Question 1

A fall in real interest rates will reduce aggregate demand.

Accepted Answer

A) True 
 B)False

Question 2

Which effect best explains the downward slope of the aggregate demand curve?

Accepted Answer

A)  a multiplier effect
B)  an income effect
C)  a substitution effect
D)  a real-balances effectE) A) and D)
F) A) and C)

Question 3

Refer to the diagram given below. 1 to AS3, then the real domestic output will: A) increase and the price level will increase. B) increase and the price level will decrease. C) decrease and the price level will increase. D) decrease and the price level will decrease." class="answers-bank-image d-inline" rel="preload" > If aggregate supply shifts from AS1 to AS3, then the real domestic output will:

Accepted Answer

A)  increase and the price level will increase.
B)  increase and the price level will decrease.
C)  decrease and the price level will increase.
D)  decrease and the price level will decrease.E) A) and D)
F) B) and C)

Question 4

A decrease in aggregate demand is most likely to be caused by:

Accepted Answer

A)  an increase in the wealth of consumers.
B)  an increase in consumer confidence.
C)  an increase in interest rates for home mortgages.
D)  a decrease in tax rates on household income.E) B) and D)
F) A) and C)

Question 5

Suppose the full-employment level of real output (Q)  for a hypothetical economy is $500 and that the price level (P)  initially is 100.Use the following short-run aggregate supply schedules to answer the next question.  Refer to the information above.In the long run, a fall in the price level from 100 to 75 will:

Accepted Answer

A)  decrease real output from $500 to $440.
B)  increase real output from $500 to $620.
C)  change the aggregate supply schedule from (a)  to (c)  and produce an equilibrium level of real output of $500.
D)  change the aggregate supply schedule from (a)  to (b)  and produce an equilibrium level of real output of $500.E) B) and D)
F) A) and D)

Question 6

A rightward shift in the aggregate supply curve might best be explained by:

Accepted Answer

A)  an increase in business taxes.
B)  a decrease in productivity.
C)  an increase in nominal wages.
D)  a decrease in the price of imported resources.E) A) and C)
F) None of the above

Question 7

A decrease in interest rates caused by a change in the price level would cause a(n) :

Accepted Answer

A)  decrease in aggregate demand.
B)  increase in aggregate demand.
C)  decrease in the quantity of real domestic output demanded.
D)  increase in the quantity of real domestic output demanded.E) A) and D)
F) All of the above

Question 8

The economy experiences an increase in the price level and a decrease in real domestic output.Which is a likely explanation?

Accepted Answer

A)  productivity has increased
B)  input prices have increased
C)  excess capacity has decreased
D)  government regulations have been reducedE) A) and B)
F) A) and C)

Question 9

Assume that an initial change in spending of $10 billion results in a rightward shift in aggregate demand that increases real GDP by $40 billion.The multiplier is:

Accepted Answer

A)  $10 billion.
B)  $40 billion.
C)  4
D)  5E) B) and C)
F) C) and D)

Question 10

The determinants of aggregate demand:

Accepted Answer

A)  explain why the aggregate demand curve is downward sloping.
B)  explain shifts in the aggregate demand curve.
C)  demonstrate why real output and the price level are inversely related.
D)  include input prices and resource productivity.E) All of the above
F) B) and D)

Question 11

The following list of items are related to aggregate demand and/or aggregate supply.Entrepreneurial ability Consumer expectations
Degree of excess capacity
Personal income tax rates
Productivity
National income abroad
Business taxes
Domestic resource availability
Business taxes
Domestic resource availability
Prices of imported products
Profit expectations on investments
Refer to the above list.Changes in which combination of factors best explain why the aggregate supply curve would shift?

Accepted Answer

A)  1 and 2
B)  2 and 10
C)  3 and 6
D)  7 and 8E) B) and C)
F) A) and D)

Question 12

Refer to the diagram given below. 2 and that the economy initially is operating at the full-employment level of output Qf.In the diagram, the long-run aggregate supply curve: A) is represented by AS2. B) is a vertical line extending from Qf upward through the points e, b, and d. C) may be either AS1, AS2, or AS3 depending on whether the price level is P1, P2, or P3. D) is a horizontal line extending from P2 rightward through points f, b, and g." class="answers-bank-image d-inline" rel="preload" > Assume that the nominal wages of workers in an economy are initially set on the basis of the price level P2 and that the economy initially is operating at the full-employment level of output Qf.In the diagram, the long-run aggregate supply curve:

Accepted Answer

A)  is represented by AS2.
B)  is a vertical line extending from Qf upward through the points e, b, and d.
C)  may be either AS1, AS2, or AS3 depending on whether the price level is P1, P2, or P3.
D)  is a horizontal line extending from P2 rightward through points f, b, and g.E) All of the above
F) B) and C)

Question 13

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.Refer to the above information.All else 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 .50 to .33.
C)  rise from 1 to 2.
D)  remain unchanged.E) B) and D)
F) B) and C)

Question 14

An increase in the aggregate expenditures schedule:

Accepted Answer

A)  increases aggregate demand by the amount of the increase in aggregate expenditures only.
B)  increases aggregate demand by the amount of the initial increase in aggregate expenditures times the multiplier.
C)  decreases aggregate demand by the amount of the increase in aggregate expenditures.
D)  decreases aggregate demand by the amount of the initial increase in aggregate expenditures times the multiplier.E) All of the above
F) A) and C)

Question 15

Which of the following explains why the aggregate demand schedule is downward sloping?

Accepted Answer

A)  the real-balances effect
B)  the interest rate effect
C)  the foreign trade effect
D)  all of theseE) B) and C)
F) B) and D)

Question 16

An increase in the GDP price level will:

Accepted Answer

A)  decrease aggregate demand.
B)  increase the quantity of real domestic output demanded.
C)  increase aggregate demand.
D)  decrease the quantity of real domestic output demanded.E) A) and B)
F) B) and C)

Question 17

The following table is for a particular country in which 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.Each question is independent of the other questions. g is gross investment expenditures, G is government expenditures, X is exports, and M is imports.All figures are in billions of dollars.Each question is independent of the other questions.   Refer to the above table.If the aggregate supply schedule intersects the aggregate demand at price level 119 in this country, its equilibrium level of real GDP will be: A) $37 billion. B) $35 billion. C) $26 billion. D) $43 billion." class="answers-bank-image d-inline" rel="preload" > Refer to the above table.If the aggregate supply schedule intersects the aggregate demand at price level 119 in this country, its equilibrium level of real GDP will be:

Accepted Answer

A)  $37 billion.
B)  $35 billion.
C)  $26 billion.
D)  $43 billion.E) A) and D)
F) None of the above

Question 18

The aggregate demand curve shows the:

Accepted Answer

A)  inverse relationship between the price level and real GDP purchased.
B)  direct relationship between the price level and real GDP produced.
C)  inverse relationship between interest rates and real GDP produced.
D)  direct relationship between real-balances and real GDP purchased.E) B) and C)
F) B) and D)

Question 19

The following table gives information about the relationship between input quantities and real domestic output in a hypothetical economy:  If the price of each input is $5, the per unit cost of production in the above economy is:

Accepted Answer

A)  $5
B)  $2.75.
C)  $2.50.
D)  $.40.E) C) and D)
F) B) and D)

Question 20

Other things equal, an increase in the price level will:

Accepted Answer

A)  shift the short run aggregate supply curve to the right.
B)  shift the aggregate demand curve to the right.
C)  cause a movement up along a short-run aggregate supply curve.
D)  cause a movement down a short run aggregate supply curve.E) A) and B)
F) C) and D)

Exam 12: B: Aggregate Demand and Aggregate Supply

The following table gives information about the relationship between input quantities and real domestic output in a hypothetical economy: If the price of each input is $5, the per unit cost of production in the above economy is:

Correct Answer
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The aggregate demand curve shows the:

Correct Answer
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Which of the following explains why the aggregate demand schedule is downward sloping?

Correct Answer
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A decrease in interest rates caused by a change in the price level would cause a(n) :

Correct Answer
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The economy experiences an increase in the price level and a decrease in real domestic output.Which is a likely explanation?

Correct Answer
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An increase in the GDP price level will:

Correct Answer
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Refer to the diagram given below. Assume that the nominal wages of workers in an economy are initially set on the basis of the price level P₂ and that the economy initially is operating at the full-employment level of output Q_f.In the diagram, the long-run aggregate supply curve:

Correct Answer
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The determinants of aggregate demand:

Correct Answer
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A rightward shift in the aggregate supply curve might best be explained by:

Correct Answer
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Refer to the diagram given below. If aggregate supply shifts from AS₁ to AS₃, then the real domestic output will:

Correct Answer
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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.Refer to the above information.All else equal, if the price of each input increased from $4 to $6, productivity would:

Correct Answer
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Other things equal, an increase in the price level will:

Correct Answer
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Correct Answer
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Which effect best explains the downward slope of the aggregate demand curve?

Correct Answer
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A fall in real interest rates will reduce aggregate demand.

Correct Answer
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Correct Answer
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Assume that an initial change in spending of $10 billion results in a rightward shift in aggregate demand that increases real GDP by $40 billion.The multiplier is:

Correct Answer
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Correct Answer
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An increase in the aggregate expenditures schedule:

Correct Answer
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A decrease in aggregate demand is most likely to be caused by:

Correct Answer
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Exam 12: B: Aggregate Demand and Aggregate Supply

The following table gives information about the relationship between input quantities and real domestic output in a hypothetical economy: If the price of each input is $5, the per unit cost of production in the above economy is:

Correct AnswerverifiedShow Answer

The aggregate demand curve shows the:

Correct AnswerverifiedShow Answer

Which of the following explains why the aggregate demand schedule is downward sloping?

Correct AnswerverifiedShow Answer

A decrease in interest rates caused by a change in the price level would cause a(n) :

Correct AnswerverifiedShow Answer

The economy experiences an increase in the price level and a decrease in real domestic output.Which is a likely explanation?

Correct AnswerverifiedShow Answer

An increase in the GDP price level will:

Correct AnswerverifiedShow Answer

Refer to the diagram given below. Assume that the nominal wages of workers in an economy are initially set on the basis of the price level P2 and that the economy initially is operating at the full-employment level of output Qf.In the diagram, the long-run aggregate supply curve:

Correct AnswerverifiedShow Answer

The determinants of aggregate demand:

Correct AnswerverifiedShow Answer

A rightward shift in the aggregate supply curve might best be explained by:

Correct AnswerverifiedShow Answer

Refer to the diagram given below. If aggregate supply shifts from AS1 to AS3, then the real domestic output 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.Refer to the above information.All else equal, if the price of each input increased from $4 to $6, productivity would:

Correct AnswerverifiedShow Answer

Other things equal, an increase in the price level will:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which effect best explains the downward slope of the aggregate demand curve?

Correct AnswerverifiedShow Answer

A fall in real interest rates will reduce aggregate demand.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Assume that an initial change in spending of $10 billion results in a rightward shift in aggregate demand that increases real GDP by $40 billion.The multiplier is:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

An increase in the aggregate expenditures schedule:

Correct AnswerverifiedShow Answer

A decrease in aggregate demand is most likely to be caused by:

Correct AnswerverifiedShow Answer

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Refer to the diagram given below. Assume that the nominal wages of workers in an economy are initially set on the basis of the price level P₂ and that the economy initially is operating at the full-employment level of output Q_f.In the diagram, the long-run aggregate supply curve:

Correct Answer
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Correct Answer
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Correct Answer
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Refer to the diagram given below. If aggregate supply shifts from AS₁ to AS₃, then the real domestic output will:

Correct Answer
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