Question 1

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 (imports minus exports) .

Question 2

When prices rise, consumers and businesses hold larger money balances. This reduces the supply of loanable funds, increases the interest rate, and discourages both consumption and investment. This process is called the:

Accepted Answer

A)   interest-rate effect.
B)   real balance effect.
C)   investment effect.
D)   disinvestment effect. A

Question 3

Suppose the price level falls. The result is that the:

Accepted Answer

A)   aggregate supply curve would shift to the right.
B)   aggregate supply curve would shift to the left.
C)   general price level would rise causing a movement up the aggregate demand curve.
D)   aggregate demand curve would slope downward because of the real balances effect.

Question 4

Which of the following would shift the aggregate demand curve to the left?

Accepted Answer

A)   An increase in exports.
B)   An increase in investment.
C)   An increase in government spending.
D)   A decrease in government spending.

Question 5

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 6

p : A)  would be associated with considerable unemployment. B)  indicates that the economy is experiencing zero inflation. C)  indicates the short-run equilibrium level of real GDP. D)  is potential real GDP for this economy." class="answers-bank-image d-inline" rel="preload" >   Macro AD-AS Model
In Exhibit 14A-4, the level of real GDP represented by Y p :

Accepted Answer

A)   would be associated with considerable unemployment.
B)   indicates that the economy is experiencing zero inflation.
C)   indicates the short-run equilibrium level of real GDP.
D)   is potential real GDP for this economy.

Question 7

Exhibit 14-1 Aggregate supply curve

In Exhibit 14-1, higher price levels allow producers to earn higher profits, stimulating production and employment in:

Accepted Answer

A)   the segment labeled ab.
B)   the segment labeled bc.
C)   the segment labeled cd.
D)   both segment bc and segment cd.

Question 8

The short-run aggregate supply curve (SRAS)  is the amount of real GDP:

Accepted Answer

A)   produced at various price levels.
B)   produced at various savings rate levels.
C)   purchased at various price levels.
D)   purchased at various saving rate levels.

Question 9

Which of the following events is the most likely to create stagflation?

Accepted Answer

A)   An increase in the money supply.
B)   A reduction in the amount spent on national defense.
C)   A doubling of oil prices.
D)   A decrease in investment spending.

Question 10

Along the short-run aggregate supply curve (SRAS) , an increase (rightward shift)  in the aggregate demand curve 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. A

Question 11

When moving along a market demand curve, the prices of related goods are assumed to be constant. With an aggregate demand curve,

Accepted Answer

A)   the assumption is meaningless because we are using a market basket for all goods and services.
B)   the prices of related goods have an inverse relationship.
C)   all goods are assumed to have the same price.
D)   the same assumption holds true.

Question 12

Along the Keynesian range of the aggregate supply curve, an increase in the aggregate demand curve will increase:

Accepted Answer

A)   both the price level and real GDP.
B)   only real GDP.
C)   only the price level.
D)   real GDP and reduce the price level.

Question 13

Other things constant, an increase in resource prices will:

Accepted Answer

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

Question 14

Which of the following will most likely increase aggregate demand?

Accepted Answer

A)   a decrease in stock market prices
B)   an increase in business investment spending
C)   a decrease in the expected inflation rate
D)   a decrease in real GDP

Question 15

Which of the following will most likely cause an increase in the aggregate supply curve?

Accepted Answer

A)   a reduction in the general level of prices
B)   an increase in the general level of prices
C)   an improvement in technology that substantially reduces the cost of generating energy
D)   an increase in taxes that makes it more expensive for Americans to import crude oil

Question 16

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 17

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. C

Question 18

Exhibit 14-2 Aggregate supply and demand curves
1 to E2 represents: A)  cost-push inflation. B)  demand-pull inflation. C)  price-push inflation. D)  wage-push inflation." class="answers-bank-image d-inline" rel="preload" >
In Exhibit 14-2, the change in equilibrium from E1 to E2 represents:

Accepted Answer

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

Question 19

Which of the following could not be expected to shift the aggregate demand curve?

Accepted Answer

A)   net exports fall
B)   consumption spending decreases
C)   an increase in government spending
D)   a change in real GDP

Question 20

In the short run, an increase in the price level causes:

Accepted Answer

A)   a rightward shift in the aggregate demand curve.
B)   a leftward shift in the short-run aggregate supply curve.
C)   a rightward shift in the short-run aggregate supply curve.
D)   a movement upward along the short-run aggregate supply curve.

Exam 14: Aggregate Demand and Supply

For an economy, aggregate demand equals:

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When prices rise, consumers and businesses hold larger money balances. This reduces the supply of loanable funds, increases the interest rate, and discourages both consumption and investment. This process is called the:

Correct AnswerverifiedA

Suppose the price level falls. The result is that the:

Correct AnswerverifiedShow Answer

Which of the following would shift the aggregate demand curve to the left?

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

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Macro AD-AS Model In Exhibit 14A-4, the level of real GDP represented by Y p :

Correct AnswerverifiedShow Answer

Exhibit 14-1 Aggregate supply curve In Exhibit 14-1, higher price levels allow producers to earn higher profits, stimulating production and employment in:

Correct AnswerverifiedShow Answer

The short-run aggregate supply curve (SRAS) is the amount of real GDP:

Correct AnswerverifiedShow Answer

Which of the following events is the most likely to create stagflation?

Correct AnswerverifiedShow Answer

Along the short-run aggregate supply curve (SRAS) , an increase (rightward shift) in the aggregate demand curve will increase:

Correct AnswerverifiedA

When moving along a market demand curve, the prices of related goods are assumed to be constant. With an aggregate demand curve,

Correct AnswerverifiedShow Answer

Along the Keynesian range of the aggregate supply curve, an increase in the aggregate demand curve will increase:

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Other things constant, an increase in resource prices will:

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Which of the following will most likely increase aggregate demand?

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Which of the following will most likely cause an increase in the aggregate supply curve?

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

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

Correct AnswerverifiedC

Exhibit 14-2 Aggregate supply and demand curves In Exhibit 14-2, the change in equilibrium from E1 to E2 represents:

Correct AnswerverifiedShow Answer

Which of the following could not be expected to shift the aggregate demand curve?

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In the short run, an increase in the price level causes:

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A

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Macro AD-AS Model In Exhibit 14A-4, the level of real GDP represented by Y _p :

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C

Exhibit 14-2 Aggregate supply and demand curves In Exhibit 14-2, the change in equilibrium from E₁ to E₂ represents:

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