Question 1

The aggregate demand curve slopes downward in part due to:

Accepted Answer

A)  the negative relationship between the price level and net exports.
B)  the positive relationship between the price level and exports.
C)  the negative relationship between the price level and imports.
D)  All of these are true.

Question 2

When prices rise,the interest rate:

Accepted Answer

A)  tends to rise.
B)  tends to fall.
C)  is usually not affected.
D)  will rise if the wealth effect outweighs the price effect.

Question 3

The relationship between the overall price level in the economy and total production by firms is shown in the:

Accepted Answer

A)  aggregate demand curve.
B)  aggregate supply curve.
C)  inflation rate.
D)  business cycle.

Question 4

When the U.S.price level increases,we predict a:

Accepted Answer

A)  movement down along the aggregate demand curve.
B)  a shift straight up of the aggregate demand curve.
C)  a shift to the right of the aggregate demand curve.
D)  None of these is true. D

Question 5

One reason that explains why the short-run aggregate supply curve is upward sloping is:

Accepted Answer

A)  sticky wages.
B)  cartels keeping prices artificially high.
C)  the lag involved with public policy making.
D)  All of these cause it to be upward sloping. A

Question 6

The aggregate demand curve:

Accepted Answer

A)  shows the relationship between the overall price level and the level of total demand.
B)  shows the price level on the vertical axis and output on the horizontal axis.
C)  slopes downward.
D)  All of these are true.

Question 7

In the macroeconomic model of aggregate supply and aggregate demand:

Accepted Answer

A)  price is the overall price level.
B)  quantity represents GDP.
C)  price is calculated as a weighted average of the prices of all goods and services.
D)  All of these are true.

Question 8

A year-long drought that destroys most wheat crops for the season would:

Accepted Answer

A)  shift the aggregate demand curve only.
B)  shift the aggregate demand curve,and the short-run aggregate supply curve would shift in response.
C)  shift the short-run aggregate supply curve only.
D)  shift the short-run aggregate supply curve and the long-run aggregate supply curve.

Question 9

Lower interest rates motivate:

Accepted Answer

A)  firms to invest less in new factories and working capital.
B)  firms to invest more in new factories and working capital.
C)  individuals to spend less on consumption goods.
D)  individuals to spend less on capital goods.

Question 10

Sticky wages occur because:

Accepted Answer

A)  employers must wait until the current contract ends to cut someone's pay.
B)  unions often negotiate wages for several years in advance.
C)  wages can only be changed at the end of contracts,as opposed to final good prices which can change anytime.
D)  All of these are true. D

Question 11

An increase in the costs of production will cause the:

Accepted Answer

A)  short-run aggregate supply curve to shift to the right.
B)  aggregate demand curve to shift to the right.
C)  short-run aggregate supply curve to shift to the left.
D)  long-run aggregate supply curve to shift to the left.

Question 12

The aggregate demand curve slopes:

Accepted Answer

A)  downward,like individual supply curves.
B)  downward,like individual demand curves.
C)  upward,like individual supply curves.
D)  upward,like individual demand curves.

Question 13

Which of the following would cause aggregate demand to shift to the right?

Accepted Answer

A)  Increased income taxes
B)  Decreased corporate income taxes
C)  Decreased consumer confidence
D)  Decreased government spending

Question 14

Which of the following would likely cause aggregate demand to shift to the right?

Accepted Answer

A)  Consumer confidence regarding future income increases
B)  A tax credit for small businesses is issued
C)  The government builds new highways
D)  All of these are likely to cause aggregate demand to shift to the right.

Question 15

Net exports are:

Accepted Answer

A)  exports minus imports.
B)  imports minus exports.
C)  imports divided by exports.
D)  imports plus exports.

Question 16

The government might increase its spending to end a recession because:

Accepted Answer

A)  allowing the short-run aggregate supply to adjust back to the long-run can take a long time.
B)  the economy experiences lower prices at the long-run equilibrium.
C)  the economy enjoys a higher level of output in the long run.
D)  None of these justify why the government might change its spending to end a recession.

Question 17

Stagflation refers to a situation in which the economy is experiencing:

Accepted Answer

A)  high economic growth and high inflation.
B)  low economic growth and low inflation.
C)  high economic growth and low inflation.
D)  low economic growth and high inflation.

Question 18

If consumption increases in general:

Accepted Answer

A)  the aggregate demand curve will shift straight down.
B)  the aggregate demand curve will shift to the right.
C)  the economy will move down along the aggregate demand curve to a higher quantity.
D)  it will be cancelled out by business's reaction and the aggregate demand curve will be unaffected.

Question 19

If the aggregate demand curve shifts in the short run moving the economy out of long-run equilibrium:

Accepted Answer

A)  the short-run aggregate supply curve will shift to bring it back into long-run equilibrium.
B)  the aggregate demand curve will eventually shift back once expectations are taken into account.
C)  inflation will always occur.
D)  None of these is true.

Question 20

Which of the following is a component of aggregate demand?

Accepted Answer

A)  Consumption
B)  Investment
C)  Net exports
D)  All of these are components of aggregate demand.

Exam 28: Aggregate Demand and Aggregate Supply

The aggregate demand curve slopes downward in part due to:

Correct AnswerverifiedShow Answer

When prices rise,the interest rate:

Correct AnswerverifiedShow Answer

The relationship between the overall price level in the economy and total production by firms is shown in the:

Correct AnswerverifiedShow Answer

When the U.S.price level increases,we predict a:

Correct AnswerverifiedD

One reason that explains why the short-run aggregate supply curve is upward sloping is:

Correct AnswerverifiedA

The aggregate demand curve:

Correct AnswerverifiedShow Answer

In the macroeconomic model of aggregate supply and aggregate demand:

Correct AnswerverifiedShow Answer

A year-long drought that destroys most wheat crops for the season would:

Correct AnswerverifiedShow Answer

Lower interest rates motivate:

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Sticky wages occur because:

Correct AnswerverifiedD

An increase in the costs of production will cause the:

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The aggregate demand curve slopes:

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Which of the following would cause aggregate demand to shift to the right?

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Which of the following would likely cause aggregate demand to shift to the right?

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Net exports are:

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The government might increase its spending to end a recession because:

Correct AnswerverifiedShow Answer

Stagflation refers to a situation in which the economy is experiencing:

Correct AnswerverifiedShow Answer

If consumption increases in general:

Correct AnswerverifiedShow Answer

If the aggregate demand curve shifts in the short run moving the economy out of long-run equilibrium:

Correct AnswerverifiedShow Answer

Which of the following is a component of aggregate demand?

Correct AnswerverifiedShow Answer

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D

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