Question 1

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. All else being equal, if the price of each input increased from $4 to $6,
Productivity would

Accepted Answer

A)   fall from 2 to 3.
B)   fall from 0.50 to 0.33.
C)   rise from 1 to 2.
D)   remain unchanged.E) B) and C)
F) A) and C)

Question 2

What is the aggregate demand curve? What is the character of its slope?

Accepted Answer

The aggregate demand curve is a curve sh...

Question 3

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) C) and D)
F) B) and C)

Question 4

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) A) and C)
F) C) and D)

Question 5

Macroeconomic equilibrium in the short run always occurs at full-employment GDP.

Accepted Answer

A) True 
 B)False

Question 6

The following factors explain the inverse relationship between the price level and the total demand for output, except

Accepted Answer

A)   a substitution effect.
B)   a real-balances effect.
C)   an interest-rate effect.
D)   a foreign-purchases effect.E) All of the above
F) A) and B)

Question 7

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) A) and C)
F) None of the above

Question 8

Explain the three reasons given for the downward slope of the aggregate demand curve.

Accepted Answer

The real-balances effect refers to how c...

Question 9

An increase in imports (independent of a change in the U.S. price level) will increase both U.S.
aggregate supply and U.S. aggregate demand.

Accepted Answer

A) True 
 B)False

Question 10

1. Real-Balances Effect 
2. Household Expectations
3. Interest-Rate Effect
4. Personal Income Tax Rates
5. Proﬁt Expectations
6. National Incomes Abroad
7. Government Spending
8. Foreign Purchases Effect
9. Exchange Rates
10. Degree of Excess Capacity
Answer the question based on the accompanying list of factors that are related to the aggregate
demand curve. A change in net export spending would most likely be caused by changes in

Accepted Answer

A)   2 and 3.
B)   5 and 6.
C)   7 and 8.
D)   6 and 9.E) A) and B)
F) None of the above

Question 11

In the diagram, the economy's immediate-short-run aggregate supply curve is shown by line

Accepted Answer

A)   1.
B)   2.
C)   3.
D)   4.E) None of the above
F) All of the above

Question 12

Suppose that an economy produces 2,400 units of output, employing 60 units of input, and the price of the input is $30 per unit. The per-unit cost of production is

Accepted Answer

A)   $0.25.
B)   $0.50.
C)   $0.75.
D)   $2.00.E) B) and C)
F) A) and D)

Question 13

The oil crisis in the 1970s can best be illustrated as a shift of the aggregate demand curve to the left.

Accepted Answer

A) True 
 B)False

Question 14

A fall in the prices of inputs will shift the aggregate

Accepted Answer

A)   demand curve leftward.
B)   demand curve rightward.
C)   supply curve rightward.
D)   supply curve leftward.E) B) and C)
F) A) and B)

Question 15

In the diagram, the economy's short-run AS curve is line ___, and its long-run AS curve is line ___.

Accepted Answer

A)   1; 3
B)   2; 4
C)   3; 4
D)   2; 1E) A) and B)
F) A) and C)

Question 16

The immediate-short-run aggregate supply curve represents circumstances where

Accepted Answer

A)   both input and output prices are ﬁxed.
B)   both input and output prices are ﬂexible.
C)   input prices are ﬁxed, but output prices are ﬂexible.
D)   input prices are ﬂexible, but output prices are ﬁxed.E) All of the above
F) B) and C)

Question 17

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) A) and C)

Question 18

If personal taxes were decreased and resource productivity increased simultaneously, the equilibrium

Accepted Answer

A)   output would necessarily rise.
B)   output would necessarily fall.
C)   price level would necessarily fall.
D)   price level would necessarily rise.E) B) and C)
F) A) and B)

Question 19

Accepted Answer

A)   an increase in productivity
B)   an increase in input prices
C)   a decrease in business taxes
D)   a decrease in household indebtednessE) B) and C)
F) C) and D)

Question 20

A sharp rise in the real value of stock prices, which is independent of a change in the price level, would best be an example of

Accepted Answer

A)   the interest-rate effect.
B)   the real-balances effect.
C)   a change in the degree of excess capacity.
D)   a change in the real value of consumer wealth.E) A) and B)
F) B) and C)

Exam 12: Aggregate Demand and Aggregate Supply

Macroeconomic equilibrium in the short run always occurs at full-employment GDP.

Correct Answer
verified

A sharp rise in the real value of stock prices, which is independent of a change in the price level, would best be an example of

Correct Answer
verified

If personal taxes were decreased and resource productivity increased simultaneously, the equilibrium

Correct Answer
verified

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

Correct Answer
verified

An increase in imports (independent of a change in the U.S. price level) will increase both U.S. aggregate supply and U.S. aggregate demand.

Correct Answer
verified

A fall in the prices of inputs will shift the aggregate

Correct Answer
verified

In the diagram, the economy's immediate-short-run aggregate supply curve is shown by line

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

Suppose that an economy produces 2,400 units of output, employing 60 units of input, and the price of the input is $30 per unit. The per-unit cost of production is

Correct Answer
verified

The oil crisis in the 1970s can best be illustrated as a shift of the aggregate demand curve to the left.

Correct Answer
verified

Explain the three reasons given for the downward slope of the aggregate demand curve.

Correct Answer
verified
The real-balances effect refers to how c...
View Answer

In the diagram, the economy's short-run AS curve is line _, and its long-run AS curve is line _.

Correct Answer
verified

The immediate-short-run aggregate supply curve represents circumstances where

Correct Answer
verified

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

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. All else being equal, if the price of each input increased from $4 to $6, Productivity would

Correct Answer
verified

What is the aggregate demand curve? What is the character of its slope?

Correct Answer
verified
The aggregate demand curve is a curve sh...
View 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 Answer
verified

The following factors explain the inverse relationship between the price level and the total demand for output, except

Correct Answer
verified

Exam 12: Aggregate Demand and Aggregate Supply

Macroeconomic equilibrium in the short run always occurs at full-employment GDP.

Correct AnswerverifiedShow Answer

A sharp rise in the real value of stock prices, which is independent of a change in the price level, would best be an example of

Correct AnswerverifiedShow Answer

If personal taxes were decreased and resource productivity increased simultaneously, the equilibrium

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

An increase in imports (independent of a change in the U.S. price level) will increase both U.S. aggregate supply and U.S. aggregate demand.

Correct AnswerverifiedShow Answer

A fall in the prices of inputs will shift the aggregate

Correct AnswerverifiedShow Answer

In the diagram, the economy's immediate-short-run aggregate supply curve is shown by line

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Suppose that an economy produces 2,400 units of output, employing 60 units of input, and the price of the input is $30 per unit. The per-unit cost of production is

Correct AnswerverifiedShow Answer

The oil crisis in the 1970s can best be illustrated as a shift of the aggregate demand curve to the left.

Correct AnswerverifiedShow Answer

Explain the three reasons given for the downward slope of the aggregate demand curve.

Correct AnswerverifiedThe real-balances effect refers to how c...View AnswerShow Answer

In the diagram, the economy's short-run AS curve is line ___, and its long-run AS curve is line ___.

Correct AnswerverifiedShow Answer

The immediate-short-run aggregate supply curve represents circumstances where

Correct AnswerverifiedShow Answer

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

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. All else being equal, if the price of each input increased from $4 to $6, Productivity would

Correct AnswerverifiedShow Answer

What is the aggregate demand curve? What is the character of its slope?

Correct AnswerverifiedThe aggregate demand curve is a curve sh...View AnswerShow 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

The following factors explain the inverse relationship between the price level and the total demand for output, except

Correct AnswerverifiedShow Answer

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The real-balances effect refers to how c...
View Answer

In the diagram, the economy's short-run AS curve is line _, and its long-run AS curve is line _.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The aggregate demand curve is a curve sh...
View Answer

Correct Answer
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Correct Answer
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