Question 1

Given aggregate demand, a decrease in aggregate supply creates:

Accepted Answer

A)   a higher price level and a higher GDP level.
B)   a lower price level and a higher GDP level.
C)   cost-push inflation.
D)   demand-pull inflation.

Question 2

Exhibit 10-4 Aggregate supply and demand curves
1 to E2 in Exhibit 10-4 represents: A)  cost-push inflation. B)  demand-shock inflation. C)  wage push inflation. D)  demand-pull inflation." class="answers-bank-image d-inline" rel="preload" >
The increase in the price level as the economy moves from E1 to E2 in Exhibit 10-4 represents:

Accepted Answer

A)   cost-push inflation.
B)   demand-shock inflation.
C)   wage push inflation.
D)   demand-pull inflation.

Question 3

In the intermediate range of the aggregate supply curve, higher aggregate demand will increase:

Accepted Answer

A)   both the price level and real GDP.
B)   real GDP without raising the price level.
C)   the price level without affecting real GDP.
D)   the price level but reduce real GDP.

Question 4

In the upward-sloping segment of the aggregate supply curve,

Accepted Answer

A)   increases in output are linked to decreases in the price level.
B)   firms are willing to pay higher wages to get more labor.
C)   producers can hire more workers without having to raise the wage rate.
D)   the economy can increase aggregate supply without prices going up.

Question 5

The vertical portion of the aggregate supply curve shows that at full employment an increase in the price level will:

Accepted Answer

A)   not alter the economy's full-employment real GDP.
B)   increase the economy's full-employment real GDP.
C)   reduce the quantity of goods and services purchasers will demand.
D)   improve the overall efficiency of resource use.

Question 6

Which of the following reasons helps explain why the aggregate demand curve is downward sloping?

Accepted Answer

A)   The real balances effect or wealth effect: Consumers spend more on goods and services when the price level falls because lower prices increase consumer purchasing power.
B)   The producer-push effect: At less than full employment, increases in quantity demanded will raise price, and thus will motivate sellers to produce more.
C)   The hidden inflation effect: As the price level rises, consumers fail to recognize that prices are higher, and consequently they fail to reduce expenditures on goods and services.
D)   The cost-pull effect: As costs of production rise, consumers are pulled to buy more of the products they want most.

Question 7

In the aggregate demand/aggregate supply model, a country's full-employment real GDP is represented by:

Accepted Answer

A)   prices.
B)   aggregate demand.
C)   aggregate supply.
D)   an increase in the general level of prices.

Question 8

In the United States during the 1960s, government spending dramatically increased to fight the Vietnam War, which resulted in:

Accepted Answer

A)   demand-pull inflation.
B)   cost-push inflation.
C)   a disinflationary recession.
D)   stagflation.

Question 9

The real balance effect (wealth effect) , the interest rate effect, and the net exports effect all help to explain the:

Accepted Answer

A)   decrease in supply in the loanable funds market.
B)   large federal budget deficit.
C)   increase in short-run aggregate supply.
D)   downward-sloping aggregate demand curve.

Question 10

For an economy, aggregate demand equals:

Accepted Answer

A)   consumption plus investment plus government spending plus exports.
B)   consumption plus investment plus government spending plus (exports minus imports) .
C)   consumption plus investment plus (taxes minus transfers)  plus (exports minus imports) .
D)   consumption plus investment plus government spending plus net exports (imports minus exports) .

Question 11

According to the interest rate effect, as the price level rises,:

Accepted Answer

A)   people feel poorer and buy less.
B)   United States products become more expensive and foreigners buy less U.S. goods.
C)   interest rates fall, and people buy less.
D)   interest rates rise, and people buy less.

Question 12

As prices rise, people will buy fewer goods and services because:

Accepted Answer

A)   the interest rate has declined.
B)   aggregate demand has increased.
C)   the purchasing power of the fixed quantity of money has declined.
D)   the income of households has increased.

Question 13

The net exports effect is the ____ relationship between net exports and the price level of an economy.

Accepted Answer

A)   inverse
B)   independent
C)   direct
D)   linear

Question 14

Using the AD-AS model, if consumers and business become more optimistic about the future direction of the economy and increase spending, then:

Accepted Answer

A)   aggregate demand will decrease.
B)   aggregate demand will increase.
C)   long-run aggregate supply will increase.
D)   long-run aggregate supply will decrease.

Exam 20: Aggregate Demand and Supply

The net exports effect is the ____ relationship between net exports and the price level of an economy.

Correct Answer
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In the aggregate demand/aggregate supply model, a country's full-employment real GDP is represented by:

Correct Answer
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In the United States during the 1960s, government spending dramatically increased to fight the Vietnam War, which resulted in:

Correct Answer
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The vertical portion of the aggregate supply curve shows that at full employment an increase in the price level will:

Correct Answer
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For an economy, aggregate demand equals:

Correct Answer
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Which of the following reasons helps explain why the aggregate demand curve is downward sloping?

Correct Answer
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Using the AD-AS model, if consumers and business become more optimistic about the future direction of the economy and increase spending, then:

Correct Answer
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In the intermediate range of the aggregate supply curve, higher aggregate demand will increase:

Correct Answer
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Exhibit 10-4 Aggregate supply and demand curves The increase in the price level as the economy moves from E₁ to E₂ in Exhibit 10-4 represents:

Correct Answer
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The real balance effect (wealth effect) , the interest rate effect, and the net exports effect all help to explain the:

Correct Answer
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According to the interest rate effect, as the price level rises,:

Correct Answer
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Given aggregate demand, a decrease in aggregate supply creates:

Correct Answer
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In the upward-sloping segment of the aggregate supply curve,

Correct Answer
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As prices rise, people will buy fewer goods and services because:

Correct Answer
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Exam 20: Aggregate Demand and Supply

The net exports effect is the ____ relationship between net exports and the price level of an economy.

Correct AnswerverifiedShow Answer

In the aggregate demand/aggregate supply model, a country's full-employment real GDP is represented by:

Correct AnswerverifiedShow Answer

In the United States during the 1960s, government spending dramatically increased to fight the Vietnam War, which resulted in:

Correct AnswerverifiedShow Answer

The vertical portion of the aggregate supply curve shows that at full employment an increase in the price level will:

Correct AnswerverifiedShow Answer

For an economy, aggregate demand equals:

Correct AnswerverifiedShow Answer

Which of the following reasons helps explain why the aggregate demand curve is downward sloping?

Correct AnswerverifiedShow Answer

Using the AD-AS model, if consumers and business become more optimistic about the future direction of the economy and increase spending, then:

Correct AnswerverifiedShow Answer

In the intermediate range of the aggregate supply curve, higher aggregate demand will increase:

Correct AnswerverifiedShow Answer

Exhibit 10-4 Aggregate supply and demand curves The increase in the price level as the economy moves from E1 to E2 in Exhibit 10-4 represents:

Correct AnswerverifiedShow Answer

The real balance effect (wealth effect) , the interest rate effect, and the net exports effect all help to explain the:

Correct AnswerverifiedShow Answer

According to the interest rate effect, as the price level rises,:

Correct AnswerverifiedShow Answer

Given aggregate demand, a decrease in aggregate supply creates:

Correct AnswerverifiedShow Answer

In the upward-sloping segment of the aggregate supply curve,

Correct AnswerverifiedShow Answer

As prices rise, people will buy fewer goods and services because:

Correct AnswerverifiedShow Answer

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Exhibit 10-4 Aggregate supply and demand curves The increase in the price level as the economy moves from E₁ to E₂ in Exhibit 10-4 represents:

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
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