Question 1

Other things equal, when the U.S. aggregate price level falls, U.S. exports _____ and U.S. imports _____.

Accepted Answer

A)   fall; rise
B)   fall; fall
C)   rise; fall
D)   rise; riseE) B) and C)
F) All of the above

Question 2

Technological advances increase aggregate supply.

Accepted Answer

A) True 
 B)False

Question 3

The 1973 oil price shock was an example of cost-push inflation.

Accepted Answer

A) True 
 B)False

Question 4

The long-run aggregate supply curve uses the classical assumptions that all variables are _____ in the long run and that long-run equilibrium occurs at _____.

Accepted Answer

A)   flexible; full employment
B)   flexible; less than full employment
C)   fixed; less than full employment
D)   fixed; full employmentE) All of the above
F) None of the above

Question 5

The oil shock of 1973 led to demand-pull inflation.

Accepted Answer

A) True 
 B)False

Question 6

In the aggregate demand/aggregate supply (AD/AS)  model, the vertical axis is labeled:

Accepted Answer

A)   aggregate price level.
B)   consumption.
C)   GDP.
D)   consumption plus investment plus government spending.E) A) and C)
F) A) and B)

Question 7

All of the following are determinants of aggregate supply EXCEPT:

Accepted Answer

A)   productivity.
B)   taxes.
C)   subsidies.
D)   net exports.E) None of the above
F) A) and C)

Question 8

Demand-pull inflation occurs when aggregate demand expands so much that equilibrium output exceeds full employment output.

Accepted Answer

A) True 
 B)False

Question 9

In the Keynesian model, the price level is _____; in the aggregate demand and supply model, the price level is _____.

Accepted Answer

A)   fixed; fixed
B)   flexible; flexible
C)   flexible; fixed
D)   fixed; flexibleE) A) and C)
F) C) and D)

Question 10

If the pound sterling appreciates against the U.S. dollar, England buys _____ U.S. goods, causing the U.S. aggregate demand curve to shift to the _____.

Accepted Answer

A)   more; right
B)   more; left
C)   fewer; left
D)   fewer; rightE) C) and D)
F) B) and D)

Question 11

The short-run supply curve slopes upward because:

Accepted Answer

A)   profits increase at higher price levels.
B)   productivity increases at higher price levels.
C)   wages increase at higher output levels in the short run.
D)   resource costs increase at higher price levels.E) All of the above
F) C) and D)

Question 12

The actual price level is determined by:

Accepted Answer

A)   government policy.
B)   the intersection of short-run aggregate supply and demand.
C)   microeconomic equilibrium.
D)   monopolists.E) B) and D)
F) None of the above

Question 13

What is the spending multiplier if the marginal propensity to consume is 0.60?

Accepted Answer

A)   1.67
B)   2.5
C)   4.0
D)   6.67E) A) and B)
F) All of the above

Question 14

A rise in real GDP is associated with increased employment.

Accepted Answer

A) True 
 B)False

Question 15

The Potbelly Pothole Company is undertaking some investments in its plant. Suppose interest rates fall and new technologies increase the return on its investment. What is likely to happen?

Accepted Answer

A)   The company's demand for investments will fall.
B)   There will be no change in the company's demand for investments.
C)   The company's demand for investments will first fall as interest rates fall and then rise as technology improves.
D)   The company's demand for investments will rise.E) B) and C)
F) A) and C)

Question 16

(Figure: Shifting SRAS and AD)   What economic event is represented if full employment GDP occurs at point a?

Accepted Answer

A)   a recession
B)   demand-pull inflation
C)   cost-push inflation
D)   deflationE) B) and C)
F) A) and D)

Question 17

The aggregate demand curve shows the relationship between nominal GDP and the price level.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following events will NOT cause the aggregate demand curve to shift?

Accepted Answer

A)   Businesses are optimistic about the economy, investing heavily in new equipment.
B)   Consumers' wealth declines because of a drop in the stock market.
C)   A rise in the aggregate price level causes a decline in exports.
D)   Governments increase spending on national security in the wake of terrorist attacks.E) A) and B)
F) B) and C)

Question 19

In Productovia, aggregate demand increases and aggregate supply decreases. Based on the shifts of these two curves, which of the following is a likely outcome?

Accepted Answer

A)   deflation
B)   higher taxes
C)   lower imports
D)   inflationE) A) and B)
F) B) and C)

Question 20

(Figure: Predicting Aggregate Demand Shifts)  Which of the following would shift the aggregate demand curve from AD1 to AD2? 1 to AD2?   A)  a tax increase B)  a decrease in interest rates C)  a decrease in government purchases D)  a worsening of consumer expectations about the future" class="answers-bank-image d-inline" rel="preload" >

Accepted Answer

A)   a tax increase
B)   a decrease in interest rates
C)   a decrease in government purchases
D)   a worsening of consumer expectations about the futureE) C) and D)
F) A) and C)

Exam 9: Aggregate Demand and Supply

The Potbelly Pothole Company is undertaking some investments in its plant. Suppose interest rates fall and new technologies increase the return on its investment. What is likely to happen?

Correct AnswerverifiedShow Answer

If the pound sterling appreciates against the U.S. dollar, England buys _____ U.S. goods, causing the U.S. aggregate demand curve to shift to the _____.

Correct AnswerverifiedShow Answer

In the Keynesian model, the price level is _____; in the aggregate demand and supply model, the price level is _____.

Correct AnswerverifiedShow Answer

(Figure: Shifting SRAS and AD) What economic event is represented if full employment GDP occurs at point a?

Correct AnswerverifiedShow Answer

Demand-pull inflation occurs when aggregate demand expands so much that equilibrium output exceeds full employment output.

Correct AnswerverifiedShow Answer

The long-run aggregate supply curve uses the classical assumptions that all variables are _____ in the long run and that long-run equilibrium occurs at _____.

Correct AnswerverifiedShow Answer

The actual price level is determined by:

Correct AnswerverifiedShow Answer

In Productovia, aggregate demand increases and aggregate supply decreases. Based on the shifts of these two curves, which of the following is a likely outcome?

Correct AnswerverifiedShow Answer

Technological advances increase aggregate supply.

Correct AnswerverifiedShow Answer

The 1973 oil price shock was an example of cost-push inflation.

Correct AnswerverifiedShow Answer

A rise in real GDP is associated with increased employment.

Correct AnswerverifiedShow Answer

The short-run supply curve slopes upward because:

Correct AnswerverifiedShow Answer

In the aggregate demand/aggregate supply (AD/AS) model, the vertical axis is labeled:

Correct AnswerverifiedShow Answer

Other things equal, when the U.S. aggregate price level falls, U.S. exports _____ and U.S. imports _____.

Correct AnswerverifiedShow Answer

The oil shock of 1973 led to demand-pull inflation.

Correct AnswerverifiedShow Answer

The aggregate demand curve shows the relationship between nominal GDP and the price level.

Correct AnswerverifiedShow Answer

Which of the following events will NOT cause the aggregate demand curve to shift?

Correct AnswerverifiedShow Answer

What is the spending multiplier if the marginal propensity to consume is 0.60?

Correct AnswerverifiedShow Answer

(Figure: Predicting Aggregate Demand Shifts) Which of the following would shift the aggregate demand curve from AD1 to AD2?

Correct AnswerverifiedShow Answer

All of the following are determinants of aggregate supply EXCEPT:

Correct AnswerverifiedShow Answer

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If the pound sterling appreciates against the U.S. dollar, England buys _ U.S. goods, causing the U.S. aggregate demand curve to shift to the _.

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In the Keynesian model, the price level is _; in the aggregate demand and supply model, the price level is _.

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The long-run aggregate supply curve uses the classical assumptions that all variables are _ in the long run and that long-run equilibrium occurs at _.

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Other things equal, when the U.S. aggregate price level falls, U.S. exports _ and U.S. imports _.

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(Figure: Predicting Aggregate Demand Shifts) Which of the following would shift the aggregate demand curve from AD₁ to AD₂?

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