Question 1

A movement upward along a given aggregate demand curve is equivalent to a(n)

Accepted Answer

A)  increase in aggregate supply.
B)  increase in aggregate demand.
C)  upward shift in the aggregate expenditures schedule.
D)  downward shift in the aggregate expenditures schedule.

Question 2

Per-unit production cost is

Accepted Answer

A)  real output divided by inputs.
B)  total input cost divided by units of output.
C)  units of output divided by total input cost.
D)  a determinant of aggregate demand.

Question 3

An increase in investment and government spending can be expected to shift the

Accepted Answer

A)  aggregate expenditures curve downward and the aggregate demand curve leftward.
B)  aggregate expenditures curve upward and the aggregate demand curve leftward.
C)  aggregate expenditures curve downward and the aggregate demand curve rightward.
D)  aggregate expenditures curve upward and the aggregate demand curve rightward.

Question 4

When aggregate demand declines, wage rates may be inflexible downward, at least for a time, because of

Accepted Answer

A)  the foreign purchases effect.
B)  inflexible product prices.
C)  wage contracts.
D)  the wealth effect.

Question 5

Given a fixed upsloping AS curve, a rightward shift of the AD curve will

Accepted Answer

A)  cause cost-push inflation.
B)  increase real output but not the price level.
C)  increase the price level but not real output.
D)  increase both the price level and real output. D

Question 6

Deflation refers to a situation where

Accepted Answer

A)  the price level falls; it could be caused by a shift of AD to the left.
B)  the price level falls; it could be caused by a decrease in aggregate supply.
C)  the rate of inflation falls; it could be caused by a shift of AS to the right.
D)  the rate of inflation rises; it could be caused by a decrease in aggregate demand.

Question 7

A decrease in personal and business taxes will cause government spending and aggregate demand to decrease.

Accepted Answer

A) True 
 B)False  False

Question 8

The foreign purchases effect

Accepted Answer

A)  shifts the aggregate demand curve rightward.
B)  shifts the aggregate demand curve leftward.
C)  shifts the aggregate supply curve rightward.
D)  moves the economy along a fixed aggregate demand curve.

Question 9

Wage contracts, efficiency wages, and the minimum wage are explanations for why

Accepted Answer

A)  competition results in price wars.
B)  wages tend to be inflexible downward.
C)  the aggregate demand curve slopes downward.
D)  there is little support for the existence of a real-balances effect.

Question 10

In which of the following sets of circumstances can we confidently expect inflation?

Accepted Answer

A)  Aggregate supply and aggregate demand both increase.
B)  Aggregate supply and aggregate demand both decrease.
C)  Aggregate supply decreases and aggregate demand increases.
D)  Aggregate supply increases and aggregate demand decreases.

Question 11

An economy is employing 2 units of capital, 5 units of raw materials, and 8 units of labor to produce its total output of 640 units.Each unit of capital costs $10; each unit of raw materials, $4; and each unit of labor, $3.If the per-unit price of raw materials rises from $4 to $8 and all else remains constant, the aggregate

Accepted Answer

A)  supply curve would shift to the left.
B)  supply curve would shift to the right.
C)  demand curve would shift to the left.
D)  demand curve would shift to the right.

Question 12

Cost-push inflation is depicted as a rightward shift of the aggregate demand curve along an upsloping aggregate supply curve.

Accepted Answer

A) True 
 B)False

Question 13

Suppose that real domestic output in an economy is 20 units, the quantity of inputs is 10, and the price of each input is $4.The per-unit cost of production in the economy described is

Accepted Answer

A)  $0.50.
B)  $1.
C)  $2.
D)  $5.

Question 14

An increase in investment spending caused by higher expected rates of return will

Accepted Answer

A)  shift the aggregate supply curve to the left.
B)  move the economy up along an existing aggregate demand curve.
C)  shift the aggregate expenditures curve downward and the aggregate demand curve to the left.
D)  shift the aggregate expenditures curve upward and the aggregate demand curve to the right.

Question 15

The upward slope of the short-run aggregate supply curve is based on the assumption that

Accepted Answer

A)  wages and other resource prices do not respond to price level changes.
B)  wages and other resource prices do respond to price level changes.
C)  prices of outputs do not respond to price level changes.
D)  prices of inputs are flexible, while prices of outputs are fixed.

Question 16

Which of the following effects best explains the downward slope of the aggregate demand curve?

Accepted Answer

A)  a multiplier effect
B)  an expectations effect
C)  a substitution effect
D)  an interest-rate effect

Question 17

Macroeconomic equilibrium in the short run always occurs at full-employment GDP.

Accepted Answer

A) True 
 B)False

Question 18

Menu costs

Accepted Answer

A)  increase during recession.
B)  decrease during recession.
C)  are the costs to firms of changing prices and communicating them to customers.
D)  are sunk costs and therefore should be disregarded.

Question 19

Aggregate demand decreases and real output falls but the price level remains the same.Which of the following factors most likely contributes to downward price inflexibility in the immediate short run?

Accepted Answer

A)  the multiplier effect
B)  the wealth effect
C)  fear of price wars
D)  business taxes

Question 20

A negative GDP gap can be caused by either a decrease in aggregate demand or a decrease in aggregate supply.

Accepted Answer

A) True 
 B)False  True

Exam 32: Aggregate Demand and Aggregate Supply

A movement upward along a given aggregate demand curve is equivalent to a(n)

Correct Answer
verified

Per-unit production cost is

Correct Answer
verified

An increase in investment and government spending can be expected to shift the

Correct Answer
verified

When aggregate demand declines, wage rates may be inflexible downward, at least for a time, because of

Correct Answer
verified

Given a fixed upsloping AS curve, a rightward shift of the AD curve will

Correct Answer
verified
D

Deflation refers to a situation where

Correct Answer
verified

A decrease in personal and business taxes will cause government spending and aggregate demand to decrease.

Correct Answer
verified
False

The foreign purchases effect

Correct Answer
verified

Wage contracts, efficiency wages, and the minimum wage are explanations for why

Correct Answer
verified

In which of the following sets of circumstances can we confidently expect inflation?

Correct Answer
verified

Correct Answer
verified

Cost-push inflation is depicted as a rightward shift of the aggregate demand curve along an upsloping aggregate supply curve.

Correct Answer
verified

Suppose that real domestic output in an economy is 20 units, the quantity of inputs is 10, and the price of each input is $4.The per-unit cost of production in the economy described is

Correct Answer
verified

An increase in investment spending caused by higher expected rates of return will

Correct Answer
verified

The upward slope of the short-run aggregate supply curve is based on the assumption that

Correct Answer
verified

Which of the following effects best explains the downward slope of the aggregate demand curve?

Correct Answer
verified

Macroeconomic equilibrium in the short run always occurs at full-employment GDP.

Correct Answer
verified

Menu costs

Correct Answer
verified

Aggregate demand decreases and real output falls but the price level remains the same.Which of the following factors most likely contributes to downward price inflexibility in the immediate short run?

Correct Answer
verified

A negative GDP gap can be caused by either a decrease in aggregate demand or a decrease in aggregate supply.

Correct Answer
verified
True

Exam 32: Aggregate Demand and Aggregate Supply

A movement upward along a given aggregate demand curve is equivalent to a(n)

Correct AnswerverifiedShow Answer

Per-unit production cost is

Correct AnswerverifiedShow Answer

An increase in investment and government spending can be expected to shift the

Correct AnswerverifiedShow Answer

When aggregate demand declines, wage rates may be inflexible downward, at least for a time, because of

Correct AnswerverifiedShow Answer

Given a fixed upsloping AS curve, a rightward shift of the AD curve will

Correct AnswerverifiedD

Deflation refers to a situation where

Correct AnswerverifiedShow Answer

A decrease in personal and business taxes will cause government spending and aggregate demand to decrease.

Correct AnswerverifiedFalse

The foreign purchases effect

Correct AnswerverifiedShow Answer

Wage contracts, efficiency wages, and the minimum wage are explanations for why

Correct AnswerverifiedShow Answer

In which of the following sets of circumstances can we confidently expect inflation?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Cost-push inflation is depicted as a rightward shift of the aggregate demand curve along an upsloping aggregate supply curve.

Correct AnswerverifiedShow Answer

Suppose that real domestic output in an economy is 20 units, the quantity of inputs is 10, and the price of each input is $4.The per-unit cost of production in the economy described is

Correct AnswerverifiedShow Answer

An increase in investment spending caused by higher expected rates of return will

Correct AnswerverifiedShow Answer

The upward slope of the short-run aggregate supply curve is based on the assumption that

Correct AnswerverifiedShow Answer

Which of the following effects best explains the downward slope of the aggregate demand curve?

Correct AnswerverifiedShow Answer

Macroeconomic equilibrium in the short run always occurs at full-employment GDP.

Correct AnswerverifiedShow Answer

Menu costs

Correct AnswerverifiedShow Answer

Aggregate demand decreases and real output falls but the price level remains the same.Which of the following factors most likely contributes to downward price inflexibility in the immediate short run?

Correct AnswerverifiedShow Answer

A negative GDP gap can be caused by either a decrease in aggregate demand or a decrease in aggregate supply.

Correct AnswerverifiedTrue

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
D

Correct Answer
verified

Correct Answer
verified
False

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
True