Question 1

If you know the marginal propensity to consume, you can calculate the marginal propensity to save.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following will shift the short-run aggregate supply curve to the left?

Accepted Answer

A)   an increase in the minimum wage
B)   a decrease in immigration from other countries
C)   a decrease in the price of oil
D)   a decrease in the actual price level

Question 3

Assume that Macroland is a country that imports 70% of the inputs used in its production and 40% of the products consumed. It has an overall trade balance. Which of the following events would cause Macroland's short-run aggregate supply curve to shift to the left?

Accepted Answer

A)   an increase in the average education level of the labor force
B)   a depreciation in the value of Macroland's currency
C)   an increase in consumption taxes and a decrease in corporate income taxes
D)   a surge in the value of stocks exchanged on Macroland's stock market

Question 4

What happens if business expectations improve?

Accepted Answer

A)   Aggregate supply shifts to the left.
B)   Aggregate supply shifts to the right.
C)   Aggregate demand shifts to the left.
D)   Aggregate demand shifts to the right.

Question 5

If the marginal propensity to consume is 0.5, then $50 of every additional $100 of income will be spent.

Accepted Answer

A) True 
 B)False

Question 6

Suppose energy prices spike. In the short run, output will _____; in the long run, output will _____ from its starting point.

Accepted Answer

A)   decrease; remain unchanged
B)   decrease; increase
C)   remain unchanged; decrease
D)   remain unchanged; increase

Question 7

Which of the following factors will cause the aggregate demand curve to shift to the left?

Accepted Answer

A)   a rise in consumer confidence
B)   a fall in excess capacity at businesses
C)   an increase in foreign income
D)   the appreciation of the dollar

Question 8

(Figure: Determining SRAS Shifts)  0 to _____ and the price level will be at _____. A)  SRAS1; P0 B)  SRAS1; P1 C)  SRAS2; P1 D)  SRAS2; P2" class="answers-bank-image d-inline" rel="preload" > If the government raises taxes or increases regulations, the short-run aggregate supply curve will shift from SRAS0 to _____ and the price level will be at _____.

Accepted Answer

A)   SRAS1; P0
B)   SRAS1; P1
C)   SRAS2; P1
D)   SRAS2; P2

Question 9

_____ occurs when a negative supply shock hits the economy, shifting the short-run aggregate supply curve leftward.

Accepted Answer

A)   Demand-pull inflation
B)   Demand-push inflation
C)   Cost-push inflation
D)   Cost-pull inflation

Question 10

Which of the following events will shift the aggregate demand curve to the right?

Accepted Answer

A)   a decrease in exports
B)   an increase in imports
C)   a rise in the interest rate
D)   a new government program to eliminate poverty

Question 11

Cost-push inflation is a result of too much spending on goods and services.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following statements regarding the short-run aggregate supply curve is true?

Accepted Answer

A)   The short-run aggregate supply curve shifts to the left when tax rates on businesses are lowered.
B)   The short-run aggregate supply curve shifts to the right when the costs of capital rise.
C)   The short-run aggregate supply curve shifts to the left when business expectations become more positive.
D)   The short-run aggregate supply curve shifts to the right with a reduction in burdensome regulations.

Question 13

According to the figure of ADAS and assuming the economy begins at point C, an increase in consumer confidence leads to what changes in the short run?

Accepted Answer

A)   an increase in unemployment
B)   cost-push inflation
C)   a decline in tax revenue
D)   demand-pull inflation

Question 14

The short-run aggregate supply curve:

Accepted Answer

A)   is vertical because the economy is at full capacity.
B)   is upward sloping because some costs are slow to rise as output expands.
C)   is horizontal because input prices do not rise as output rises.
D)   cannot be generalized because each economy is unique.

Question 15

John Maynard Keynes's analysis was based on an economy whose resources were underutilized.

Accepted Answer

A) True 
 B)False

Question 16

Increased consumer confidence will shift the aggregate demand curve to the _____ and _____ output demanded.

Accepted Answer

A)   left; decrease
B)   left; increase
C)   right; increase
D)   right; decrease

Question 17

Which of the following would NOT cause a shift in the short-run aggregate supply curve?

Accepted Answer

A)   an increase in resource prices
B)   a decrease in the expected rate of inflation
C)   a major technological advance
D)   a decrease in real interest rates

Question 18

A falling aggregate price level _____ demand for a country's exports and therefore _____ output demanded.

Accepted Answer

A)   increases; increases
B)   increases; reduces
C)   reduces; increases
D)   reduces; reduces

Question 19

When the monopoly power of firms increases, short-run aggregate supply shifts to the left.

Accepted Answer

A) True 
 B)False

Question 20

(Figure: Interpreting Aggregate Shifts)  The graph shows:

Accepted Answer

A)   a decrease in aggregate quantity supplied.
B)   an increase in aggregate quantity supplied.
C)   a decrease in aggregate demand.
D)   an increase in aggregate demand.

Exam 9: Aggregate Demand and Supply

According to the figure of ADAS and assuming the economy begins at point C, an increase in consumer confidence leads to what changes in the short run?

Correct AnswerverifiedShow Answer

Which of the following will shift the short-run aggregate supply curve to the left?

Correct AnswerverifiedShow Answer

Assume that Macroland is a country that imports 70% of the inputs used in its production and 40% of the products consumed. It has an overall trade balance. Which of the following events would cause Macroland's short-run aggregate supply curve to shift to the left?

Correct AnswerverifiedShow Answer

_____ occurs when a negative supply shock hits the economy, shifting the short-run aggregate supply curve leftward.

Correct AnswerverifiedShow Answer

Suppose energy prices spike. In the short run, output will _____; in the long run, output will _____ from its starting point.

Correct AnswerverifiedShow Answer

Which of the following statements regarding the short-run aggregate supply curve is true?

Correct AnswerverifiedShow Answer

Which of the following would NOT cause a shift in the short-run aggregate supply curve?

Correct AnswerverifiedShow Answer

(Figure: Interpreting Aggregate Shifts) The graph shows:

Correct AnswerverifiedShow Answer

When the monopoly power of firms increases, short-run aggregate supply shifts to the left.

Correct AnswerverifiedShow Answer

Which of the following factors will cause the aggregate demand curve to shift to the left?

Correct AnswerverifiedShow Answer

Which of the following events will shift the aggregate demand curve to the right?

Correct AnswerverifiedShow Answer

Cost-push inflation is a result of too much spending on goods and services.

Correct AnswerverifiedShow Answer

What happens if business expectations improve?

Correct AnswerverifiedShow Answer

A falling aggregate price level _____ demand for a country's exports and therefore _____ output demanded.

Correct AnswerverifiedShow Answer

The short-run aggregate supply curve:

Correct AnswerverifiedShow Answer

If the marginal propensity to consume is 0.5, then $50 of every additional $100 of income will be spent.

Correct AnswerverifiedShow Answer

John Maynard Keynes's analysis was based on an economy whose resources were underutilized.

Correct AnswerverifiedShow Answer

If you know the marginal propensity to consume, you can calculate the marginal propensity to save.

Correct AnswerverifiedShow Answer

(Figure: Determining SRAS Shifts) If the government raises taxes or increases regulations, the short-run aggregate supply curve will shift from SRAS0 to _____ and the price level will be at _____.

Correct AnswerverifiedShow Answer

Increased consumer confidence will shift the aggregate demand curve to the _____ and _____ output demanded.

Correct AnswerverifiedShow Answer

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Suppose energy prices spike. In the short run, output will _; in the long run, output will _ from its starting point.

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A falling aggregate price level _ demand for a country's exports and therefore _ output demanded.

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(Figure: Determining SRAS Shifts) If the government raises taxes or increases regulations, the short-run aggregate supply curve will shift from SRAS₀ to _ and the price level will be at _.

Correct Answer
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Increased consumer confidence will shift the aggregate demand curve to the _ and _ output demanded.

Correct Answer
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