Question 1

Suppose the full-employment level of real output (Q)  for a hypothetical economy is $500 and that the price level (P)  initially is 100.Use the following short-run aggregate supply schedules to answer the next question.  Refer to the information above.In the long run, an increase in the price level from 100 to 125 will:

Accepted Answer

A)  increase real output from $500 to $560.
B)  decrease real output from $500 to $440.
C)  change the aggregate supply schedule from (a)  to (c)  and result in an equilibrium level of real output of $560.
D)  change the aggregate supply schedule from (a)  to (b)  and result in an equilibrium level of real output of $500.E) B) and C)
F) A) and D)

Question 2

With output and input prices fixed, the immediate short run aggregate supply curve is:

Accepted Answer

A)  vertical.
B)  upward sloping.
C)  horizontal.
D)  downward sloping.E) None of the above
F) A) and C)

Question 3

Which of the factors below best explain the downward slope of aggregate demand curve? The following list of factors, are related to the aggregate demand curve.Real-balances effect
Household expectations
Interest-rate effect
Personal income tax rates
Profit expectations
National income abroad
Government spending
Foreign trade effect
Exchange rates
Degree of excess capacity

Accepted Answer

A)  2, 4, and 6
B)  7, 9, and 10
C)  1, 3, and 8
D)  4, 6, and 7E) All of the above
F) None of the above

Question 4

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.E) All of the above
F) B) and C)

Question 5

A change in business taxes and regulation can affect input prices and aggregate supply.

Accepted Answer

A) True 
 B)False

Question 6

An increase in the price level in the aggregate expenditures model would:

Accepted Answer

A)  decrease aggregate expenditures and real GDP.
B)  increase aggregate expenditures and real GDP.
C)  increase aggregate expenditures and decrease real GDP.
D)  decrease aggregate expenditures and increase real GDP.E) B) and D)
F) A) and C)

Question 7

Other things equal, the short-run aggregate supply curve shifts positions when:

Accepted Answer

A)  the price level changes.
B)  the rate of inflation changes.
C)  input prices change.
D)  aggregate demand changes.E) B) and D)
F) B) and C)

Question 8

The following list of items are related to aggregate demand and/or aggregate supply.Entrepreneurial ability Consumer expectations
Degree of excess capacity
Personal income tax rates
Productivity
National income abroad
Business taxes
Domestic resource availability
Business taxes
Domestic resource availability
Prices of imported products
Profit expectations on investments
Refer to the above list.A change in which factor is most likely to change both aggregate demand and aggregate supply?

Accepted Answer

A)  3
B)  5
C)  7
D)  9E) B) and C)
F) All of the above

Question 9

Which of the following is true of aggregate supply in the long run?

Accepted Answer

A)  Nominal wages and output prices are both fixed.
B)  Nominal wages are fixed but output prices can vary.
C)  Output prices are fixed.
D)  Nominal wages are fully responsive to changes in the price level.E) None of the above
F) B) and C)

Question 10

The following table gives information about the relationship between input quantities and real domestic output in a hypothetical economy:  Suppose that the price of each input increased from $5 to $8.The per unit cost of production in the above economy would:

Accepted Answer

A)  rise by $1.50 and the aggregate supply curve would shift to the right.
B)  rise by 60 percent and the aggregate supply curve would shift to the left.
C)  rise by 60 percent and the aggregate demand curve would shift to the left.
D)  fall by $1.50 and the aggregate demand curve would shift to the right.E) A) and D)
F) None of the above

Question 11

Which of the above diagrams best portrays the effects of declines in the prices of imported resources?

Accepted Answer

A)  A
B)  B
C)  C
D)  DE) B) and C)
F) B) and D)

Question 12

A decrease in aggregate demand is most likely to be caused by:

Accepted Answer

A)  an increase in the wealth of consumers.
B)  an increase in consumer confidence.
C)  an increase in interest rates for home mortgages.
D)  a decrease in tax rates on household income.E) A) and B)
F) All of the above

Question 13

Which of the above diagrams best portrays the effects of an increase in foreign spending on our products?

Accepted Answer

A)  A
B)  B
C)  C
D)  DE) None of the above
F) All of the above

Question 14

A decrease in interest rates caused by a change in the price level would cause a(n) :

Accepted Answer

A)  decrease in aggregate demand.
B)  increase in aggregate demand.
C)  decrease in the quantity of real domestic output demanded.
D)  increase in the quantity of real domestic output demanded.E) None of the above
F) C) and D)

Question 15

Per unit production cost is:

Accepted Answer

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

Question 16

In terms of aggregate supply, in the immediate short run:

Accepted Answer

A)  the price level is variable.
B)  real output is fixed.
C)  nominal wages are variable.
D)  both input prices and output prices are fixed.E) B) and C)
F) B) and D)

Question 17

In terms of aggregate supply, the short run is a period in which:

Accepted Answer

A)  the price level is fixed.
B)  employment is fixed.
C)  real output is fixed.
D)  nominal wages and other input prices are fixed.E) A) and B)
F) A) and C)

Question 18

1, then: A) aggregate demand is AD2. B) the equilibrium output level is Q3. C) the equilibrium output level is Q2. D) producers will supply output level Q1." class="answers-bank-image d-inline" rel="preload" > Refer to the above diagram.If the equilibrium price level is P1, then:

Accepted Answer

A)  aggregate demand is AD2.
B)  the equilibrium output level is Q3.
C)  the equilibrium output level is Q2.
D)  producers will supply output level Q1.E) A) and B)
F) A) and C)

Question 19

Which of the above diagrams best portrays the effects of a substantial reduction in government spending?

Accepted Answer

A)  A
B)  B
C)  C
D)  DE) B) and C)
F) A) and C)

Question 20

Refer to the figure given below. 1 and AS1 represent the original aggregate demand and aggregate supply curves, respectively.AD2 and AS2 show the new aggregate demand and aggregate supply curves.At the original equilibrium price and quantity, this economy is experiencing: A) inflation. B) economic growth. C) full employment. D) less than full-capacity output." class="answers-bank-image d-inline" rel="preload" > In the above figure, AD1 and AS1 represent the original aggregate demand and aggregate supply curves, respectively.AD2 and AS2 show the new aggregate demand and aggregate supply curves.At the original equilibrium price and quantity, this economy is experiencing:

Accepted Answer

A)  inflation.
B)  economic growth.
C)  full employment.
D)  less than full-capacity output.E) None of the above
F) All of the above

Exam 12: Part B: Aggregate Demand and Aggregate Supply

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A decrease in aggregate demand is most likely to be caused by:

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Per unit production cost is:

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A decrease in interest rates caused by a change in the price level would cause a(n) :

Correct Answer
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With output and input prices fixed, the immediate short run aggregate supply curve is:

Correct Answer
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Which of the above diagrams best portrays the effects of a substantial reduction in government spending?

Correct Answer
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Which of the above diagrams best portrays the effects of an increase in foreign spending on our products?

Correct Answer
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Which of the following is true of aggregate supply in the long run?

Correct Answer
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Which of the above diagrams best portrays the effects of declines in the prices of imported resources?

Correct Answer
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Other things equal, the short-run aggregate supply curve shifts positions when:

Correct Answer
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In terms of aggregate supply, in the immediate short run:

Correct Answer
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Refer to the above diagram.If the equilibrium price level is P₁, then:

Correct Answer
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The following table gives information about the relationship between input quantities and real domestic output in a hypothetical economy: Suppose that the price of each input increased from $5 to $8.The per unit cost of production in the above economy would:

Correct Answer
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An increase in the price level in the aggregate expenditures model would:

Correct Answer
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In terms of aggregate supply, the short run is a period in which:

Correct Answer
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A change in business taxes and regulation can affect input prices and aggregate supply.

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

Correct Answer
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Exam 12: Part B: Aggregate Demand and Aggregate Supply

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Refer to the figure given below. In the above figure, AD1 and AS1 represent the original aggregate demand and aggregate supply curves, respectively.AD2 and AS2 show the new aggregate demand and aggregate supply curves.At the original equilibrium price and quantity, this economy is experiencing:

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A decrease in aggregate demand is most likely to be caused by:

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Per unit production cost is:

Correct AnswerverifiedShow Answer

A decrease in interest rates caused by a change in the price level would cause a(n) :

Correct AnswerverifiedShow Answer

With output and input prices fixed, the immediate short run aggregate supply curve is:

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Which of the above diagrams best portrays the effects of a substantial reduction in government spending?

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Which of the above diagrams best portrays the effects of an increase in foreign spending on our products?

Correct AnswerverifiedShow Answer

Which of the following is true of aggregate supply in the long run?

Correct AnswerverifiedShow Answer

Which of the above diagrams best portrays the effects of declines in the prices of imported resources?

Correct AnswerverifiedShow Answer

Other things equal, the short-run aggregate supply curve shifts positions when:

Correct AnswerverifiedShow Answer

In terms of aggregate supply, in the immediate short run:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Refer to the above diagram.If the equilibrium price level is P1, then:

Correct AnswerverifiedShow Answer

The following table gives information about the relationship between input quantities and real domestic output in a hypothetical economy: Suppose that the price of each input increased from $5 to $8.The per unit cost of production in the above economy would:

Correct AnswerverifiedShow Answer

An increase in the price level in the aggregate expenditures model would:

Correct AnswerverifiedShow Answer

In terms of aggregate supply, the short run is a period in which:

Correct AnswerverifiedShow Answer

A change in business taxes and regulation can affect input prices and aggregate supply.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

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Refer to the above diagram.If the equilibrium price level is P₁, then:

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