Question 1

(Consider This)  The idea that the price level readily moves upward but not downward is called the

Accepted Answer

A)  elevator effect.
B)  escalator effect.
C)  ratchet effect.
D)  stair-step effect.E) All of the above
F) A) and B)

Question 2

In the accompanying table for a particular country, 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.If equilibrium real GDP is $31 billion, the equilibrium price level will be

Accepted Answer

A)  128.
B)  125.
C)  122.
D)  119.E) A) and D)
F) A) and C)

Question 3

When the economy is experiencing demand-pull inflation, its real GDP tends to be rising.

Accepted Answer

A) True 
 B)False

Question 4

An increase in the price level, other things equal, will shift the

Accepted Answer

A)  consumption, investment, and net exports schedules of the aggregate expenditures model downward.
B)  consumption, investment, and net exports schedules of the aggregate expenditures model upward.
C)  consumption and investment schedules of the aggregate expenditures model upward, but the net exports schedule downward.
D)  consumption and net exports schedules of the aggregate expenditures model upward, but the investment schedule downward.E) A) and D)
F) C) and D)

Question 5

An economy's aggregate demand curve shifts leftward or rightward by more than changes in initial spending because of the

Accepted Answer

A)  net export effect.
B)  wealth effect.
C)  real-balances effect.
D)  multiplier effect.E) None of the above
F) A) and B)

Question 6

The table gives information about the relationship between input quantities and real domestic output in a hypothetical economy.The level of productivity in the economy is

Accepted Answer

A)  2.
B)  0.5.
C)  4.
D)   200E) B) and D)
F) All of the above

Question 7

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 practicesE) All of the above
F) C) and D)

Question 8

When deriving the aggregate demand (AD)  curve from the aggregate expenditures model, an increase in U.S.product prices would cause an increase in

Accepted Answer

A)  the value of household wealth and lower consumption expenditures.
B)  interest rates and lower investment expenditures.
C)  exports and imports.
D)  U.S.resource prices and an increase in aggregate supply.E) B) and D)
F) A) and B)

Question 9

In deriving the aggregate demand curve from the aggregate expenditures model, we note that

Accepted Answer

A)  the real-balances effect is irrelevant to both models.
B)  a change in the price level will have no impact on the aggregate expenditures schedule.
C)  an increase (decrease)  in the price level shifts the aggregate expenditures schedule upward (downward) .
D)  an increase (decrease)  in the price level shifts the aggregate expenditures schedule downward (upward) .E) All of the above
F) A) and D)

Question 10

Which of the following would most likely reduce aggregate demand (shift the AD curve to the left) ?

Accepted Answer

A)  a reduced amount of excess capacity
B)  increased government spending on military equipment
C)  an appreciation of the U.S.dollar
D)  increased consumer optimism regarding future economic conditionsE) C) and D)
F) All of the above

Question 11

Degree of Excess Capacity Answer the question based on the accompanying list of factors that are related to the aggregate demand curve.Changes in which two of the factors would most likely cause a shift in aggregate demand due to a change in consumer spending?

Accepted Answer

A)  1 and 3
B)  2 and 4
C)  5 and 10
D)  8 and 9E) A) and B)
F) B) and D)

Question 12

Other things equal, an improvement in productivity will

Accepted Answer

A)  shift the aggregate demand curve to the left.
B)  shift the aggregate supply curve to the left.
C)  shift the aggregate supply curve to the right.
D)  increase the price level.E) B) and D)
F) A) and B)

Question 13

A decrease in government spending will cause a(n)

Accepted Answer

A)  increase in the quantity of real output demanded.
B)  decrease in the quantity of real output demanded.
C)  decrease in aggregate demand.
D)  increase in aggregate demand.E) All of the above
F) B) and D)

Question 14

When the dollar appreciates relative to foreign currencies, it means that

Accepted Answer

A)  we need more dollars to buy each unit of another currency.
B)  we can buy less foreign currency with a given amount of dollars.
C)  the value of foreign currencies decreased relative to our dollar.
D)  foreigners need less of their currency to buy one dollar.E) C) and D)
F) B) and D)

Question 15

If the dollar appreciates in value relative to foreign currencies,

Accepted Answer

A)  aggregate demand decreases because C decreases.
B)  aggregate demand increases because C increases.
C)  aggregate demand decreases because net exports decrease.
D)  aggregate demand increases because net exports increase.E) All of the above
F) B) and C)

Question 16

When the price level decreases,

Accepted Answer

A)  the demand for money falls and the interest rate falls.
B)  holders of financial assets with fixed money values decrease their spending.
C)  holders of financial assets with fixed money values have less purchasing power.
D)  there is a decrease in consumer spending that is sensitive to changes in interest rates.E) B) and C)
F) A) and D)

Question 17

If the price level increases, then the aggregate expenditures schedule will shift down and the aggregate demand curve will shift to the left.

Accepted Answer

A) True 
 B)False

Question 18

Prices and wages tend to be

Accepted Answer

A)  flexible both upward and downward.
B)  inflexible both upward and downward.
C)  flexible downward but inflexible upward.
D)  flexible upward but inflexible downward.E) A) and C)
F) A) and B)

Question 19

If the U.S.dollar appreciates in value relative to foreign currencies, then this will

Accepted Answer

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

Question 20

Which one of the following would not shift the aggregate demand curve?

Accepted Answer

A)  a change in the price level
B)  depreciation of the international value of the dollar
C)  a decline in the interest rate at each possible price level
D)  an increase in personal income tax ratesE) None of the above
F) C) and D)

Exam 32: Aggregate Demand and Aggregate Supply

When the dollar appreciates relative to foreign currencies, it means that

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In the accompanying table for a particular country, 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.If equilibrium real GDP is $31 billion, the equilibrium price level will be

Correct AnswerverifiedShow Answer

An increase in the price level, other things equal, will shift the

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Degree of Excess Capacity Answer the question based on the accompanying list of factors that are related to the aggregate demand curve.Changes in which two of the factors would most likely cause a shift in aggregate demand due to a change in consumer spending?

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Other things equal, an improvement in productivity will

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In deriving the aggregate demand curve from the aggregate expenditures model, we note that

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If the price level increases, then the aggregate expenditures schedule will shift down and the aggregate demand curve will shift to the left.

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Which one of the following would not shift the aggregate demand curve?

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When the economy is experiencing demand-pull inflation, its real GDP tends to be rising.

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When deriving the aggregate demand (AD) curve from the aggregate expenditures model, an increase in U.S.product prices would cause an increase in

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Which of the following would most likely reduce aggregate demand (shift the AD curve to the left) ?

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If the U.S.dollar appreciates in value relative to foreign currencies, then this will

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The table gives information about the relationship between input quantities and real domestic output in a hypothetical economy.The level of productivity in the economy is

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

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When the price level decreases,

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An economy's aggregate demand curve shifts leftward or rightward by more than changes in initial spending because of the

Correct AnswerverifiedShow Answer

Prices and wages tend to be

Correct AnswerverifiedShow Answer

(Consider This) The idea that the price level readily moves upward but not downward is called the

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If the dollar appreciates in value relative to foreign currencies,

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A decrease in government spending will cause a(n)

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