Question 1

_________ inflation can be explained by an ________ shift in the aggregate _________ curve.

Accepted Answer

A)   Demand-pull, leftward, demand
B)   Cost-push, rightward, demand
C)   Demand-pull, leftward, supply
D)   Cost-push, rightward, supply

Question 2

The aggregate demand curve is downward sloping because:

Accepted Answer

A)   an increase in the price level will cause an increase in spending.
B)   at lower price levels, real wealth decreases, causing a decrease in the quantities of goods and services demanded.
C)   at lower price levels, interest rates decrease, causing a decrease in the quantities of goods and services demanded.
D)   at lower price levels, exports increase, causing an increase in real GDP.

Question 3

Which of the following correctly describes the interest-rate effect?

Accepted Answer

A)   If the price level decreases, consumer purchasing power decreases, the demand for credit rises, interest rates rise, debt-financed borrowing decreases, and real GDP demanded falls.
B)   If the price level decreases, consumer purchasing power increases, the demand for credit rises, interest rates rise, debt-financed borrowing decreases, and real GDP demanded falls.
C)   If the price level decreases, consumer purchasing power increases, the demand for credit falls, interest rates rise, debt-financed borrowing decreases, and real GDP demanded falls.
D)   If the price level decreases, consumer purchasing power increases, the demand for credit falls, interest rates fall, debt-financed borrowing increases, and real GDP demanded increases.

Question 4

When OPEC caused the price of oil to rise in the early 1970s, the:

Accepted Answer

A)   aggregate supply curve shifted to the right.
B)   aggregate supply curve shifted to the left.
C)   aggregate demand curve shifted to the right.
D)   aggregate demand curve shifted to the left.

Question 5

Other things constant, an increase in resource prices will:

Accepted Answer

A)   increase aggregate demand.
B)   decrease aggregate demand.
C)   decrease aggregate supply.
D)   increase aggregate supply.

Question 6

Why does the aggregate demand (AD) curve slope downward? What could cause the AD curve to shift to the right? What impact would a rightward shift of the AD curve have on the economy?

Accepted Answer

The AD curve slopes downward because of ...

Question 7

Exhibit 10-5 Aggregate demand curves
3 to AD2? A)  greater resource availability B)  nonfluctuating resource availability C)  a recession in Japan D)  an increase in government grants for AIDS awareness programs" class="answers-bank-image d-inline" rel="preload" >
In Exhibit 10-5, which one of the following could cause the U.S. aggregate demand curve to move from AD3 to AD2?

Accepted Answer

A)   greater resource availability
B)   nonfluctuating resource availability
C)   a recession in Japan
D)   an increase in government grants for AIDS awareness programs

Question 8

The net exports effect is the inverse relationship between net exports and the ____ of an economy.

Accepted Answer

A)   potential real GDP
B)   chain-price deflator
C)   price level
D)   consumption spending

Question 9

Stagflation occurs when the economy experiences:

Accepted Answer

A)   low unemployment and low inflation.
B)   high unemployment and rapid inflation.
C)   low unemployment and rapid inflation.
D)   high unemployment and low inflation. B

Question 10

In the classical range of the aggregate supply curve, greater spending for consumer and investment goods results in:

Accepted Answer

A)   stagflation.
B)   more unemployment.
C)   greater output.
D)   a higher price level. D

Question 11

How will an increase in the world price of crude oil influence the economy of an oil-importing country such as the United States?

Accepted Answer

A)   Aggregate supply will decrease, leading to a decrease in real GDP.
B)   Aggregate supply will increase, leading to an increase in real GDP.
C)   Aggregate supply will increase, leading to an increase in prices and smaller GDP.
D)   A change in the price of an imported good will not affect the domestic economy of an oil-importing country.

Question 12

When moving along a market demand curve, the prices of related goods are assumed to be constant. With an aggregate demand curve,

Accepted Answer

A)   the assumption is meaningless because we are using a market basket for all goods and services.
B)   the prices of related goods have an inverse relationship.
C)   all goods are assumed to have the same price.
D)   the same assumption holds true.

Question 13

According to the net exports effect, as the price level falls relative to the rest of the world,

Accepted Answer

A)   foreigners buy fewer goods.
B)   foreigners buy more U.S. goods.
C)   the aggregate demand curve shifts to the left.
D)   the aggregate demand curve shifts to the right.

Question 14

Along the classical or vertical range of the aggregate supply curve, an increase in the aggregate demand curve will increase:

Accepted Answer

A)   both the price level and real GDP.
B)   only real GDP.
C)   only the price level.
D)   real GDP and reduce the price level. C

Question 15

The aggregate demand curve slopes downward indicating that:

Accepted Answer

A)   an increase in the general price level will reduce the aggregate quantity of goods and services demanded.
B)   an increase in the general price level will increase the aggregate quantity of goods and services demanded.
C)   a change in the interest rate will alter the aggregate quantity of goods and services demanded.
D)   consumers substitute between domestic-made and foreign-made goods as their relative prices change.

Question 16

Which of the following would cause a rightward shift in the aggregate supply curve?

Accepted Answer

A)   larger-than-expected wage increases
B)   lower oil prices
C)   increased investment spending
D)   greater government regulation

Question 17

Exhibit 10-6 Aggregate supply curve

In Exhibit 10-6, the economy's employment potential is fully exhausted at:

Accepted Answer

A)   GDP = $1,000 billion.
B)   GDP = $1,100 billion.
C)   GDP = $1,200 billion.
D)   the employment potential is never fully exhausted.

Question 18

Which of the following will increase aggregate demand in the United States?

Accepted Answer

A)   a higher price level
B)   an increase in the real interest rate
C)   an increase in wealth due to a substantial appreciation in the value of stocks
D)   a decrease in real income in Japan and Western Europe

Question 19

Exhibit 10-8 Aggregate demand and supply
1 to AD3, A)  real GDP will increase from $3.0 to $4.0, and the price level will increase from 100 to 140. B)  real GDP will increase from $3.0 to $7.0, and the price level will increase from 100 to 140. C)  real GDP will increase from $3.0 to $4.0, and the price level does not change. D)  real GDP will increase from $3.0 to $7.0, and the price level will increase from 100 to 120." class="answers-bank-image d-inline" rel="preload" >
In Exhibit 10-8, if aggregate demand shifts from AD1 to AD3,

Accepted Answer

A)   real GDP will increase from $3.0 to $4.0, and the price level will increase from 100 to 140.
B)   real GDP will increase from $3.0 to $7.0, and the price level will increase from 100 to 140.
C)   real GDP will increase from $3.0 to $4.0, and the price level does not change.
D)   real GDP will increase from $3.0 to $7.0, and the price level will increase from 100 to 120.

Question 20

Which of the following will not shift the aggregate demand curve to the left?

Accepted Answer

A)   Consumers become more optimistic about the future.
B)   Government spending decreases.
C)   Business optimism decreases.
D)   Consumers become pessimistic about the future.

Exam 20: Aggregate Demand and Supply

_________ inflation can be explained by an ________ shift in the aggregate _________ curve.

Correct AnswerverifiedShow Answer

The aggregate demand curve is downward sloping because:

Correct AnswerverifiedShow Answer

Which of the following correctly describes the interest-rate effect?

Correct AnswerverifiedShow Answer

When OPEC caused the price of oil to rise in the early 1970s, the:

Correct AnswerverifiedShow Answer

Other things constant, an increase in resource prices will:

Correct AnswerverifiedShow Answer

Why does the aggregate demand (AD) curve slope downward? What could cause the AD curve to shift to the right? What impact would a rightward shift of the AD curve have on the economy?

Correct AnswerverifiedThe AD curve slopes downward because of ...View AnswerShow Answer

Exhibit 10-5 Aggregate demand curves In Exhibit 10-5, which one of the following could cause the U.S. aggregate demand curve to move from AD3 to AD2?

Correct AnswerverifiedShow Answer

The net exports effect is the inverse relationship between net exports and the ____ of an economy.

Correct AnswerverifiedShow Answer

Stagflation occurs when the economy experiences:

Correct AnswerverifiedB

In the classical range of the aggregate supply curve, greater spending for consumer and investment goods results in:

Correct AnswerverifiedD

How will an increase in the world price of crude oil influence the economy of an oil-importing country such as the United States?

Correct AnswerverifiedShow Answer

When moving along a market demand curve, the prices of related goods are assumed to be constant. With an aggregate demand curve,

Correct AnswerverifiedShow Answer

According to the net exports effect, as the price level falls relative to the rest of the world,

Correct AnswerverifiedShow Answer

Along the classical or vertical range of the aggregate supply curve, an increase in the aggregate demand curve will increase:

Correct AnswerverifiedC

The aggregate demand curve slopes downward indicating that:

Correct AnswerverifiedShow Answer

Which of the following would cause a rightward shift in the aggregate supply curve?

Correct AnswerverifiedShow Answer

Exhibit 10-6 Aggregate supply curve In Exhibit 10-6, the economy's employment potential is fully exhausted at:

Correct AnswerverifiedShow Answer

Which of the following will increase aggregate demand in the United States?

Correct AnswerverifiedShow Answer

Exhibit 10-8 Aggregate demand and supply In Exhibit 10-8, if aggregate demand shifts from AD1 to AD3,

Correct AnswerverifiedShow Answer

Which of the following will not shift the aggregate demand curve to the left?

Correct AnswerverifiedShow Answer

_ inflation can be explained by an shift in the aggregate _ curve.

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The AD curve slopes downward because of ...
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Exhibit 10-5 Aggregate demand curves In Exhibit 10-5, which one of the following could cause the U.S. aggregate demand curve to move from AD₃ to AD₂?

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B

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D

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C

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Exhibit 10-8 Aggregate demand and supply In Exhibit 10-8, if aggregate demand shifts from AD₁ to AD₃,

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