Question 1

A situation in which output decreases while prices increase is often referred to as:

Accepted Answer

A)   stagflation.
B)   inflation.
C)   negative economic growth.
D)   a recession.E) A) and D)
F) A) and C)

Question 2

In macroeconomics, the long run refers to:

Accepted Answer

A)   how long it takes for the prices of inputs to fully adjust to changes in economic conditions.
B)   the time period over which sticky wages occur.
C)   the time period the government uses to make budget projections.
D)   a firm's profits in the next fiscal year.E) A) and B)
F) A) and C)

Question 3

Fluctuations around the level of potential output are:

Accepted Answer

A)   called the business cycle.
B)   expansions, recessions, and recoveries.
C)   normal for an economy.
D)   All of these are true.E) A) and B)
F) C) and D)

Question 4

In the long run, a drought that destroys most of a summer's wheat crops would cause permanently:

Accepted Answer

A)   higher prices.
B)   lower output.
C)   lower prices.
D)   None of these are true.E) A) and B)
F) A) and C)

Question 5

Consumption:

Accepted Answer

A)   is a major component of aggregate demand.
B)   is negatively related to the national price level.
C)   measures people's expenditures on real goods and services.
D)   All of these are true.E) A) and B)
F) C) and D)

Question 6

In the macroeconomic model of aggregate supply and aggregate demand:

Accepted Answer

A)   unemployment is negatively related to the overall price level.
B)   quantity represents GDP.
C)   price is calculated as a weighted average of services traded in the economy.
D)   All of these are true.E) A) and D)
F) A) and C)

Question 7

When the economy is operating at a point where aggregate demand equals long-run aggregate supply:

Accepted Answer

A)   the economy is in a recession.
B)   the economy is in long-run equilibrium.
C)   short-run aggregate supply must shift to the left to adjust.
D)   All of these are trueE) A) and B)
F) All of the above

Question 8

A negative relationship exists between the price level and which components of GDP? I. Consumption
II)  Investment
III)  Government spending
IV)  Net exports

Accepted Answer

A)   I, II, and III only
B)   II, III, and IV
C)   I, II, III, and IV
D)   I, II, and IV onlyE) A) and B)
F) B) and D)

Question 9

The relationship between government spending and the price level explains the:

Accepted Answer

A)   upward-sloping aggregate demand curve.
B)   downward-sloping aggregate demand curve.
C)   perfect elasticity of the aggregate demand curve.
D)   None of these is true.E) B) and C)
F) A) and D)

Question 10

A(n)  _______ relationship exists between the price level and net exports.

Accepted Answer

A)   negative
B)   positive
C)   perfectly correlated
D)   uncorrelatedE) All of the above
F) B) and D)

Question 11

An increase in production costs will shift the _______ aggregate supply curve to the _______.

Accepted Answer

A)   short-run; right
B)   long-run; right
C)   short-run; left
D)   long-run; leftE) A) and B)
F) All of the above

Question 12

Because the prices of final goods and services tend to increase more quickly than the prices of inputs, the short-run aggregate supply curve:

Accepted Answer

A)   slopes upward.
B)   slopes downward.
C)   has a constant slope.
D)   None of these are true.E) C) and D)
F) A) and B)

Question 13

During a recession, analysts at the CBO project that the economy is operating $1.5 trillion below potential output. Assuming the MPC is 0.8, by how much would the government have to cut taxes to restore potential output?

Accepted Answer

A)   $375 billion
B)   $300 billion
C)   $1.2 trillion
D)   $800 billionE) A) and B)
F) B) and C)

Question 14

A decrease in an economy's output and prices would suggest a:

Accepted Answer

A)   decrease in aggregate demand.
B)   increase in aggregate demand.
C)   decrease in short-run aggregate supply.
D)   increase in short-run aggregate supply.E) A) and D)
F) B) and C)

Question 15

Lower interest rates cause:

Accepted Answer

A)   firms to invest less in human capital.
B)   firms to invest more in new factories and working capital.
C)   individuals to spend less on consumption goods.
D)   individuals to spend less on housing.E) A) and B)
F) A) and C)

Question 16

Which of the following scenarios would likely cause the aggregate demand curve to shift to the left?

Accepted Answer

A)   Interest rates increase.
B)   Higher tariffs are placed on all imports into the United States.
C)   Consumers gain greater confidence about the future.
D)   All of these would likely cause the aggregate demand curve to shift to the left.E) None of the above
F) A) and C)

Question 17

When prices rise, the interest rate:

Accepted Answer

A)   also tends to rise.
B)   tends to fall.
C)   is usually not affected.
D)   will rise if the wealth effect outweighs the price effect.E) C) and D)
F) A) and C)

Question 18

Falling output in the short run could be due to:

Accepted Answer

A)   a reduction in aggregate demand.
B)   an increase in short-run aggregate supply.
C)   an increase in long-run aggregate supply.
D)   an increase in aggregate demand.E) A) and B)
F) None of the above

Question 19

The figure shown displays various economic outcomes. 2 to AD3, the resulting price and output in the short run would be: A)  P 1 and Y 2. B)  P 3 and Y 1. C)  P 2 and Y 3. D)  P 2 and Y 2." class="answers-bank-image d-inline" rel="preload" > If the aggregate demand curve shifts from AD2 to AD3, the resulting price and output in the short run would be:

Accepted Answer

A)   P 1 and Y 2.
B)   P 3 and Y 1.
C)   P 2 and Y 3.
D)   P 2 and Y 2.E) A) and D)
F) None of the above

Question 20

In the macroeconomic model of aggregate supply and aggregate demand, price is:

Accepted Answer

A)   the measure of the value of all goods and services produced by the economy.
B)   not a factor that is considered.
C)   calculated as a weighted average of the prices of all goods and services.
D)   None of these are true.E) A) and B)
F) A) and C)

Exam 12: Aggregatedemand and Aggregate Supply

In the long run, a drought that destroys most of a summer's wheat crops would cause permanently:

Correct AnswerverifiedShow Answer

A negative relationship exists between the price level and which components of GDP? I. Consumption II) Investment III) Government spending IV) Net exports

Correct AnswerverifiedShow Answer

When the economy is operating at a point where aggregate demand equals long-run aggregate supply:

Correct AnswerverifiedShow Answer

During a recession, analysts at the CBO project that the economy is operating $1.5 trillion below potential output. Assuming the MPC is 0.8, by how much would the government have to cut taxes to restore potential output?

Correct AnswerverifiedShow Answer

An increase in production costs will shift the _______ aggregate supply curve to the _______.

Correct AnswerverifiedShow Answer

A(n) _______ relationship exists between the price level and net exports.

Correct AnswerverifiedShow Answer

In the macroeconomic model of aggregate supply and aggregate demand:

Correct AnswerverifiedShow Answer

When prices rise, the interest rate:

Correct AnswerverifiedShow Answer

A decrease in an economy's output and prices would suggest a:

Correct AnswerverifiedShow Answer

Which of the following scenarios would likely cause the aggregate demand curve to shift to the left?

Correct AnswerverifiedShow Answer

Lower interest rates cause:

Correct AnswerverifiedShow Answer

A situation in which output decreases while prices increase is often referred to as:

Correct AnswerverifiedShow Answer

Fluctuations around the level of potential output are:

Correct AnswerverifiedShow Answer

Falling output in the short run could be due to:

Correct AnswerverifiedShow Answer

In macroeconomics, the long run refers to:

Correct AnswerverifiedShow Answer

The relationship between government spending and the price level explains the:

Correct AnswerverifiedShow Answer

Consumption:

Correct AnswerverifiedShow Answer

In the macroeconomic model of aggregate supply and aggregate demand, price is:

Correct AnswerverifiedShow Answer

The figure shown displays various economic outcomes. If the aggregate demand curve shifts from AD2 to AD3, the resulting price and output in the short run would be:

Correct AnswerverifiedShow Answer

Because the prices of final goods and services tend to increase more quickly than the prices of inputs, the short-run aggregate supply curve:

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

An increase in production costs will shift the _ aggregate supply curve to the _.

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

The figure shown displays various economic outcomes. If the aggregate demand curve shifts from AD₂ to AD₃, the resulting price and output in the short run would be:

Correct Answer
verified

Correct Answer
verified