Question 1

Which of the following is a true statement?

Accepted Answer

A)  Firms and resource suppliers generally find it easier to reduce prices than to raise them.
B)  As the price level increases, interest rates will rise and therefore consumption and investment spending will also rise.
C)  An initial increase in aggregate demand may cause a further increase in aggregate demand because higher prices mean higher incomes.
D)  A decline in aggregate demand will primarily affect real output and employment if prices are inflexible downward.E) None of the above
F) A) and B)

Question 2

The foreign purchases effect suggests that an increase in the U.S.price level relative to other countries will

Accepted Answer

A)  increase the amount of U.S.real output purchased.
B)  increase U.S.imports and decrease U.S.exports.
C)  increase both U.S.imports and U.S.exports.
D)  decrease both U.S.imports and U.S.exports.E) B) and C)
F) A) and B)

Question 3

Changes in which of the following would not shift the aggregate demand curve?

Accepted Answer

A)  productivity rates
B)  foreign-exchange rates
C)  real interest rates
D)  income tax ratesE) C) and D)
F) B) and C)

Question 4

An increase in personal income tax rates will cause a(n)

Accepted Answer

A)  decrease (or shift left)  in aggregate demand.
B)  increase (or shift right)  in aggregate demand.
C)  decrease in the quantity of real output demanded (or movement up along A
D)  .
D)  increase in the quantity of real output demanded (or movement down along A
D)  .E) All of the above
F) A) and B)

Question 5

The aggregate expenditures model and the aggregate demand curve can be reconciled because, other things equal, in the aggregate expenditures model,

Accepted Answer

A)  changes in the price level have no effect on the equilibrium level of GDP.
B)  an increase in the price level increases the real value of wealth.
C)  the level of aggregate expenditures and therefore the level of real GDP vary inversely with the price level.
D)  the level of aggregate expenditures and therefore the level of real GDP vary directly with the price level.E) A) and C)
F) B) and C)

Question 6

Which of the following would not shift the aggregate supply curve?

Accepted Answer

A)  an increase in labor productivity
B)  a decline in the price of imported oil
C)  a decline in business taxes
D)  an increase in the price levelE) None of the above
F) C) and D)

Question 7

The fear of unwanted price wars may explain why many firms are reluctant to

Accepted Answer

A)  reduce wages when a decline in aggregate demand occurs.
B)  reduce prices when a decline in aggregate demand occurs.
C)  expand production capacity when an increase in aggregate demand occurs.
D)  provide wage increases when labor productivity rises.E) A) and D)
F) A) and C)

Question 8

An increase in wealth from a substantial increase in stock prices will move the economy along a fixed aggregate demand curve.

Accepted Answer

A) True 
 B)False

Question 9

In the accompanying table for a particular country, 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.A decrease in the interest rate not caused by a change in the price level would

Accepted Answer

A)  increase the values in column Ig and increase aggregate demand.
B)  decrease the values in column Ig and increase aggregate demand.
C)  increase the values in column C and decrease aggregate demand.
D)  decrease the values in column C and decrease aggregate demand.E) A) and B)
F) A) and C)

Question 10

If investment increases by $10 billion and the economy's MPC is 0.8, the aggregate demand curve will shift

Accepted Answer

A)  leftward by $50 billion at each price level.
B)  rightward by $10 billion at each price level.
C)  rightward by $50 billion at each price level.
D)  leftward by $40 billion at each price level.E) C) and D)
F) None of the above

Question 11

With cost-push inflation in the short run, there will be

Accepted Answer

A)  an increase in real GDP.
B)  a leftward shift in the aggregate demand curve.
C)  a decrease in real GDP.
D)  a decrease in unemployment.E) C) and D)
F) B) and D)

Question 12

In the accompanying table for a particular country, 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.If the equilibrium level of real GDP is $43 billion, its level of consumption will be

Accepted Answer

A)  $20 billion.
B)  $22 billion.
C)  $24 billion.
D)  $26 billion.E) A) and C)
F) A) and B)

Question 13

Cost-push inflation can be described as a rightward shift of the aggregate supply curve.

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

A)  domestic products.
B)  foreign products.
C)  financial assets.
D)  resources.E) C) and D)
F) B) and D)

Question 15

If personal income taxes and business taxes increase, then this will

Accepted Answer

A)  increase aggregate demand and aggregate supply.
B)  decrease aggregate demand and aggregate supply.
C)  decrease aggregate demand and increase aggregate supply.
D)  increase aggregate demand and decrease aggregate supply.E) All of the above
F) None of the above

Question 16

In the mid-1970s, changes in oil prices greatly affected U.S.inflation.When oil prices rose, the U.S.experienced

Accepted Answer

A)  cost-push inflation and rising output.
B)  demand-pull inflation and rising output.
C)  cost-push inflation and falling output.
D)  demand-pull inflation and falling output.E) A) and D)
F) B) and C)

Question 17

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.If the per-unit price of raw materials rises from $4 to $8 and all else remains constant, the per-unit cost of production will rise by about

Accepted Answer

A)  100 percent.
B)  50 percent.
C)  40 percent.
D)  30 percent.E) C) and D)
F) B) and C)

Question 18

The shape of the short-run aggregate supply curve indicates that as the general price level rises, output will expand but not by much when the economy reaches full employment.

Accepted Answer

A) True 
 B)False

Question 19

An increase in the price level reduces the real value of financial assets with fixed money values, and, as a result, the holders of these assets decrease their spending.

Accepted Answer

A) True 
 B)False

Question 20

The expenditure multiplier concept of the aggregate expenditures model

Accepted Answer

A)  is not at all relevant in the AD-AS model.
B)  magnifies the shifts of the aggregate demand curve.
C)  explains movement up or down the aggregate demand curve.
D)  reverses the shift of the aggregate demand curve.E) A) and D)
F) C) and D)

Exam 32: Aggregate Demand and Aggregate Supply

An increase in the price level reduces the real value of financial assets with fixed money values, and, as a result, the holders of these assets decrease their spending.

Correct Answer
verified

An increase in wealth from a substantial increase in stock prices will move the economy along a fixed aggregate demand curve.

Correct Answer
verified

The fear of unwanted price wars may explain why many firms are reluctant to

Correct Answer
verified

If investment increases by $10 billion and the economy's MPC is 0.8, the aggregate demand curve will shift

Correct Answer
verified

In the accompanying table for a particular country, 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.A decrease in the interest rate not caused by a change in the price level would

Correct Answer
verified

With cost-push inflation in the short run, there will be

Correct Answer
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Correct Answer
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Which of the following is a true statement?

Correct Answer
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Correct Answer
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Changes in which of the following would not shift the aggregate demand curve?

Correct Answer
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Which of the following would not shift the aggregate supply curve?

Correct Answer
verified

The foreign purchases effect suggests that an increase in the U.S.price level relative to other countries will

Correct Answer
verified

The expenditure multiplier concept of the aggregate expenditures model

Correct Answer
verified

In the mid-1970s, changes in oil prices greatly affected U.S.inflation.When oil prices rose, the U.S.experienced

Correct Answer
verified

If personal income taxes and business taxes increase, then this will

Correct Answer
verified

An increase in personal income tax rates will cause a(n)

Correct Answer
verified

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

Correct Answer
verified

The aggregate expenditures model and the aggregate demand curve can be reconciled because, other things equal, in the aggregate expenditures model,

Correct Answer
verified

The shape of the short-run aggregate supply curve indicates that as the general price level rises, output will expand but not by much when the economy reaches full employment.

Correct Answer
verified

Cost-push inflation can be described as a rightward shift of the aggregate supply curve.

Correct Answer
verified

Exam 32: Aggregate Demand and Aggregate Supply

An increase in the price level reduces the real value of financial assets with fixed money values, and, as a result, the holders of these assets decrease their spending.

Correct AnswerverifiedShow Answer

An increase in wealth from a substantial increase in stock prices will move the economy along a fixed aggregate demand curve.

Correct AnswerverifiedShow Answer

The fear of unwanted price wars may explain why many firms are reluctant to

Correct AnswerverifiedShow Answer

If investment increases by $10 billion and the economy's MPC is 0.8, the aggregate demand curve will shift

Correct AnswerverifiedShow Answer

In the accompanying table for a particular country, 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.A decrease in the interest rate not caused by a change in the price level would

Correct AnswerverifiedShow Answer

With cost-push inflation in the short run, there will be

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is a true statement?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Changes in which of the following would not shift the aggregate demand curve?

Correct AnswerverifiedShow Answer

Which of the following would not shift the aggregate supply curve?

Correct AnswerverifiedShow Answer

The foreign purchases effect suggests that an increase in the U.S.price level relative to other countries will

Correct AnswerverifiedShow Answer

The expenditure multiplier concept of the aggregate expenditures model

Correct AnswerverifiedShow Answer

In the mid-1970s, changes in oil prices greatly affected U.S.inflation.When oil prices rose, the U.S.experienced

Correct AnswerverifiedShow Answer

If personal income taxes and business taxes increase, then this will

Correct AnswerverifiedShow Answer

An increase in personal income tax rates will cause a(n)

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The aggregate expenditures model and the aggregate demand curve can be reconciled because, other things equal, in the aggregate expenditures model,

Correct AnswerverifiedShow Answer

The shape of the short-run aggregate supply curve indicates that as the general price level rises, output will expand but not by much when the economy reaches full employment.

Correct AnswerverifiedShow Answer

Cost-push inflation can be described as a rightward shift of the aggregate supply curve.

Correct AnswerverifiedShow Answer

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