17

The line showing potential GDP is a vertical straight line because

Accepted Answer

A) there is only one level of full employment at any point in time. 
B) economists are unsure about how to determine potential GDP. 
C) it represents the minimum level of real GDP in a recession. 
D) when nothing else changes,a higher price level has no effect on real GDP. 
E) the aggregate supply curve is upward sloping.

Question 18

When the macroeconomic equilibrium is such that real GDP exceeds potential real GDP,the economy is suffering from ________,and the government policy to eliminate this gap will ________ real GDP and ________ the price level.

Accepted Answer

A) an inflationary gap;increase;increase 
B) a recessionary gap;decrease;decrease 
C) an inflationary gap;increase;decrease 
D) a recessionary gap;increase;decrease 
E) an inflationary gap;decrease;decrease

Question 19

-According to the figure above,which point or points correspond to full employment?

Accepted Answer

A) only point a 
B) only point b 
C) only point c 
D) points a and b 
E) points a,b,and c

Question 20

A fall in the real wage rate ________ firms' profits and leads to ________ in the quantity supplied.

Accepted Answer

A) raises;an increase 
B) raises;a decrease 
C) lowers;an increase 
D) lowers;a decrease 
E) does not change;no change

Exam 19: Aggregate Supply and Aggregate Demand