Question 1

Assume that an initial change in spending of $10 billion results in a rightward shift in aggregate demand that increases real GDP by $40 billion.The multiplier is:

Accepted Answer

A)  $10 billion.
B)  $40 billion.
C)  4
D)  5E) A) and D)
F) C) and D)

Question 2

The aggregate supply curve slopes downward.

Accepted Answer

A) True 
 B)False

Question 3

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 input prices and r productivity.E) All of the above
F) B) and C)

Question 4

Per-unit production cost is determined by dividing output by total input cost.

Accepted Answer

A) True 
 B)False

Question 5

An increase in aggregate expenditures resulting from a decrease in the price level is equivalent to a:

Accepted Answer

A)  rightward shift of the aggregate demand curve.
B)  leftward shift of the aggregate demand curve.
C)  movement downward along a fixed aggregate demand curve.
D)  decrease in aggregate supply.E) B) and D)
F) B) and C)

Question 6

Productivity measures:

Accepted Answer

A)  real output per unit of input.
B)  per unit production costs.
C)  the changes in real wealth caused by price level changes.
D)  the amount of capital goods used per worker.E) None of the above
F) A) and D)

Question 7

The horizontal shape of the immediate short run aggregate supply implies that:

Accepted Answer

A)  the total amount of output in the economy depends only on the general price level.
B)  the total amount of output in the economy depends only on the volume of spending.
C)  the total amount of output in the economy is fixed.
D)  the total amount of spending depends on the price of inputs.E) A) and D)
F) B) and C)

Question 8

The short-run aggregate supply curve is upward-sloping because:

Accepted Answer

A)  of the interest-rate effect.
B)  higher price levels create incentives to expand output when resource prices remain constant.
C)  of the net export effect.
D)  higher price levels create an expectation among producers of still higher price levels.E) A) and C)
F) All of the above

Question 9

The interest-rate and real-balances effects are important because they help explain:

Accepted Answer

A)  rightward and leftward shifts of the aggregate demand curve.
B)  why demand-management policy cannot be used effectively to curb stagflation.
C)  the shape of the aggregate demand curve.
D)  the shape of the aggregate supply curve.E) B) and D)
F) A) and B)

Question 10

The short run aggregate supply curve:

Accepted Answer

A)  shows the various amounts of real output which businesses will produce at each price level.
B)  is downward sloping because real purchasing power increases as the price level falls.
C)  contains a vertical range where real output is variable and the price level is constant.
D)  is explained by the interest rate, wealth, and foreign trade effects.E) B) and D)
F) All of the above

Question 11

Suppose that real domestic output in an economy is 20 units, the quantity of inputs is 10, and the price of each input is $4.The per unit cost of production in the economy described above is:

Accepted Answer

A)  $.50.
B)  $1
C)  $2
D)  $5E) A) and B)
F) A) and C)

Question 12

A fall in real interest rates will reduce aggregate demand.

Accepted Answer

A) True 
 B)False

Question 13

An increase in the price level, other things equal, will shift the:

Accepted Answer

A)  consumption, investment, and net exports schedules of the aggregate expenditures model downward.
B)  consumption, investment, and net exports schedules of the aggregate expenditures model upward.
C)  consumption, and investment schedules of the aggregate expenditures model upward, but the net exports schedule downward.
D)  consumption, and net exports schedules of the aggregate expenditures model upward, but the investment schedule downward.E) C) and D)
F) None of the above

Question 14

The economy experiences a decrease in the price level and an increase in real domestic output.Which is a likely explanation?

Accepted Answer

A)  consumer incomes and the quantity of labour have decreased
B)  interest rates and wage rates have decreased
C)  the prices of imported resources have increased
D)  national income abroad has increasedE) B) and C)
F) A) and C)

Question 15

Collective bargaining agreements that prohibit wage cuts for the duration of the contract contribute to:

Accepted Answer

A)  a wealth effect.
B)  a multiplier effect.
C)  an increase in aggregate supply.
D)  a price level that is inflexible downward.E) A) and C)
F) B) and C)

Question 16

Suppose the full-employment level of real output (Q)  for a hypothetical economy is $500 and that the price level (P)  initially is 100.Use the following short-run aggregate supply schedules to answer the next question.  Refer to the information above.In the long run, a fall in the price level from 100 to 75 will:

Accepted Answer

A)  decrease real output from $500 to $440.
B)  increase real output from $500 to $620.
C)  change the aggregate supply schedule from (a)  to (c)  and produce an equilibrium level of real output of $500.
D)  change the aggregate supply schedule from (a)  to (b)  and produce an equilibrium level of real output of $500.E) C) and D)
F) All of the above

Question 17

The real-balances, interest rate, and foreign trade effects all help explain:

Accepted Answer

A)  why the aggregate demand curve is downward sloping.
B)  why the aggregate supply curve is upward sloping.
C)  shifts in the aggregate demand curve.
D)  shifts in the aggregate supply curve.E) C) and D)
F) B) and D)

Question 18

Which would most likely shift the aggregate supply curve? A change in:

Accepted Answer

A)  consumer expectations.
B)  government spending.
C)  excess capacity in business.
D)  prices of imported resources.E) C) and D)
F) None of the above

Question 19

The following aggregate demand and supply schedules are for a hypothetical economy:  Refer to the above data.The change in aggregate demand indicated in the previous question might have been caused by:

Accepted Answer

A)  an increase in net exports.
B)  a worsening of business expectations.
C)  an increase in consumer wealth.
D)  a decrease in the personal income tax.E) None of the above
F) A) and B)

Question 20

In the long run, the aggregate supply curve of an economy is:

Accepted Answer

A)  upward sloping.
B)  downward sloping.
C)  horizontal.
D)  vertical.E) A) and B)
F) A) and C)

Exam 12: Part B: Aggregate Demand and Aggregate Supply

Collective bargaining agreements that prohibit wage cuts for the duration of the contract contribute to:

Correct Answer
verified

In the long run, the aggregate supply curve of an economy is:

Correct Answer
verified

The horizontal shape of the immediate short run aggregate supply implies that:

Correct Answer
verified

The real-balances, interest rate, and foreign trade effects all help explain:

Correct Answer
verified

The short-run aggregate supply curve is upward-sloping because:

Correct Answer
verified

Correct Answer
verified

A fall in real interest rates will reduce aggregate demand.

Correct Answer
verified

The short run aggregate supply curve:

Correct Answer
verified

An increase in the price level, other things equal, will shift the:

Correct Answer
verified

Assume that an initial change in spending of $10 billion results in a rightward shift in aggregate demand that increases real GDP by $40 billion.The multiplier is:

Correct Answer
verified

The interest-rate and real-balances effects are important because they help explain:

Correct Answer
verified

Suppose that real domestic output in an economy is 20 units, the quantity of inputs is 10, and the price of each input is $4.The per unit cost of production in the economy described above is:

Correct Answer
verified

Productivity measures:

Correct Answer
verified

Per-unit production cost is determined by dividing output by total input cost.

Correct Answer
verified

The following aggregate demand and supply schedules are for a hypothetical economy: Refer to the above data.The change in aggregate demand indicated in the previous question might have been caused by:

Correct Answer
verified

The economy experiences a decrease in the price level and an increase in real domestic output.Which is a likely explanation?

Correct Answer
verified

An increase in aggregate expenditures resulting from a decrease in the price level is equivalent to a:

Correct Answer
verified

The determinants of aggregate supply:

Correct Answer
verified

Which would most likely shift the aggregate supply curve? A change in:

Correct Answer
verified

The aggregate supply curve slopes downward.

Correct Answer
verified

Exam 12: Part B: Aggregate Demand and Aggregate Supply

Collective bargaining agreements that prohibit wage cuts for the duration of the contract contribute to:

Correct AnswerverifiedShow Answer

In the long run, the aggregate supply curve of an economy is:

Correct AnswerverifiedShow Answer

The horizontal shape of the immediate short run aggregate supply implies that:

Correct AnswerverifiedShow Answer

The real-balances, interest rate, and foreign trade effects all help explain:

Correct AnswerverifiedShow Answer

The short-run aggregate supply curve is upward-sloping because:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A fall in real interest rates will reduce aggregate demand.

Correct AnswerverifiedShow Answer

The short run aggregate supply curve:

Correct AnswerverifiedShow Answer

An increase in the price level, other things equal, will shift the:

Correct AnswerverifiedShow Answer

Assume that an initial change in spending of $10 billion results in a rightward shift in aggregate demand that increases real GDP by $40 billion.The multiplier is:

Correct AnswerverifiedShow Answer

The interest-rate and real-balances effects are important because they help explain:

Correct AnswerverifiedShow Answer

Suppose that real domestic output in an economy is 20 units, the quantity of inputs is 10, and the price of each input is $4.The per unit cost of production in the economy described above is:

Correct AnswerverifiedShow Answer

Productivity measures:

Correct AnswerverifiedShow Answer

Per-unit production cost is determined by dividing output by total input cost.

Correct AnswerverifiedShow Answer

The following aggregate demand and supply schedules are for a hypothetical economy: Refer to the above data.The change in aggregate demand indicated in the previous question might have been caused by:

Correct AnswerverifiedShow Answer

The economy experiences a decrease in the price level and an increase in real domestic output.Which is a likely explanation?

Correct AnswerverifiedShow Answer

An increase in aggregate expenditures resulting from a decrease in the price level is equivalent to a:

Correct AnswerverifiedShow Answer

The determinants of aggregate supply:

Correct AnswerverifiedShow Answer

Which would most likely shift the aggregate supply curve? A change in:

Correct AnswerverifiedShow Answer

The aggregate supply curve slopes downward.

Correct AnswerverifiedShow Answer

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