Question 1

The aggregate supply curve

Accepted Answer

A)  is explained by the interest rate, real-balances, and foreign purchases effects.
B)  gets steeper as the economy moves from the top of the curve to the bottom of the curve.
C)  shows the various amounts of real output that businesses will produce at each price level.
D)  is downsloping because real purchasing power increases as the price level falls.

Question 2

If aggregate demand increases and aggregate supply decreases, the price level

Accepted Answer

A)  will decrease, but real output may increase, decrease, or remain unchanged.
B)  will increase, but real output may increase, decrease, or remain unchanged.
C)  and real output will both increase.
D)  and real output will both decrease.

Question 3

An increase in aggregate expenditures resulting from some factor other than a change in the price level is equivalent to

Accepted Answer

A)  a rightward shift of the aggregate demand curve in the AD-AS model.
B)  a leftward shift of the aggregate demand curve in the AD-AS model.
C)  a movement downward along a fixed aggregate demand curve in the AD-AS model.
D)  a decrease in aggregate supply in the AD-AS model.

Question 4

Which of the following will not tend to happen if the U.S.dollar depreciates against the euro?

Accepted Answer

A)  Europeans will find U.S.goods become less expensive in euro terms.
B)  Americans will find European goods become more expensive in dollar terms.
C)  Many Americans will switch and buy domestic goods instead of imports from Europe.
D)  Many Europeans will switch and buy their own products instead of imports from the U.S.

Question 5

A fall in the prices of inputs will shift the aggregate

Accepted Answer

A)  demand curve leftward.
B)  demand curve rightward.
C)  supply curve rightward.
D)  supply curve leftwarD.

Question 6

If personal taxes were decreased and resource productivity increased simultaneously, the equilibrium

Accepted Answer

A)  output would necessarily rise.
B)  output would necessarily fall.
C)  price level would necessarily fall.
D)  price level would necessarily rise.

Question 7

Collective bargaining agreements that prohibit wage cuts for the duration of the contract contribute to

Accepted Answer

A)  a wealth effect.
B)  a multiplier effect.
C)  an increase in aggregate supply.
D)  a price level that is inflexible downward.Difficulty: 02 Medium

Question 8

When aggregate demand declines, the price level may remain constant, at least for a time, because

Accepted Answer

A)  firms individually may fear that their price cut may set off a price war.
B)  menu costs rise.
C)  price cuts tend to increase efficiency wages.
D)  product markets are highly competitive.

Question 9

The economy experiences an increase in the price level and a decrease in real domestic output.Which of the following is a likely explanation?

Accepted Answer

A)  Productivity has increased.
B)  Input prices have increased.
C)  There has been an increase in government spending.
D)  Government regulations have been reduced.

Question 10

An increase in business excise taxes will shift the aggregate supply curve leftward.Topic: Changes in Aggregate Supply

Accepted Answer

A) True 
 B)False

Question 11

If Congress passed new laws significantly increasing the regulation of business, this action would tend to

Accepted Answer

A)  increase per-unit production costs and shift the aggregate supply curve to the left.
B)  increase per-unit production costs and shift the aggregate supply curve to the right.
C)  increase per-unit production costs and shift the aggregate demand curve to the left.
D)  decrease per-unit production costs and shift the aggregate supply curve to the left

Question 12

The aggregate demand curve shows the

Accepted Answer

A)  inverse relationship between the price level and the quantity of real GDP purchased.
B)  direct relationship between the price level and the quantity of real GDP produced.
C)  inverse relationship between interest rates and the quantity of real GDP produced.
D)  direct relationship between real-balances and the quantity of real GDP purchaseD.Topic: Aggregate Demand

Question 13

A decrease in business taxes will tend to

Accepted Answer

A)  increase aggregate demand but not change aggregate supply.
B)  increase aggregate supply but not change aggregate demand.
C)  increase aggregate demand and increase aggregate supply.
D)  decrease aggregate supply and decrease aggregate demand.

Question 14

An increase in personal income taxes would shift AD to the

Accepted Answer

A)  right because C will increase.
B)  left because C will decrease.
C)  right because G will increase.
D)  left because G will decrease.

Question 15

The real-balances effect indicates that

Accepted Answer

A)  an increase in the price level will increase the demand for money, increase interest rates, and reduce consumption and investment spending.
B)  a lower price level will decrease the real value of many financial assets and therefore reduce spending.
C)  a higher price level will increase the real value of many financial assets and therefore increase spending.
D)  a higher price level will decrease the real value of many financial assets and therefore reduce spending.

Question 16

Efficiency wages are

Accepted Answer

A)  above-market wages that bring forth so much added work effort that per-unit production costs are lower than at market wages.
B)  wage payments necessary to compensate workers for unpleasant or risky work conditions.
C)  usually less than market wages.
D)  relevant to macroeconomics because they explain rightward shifts in aggregate demand.

Question 17

The long-run aggregate supply curve is upward sloping.

Accepted Answer

A) True 
 B)False

Question 18

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.All else being equal, if the price of each input increased from $4 to $6, productivity would

Accepted Answer

A)  fall from 2 to 3.
B)  fall from 0.50 to 0.33.
C)  rise from 1 to 2.
D)  remain unchanged.

Question 19

Graphically, cost-push inflation is shown as a

Accepted Answer

A)  leftward shift of the AD curve.
B)  rightward shift of the AS curve.
C)  leftward shift of the AS curve.
D)  rightward shift of the AD curve.

Question 20

The so-called ratchet effect refers to the characteristic in the economy where product prices, wages, and per-unit production cost are flexible when

Accepted Answer

A)  AD decreases but not when AD increases.
B)  AD increases but not when AD decreases.
C)  AS increases but not when AS decreases.
D)  AD shifts but not when AS shifts.

Exam 32: Aggregate Demand and Aggregate Supply

The long-run aggregate supply curve is upward sloping.

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An increase in personal income taxes would shift AD to the

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Collective bargaining agreements that prohibit wage cuts for the duration of the contract contribute to

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The real-balances effect indicates that

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If aggregate demand increases and aggregate supply decreases, the price level

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Graphically, cost-push inflation is shown as a

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Efficiency wages are

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A fall in the prices of inputs will shift the aggregate

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The economy experiences an increase in the price level and a decrease in real domestic output.Which of the following is a likely explanation?

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An increase in aggregate expenditures resulting from some factor other than a change in the price level is equivalent to

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If Congress passed new laws significantly increasing the regulation of business, this action would tend to

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The aggregate demand curve shows the

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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.All else being equal, if the price of each input increased from $4 to $6, productivity would

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The so-called ratchet effect refers to the characteristic in the economy where product prices, wages, and per-unit production cost are flexible when

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The aggregate supply curve

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When aggregate demand declines, the price level may remain constant, at least for a time, because

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Which of the following will not tend to happen if the U.S.dollar depreciates against the euro?

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An increase in business excise taxes will shift the aggregate supply curve leftward.Topic: Changes in Aggregate Supply

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A decrease in business taxes will tend to

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If personal taxes were decreased and resource productivity increased simultaneously, the equilibrium

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