Question 1

(Consider This) The ratchet effect is the tendency of:

Accepted Answer

A)   the price level to increase but not to decrease.
B)   nominal GDP to increase more rapidly than real GDP.
C)   real interest rates to fall more rapidly than nominal interest rates.
D)   consumption to rise year after year regardless of what happens to disposable income.E) B) and C)
F) A) and C)

Question 2

A decrease in per-unit production costs will shift the aggregate supply curve leftward.

Accepted Answer

A) True 
 B)False

Question 3

Answer the question on the basis of the following information about the relationship between input quantities and real domestic output in a hypothetical economy:   Input Quantity  Real Domestic Output 100200150300200400\begin{array} { c c } 	ext { Input Quantity } & 	ext { Real Domestic Output } \100 & 200 \150 & 300 \200 & 400\end{array} Input Quantity 100150200​ Real Domestic Output 200300400​  Refer to the table.If the price of each input is $5,the per-unit cost of production in the economy is:

Accepted Answer

A)   $5.
B)   $2.75.
C)   $2.50.
D)   $.40. E) A) and B)
F) A) and C)

Question 4

Other things equal,if the U.S.dollar were to depreciate,the:

Accepted Answer

A)   aggregate demand curve would remain fixed in place.
B)   aggregate supply curve would shift to the left.
C)   aggregate supply curve would shift to the right.
D)   aggregate demand curve would shift to the left.E) A) and D)
F) B) and C)

Question 5

If investment increases by $10 billion and the economy's MPC is .8,the aggregate demand curve will shift:

Accepted Answer

A)   leftward by $50 billion at each price level.
B)   rightward by $10 billion at each price level.
C)   rightward by $50 billion at each price level.
D)   leftward by $40 billion at each price level.E) None of the above
F) C) and D)

Question 6

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.E) A) and B)
F) None of the above

Question 7

The economy's long-run AS curve assumes that wages and other resource prices:

Accepted Answer

A)   eventually rise and fall to match upward or downward changes in the price level.
B)   are flexible upward but inflexible downward.
C)   rise and fall more rapidly than the price level.
D)   are relatively inflexible both upward and downward.E) B) and C)
F) A) and D)

Question 8

Answer the question on the basis of the following table for a particular country in which C is consumption expenditures,Ig is gross investment expenditures,G is government expenditures,X is exports,and M is imports.All figures are in billions of dollars.Each question is independent of other question using the same table,unless otherwise stated.  Price Level‾128125122119116C‾$1820222426Ig‾$246810G ‾$33333X ‾$12345M‾$54321Real GDP‾\begin{array}{c}\begin{array}{c}\underline{	ext {Price Level}}\128 \125 \122 \119 \116\end{array}\begin{array}{c}\underline{	ext {C}} \ \$ 18 \20 \22 \24 \26\end{array}\begin{array}{c}\underline{\mathrm{I}_{\mathrm{g}} }\ \$ 2 \4 \6 \8 \10\end{array}\begin{array}{c}\underline{	ext {G }}\ \$ 3 \3 \3 \3 \3\end{array}\begin{array}{c}\underline{	ext {X }}\\$ 1 \2 \3 \4 \5\end{array}\begin{array}{c}\underline{	ext {M}} \ \$ 5 \4 \3 \2 \1\end{array}\begin{array}{c}\underline{	ext {Real GDP}} \ \\\ \\\end{array}\end{array}Price Level​128125122119116​C​$1820222426​Ig​​$246810​G ​$33333​X ​$12345​M​$54321​Real GDP​​​ 
 Refer to the table.If the equilibrium level of real GDP is $43 billion,its level of consumption will be:

Accepted Answer

A)   $20 billion.
B)   $22 billion.
C)   $24 billion.
D)   $26 billion. E) None of the above
F) A) and D)

Question 9

Answer the question on the basis of the following aggregate demand and supply schedules for a hypothetical economy:  Amount of Real Output Demanded‾$200300400500600Price Level(Index Value) ‾300250200150100Amount of RealOutput Supplied‾$500450400300200\begin{array}{c}\begin{array}{c}	ext {Amount of Real }\\underline{	ext {Output Demanded}}\\$ 200 \300 \400 \500 \600\end{array}\begin{array}{c}	ext {Price Level}\\underline{	ext {(Index Value) }}\300\250\200\150\100\end{array}\begin{array}{c}	ext {Amount of Real}\\underline{	ext {Output Supplied}}\\$ 500 \450 \400 \300 \200\end{array}\end{array}Amount of Real Output Demanded​$200300400500600​Price Level(Index Value) ​300250200150100​Amount of RealOutput Supplied​$500450400300200​​  Refer to the data.If the amount of real output demanded at each price level falls by $200,the equilibrium price level and equilibrium level of real domestic output will fall to:

Accepted Answer

A)   250 and $200,respectively.
B)   200 and $300,respectively.
C)   150 and $300,respectively.
D)   150 and $200,respectively. E) None of the above
F) A) and B)

Question 10

A rightward shift in the aggregate supply curve is best explained by an increase in:

Accepted Answer

A)   business taxes.
B)   productivity.
C)   nominal wages.
D)   the price of imported resources.E) A) and B)
F) None of the above

Question 11

The immediate-short-run aggregate supply curve represents circumstances where:

Accepted Answer

A)   both input and output prices are fixed.
B)   both input and output prices are flexible.
C)   input prices are fixed,but output prices are flexible.
D)   input prices are flexible,but output prices are fixed.E) All of the above
F) A) and C)

Question 12

Other things equal,an improvement in productivity will:

Accepted Answer

A)   increase the equilibrium price level.
B)   shift the aggregate supply curve to the left.
C)   shift the aggregate supply curve to the right.
D)   shift the aggregate demand curve to the left.E) None of the above
F) B) and C)

Question 13

Other things equal,a reduction in personal and business taxes can be expected to:

Accepted Answer

A)   increase aggregate demand and decrease aggregate supply.
B)   increase both aggregate demand and aggregate supply.
C)   decrease both aggregate demand and aggregate supply.
D)   decrease aggregate demand and increase aggregate supply.E) A) and C)
F) B) and D)

Question 14

The foreign purchases effect suggests that an increase in the U.S.price level relative to other countries will:

Accepted Answer

A)   increase the amount of U.S.real output purchased.
B)   increase U.S.imports and decrease U.S.exports.
C)   increase both U.S.imports and U.S.exports.
D)   decrease both U.S.imports and U.S.exports.E) A) and B)
F) B) and D)

Question 15

The fear of unwanted price wars may explain why many firms are reluctant to:

Accepted Answer

A)   reduce wages when a decline in aggregate demand occurs.
B)   reduce prices when a decline in aggregate demand occurs.
C)   expand production capacity when an increase in aggregate demand occurs.
D)   provide wage increases when labor productivity rises.E) A) and D)
F) A) and C)

Question 16

Which of the following would most likely shift the aggregate demand curve to the right?

Accepted Answer

A)   An increase in stock prices that increases consumer wealth.
B)   Increased fear that a recession will cause workers to lose their jobs.
C)   An increase in personal income tax rates.
D)   A reduction in household borrowing because of tighter lending practices.E) C) and D)
F) B) and C)

Question 17

Answer the question on the basis of the following aggregate demand and supply schedules for a hypothetical economy:  Amount of Real Output Demanded‾$200300400500600Price Level(Index Value) ‾300250200150100Amount of RealOutput Supplied‾$500450400300200\begin{array}{c}\begin{array}{c}	ext {Amount of Real }\\underline{	ext {Output Demanded}}\\$ 200 \300 \400 \500 \600\end{array}\begin{array}{c}	ext {Price Level}\\underline{	ext {(Index Value) }}\300\250\200\150\100\end{array}\begin{array}{c}	ext {Amount of Real}\\underline{	ext {Output Supplied}}\\$ 500 \450 \400 \300 \200\end{array}\end{array}Amount of Real Output Demanded​$200300400500600​Price Level(Index Value) ​300250200150100​Amount of RealOutput Supplied​$500450400300200​​  Refer to the data.If the amount of real output demanded at each price level falls by $200,this might have been caused by:

Accepted Answer

A)   an increase in net exports.
B)   a worsening of business expectations.
C)   an increase in consumer wealth.
D)   a decrease in the personal income tax. E) B) and C)
F) A) and D)

Question 18

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.E) A) and D)
F) C) and D)

Question 19

An increase in input productivity will:

Accepted Answer

A)   shift the aggregate supply curve leftward.
B)   reduce the equilibrium price level,assuming downward flexible prices.
C)   reduce the equilibrium real output.
D)   reduce aggregate demand.E) A) and C)
F) A) and B)

Question 20

Which of the following is incorrect?

Accepted Answer

A)   As the U.S.price level rises,U.S.goods become relatively more expensive so that U.S.exports fall and U.S.imports rise.
B)   As the price level falls,the demand for money declines,the interest rate declines,and interest-rate-sensitive spending increases.
C)   When the price level increases,real balances increase and businesses and households find themselves wealthier and therefore increase their spending.
D)   Given aggregate demand,an increase in aggregate supply increases real output and,assuming downward-flexible prices,reduces the price level.E) C) and D)
F) A) and D)

Exam 31: Aggregate Demand and Aggregate Supply

Which of the following is incorrect?

Correct Answer
verified

Correct Answer
verified

The economy's long-run AS curve assumes that wages and other resource prices:

Correct Answer
verified

The fear of unwanted price wars may explain why many firms are reluctant to:

Correct Answer
verified

Other things equal,if the U.S.dollar were to depreciate,the:

Correct Answer
verified

Which of the following would most likely shift the aggregate demand curve to the right?

Correct Answer
verified

Correct Answer
verified

A decrease in per-unit production costs will shift the aggregate supply curve leftward.

Correct Answer
verified

Correct Answer
verified

The foreign purchases effect:

Correct Answer
verified

Other things equal,an improvement in productivity will:

Correct Answer
verified

(Consider This) The ratchet effect is the tendency of:

Correct Answer
verified

The foreign purchases effect suggests that an increase in the U.S.price level relative to other countries will:

Correct Answer
verified

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

Correct Answer
verified

If investment increases by $10 billion and the economy's MPC is .8,the aggregate demand curve will shift:

Correct Answer
verified

The immediate-short-run aggregate supply curve represents circumstances where:

Correct Answer
verified

A rightward shift in the aggregate supply curve is best explained by an increase in:

Correct Answer
verified

An increase in input productivity will:

Correct Answer
verified

Other things equal,a reduction in personal and business taxes can be expected to:

Correct Answer
verified

Correct Answer
verified

Exam 31: Aggregate Demand and Aggregate Supply

Which of the following is incorrect?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The economy's long-run AS curve assumes that wages and other resource prices:

Correct AnswerverifiedShow Answer

The fear of unwanted price wars may explain why many firms are reluctant to:

Correct AnswerverifiedShow Answer

Other things equal,if the U.S.dollar were to depreciate,the:

Correct AnswerverifiedShow Answer

Which of the following would most likely shift the aggregate demand curve to the right?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A decrease in per-unit production costs will shift the aggregate supply curve leftward.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The foreign purchases effect:

Correct AnswerverifiedShow Answer

Other things equal,an improvement in productivity will:

Correct AnswerverifiedShow Answer

(Consider This) The ratchet effect is the tendency of:

Correct AnswerverifiedShow Answer

The foreign purchases effect suggests that an increase in the U.S.price level relative to other countries will:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If investment increases by $10 billion and the economy's MPC is .8,the aggregate demand curve will shift:

Correct AnswerverifiedShow Answer

The immediate-short-run aggregate supply curve represents circumstances where:

Correct AnswerverifiedShow Answer

A rightward shift in the aggregate supply curve is best explained by an increase in:

Correct AnswerverifiedShow Answer

An increase in input productivity will:

Correct AnswerverifiedShow Answer

Other things equal,a reduction in personal and business taxes can be expected to:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified