Question 1

The model of aggregate supply and aggregate demand is based on the assumption that a firm expands output of its product when its selling price increases.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following factors causes the aggregate demand curve to slope downward and to the right?

Accepted Answer

A)   The substitution effect
B)   The income effect
C)   The open economy effect
D)   The profit motive

Question 3

Along a given aggregate demand curve, _____ is constant.

Accepted Answer

A)   the level of exports.
B)   the level of imports.
C)   the population.
D)   the price level.

Question 4

Aggregate demand shows the relationship between the amount of imports and the overall level of spending.

Accepted Answer

A) True 
 B)False

Question 5

The U.S. aggregate demand curve would shift to the left if

Accepted Answer

A)   economic conditions in Europe improved.
B)   there was a tax decrease.
C)   there was a tax increase.
D)   the aggregate supply curve shifts to the right.

Question 6

A decline in consumer confidence will increase aggregate supply.

Accepted Answer

A) True 
 B)False

Question 7

An increase in investment spending by firms causes

Accepted Answer

A)   an increase in aggregate demand and a decrease in aggregate supply.
B)   a decrease in aggregate supply only.
C)   an increase in aggregate demand only.
D)   an increase in the labor force participation rate.

Question 8

In product markets, households are the sellers and businesses are the buyers.

Accepted Answer

A) True 
 B)False

Question 9

Holding nominal money balances constant, a decrease in the price level

Accepted Answer

A)   causes the real value of the money balances to increase, in turn increasing the quantity of goods and services demanded.
B)   causes the real value of the money balances to decrease, in turn decreasing the quantity of goods and services demanded.
C)   causes the real value of the money balances to increase, thereby increasing the interest rate.
D)   generates a reduction in the value of the money balances, leading to higher interest rates and a decrease in the quantity of goods and services demanded.

Question 10

The open economy effect explains the upward slope of aggregate supply.

Accepted Answer

A) True 
 B)False

Question 11

The real-balance effect indicates that a higher price level causes

Accepted Answer

A)   the real value of financial assets to decrease.
B)   the real value of financial assets to increase.
C)   consumers to save more.
D)   banks to be more restrictive in their lending practices.

Question 12

Tax cuts decrease aggregate demand.

Accepted Answer

A) True 
 B)False

Question 13

In the circular flow model, business sell factor services to households.

Accepted Answer

A) True 
 B)False

Question 14

How are the price level and the level of real output affected if aggregate supply decreases?

Accepted Answer

The price level incr...

Question 15

In factor markets, households are the sellers and businesses are the buyers.

Accepted Answer

A) True 
 B)False

Question 16

The open economy effect involves the way that

Accepted Answer

A)   investors alter their stock portfolios when the price level rises.
B)   investors alter their stock portfolios when the interest rate rises.
C)   the demand for imports is dependent on the domestic price level.
D)   consumers change their planned purchases when the unemployment rate changes.

Question 17

The two reasons for the downward slope of aggregate demand are the _________ _________ effect and the _________ _________ effect.

Accepted Answer

real balan...

Question 18

An increase in the foreign exchange value of the dollar causes aggregate demand to _________ .

Accepted Answer

The answer of An increase in the foreign exchange value...

Exam 11: Aggregate Demand and Supply

The open economy effect explains the upward slope of aggregate supply.

Correct Answer
verified

In the circular flow model, business sell factor services to households.

Correct Answer
verified

Which of the following factors causes the aggregate demand curve to slope downward and to the right?

Correct Answer
verified

An increase in the foreign exchange value of the dollar causes aggregate demand to _________ .

Correct Answer
verified

The real-balance effect indicates that a higher price level causes

Correct Answer
verified

In factor markets, households are the sellers and businesses are the buyers.

Correct Answer
verified

A decline in consumer confidence will increase aggregate supply.

Correct Answer
verified

Aggregate demand shows the relationship between the amount of imports and the overall level of spending.

Correct Answer
verified

Tax cuts decrease aggregate demand.

Correct Answer
verified

Holding nominal money balances constant, a decrease in the price level

Correct Answer
verified

An increase in investment spending by firms causes

Correct Answer
verified

The open economy effect involves the way that

Correct Answer
verified

How are the price level and the level of real output affected if aggregate supply decreases?

Correct Answer
verified
The price level incr...
View Answer

The U.S. aggregate demand curve would shift to the left if

Correct Answer
verified

The model of aggregate supply and aggregate demand is based on the assumption that a firm expands output of its product when its selling price increases.

Correct Answer
verified

The two reasons for the downward slope of aggregate demand are the _____ _ effect and the _ _____ effect.

Correct Answer
verified
real balan...
View Answer

Along a given aggregate demand curve, _____ is constant.

Correct Answer
verified

In product markets, households are the sellers and businesses are the buyers.

Correct Answer
verified

Exam 11: Aggregate Demand and Supply

The open economy effect explains the upward slope of aggregate supply.

Correct AnswerverifiedShow Answer

In the circular flow model, business sell factor services to households.

Correct AnswerverifiedShow Answer

Which of the following factors causes the aggregate demand curve to slope downward and to the right?

Correct AnswerverifiedShow Answer

An increase in the foreign exchange value of the dollar causes aggregate demand to _________ .

Correct AnswerverifiedShow Answer

The real-balance effect indicates that a higher price level causes

Correct AnswerverifiedShow Answer

In factor markets, households are the sellers and businesses are the buyers.

Correct AnswerverifiedShow Answer

A decline in consumer confidence will increase aggregate supply.

Correct AnswerverifiedShow Answer

Aggregate demand shows the relationship between the amount of imports and the overall level of spending.

Correct AnswerverifiedShow Answer

Tax cuts decrease aggregate demand.

Correct AnswerverifiedShow Answer

Holding nominal money balances constant, a decrease in the price level

Correct AnswerverifiedShow Answer

An increase in investment spending by firms causes

Correct AnswerverifiedShow Answer

The open economy effect involves the way that

Correct AnswerverifiedShow Answer

How are the price level and the level of real output affected if aggregate supply decreases?

Correct AnswerverifiedThe price level incr...View AnswerShow Answer

The U.S. aggregate demand curve would shift to the left if

Correct AnswerverifiedShow Answer

The model of aggregate supply and aggregate demand is based on the assumption that a firm expands output of its product when its selling price increases.

Correct AnswerverifiedShow Answer

The two reasons for the downward slope of aggregate demand are the _________ _________ effect and the _________ _________ effect.

Correct Answerverifiedreal balan...View AnswerShow Answer

Along a given aggregate demand curve, _____ is constant.

Correct AnswerverifiedShow Answer

In product markets, households are the sellers and businesses are the buyers.

Correct AnswerverifiedShow Answer

Correct Answer
verified

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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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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The price level incr...
View Answer

Correct Answer
verified

Correct Answer
verified

The two reasons for the downward slope of aggregate demand are the _____ _ effect and the _ _____ effect.

Correct Answer
verified
real balan...
View Answer

Correct Answer
verified

Correct Answer
verified