Question 1

Refer to the graph. The equilibrium for this economy is

Accepted Answer

A)   at point a.
B)   at point b.
C)   at price level P  P2 and output Q2. P _ { 2 } 	ext { and output } Q _ { 2 } 	ext {. }P2​ and output Q2​.  
D)   at price level P  P1 and output Q1. P _ { 1 } 	ext { and output } Q _ { 1 } 	ext {. }P1​ and output Q1​.

Question 2

A change in business taxes and regulation can affect production costs and aggregate supply.

Accepted Answer

A) True 
 B)False

Question 3

If personal income taxes and business taxes increase, then this will

Accepted Answer

A)   increase aggregate demand and aggregate supply.
B)   decrease aggregate demand and aggregate supply.
C)   decrease aggregate demand and increase aggregate supply.
D)   increase aggregate demand and decrease aggregate supply.

Question 4

If the stock market crashes, the so-called reverse wealth effect will cause consumer spending to
decrease.

Accepted Answer

A) True 
 B)False

Question 5

Why does aggregate demand shift outward by a greater amount than the initial increase in
spending?

Accepted Answer

The reason is because of the multiplier....

Question 6

Identify the four factors that affect consumer spending. How does a change in consumer spending
affect aggregate demand?

Accepted Answer

The four factors that affect consumer sp...

Question 7

(Last Word) Discuss the explanations economists give for the slow recovery after the Great
Recession.

Accepted Answer

One explanation was that it was hard for...

Question 8

Accepted Answer

A)   a reduction in the price level.
B)   the increase in productivity.
C)   an increase in business taxes.
D)   the real-balances, interest-rate, and foreign purchases effects.

Question 9

The interest-rate effect suggests that

Accepted Answer

A)   a decrease in the supply of money will increase interest rates and reduce interest-sensitive consumption and investment spending.
B)   an increase in the price level will increase the demand for money, reduce interest rates, and decrease consumption and investment spending.
C)   an increase in the price level will increase the demand for money, increase interest rates, and decrease consumption and investment spending.
D)   an increase in the price level will decrease the demand for money, reduce interest rates, and increase consumption and investment spending.

Question 10

The foreign purchases effect suggests that a decrease in the U.S. price level relative to other countries will

Accepted Answer

A)   shift the aggregate demand curve leftward.
B)   shift the aggregate supply curve leftward.
C)   decrease U.S. exports and increase U.S. imports.
D)   increase U.S. exports and decrease U.S. imports.

Question 11

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

Accepted Answer

A)   decrease (or shift left)  in aggregate demand.
B)   increase (or shift right)  in aggregate demand.
C)   decrease in the quantity of real output demanded (or movement up along A
D)  .
D)   increase in the quantity of real output demanded (or movement down along A
D)  .

Question 12

An increase in aggregate demand is most likely to be caused by which of the following?

Accepted Answer

A)   an increase in real interest rates
B)   a decrease in government spending
C)   a decrease in expected returns on investment
D)   a decrease in the tax rates on household income

Question 13

With cost-push inﬂation, there will be

Accepted Answer

A)   an increase in real GDP.
B)   a leftward shift in the aggregate demand curve.
C)   a decrease in real GDP.
D)   a decrease in unemployment.

Question 14

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. If productivity increased such that 3,000 units are now produced
With the quantity of inputs still equal to 60, then per-unit production costs would

Accepted Answer

A)   decrease and aggregate supply would decrease.
B)   decrease and aggregate supply would increase.
C)   increase and aggregate supply would decrease.
D)   remain unchanged and aggregate supply would remain unchanged.

Question 15

Accepted Answer

A)   A
B)   B
C)   C
D)   D

Question 16

In the accompanying graph, which line might represent an immediate-short-run aggregate supply curve?

Accepted Answer

A)   1
B)   2
C)   3
D)   4

Question 17

In which of the following sets of circumstances can we conﬁdently expect inﬂation?

Accepted Answer

A)   Aggregate supply and aggregate demand both increase.
B)   Aggregate supply and aggregate demand both decrease.
C)   Aggregate supply decreases and aggregate demand increases.
D)   Aggregate supply increases and aggregate demand decreases.

Question 18

An increase in input productivity will

Accepted Answer

A)   shift the aggregate supply curve leftward.
B)   reduce the equilibrium price level, assuming downward ﬂexible prices.
C)   reduce the equilibrium real output.
D)   reduce aggregate demand.

Question 19

If aggregate demand increases and aggregate supply decreases, the price level

Accepted Answer

A)   will decrease, but real output may increase, decrease, or remain unchanged.
B)   will increase, but real output may increase, decrease, or remain unchanged.
C)   and real output will both increase.
D)   and real output will both decrease.

Question 20

Which of the following will not tend to happen if the U.S. dollar depreciates against the euro?

Accepted Answer

A)   Europeans will ﬁnd U.S. goods become less expensive in euro terms.
B)   Americans will ﬁnd European goods become more expensive in dollar terms.
C)   Many Americans will switch and buy domestic goods instead of imports from Europe.
D)   Many Europeans will switch and buy their own products instead of imports from the U.S.

Exam 12: Aggregate Demand and Aggregate Supply

Correct Answer
verified

In which of the following sets of circumstances can we conﬁdently expect inﬂation?

Correct Answer
verified

The interest-rate effect suggests that

Correct Answer
verified

A change in business taxes and regulation can affect production costs and aggregate supply.

Correct Answer
verified

An increase in aggregate demand is most likely to be caused by which of the following?

Correct Answer
verified

The foreign purchases effect suggests that a decrease in the U.S. price level relative to other countries will

Correct Answer
verified

If aggregate demand increases and aggregate supply decreases, the price level

Correct Answer
verified

With cost-push inﬂation, there will be

Correct Answer
verified

Identify the four factors that affect consumer spending. How does a change in consumer spending affect aggregate demand?

Correct Answer
verified
The four factors that affect consumer sp...
View Answer

$Refer to the graph. The equilibrium for this economy is A) at point a. B) at point b. C) at price level P P _ { 2 } \text { and output } Q _ { 2 } \text {. } D) at price level P P _ { 1 } \text { and output } Q _ { 1 } \text {. }$ Refer to the graph. The equilibrium for this economy is

Correct Answer
verified

In the accompanying graph, which line might represent an immediate-short-run aggregate supply curve?

Correct Answer
verified

An increase in input productivity will

Correct Answer
verified

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

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. If productivity increased such that 3,000 units are now produced With the quantity of inputs still equal to 60, then per-unit production costs would

Correct Answer
verified

(Last Word) Discuss the explanations economists give for the slow recovery after the Great Recession.

Correct Answer
verified
One explanation was that it was hard for...
View Answer

Correct Answer
verified

Which of the following will not tend to happen if the U.S. dollar depreciates against the euro?

Correct Answer
verified

If the stock market crashes, the so-called reverse wealth effect will cause consumer spending to decrease.

Correct Answer
verified

If personal income taxes and business taxes increase, then this will

Correct Answer
verified

Why does aggregate demand shift outward by a greater amount than the initial increase in spending?

Correct Answer
verified
The reason is because of the multiplier....
View Answer

Exam 12: Aggregate Demand and Aggregate Supply

Correct AnswerverifiedShow Answer

In which of the following sets of circumstances can we conﬁdently expect inﬂation?

Correct AnswerverifiedShow Answer

The interest-rate effect suggests that

Correct AnswerverifiedShow Answer

A change in business taxes and regulation can affect production costs and aggregate supply.

Correct AnswerverifiedShow Answer

An increase in aggregate demand is most likely to be caused by which of the following?

Correct AnswerverifiedShow Answer

The foreign purchases effect suggests that a decrease in the U.S. price level relative to other countries will

Correct AnswerverifiedShow Answer

If aggregate demand increases and aggregate supply decreases, the price level

Correct AnswerverifiedShow Answer

With cost-push inﬂation, there will be

Correct AnswerverifiedShow Answer

Identify the four factors that affect consumer spending. How does a change in consumer spending affect aggregate demand?

Correct AnswerverifiedThe four factors that affect consumer sp...View AnswerShow Answer

Refer to the graph. The equilibrium for this economy is

Correct AnswerverifiedShow Answer

In the accompanying graph, which line might represent an immediate-short-run aggregate supply curve?

Correct AnswerverifiedShow Answer

An increase in input productivity will

Correct AnswerverifiedShow Answer

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

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. If productivity increased such that 3,000 units are now produced With the quantity of inputs still equal to 60, then per-unit production costs would

Correct AnswerverifiedShow Answer

(Last Word) Discuss the explanations economists give for the slow recovery after the Great Recession.

Correct AnswerverifiedOne explanation was that it was hard for...View AnswerShow Answer

Correct AnswerverifiedShow Answer

Which of the following will not tend to happen if the U.S. dollar depreciates against the euro?

Correct AnswerverifiedShow Answer

If the stock market crashes, the so-called reverse wealth effect will cause consumer spending to decrease.

Correct AnswerverifiedShow Answer

If personal income taxes and business taxes increase, then this will

Correct AnswerverifiedShow Answer

Why does aggregate demand shift outward by a greater amount than the initial increase in spending?

Correct AnswerverifiedThe reason is because of the multiplier....View AnswerShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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The four factors that affect consumer sp...
View Answer

$Refer to the graph. The equilibrium for this economy is A) at point a. B) at point b. C) at price level P P _ { 2 } \text { and output } Q _ { 2 } \text {. } D) at price level P P _ { 1 } \text { and output } Q _ { 1 } \text {. }$ Refer to the graph. The equilibrium for this economy is

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified
One explanation was that it was hard for...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The reason is because of the multiplier....
View Answer