Question 1

When the price level increases, people:

Accepted Answer

A)   feel less wealthy.
B)   feel wealthier.
C)   have the same real value of assets, regardless of the change in the price level.
D)   work less.E) None of the above
F) All of the above

Question 2

In the macroeconomic model of aggregate supply and aggregate demand, quantity is:

Accepted Answer

A)   the amount traded by all individual buyers and sellers in a market.
B)   only influenced by changes in aggregate demand.
C)   a measure of total output.
D)   All of these are true.E) A) and B)
F) All of the above

Question 3

The introduction of the power loom during the Industrial Revolution caused the _______ aggregate supply curve to shift to the _______.

Accepted Answer

A)   long-run; left
B)   long-run; right
C)   short-run; left
D)   None of these shifts occurred when the power loom was introduced.E) A) and B)
F) B) and C)

Question 4

When the U.S. price level decreases, we would expect a(n)  _______ the aggregate demand curve.

Accepted Answer

A)   downward movement along
B)   leftward shift of
C)   rightward shift of
D)   upward movement alongE) A) and B)
F) All of the above

Question 5

A year-long drought that destroys most of the summer's crops would be considered a:

Accepted Answer

A)   short-run supply shock.
B)   long-run supply shock.
C)   short-run demand shock.
D)   long-run demand shock.E) A) and B)
F) A) and C)

Question 6

When the U.S. price level decreases relative to the rest of the world:

Accepted Answer

A)   exports and net exports will increase.
B)   imports and net exports will increase.
C)   exports will increase and net exports will decrease.
D)   exports will decrease and net exports will increase.E) A) and B)
F) None of the above

Question 7

During the dot-com bubble, consumers believed that the Internet would radically change the shopping experience and lead to higher incomes throughout the economy. How would the dot-com bubble be best represented in the AD/AS model?

Accepted Answer

A)   The aggregate demand curve shifts right.
B)   The aggregate demand curve shifts left.
C)   Prices increase along the aggregate demand curve.
D)   Prices decrease along the aggregate demand curve.E) None of the above
F) A) and B)

Question 8

Suppose prices in the United States increase relative to other countries. What type of shock is the U.S. economy experiencing?

Accepted Answer

A)   Long-run supply shock
B)   Short-run supply shock
C)   Demand shock
D)   Change in price levelE) A) and D)
F) B) and C)

Question 9

If the government were to increase income taxes, we would predict:

Accepted Answer

A)   a downward movement along the aggregate demand curve.
B)   the aggregate demand curve to shift to the right.
C)   the aggregate demand curve to shift to the left.
D)   an upward movement along the aggregate demand curve.E) B) and D)
F) All of the above

Question 10

When the economy is producing at a quantity greater than its long-run aggregate supply:

Accepted Answer

A)   it is pushing some of its resources to operate beyond capacity.
B)   it is experiencing greater economic growth.
C)   a bubble forms in one of its major sectors.
D)   it is experiencing a recession.E) A) and D)
F) A) and C)

Question 11

When the government is considering whether it should change its spending in response to a recession, it must weigh the trade-off between _______ and _______.

Accepted Answer

A)   a faster recovery time; inflation
B)   less output; higher prices
C)   more output; lower prices
D)   a faster recovery time; lower pricesE) None of the above
F) All of the above

Question 12

The figure shown displays various economic outcomes. 1 to AD2, the resulting price and output in the long run would be: A)  P 1 and Y 2. B)  P 3 and Y 1. C)  P 2 and Y 3. D)  P 2 and Y 2." class="answers-bank-image d-inline" rel="preload" > If the aggregate demand curve shifts from AD1 to AD2, the resulting price and output in the long run would be:

Accepted Answer

A)   P 1 and Y 2.
B)   P 3 and Y 1.
C)   P 2 and Y 3.
D)   P 2 and Y 2.E) A) and D)
F) A) and C)

Question 13

The aggregate demand curve is downward-sloping partly due to the _______ relationship between the price level and _______.

Accepted Answer

A)   positive; net exports
B)   negative; net exports
C)   positive; government spending
D)   negative; government spendingE) A) and C)
F) B) and D)

Question 14

If U.S. prices increase relative to the rest of the world, we would expect:

Accepted Answer

A)   net exports to increase.
B)   net exports to decrease.
C)   imports to decrease.
D)   imports to remain unaffected.E) All of the above
F) A) and D)

Question 15

The aggregate supply and aggregate demand model is used to explain:

Accepted Answer

A)   how individual markets affect other markets.
B)   how entire markets operate, not just each individual seller within a market.
C)   how the market price is determined by all buyers and sellers interacting in a market.
D)   how output, prices, and employment are tied together in a single economic equilibrium.E) A) and B)
F) None of the above

Question 16

A sudden increase in immigration would be considered a(n) :

Accepted Answer

A)   short-run supply shock.
B)   long-run supply shock.
C)   interest-rate shock.
D)   A change in immigration would not influence aggregate demand or supply.E) A) and D)
F) C) and D)

Question 17

Which of the following is a component of aggregate demand?

Accepted Answer

A)   Net exports
B)   Income
C)   Government revenues
D)   Interest ratesE) B) and C)
F) B) and D)

Question 18

A decrease in output and an increase in prices would indicate that the economy has experienced a:

Accepted Answer

A)   positive supply side shock.
B)   negative supply side shock.
C)   positive demand side shock.
D)   negative demand side shock.E) A) and B)
F) A) and D)

Question 19

If an economy is in a recession, and the government increases its spending to bring the economy back to its long-run equilibrium, the long-run level of output will:

Accepted Answer

A)   return, but with higher prices.
B)   return, as will the original price level.
C)   return, but with lower prices.
D)   not return.E) B) and C)
F) None of the above

Question 20

The difference in stimulus provided by government spending versus tax cuts is caused by the fact that:

Accepted Answer

A)   people don't respond to tax policy as greatly as they do to as spending policy.
B)   the government is able to target spending in high-need areas of the economy.
C)   tax cuts take longer to implement legislatively.
D)   only a fraction of tax cuts are spent immediately, while the full amount of government spending immediately makes it to the economy.E) C) and D)
F) B) and D)

Exam 12: Aggregatedemand and Aggregate Supply

Suppose prices in the United States increase relative to other countries. What type of shock is the U.S. economy experiencing?

Correct AnswerverifiedShow Answer

When the government is considering whether it should change its spending in response to a recession, it must weigh the trade-off between _______ and _______.

Correct AnswerverifiedShow Answer

The aggregate demand curve is downward-sloping partly due to the _______ relationship between the price level and _______.

Correct AnswerverifiedShow Answer

Which of the following is a component of aggregate demand?

Correct AnswerverifiedShow Answer

When the U.S. price level decreases, we would expect a(n) _______ the aggregate demand curve.

Correct AnswerverifiedShow Answer

When the U.S. price level decreases relative to the rest of the world:

Correct AnswerverifiedShow Answer

When the economy is producing at a quantity greater than its long-run aggregate supply:

Correct AnswerverifiedShow Answer

During the dot-com bubble, consumers believed that the Internet would radically change the shopping experience and lead to higher incomes throughout the economy. How would the dot-com bubble be best represented in the AD/AS model?

Correct AnswerverifiedShow Answer

A year-long drought that destroys most of the summer's crops would be considered a:

Correct AnswerverifiedShow Answer

In the macroeconomic model of aggregate supply and aggregate demand, quantity is:

Correct AnswerverifiedShow Answer

If the government were to increase income taxes, we would predict:

Correct AnswerverifiedShow Answer

A decrease in output and an increase in prices would indicate that the economy has experienced a:

Correct AnswerverifiedShow Answer

The figure shown displays various economic outcomes. If the aggregate demand curve shifts from AD1 to AD2, the resulting price and output in the long run would be:

Correct AnswerverifiedShow Answer

The aggregate supply and aggregate demand model is used to explain:

Correct AnswerverifiedShow Answer

When the price level increases, people:

Correct AnswerverifiedShow Answer

If an economy is in a recession, and the government increases its spending to bring the economy back to its long-run equilibrium, the long-run level of output will:

Correct AnswerverifiedShow Answer

The introduction of the power loom during the Industrial Revolution caused the _______ aggregate supply curve to shift to the _______.

Correct AnswerverifiedShow Answer

A sudden increase in immigration would be considered a(n) :

Correct AnswerverifiedShow Answer

If U.S. prices increase relative to the rest of the world, we would expect:

Correct AnswerverifiedShow Answer

The difference in stimulus provided by government spending versus tax cuts is caused by the fact that:

Correct AnswerverifiedShow Answer

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When the government is considering whether it should change its spending in response to a recession, it must weigh the trade-off between _ and _.

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The aggregate demand curve is downward-sloping partly due to the _ relationship between the price level and _.

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The figure shown displays various economic outcomes. If the aggregate demand curve shifts from AD₁ to AD₂, the resulting price and output in the long run would be:

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The introduction of the power loom during the Industrial Revolution caused the _ aggregate supply curve to shift to the _.

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