Question 1

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

Accepted Answer

A)   the measure of the value of all goods and services produced by the economy.
B)   represented by GDP.
C)   calculated as a weighted average of the prices of all goods and services.
D)   None of these is true.E) B) and D)
F) A) and C)

Question 2

If prices increase only in the United States, then:

Accepted Answer

A)   U.S. goods become relatively more expensive than goods from other countries.
B)   U.S. goods become relatively less expensive than goods from other countries.
C)   the prices of foreign goods must rise.
D)   the income level of people in the US must rise.E) B) and C)
F) A) and D)

Question 3

Which of the follow is not a property of the aggregate demand curve?

Accepted Answer

A)   It shows the relationship between the overall price level and the level of total demand.
B)   It shows the price level on the vertical axis and output on the horizontal axis.
C)   The aggregate demand curve slopes downward.
D)   It shows the relationship between the overall price level and level consumption.E) B) and C)
F) None of the above

Question 4

One major difference between the aggregate supply curve and an individual supply curve isthe aggregate supply curve represents:

Accepted Answer

A)   production in the economy as a whole rather than just one good or service.
B)   production in an entire market rather than just one firm.
C)   goods and services sold rather than the total actually produced by each firm.
D)   goods and services produced and actually sold by each firm.E) None of the above
F) A) and D)

Question 5

Consumption spending is:

Accepted Answer

A)   negatively related to the overall price level.
B)   positively related to the overall price level.
C)   equal to the overall price level.
D)   not correlated with the overall price level.E) All of the above
F) C) and D)

Question 6

The aggregate supply curve shows the relationship between the:

Accepted Answer

A)   overall price level in the economy and total production by firms.
B)   unemployment rate and total production by firms.
C)   overall price level in the economy and the unemployment rate.
D)   inflation rate and the overall price level in the economy.E) C) and D)
F) All of the above

Question 7

Which of the following is a component of aggregate demand?

Accepted Answer

A)   Consumption
B)   Income
C)   Taxes
D)   Transfer paymentsE) A) and B)
F) A) and C)

Question 8

Temporary supply shocks:

Accepted Answer

A)   are significant events that directly affect production.
B)   shift the aggregate-supply curve in the short run.
C)   would affect the short-run equilibrium.
D)   All of these are true.E) B) and D)
F) C) and D)

Question 9

Which of the following would cause aggregate demand to shift to the right?

Accepted Answer

A)   Increased income taxes
B)   Decreased corporate income taxes
C)   Decreased consumer confidence
D)   Decreased government spendingE) None of the above
F) C) and D)

Question 10

The long-run result of government intervention in responding to a recession is:

Accepted Answer

A)   the same level of output at higher prices.
B)   higher level of output at higher prices.
C)   higher level of output at lower prices.
D)   lower level of output at the same prices.E) A) and C)
F) All of the above

Question 11

The slope of the short-run aggregate supply curve shows that:

Accepted Answer

A)   as overall price levels increase, firms are willing to produce more.
B)   as overall price levels decrease, firms are willing to produce more.
C)   firms are constrained to a certain level of output in the short run, regardless of the price.
D)   firms are constrained to a certain price in the short run, regardless of level of output.E) All of the above
F) A) and B)

Question 12

Using Figure 1 above, if the aggregate demand curve shifts from AD3 to AD2 the result in the long run would be:

Accepted Answer

A)   P1 and Y2.
B)   P3 and Y2.
C)   P2 and Y1.
D)   P3 and Y1.E) A) and D)
F) B) and C)

Question 13

The long-run aggregate supply curve represents:

Accepted Answer

A)   potential output in the economy.
B)   the level of output possible if the economy is operating at full capacity.
C)   a production function for the entire economy.
D)   All of these are true.E) None of the above
F) B) and D)

Question 14

When the prices of final goods and services increase more quickly than the prices of inputs, we say that:

Accepted Answer

A)   the prices of some inputs are sticky.
B)   the prices of some final goods are sticky.
C)   the economy must be in the long run.
D)   the economy is inefficient.E) C) and D)
F) A) and B)

Question 15

An example of stimulus spending by the government might be:

Accepted Answer

A)   increase in government purchases of new cars.
B)   the monthly payments a government agency makes to its employees.
C)   a cut in the government budget aimed at spurring private consumption.
D)   the FED engaging in open market sales of securities.E) B) and C)
F) A) and C)

Question 16

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)   net exports to be unaffected.
D)   government spending to increase.E) A) and B)
F) B) and C)

Question 17

When the U.S. price level increases, we would expect a:

Accepted Answer

A)   movement downward along the aggregate demand curve.
B)   movement up along the aggregate demand curve.
C)   shift to the right of the aggregate demand curve.
D)   shift to the left of the aggregate demand curve.E) A) and D)
F) A) and C)

Question 18

Which of the following would likely cause aggregate demand to shift to the right?

Accepted Answer

A)   Consumer confidence regarding future income increases
B)   A tax credit for small businesses is issued
C)   The government builds new highways
D)   All of these are likely to cause aggregate demand to shift to the right.E) A) and B)
F) A) and D)

Question 19

Which of the following would likely cause aggregate demand to shift to the left?

Accepted Answer

A)   Decreased income taxes
B)   Decreased consumer confidence
C)   Increased government spending
D)   increase in investors' confidence.E) All of the above
F) C) and D)

Question 20

U.S. goods will become relatively less expensive than goods from other countries if prices were to:

Accepted Answer

A)   increase in the United States only.
B)   decrease in the United States only.
C)   increase in the United States and foreign countries at the same rate.
D)   decrease in the United States and foreign countries at the same rate.E) A) and B)
F) A) and C)

Exam 12: Aggregate Demand and Aggregate Supply

Which of the following would likely cause aggregate demand to shift to the right?

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

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If prices increase only in the United States, then:

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Which of the follow is not a property of the aggregate demand curve?

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

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Which of the following would likely cause aggregate demand to shift to the left?

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U.S. goods will become relatively less expensive than goods from other countries if prices were to:

Correct AnswerverifiedShow Answer

The long-run result of government intervention in responding to a recession is:

Correct AnswerverifiedShow Answer

Which of the following would cause aggregate demand to shift to the right?

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The aggregate supply curve shows the relationship between the:

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When the U.S. price level increases, we would expect a:

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An example of stimulus spending by the government might be:

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Which of the following is a component of aggregate demand?

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The long-run aggregate supply curve represents:

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Consumption spending is:

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Temporary supply shocks:

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The slope of the short-run aggregate supply curve shows that:

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When the prices of final goods and services increase more quickly than the prices of inputs, we say that:

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One major difference between the aggregate supply curve and an individual supply curve isthe aggregate supply curve represents:

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Using Figure 1 above, if the aggregate demand curve shifts from AD3 to AD2 the result in the long run would be:

Correct AnswerverifiedShow Answer

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