Question 1

-In the figure above,the shift in the aggregate demand curve from AD1 to AD3 could be the result of

Accepted Answer

A) a fall in the price level. 
B) a tax cut. 
C) an increased expectation of a recession that lowers people's expected future incomes. 
D) a decrease in the foreign exchange rate. 
E) a rise in the price level.

Question 2

If the price level rises but the money wage rate does not,then firms will hire ________ labor and the quantity of real GDP supplied will ________.

Accepted Answer

A) more;increase 
B) the same amount of;not change 
C) less;decrease 
D) more;not change 
E) less;increase

Question 3

The the government increases the level of government expenditure.If there is no change in the aggregate supply curve,then aggregate demand will ________,real GDP will ________,and the price level will ________.

Accepted Answer

A) increase;remain the same;increase 
B) remain the same;increase;increase 
C) increase;increase;increase 
D) decrease;increase;increase 
E) decrease;remain the same;decrease

Question 4

The figure above shows the aggregate demand curve.
-The aggregate demand curve in the figure above shifts rightward if

Accepted Answer

A) potential GDP increases. 
B) the money wage rate falls. 
C) taxes are cut. 
D) government expenditure decreases. 
E) the Federal Reserve raises the interest rate.

Question 5

How does the aggregate demand curve reflect an increase in aggregate demand?

Accepted Answer

The answer of How does the aggregate demand curve reflect...

Question 6

Inflation can be started by

Accepted Answer

A) a decrease in aggregate supply or a decrease in aggregate demand. 
B) a decrease in aggregate supply or an increase in aggregate demand. 
C) an increase in aggregate supply or an increase in aggregate demand. 
D) an increase in aggregate supply or a decrease in aggregate demand. 
E) an increase in aggregate demand or an increase in potential GDP.

Question 7

The figure above shows the aggregate demand curve.
-The aggregate demand curve in the figure above shifts rightward if

Accepted Answer

A) potential GDP increases. 
B) the money wage rate falls. 
C) taxes are raised. 
D) government expenditure increases. 
E) the Federal Reserve raises the interest rate.

Question 8

Cost-push inflation starts with

Accepted Answer

A) an increase in aggregate demand. 
B) a decrease in aggregate demand. 
C) an increase in aggregate supply. 
D) a decrease in aggregate supply. 
E) an increase in potential GDP.

Question 9

A fall in the price level produces a ________ the aggregate demand curve.

Accepted Answer

A) rightward shift of 
B) movement downward along 
C) leftward shift of 
D) movement upward along 
E) change in the slope of

Question 10

The money wage rate is constant when moving along

Accepted Answer

A) only the aggregate supply curve. 
B) only the aggregate supply curve and the potential GDP line. 
C) only the potential GDP line. 
D) neither the aggregate supply curve nor the potential GDP line. 
E) the aggregate supply curve,the potential GDP line,and the aggregate demand curve.

Question 11

The AS curve shifts leftward if

Accepted Answer

A) good weather increases agricultural harvests. 
B) OPEC reduces world oil prices. 
C) tax cuts stimulate labor supply. 
D) the money wage rate increases. 
E) government expenditure increases.

Question 12

Which of the following can start an inflation?

Accepted Answer

A) an increase in aggregate demand 
B) an increase in aggregate supply 
C) a decrease in aggregate supply 
D) Both answers A and C are correct. 
E) Answers A,B,and C are correct.

Question 13

An increase in the price of oil ________ aggregate supply,shifting the aggregate supply curve ________ and potentially bringing the ________ phase of the business cycle.

Accepted Answer

A) decreases;rightward;expansion 
B) increases;rightward;recession 
C) increases;rightward;expansion 
D) decreases;leftward;recession 
E) decreases;rightward;recession

Question 14

If European economies enter a recession,

Accepted Answer

A) U.S.aggregate demand decreases and the U.S.AD curve shifts leftward. 
B) U.S.aggregate demand increases and the U.S.AD curve shifts rightward. 
C) the quantity of real GDP demanded in the United States decreases and there is a movement down along the U.S.AD curve. 
D) the quantity of real GDP demanded in the United States increases and there is a movement up along the U.S.AD curve. 
E) U.S.aggregate demand decreases and the U.S.AD curve shifts rightward.

Question 15

What is a cost-push inflation?

Accepted Answer

The answer of What is a cost-push inflation?...

Question 16

-The change reflected in the above figure might be a result of

Accepted Answer

A) a decrease in the quantity of capital. 
B) an increase in the quantity of labor. 
C) a rise in the money wage rate. 
D) a decrease in the money prices of resources other than labor. 
E) a fall in the price level.

Question 17

A change in the price level brings a ________ the aggregate supply curve,NOT a ________ the aggregate supply curve.

Accepted Answer

A) shift in;movement along 
B) vertical displacement of;change in the slope of 
C) movement along;shift in 
D) change in the slope of;horizontal displacement of 
E) shift in;change in the slope of

Question 18

The aggregate demand curve shifts when any of the following factors change EXCEPT

Accepted Answer

A) foreign income. 
B) the price level. 
C) monetary policy. 
D) expectations about the future. 
E) fiscal policy.

Question 19

The aggregate demand multiplier effect says that an initial increase in expenditure plans leads to an induced

Accepted Answer

A) increase in consumption expenditure. 
B) increase in production expenditure. 
C) increase in government expenditures on goods and services. 
D) decrease in the price level. 
E) increase in exports.

Question 20

The economy is at full employment.If aggregate demand increases,

Accepted Answer

A) an inflationary gap is created and the AS curve shifts leftward as the money wage rate rises. 
B) an inflationary gap is created and the AD curve shifts leftward. 
C) an inflationary gap is created and potential GDP increases to close the gap. 
D) a recessionary gap is created and the AS curve shifts leftward as the money wage rate falls. 
E) a recessionary gap is created and the AS curve shifts leftward as the money wage rate rises.

Exam 19: Aggregate Supply and Aggregate Demand