Question 1

An increase in disposable income would tend to shift the aggregate demand curve to the left.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following would be true of the aggregate demand curve of an economy if investment grew by a smaller magnitude than imports?

Accepted Answer

A)  The aggregate demand curve would shift to the right.
B)  The aggregate demand curve would shift to the left.
C)  The aggregate demand curve would not shift at all.
D)  The slope of the aggregate demand curve would increase.
E)  The slope of the aggregate demand curve would decrease.F) A) and B)
G) A) and C)

Question 3

Jason has been holding his retirement savings in a safe in his house. Currently, the economy is experiencing a falling price level. He can conclude that:

Accepted Answer

A)  the real purchasing power of his money is constant.
B)  the real value of his savings would increase as long as the price level falls.
C)  the real value of his savings would decrease as long as the price level is falls.
D)  he would have been worse off if he had deposited his savings at a bank.
E)  he would have been better off if he had used a major percentage of his savings for consumption earlier.F) A) and C)
G) B) and D) B

Question 4

Stagflation is generally caused by:

Accepted Answer

A)  an increase in aggregate demand.
B)  a decrease in aggregate demand.
C)  an increase in aggregate supply.
D)  a decrease in aggregate supply.
E)  a low rate of interest.F) C) and D)
G) D) and E)

Question 5

Which of the following statements is true?

Accepted Answer

A)  The short-run aggregate supply curve is generally upward sloping.
B)  The short-run aggregate supply curve is generally downward sloping.
C)  The short-run aggregate supply curve is vertical.
D)  The long-run aggregate supply curve is horizontal.
E)  The long-run aggregate supply curve is generally downward sloping.F) B) and E)
G) A) and B) A

Question 6

According to the misperception effect, firms increase output as the price level rises because they mistake the increase in overall prices for an increase in the relative price of their own output.

Accepted Answer

A) True 
 B)False

Question 7

If there is currently an inflationary gap, an increase in aggregate demand will make the inflationary gap smaller, but a decrease in aggregate demand would make the inflationary gap larger.

Accepted Answer

A) True 
 B)False

Question 8

Economies usually face recessions for long periods of time because:

Accepted Answer

A)  the pessimism in the economy slows down the process of adjustment.
B)  wages and prices are rigid in nature.
C)  firms tend to streamline their operations every year.
D)  governments tend to avoid making tough decisions.
E)  wages fall faster than the price level.F) B) and E)
G) C) and D)

Question 9

An unexpected increase in aggregate demand results in a decrease in real wages in the short run.

Accepted Answer

A) True 
 B)False

Question 10

A change that shifted the long-run aggregate supply curve to the right would not necessarily shift the short-run aggregate supply curve to the right.

Accepted Answer

A) True 
 B)False

Question 11

Figure 13-9 shows the short-run macroeconomic equilibrium of an economy at Point A. As the economy adjusts from short run equilibrium to long-run equilibrium, _____.Figure 13-9

Accepted Answer

A)  the price level will rise
B)  the price level will fall
C)  real GDP will increase
D)  short-run aggregate supply will increase
E)  aggregate demand will increaseF) All of the above
G) D) and E)

Question 12

A fall in the price level will cause the aggregate demand curve to shift to the left.

Accepted Answer

A) True 
 B)False

Question 13

If some non-price level determinant causes total spending to increase, there will be a(n) :

Accepted Answer

A)  upward movement along the aggregate demand curve.
B)  downward movement along the aggregate demand curve.
C)  leftward shift of the aggregate demand curve.
D)  rightward shift of the aggregate demand curve.
E)  decrease in the slope of the aggregate demand curve.F) B) and E)
G) A) and B)

Question 14

Figure 13-2 shows shifts in the aggregate demand curve. Which of the following combinations would be illustrated by a shift in aggregate demand from AD0 to AD1?Figure 13-2 0 to AD1?Figure 13-2   A) A slow increase in government purchases combined with a large decrease in investment B) An increase in consumption combined with an increase in exports C) An increase in business tax rates combined with a decrease in consumer confidence D) An increase in the growth rates of a major trading partner combined with a severe slowdown in stock market wealth E) An increase in exports combined with an even larger increase in imports" class="answers-bank-image d-inline" rel="preload" >

Accepted Answer

A)  A slow increase in government purchases combined with a large decrease in investment
B)  An increase in consumption combined with an increase in exports
C)  An increase in business tax rates combined with a decrease in consumer confidence
D)  An increase in the growth rates of a major trading partner combined with a severe slowdown in stock market wealth
E)  An increase in exports combined with an even larger increase in importsF) B) and C)
G) B) and E) B

Question 15

Stagflation could be caused solely by a shift in the aggregate demand curve.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following would shift both the short-run aggregate supply curve and the long-run aggregate supply curve of iron and steel industry rightward?

Accepted Answer

A)  A decrease in wage rates due to immigration​
B)  A decrease in the price of oil due to the discovery of new oil fields
C)  A decrease in the size of the labor force due to migration to other countries
D)  An increase in corporate taxes by the government
E)  An increase in the aggregate price levelF) A) and E)
G) B) and D)

Question 17

Discuss the impact of efficiency wages on unemployment and wage inflexibility.

Accepted Answer

Answers will vary. Because the efficienc...

Question 18

Which of the following variables changes along the long-run aggregate supply curve?

Accepted Answer

A)  Real GDP
B)  Investment
C)  Consumption
D)  Government purchases
E)  Price levelF) A) and E)
G) A) and D)

Question 19

An increase in the U.S. price level will:

Accepted Answer

A)  increase U.S. exports.
B)  increase U.S. imports.
C)  increase the quantity of real GDP demanded in the United States.
D)  increase the real value of the U.S. dollar.
E)  encourage people to hold less money.F) B) and C)
G) C) and D)

Question 20

Which of the following will cause consumption and, as a result, aggregate demand to decrease?

Accepted Answer

A)  A tax cut
B)  A decrease in consumer confidence
C)  An increase in population
D)  An optimistic forecast of future income growth
E)  A decrease in consumer debtF) C) and E)
G) C) and D)

Exam 13: Aggregate Demand and Aggregate Supply

An increase in disposable income would tend to shift the aggregate demand curve to the left.

Correct AnswerverifiedShow Answer

Which of the following would be true of the aggregate demand curve of an economy if investment grew by a smaller magnitude than imports?

Correct AnswerverifiedShow Answer

Jason has been holding his retirement savings in a safe in his house. Currently, the economy is experiencing a falling price level. He can conclude that:

Correct AnswerverifiedB

Stagflation is generally caused by:

Correct AnswerverifiedShow Answer

Which of the following statements is true?

Correct AnswerverifiedA

According to the misperception effect, firms increase output as the price level rises because they mistake the increase in overall prices for an increase in the relative price of their own output.

Correct AnswerverifiedShow Answer

If there is currently an inflationary gap, an increase in aggregate demand will make the inflationary gap smaller, but a decrease in aggregate demand would make the inflationary gap larger.

Correct AnswerverifiedShow Answer

Economies usually face recessions for long periods of time because:

Correct AnswerverifiedShow Answer

An unexpected increase in aggregate demand results in a decrease in real wages in the short run.

Correct AnswerverifiedShow Answer

A change that shifted the long-run aggregate supply curve to the right would not necessarily shift the short-run aggregate supply curve to the right.

Correct AnswerverifiedShow Answer

Figure 13-9 shows the short-run macroeconomic equilibrium of an economy at Point A. As the economy adjusts from short run equilibrium to long-run equilibrium, _____.Figure 13-9

Correct AnswerverifiedShow Answer

A fall in the price level will cause the aggregate demand curve to shift to the left.

Correct AnswerverifiedShow Answer

If some non-price level determinant causes total spending to increase, there will be a(n) :

Correct AnswerverifiedShow Answer

Figure 13-2 shows shifts in the aggregate demand curve. Which of the following combinations would be illustrated by a shift in aggregate demand from AD0 to AD1?Figure 13-2

Correct AnswerverifiedB

Stagflation could be caused solely by a shift in the aggregate demand curve.

Correct AnswerverifiedShow Answer

Which of the following would shift both the short-run aggregate supply curve and the long-run aggregate supply curve of iron and steel industry rightward?

Correct AnswerverifiedShow Answer

Discuss the impact of efficiency wages on unemployment and wage inflexibility.

Correct AnswerverifiedAnswers will vary. Because the efficienc...View AnswerShow Answer

Which of the following variables changes along the long-run aggregate supply curve?

Correct AnswerverifiedShow Answer

An increase in the U.S. price level will:

Correct AnswerverifiedShow Answer

Which of the following will cause consumption and, as a result, aggregate demand to decrease?

Correct AnswerverifiedShow Answer

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B

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A

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Figure 13-2 shows shifts in the aggregate demand curve. Which of the following combinations would be illustrated by a shift in aggregate demand from AD₀ to AD₁?Figure 13-2

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B

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Answers will vary. Because the efficienc...
View Answer

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