Question 1

Given that energy is an input in production, the development of a cheaper source of energy will result in:

Accepted Answer

A)  a lower price level and a lower amount of production.
B)  a higher price level and a higher amount of production.
C)  a lower amount of production at every price level.
D)  a higher amount of production at every price level.
E)  a lower profit at every price level.F) B) and D)
G) B) and C)

Question 2

Each of the panels given below represents the short-run equilibrium in the U.S.economy.The Aggregate Demand and Aggregate Supply curves in each panel responds to various economic changes. Figure 8.1  Refer to Figure 8.1.Which of the graphs in the figure best describes the impact of an effective oil embargo that raises the price of gasoline?

Accepted Answer

A)  Panel A
B)  Panel B
C)  Panel C
D)  Panel D
E)  Panel EF) A) and B)
G) B) and E)

Question 3

The main reason why the short-run aggregate supply curve slopes upward is that as the average price level increases, larger scales of production become more profitable.

Accepted Answer

A) True 
 B)False

Question 4

A higher domestic price level lowers aggregate expenditures and, therefore, shifts the aggregate demand curve to the left.

Accepted Answer

A) True 
 B)False

Question 5

Pessimistic consumer expectations and decreased government spending are both associated with:

Accepted Answer

A)  a downward movement along the aggregate demand curve.
B)  an upward movement along the aggregate demand curve.
C)  a leftward shift of the aggregate demand curve.
D)  a rightward shift of the aggregate demand curve.
E)  a steeper slope of the aggregate demand curve.F) A) and E)
G) B) and E)

Question 6

The steeper slope of the aggregate supply curve in the long run indicates that an increase in aggregate demand will cause an increase in the price level and an even greater increase in output in the long run.

Accepted Answer

A) True 
 B)False

Question 7

The fact that the aggregate demand curve slopes downward means that aggregate expenditures increase when the price level decreases.

Accepted Answer

A) True 
 B)False

Question 8

The change in aggregate expenditures resulting from a movement in the domestic price level, which in turn changes the price of domestic goods in relation to foreign goods, is known as the:

Accepted Answer

A)  international trade effect.
B)  multilateral equilibrium condition.
C)  international exchange rate effect.
D)  magnified international pricing effect.
E)  international deficit effect.F) D) and E)
G) A) and C)

Question 9

Long-run aggregate supply increases as:

Accepted Answer

A)  new production technology is introduced.
B)  the quality of labor declines.
C)  the average price level increases.
D)  natural resources become depleted.
E)  corporate wage rates increase.F) B) and E)
G) A) and C)

Question 10

The steepness of the aggregate supply curve depends on the:

Accepted Answer

A)  rate of inflation in the economy.
B)  change in relative prices of commodities.
C)  substitutability of the inputs used in producing various goods and services.
D)  ability of the producers to respond to price-level changes in the short run.
E)  the market rate of interest.F) A) and C)
G) A) and B)

Question 11

The AD curve will shift to the right if:

Accepted Answer

A)  people become pessimistic about the future of the economy.
B)  there is a decrease in foreign income.
C)  the government decreases spending.
D)  domestic price levels decrease.
E)  foreign price levels increase.F) A) and C)
G) C) and D)

Question 12

In the long-run, the aggregate supply curve normally is downward-sloping.

Accepted Answer

A) True 
 B)False

Question 13

Other things held constant, when the general price level changes:

Accepted Answer

A)  we move along the aggregate demand curve.
B)  we shift the aggregate demand curve to the right.
C)  we shift the aggregate demand curve to the left.
D)  we shift the aggregate supply curve to the right.E) A) and D)
F) C) and D)

Question 14

Which of the following is an impact of an increase in the general price level?

Accepted Answer

A)  An increase in aggregate demand for goods and services
B)  A decrease in aggregate supply of goods and services
C)  An increase in the price of the financial assets
D)  A decrease in supply of bonds and other assets
E)  An increase in interest ratesF) A) and B)
G) C) and D)

Question 15

The table given below reports the average hourly wage received by laborers and the price index for two years. Table 8.2
 Refer to Table 8.2.The data in the table suggests that in year 2:

Accepted Answer

A)  aggregate supply remains constant.
B)  aggregate demand decreases.
C)  aggregate supply decreases.
D)  aggregate demand increases.
E)  aggregate supply increasesF) A) and B)
G) A) and C)

Question 16

Which of the following is true of the aggregate demand curve?

Accepted Answer

A)  The aggregate demand curve shows the various levels of expenditures in the economy at alternative price levels.
B)  The aggregate demand curve implies a positive relationship between inflation and unemployment.
C)  The aggregate demand curve is identical to the income consumption curve.
D)  The aggregate demand curve has the same slope as the aggregate supply curve.
E)  The aggregate demand curve relates relative prices to the quantity demanded of a particular good.F) B) and C)
G) A) and E)

Question 17

Government spending is set by the federal authorities in such a way that aggregate supply just equals aggregate spending.

Accepted Answer

A) True 
 B)False

Question 18

Suppose an increase in investment spending results in an increase in equilibrium real GDP and a rise in the equilibrium price level.This implies that the aggregate supply curve for this economy is vertical.

Accepted Answer

A) True 
 B)False

Question 19

Identify the correct statement about the aggregate supply curve.

Accepted Answer

A)  The aggregate supply curve is irrelevant for determining macroeconomic equilibrium.
B)  The aggregate supply curve shows the various quantities of a particular good that is produced in the economy.
C)  The aggregate supply curve shows an inverse relationship between price level and employment.
D)  The aggregate supply curve shifts inward with an increase in consumer spending, investment, government spending, and net exports.
E)  The aggregate supply curve relates total output in the economy to alternative price levels.F) All of the above
G) A) and D)

Question 20

Which of the following statements is true about the economy in the long run?

Accepted Answer

A)  Equilibrium output must be below potential GDP and the rate of unemployment must exceed the natural rate.
B)  Production costs are close to zero.
C)  The rate of unemployment is zero in the long run.
D)  The aggregate demand curve plays no role in determining the equilibrium level of real GDP.
E)  The aggregate supply curve is a horizontal line.F) A) and E)
G) B) and E)

Exam 11: Macroeconomic Equilibrium: Aggregate Demand and Supply

In the long-run, the aggregate supply curve normally is downward-sloping.

Correct Answer
verified

The AD curve will shift to the right if:

Correct Answer
verified

Other things held constant, when the general price level changes:

Correct Answer
verified

A higher domestic price level lowers aggregate expenditures and, therefore, shifts the aggregate demand curve to the left.

Correct Answer
verified

Correct Answer
verified

Suppose an increase in investment spending results in an increase in equilibrium real GDP and a rise in the equilibrium price level.This implies that the aggregate supply curve for this economy is vertical.

Correct Answer
verified

Which of the following is an impact of an increase in the general price level?

Correct Answer
verified

The fact that the aggregate demand curve slopes downward means that aggregate expenditures increase when the price level decreases.

Correct Answer
verified

Pessimistic consumer expectations and decreased government spending are both associated with:

Correct Answer
verified

Identify the correct statement about the aggregate supply curve.

Correct Answer
verified

The table given below reports the average hourly wage received by laborers and the price index for two years. Table 8.2 Refer to Table 8.2.The data in the table suggests that in year 2:

Correct Answer
verified

The change in aggregate expenditures resulting from a movement in the domestic price level, which in turn changes the price of domestic goods in relation to foreign goods, is known as the:

Correct Answer
verified

Long-run aggregate supply increases as:

Correct Answer
verified

Given that energy is an input in production, the development of a cheaper source of energy will result in:

Correct Answer
verified

The steeper slope of the aggregate supply curve in the long run indicates that an increase in aggregate demand will cause an increase in the price level and an even greater increase in output in the long run.

Correct Answer
verified

The main reason why the short-run aggregate supply curve slopes upward is that as the average price level increases, larger scales of production become more profitable.

Correct Answer
verified

Government spending is set by the federal authorities in such a way that aggregate supply just equals aggregate spending.

Correct Answer
verified

Which of the following is true of the aggregate demand curve?

Correct Answer
verified

The steepness of the aggregate supply curve depends on the:

Correct Answer
verified

Which of the following statements is true about the economy in the long run?

Correct Answer
verified

Exam 11: Macroeconomic Equilibrium: Aggregate Demand and Supply

In the long-run, the aggregate supply curve normally is downward-sloping.

Correct AnswerverifiedShow Answer

The AD curve will shift to the right if:

Correct AnswerverifiedShow Answer

Other things held constant, when the general price level changes:

Correct AnswerverifiedShow Answer

A higher domestic price level lowers aggregate expenditures and, therefore, shifts the aggregate demand curve to the left.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Suppose an increase in investment spending results in an increase in equilibrium real GDP and a rise in the equilibrium price level.This implies that the aggregate supply curve for this economy is vertical.

Correct AnswerverifiedShow Answer

Which of the following is an impact of an increase in the general price level?

Correct AnswerverifiedShow Answer

The fact that the aggregate demand curve slopes downward means that aggregate expenditures increase when the price level decreases.

Correct AnswerverifiedShow Answer

Pessimistic consumer expectations and decreased government spending are both associated with:

Correct AnswerverifiedShow Answer

Identify the correct statement about the aggregate supply curve.

Correct AnswerverifiedShow Answer

The table given below reports the average hourly wage received by laborers and the price index for two years. Table 8.2 Refer to Table 8.2.The data in the table suggests that in year 2:

Correct AnswerverifiedShow Answer

The change in aggregate expenditures resulting from a movement in the domestic price level, which in turn changes the price of domestic goods in relation to foreign goods, is known as the:

Correct AnswerverifiedShow Answer

Long-run aggregate supply increases as:

Correct AnswerverifiedShow Answer

Given that energy is an input in production, the development of a cheaper source of energy will result in:

Correct AnswerverifiedShow Answer

The steeper slope of the aggregate supply curve in the long run indicates that an increase in aggregate demand will cause an increase in the price level and an even greater increase in output in the long run.

Correct AnswerverifiedShow Answer

The main reason why the short-run aggregate supply curve slopes upward is that as the average price level increases, larger scales of production become more profitable.

Correct AnswerverifiedShow Answer

Government spending is set by the federal authorities in such a way that aggregate supply just equals aggregate spending.

Correct AnswerverifiedShow Answer

Which of the following is true of the aggregate demand curve?

Correct AnswerverifiedShow Answer

The steepness of the aggregate supply curve depends on the:

Correct AnswerverifiedShow Answer

Which of the following statements is true about the economy in the long run?

Correct AnswerverifiedShow Answer

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