Question 1

If aggregate demand increases and aggregate supply decreases,the price level:

Accepted Answer

A)   will decrease,but real output may increase,decrease,or remain unchanged.
B)   will increase,but real output may increase,decrease,or remain unchanged.
C)   and real output will both increase.
D)   and real output will both decrease.E) A) and C)
F) All of the above

Question 2

Prices and wages tend to be:

Accepted Answer

A)   flexible both upward and downward.
B)   inflexible both upward and downward.
C)   flexible downward,but inflexible upward.
D)   flexible upward,but inflexible downward.E) A) and C)
F) A) and D)

Question 3

If the price level increases in the United States relative to foreign countries,then American consumers will purchase more foreign goods and fewer U.S.goods.This statement describes:

Accepted Answer

A)   the output effect.
B)   the foreign purchases effect.
C)   the real-balances effect.
D)   the shift-of-spending effect.E) A) and D)
F) B) and C)

Question 4

Which one of the following would not shift the aggregate demand curve?

Accepted Answer

A)   A change in the price level.
B)   Depreciation of the international value of the dollar.
C)   A decline in the interest rate at each possible price level.
D)   An increase in personal income tax rates.E) B) and D)
F) B) and C)

Question 5

The aggregate supply curve (short run)becomes steeper as the economy moves rightward and upward along it.

Accepted Answer

A) True 
 B)False

Question 6

In the immediate short run,both input and output prices are fixed.

Accepted Answer

A) True 
 B)False

Question 7

Suppose that technological advancements stimulate $20 billion in additional investment spending.If the MPC = .6,how much will the change in investment increase aggregate demand?

Accepted Answer

A)   $12 billion.
B)   $20 billion.
C)   $33.3 billion.
D)   $50 billion.E) B) and D)
F) B) and C)

Question 8

Answer the question on the basis of the following table for a particular country in which C is consumption expenditures,Ig is gross investment expenditures,G is government expenditures,X is exports,and M is imports.All figures are in billions of dollars.Each question is independent of other question using the same table,unless otherwise stated.  Price Level‾128125122119116C‾$1820222426Ig‾$246810G ‾$33333X ‾$12345M‾$54321Real GDP‾\begin{array}{c}\begin{array}{c}\underline{	ext {Price Level}}\128 \125 \122 \119 \116\end{array}\begin{array}{c}\underline{	ext {C}} \ \$ 18 \20 \22 \24 \26\end{array}\begin{array}{c}\underline{\mathrm{I}_{\mathrm{g}} }\ \$ 2 \4 \6 \8 \10\end{array}\begin{array}{c}\underline{	ext {G }}\ \$ 3 \3 \3 \3 \3\end{array}\begin{array}{c}\underline{	ext {X }}\\$ 1 \2 \3 \4 \5\end{array}\begin{array}{c}\underline{	ext {M}} \ \$ 5 \4 \3 \2 \1\end{array}\begin{array}{c}\underline{	ext {Real GDP}} \ \\\ \\\end{array}\end{array}Price Level​128125122119116​C​$1820222426​Ig​​$246810​G ​$33333​X ​$12345​M​$54321​Real GDP​​​ 
 Refer to the table.If the amounts of GDP supplied at the price levels shown (in descending order) are $45,$43,$40,$37,and $31,the equilibrium level of real GDP will be:

Accepted Answer

A)   $37 billion.
B)   $35 billion.
C)   $26 billion.
D)   $43 billion. E) B) and D)
F) B) and C)

Question 9

A rightward shift of the AD curve in the very flat part of the short-run AS curve will:

Accepted Answer

A)   increase real output by more than the price level.
B)   increase the price level by more than real output.
C)   reduce real output by more than the price level.
D)   reduce the price level by more than real output.E) A) and C)
F) B) and D)

Question 10

In an effort to avoid recession,the government implements a tax rebate program,effectively cutting taxes for households.We would expect this to:

Accepted Answer

A)   affect neither aggregate supply nor aggregate demand.
B)   increase aggregate demand.
C)   reduce aggregate demand.
D)   reduce aggregate supply.E) A) and B)
F) None of the above

Question 11

An increase in investment spending caused by higher expected rates of return will:

Accepted Answer

A)   shift the aggregate supply curve to the left.
B)   move the economy up along an existing aggregate demand curve.
C)   shift the aggregate expenditures curve downward and the aggregate demand curve to the left.
D)   shift the aggregate expenditures curve upward and the aggregate demand curve to the right.E) B) and D)
F) None of the above

Question 12

The equilibrium price level and level of real output occur where:

Accepted Answer

A)   real output is at its highest possible level.
B)   exports equal imports.
C)   the price level is at its lowest level.
D)   the aggregate demand and supply curves intersect.E) A) and B)
F) A) and C)

Question 13

An increase in net exports will shift the AD curve to the:

Accepted Answer

A)   left by a multiple of the change in investment.
B)   left by the same amount as the change in investment.
C)   right by the same amount as the change in investment.
D)   right by a multiple of the change in investment.E) All of the above
F) A) and B)

Question 14

The size of the multiplier associated with an initial increase in spending will be:

Accepted Answer

A)   the same whether or not inflation occurs.
B)   diminished if inflation occurs.
C)   zero if any increase in the price level occurs.
D)   enhanced if inflation occurs.E) C) and D)
F) B) and C)

Question 15

The immediate-short-run aggregate supply curve is:

Accepted Answer

A)   downsloping.
B)   upsloping.
C)   vertical.
D)   horizontal.E) B) and C)
F) All of the above

Question 16

(Consider This) The idea that the price level readily moves upward but not downward is called the:

Accepted Answer

A)   elevator effect.
B)   escalator effect.
C)   ratchet effect.
D)   stair-step effect.E) A) and D)
F) C) and D)

Question 17

The economy's long-run aggregate supply curve:

Accepted Answer

A)   slopes upward and to the right.
B)   is vertical.
C)   is horizontal.
D)   slopes downward and to the right.E) All of the above
F) A) and B)

Question 18

Menu costs:

Accepted Answer

A)   increase during recession.
B)   decrease during recession.
C)   are the costs to firms of changing prices and communicating them to customers.
D)   are sunk costs and therefore should be disregarded.E) B) and C)
F) None of the above

Question 19

Answer the question on the basis of the following information.An economy is employing 2 units of capital,5 units of raw materials,and 8 units of labor to produce its total output of 640 units.Each unit of capital costs $10;each unit of raw materials,$4;and each unit of labor,$3. Refer to the information.If the per-unit price of raw materials rises from $4 to $8 and all else remains constant,the aggregate:

Accepted Answer

A)   supply curve would shift to the left.
B)   supply curve would shift to the right.
C)   demand curve would shift to the left.
D)   demand curve would shift to the right.E) A) and B)
F) A) and D)

Question 20

The determinants of aggregate supply:

Accepted Answer

A)   are consumption,investment,government,and net export spending.
B)   explain why real domestic output and the price level are directly related.
C)   explain the three distinct ranges of the aggregate supply curve.
D)   include resource prices and resource productivity.E) None of the above
F) C) and D)

Exam 31: Aggregate Demand and Aggregate Supply

Menu costs:

Correct Answer
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The determinants of aggregate supply:

Correct Answer
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In the immediate short run,both input and output prices are fixed.

Correct Answer
verified

An increase in net exports will shift the AD curve to the:

Correct Answer
verified

Suppose that technological advancements stimulate $20 billion in additional investment spending.If the MPC = .6,how much will the change in investment increase aggregate demand?

Correct Answer
verified

The economy's long-run aggregate supply curve:

Correct Answer
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The immediate-short-run aggregate supply curve is:

Correct Answer
verified

Correct Answer
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A rightward shift of the AD curve in the very flat part of the short-run AS curve will:

Correct Answer
verified

In an effort to avoid recession,the government implements a tax rebate program,effectively cutting taxes for households.We would expect this to:

Correct Answer
verified

An increase in investment spending caused by higher expected rates of return will:

Correct Answer
verified

Prices and wages tend to be:

Correct Answer
verified

Correct Answer
verified

If aggregate demand increases and aggregate supply decreases,the price level:

Correct Answer
verified

(Consider This) The idea that the price level readily moves upward but not downward is called the:

Correct Answer
verified

The aggregate supply curve (short run)becomes steeper as the economy moves rightward and upward along it.

Correct Answer
verified

Which one of the following would not shift the aggregate demand curve?

Correct Answer
verified

The equilibrium price level and level of real output occur where:

Correct Answer
verified

If the price level increases in the United States relative to foreign countries,then American consumers will purchase more foreign goods and fewer U.S.goods.This statement describes:

Correct Answer
verified

The size of the multiplier associated with an initial increase in spending will be:

Correct Answer
verified

Exam 31: Aggregate Demand and Aggregate Supply

Menu costs:

Correct AnswerverifiedShow Answer

The determinants of aggregate supply:

Correct AnswerverifiedShow Answer

In the immediate short run,both input and output prices are fixed.

Correct AnswerverifiedShow Answer

An increase in net exports will shift the AD curve to the:

Correct AnswerverifiedShow Answer

Suppose that technological advancements stimulate $20 billion in additional investment spending.If the MPC = .6,how much will the change in investment increase aggregate demand?

Correct AnswerverifiedShow Answer

The economy's long-run aggregate supply curve:

Correct AnswerverifiedShow Answer

The immediate-short-run aggregate supply curve is:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A rightward shift of the AD curve in the very flat part of the short-run AS curve will:

Correct AnswerverifiedShow Answer

In an effort to avoid recession,the government implements a tax rebate program,effectively cutting taxes for households.We would expect this to:

Correct AnswerverifiedShow Answer

An increase in investment spending caused by higher expected rates of return will:

Correct AnswerverifiedShow Answer

Prices and wages tend to be:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If aggregate demand increases and aggregate supply decreases,the price level:

Correct AnswerverifiedShow Answer

(Consider This) The idea that the price level readily moves upward but not downward is called the:

Correct AnswerverifiedShow Answer

The aggregate supply curve (short run)becomes steeper as the economy moves rightward and upward along it.

Correct AnswerverifiedShow Answer

Which one of the following would not shift the aggregate demand curve?

Correct AnswerverifiedShow Answer

The equilibrium price level and level of real output occur where:

Correct AnswerverifiedShow Answer

If the price level increases in the United States relative to foreign countries,then American consumers will purchase more foreign goods and fewer U.S.goods.This statement describes:

Correct AnswerverifiedShow Answer

The size of the multiplier associated with an initial increase in spending will be:

Correct AnswerverifiedShow Answer

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