Question 1

The long-run aggregate supply curve is the relationship between the price level and the quantity of real GDP that is supplied once input prices have had time to fully adjust to that price level.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following observations will be valid,if major trading partners of the United States experience an economic slowdown?

Accepted Answer

A)   an increase in U.S. exports to them
B)   aggregate demand will not be affected
C)   U.S. net exports will decrease
D)   aggregate demand will shift to the rightE) All of the above
F) A) and C)

Question 3

Classical economists believe that prices are ____ and that recessions will be relatively ____.

Accepted Answer

A)   inflexible; long
B)   inflexible; brief
C)   flexible; brief
D)   flexible; longE) All of the above
F) B) and D)

Question 4

Faster growth rates by a major trading partner,combined with an increase in stock market wealth,would have what effect on aggregate demand?

Accepted Answer

A)   AD would increase.
B)   AD would decrease.
C)   AD would stay the same.
D)   AD could either increase or decrease, depending on which change was of a greater magnitude.E) B) and D)
F) A) and D)

Question 5

What happens to aggregate demand if the demand for consumption goods decreases? If the demand for investment goods increases?

Accepted Answer

If the demand for consumption goods decr...

Question 6

Which of the following decreases U.S.aggregate demand?

Accepted Answer

A)   a lower price level, increasing citizen's real wealth
B)   a lower price level, reducing interest rates
C)   a lower price level, increasing exports and decreasing imports
D)   None of the above decrease U.S. aggregate demand.E) None of the above
F) B) and C)

Question 7

Higher interest rates will tend to reduce aggregate demand,other things being equal.

Accepted Answer

A) True 
 B)False

Question 8

Aggregate demand can be defined as:

Accepted Answer

A)   the total spending by all consumers, business firms, government agencies, and foreigners in the United States.
B)   the total amounts that all consumers, business firms, government agencies, and foreigners wish to spend on all final goods and services at various price levels.
C)   the total spending by consumers, business firms, and government agencies in one year.
D)   the total spending by consumers, business firms, and government agencies on final goods and services.E) B) and C)
F) A) and B)

Question 9

How will firms react to rising output price levels? What reactions can they expect from their employees and suppliers over time?

Accepted Answer

Firms have an incentive to increase real...

Question 10

During the 1970s,U.S.prices generally rose faster than prices in other parts of the world.Which of the following changes would the open economy effect predict took place in response to these price level changes?

Accepted Answer

A)   Americans reduced the proportion of foreign goods bought since their foreign prices became relatively lower.
B)   Americans reduced the amount of investment they undertook because interest rates increased.
C)   Americans reduced the amount of goods and services they wanted to purchase for consumption because they felt less wealthy.
D)   Americans reduced the fraction of purchases they made from domestic producers of goods and services since foreign prices became relatively lower.E) A) and B)
F) A) and C)

Question 11

In an open economy as the price level decreases,a(n) ____ in demand for domestic goods relative to foreign goods results in a(n) ____ in the quantity of RGDP demanded.

Accepted Answer

A)   increase, decrease
B)   increase, increase
C)   decrease, decrease
D)   decrease, increaseE) A) and B)
F) B) and C)

Question 12

A decrease in the U.S.price level will:

Accepted Answer

A)   decrease U.S. exports.
B)   decrease U.S. imports.
C)   decrease RGDP demanded in the United States.
D)   both (a)  and (c) E) B) and C)
F) All of the above

Question 13

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)   increased population
D)   an optimistic forecast of future income growthE) A) and B)
F) A) and C)

Question 14

Exhibit 22-2  In Exhibit 22-2,which curve represents aggregate demand?

Accepted Answer

A)   A
B)   B
C)   C
D)   none of the aboveE) A) and B)
F) A) and D)

Question 15

If private consumption in the United States was 69 percent of GDP,investment was 18 percent,government purchases were 18 percent,exports were 9 percent,and imports were 14 percent,net exports were equal to ____ percent of GDP.

Accepted Answer

A)   -5
B)   5
C)   -23
D)   23E) A) and D)
F) A) and B)

Question 16

Pierre is French Canadian,and like many Canadians he is experiencing booming good economic times.His good fortune is likely to impact U.S.aggregate demand in what way?

Accepted Answer

A)   Positively, because he prefers to make all his purchases in Canada from Canadian firms.
B)   Negatively, because he prefers to make all his purchases in Canada from Canadian firms.
C)   Negatively, since we are all members of North American Free Trade Zone.
D)   Positively, since he will be in a better position to purchase U.S.-made goods.E) A) and D)
F) A) and C)

Question 17

When there is a recessionary gap,one is likely to see an increase in overtime work and more hours worked by part-time workers.

Accepted Answer

A) True 
 B)False

Question 18

If both imports and exports rose,

Accepted Answer

A)   AD would decrease.
B)   AD would increase.
C)   AD would decrease if exports rose more than imports.
D)   AD would increase if exports rose more than imports.E) B) and C)
F) All of the above

Question 19

The short-run aggregate supply curve:

Accepted Answer

A)   has the same slope as the LRAS.
B)   shifts only when the LRAS shifts in the same direction.
C)   normally slopes upward to the right because the costs of labor and other inputs are relatively fixed in the short run.
D)   normally has a slope of zero, meaning the curve is horizontal.E) A) and B)
F) All of the above

Question 20

The SRAS is ____; the LRAS is ____.

Accepted Answer

A)   upward sloping; upward sloping
B)   upward sloping; vertical
C)   vertical; upward sloping
D)   vertical; verticalE) A) and C)
F) None of the above

Exam 22: Aggregate Demand and Aggregate Supply

What happens to aggregate demand if the demand for consumption goods decreases? If the demand for investment goods increases?

Correct AnswerverifiedIf the demand for consumption goods decr...View AnswerShow Answer

Which of the following observations will be valid,if major trading partners of the United States experience an economic slowdown?

Correct AnswerverifiedShow Answer

Classical economists believe that prices are ____ and that recessions will be relatively ____.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Exhibit 22-2 In Exhibit 22-2,which curve represents aggregate demand?

Correct AnswerverifiedShow Answer

Higher interest rates will tend to reduce aggregate demand,other things being equal.

Correct AnswerverifiedShow Answer

If private consumption in the United States was 69 percent of GDP,investment was 18 percent,government purchases were 18 percent,exports were 9 percent,and imports were 14 percent,net exports were equal to ____ percent of GDP.

Correct AnswerverifiedShow Answer

Aggregate demand can be defined as:

Correct AnswerverifiedShow Answer

Which of the following decreases U.S.aggregate demand?

Correct AnswerverifiedShow Answer

The SRAS is ____; the LRAS is ____.

Correct AnswerverifiedShow Answer

Pierre is French Canadian,and like many Canadians he is experiencing booming good economic times.His good fortune is likely to impact U.S.aggregate demand in what way?

Correct AnswerverifiedShow Answer

How will firms react to rising output price levels? What reactions can they expect from their employees and suppliers over time?

Correct AnswerverifiedFirms have an incentive to increase real...View AnswerShow Answer

In an open economy as the price level decreases,a(n) ____ in demand for domestic goods relative to foreign goods results in a(n) ____ in the quantity of RGDP demanded.

Correct AnswerverifiedShow Answer

When there is a recessionary gap,one is likely to see an increase in overtime work and more hours worked by part-time workers.

Correct AnswerverifiedShow Answer

Faster growth rates by a major trading partner,combined with an increase in stock market wealth,would have what effect on aggregate demand?

Correct AnswerverifiedShow Answer

The short-run aggregate supply curve:

Correct AnswerverifiedShow Answer

If both imports and exports rose,

Correct AnswerverifiedShow Answer

The long-run aggregate supply curve is the relationship between the price level and the quantity of real GDP that is supplied once input prices have had time to fully adjust to that price level.

Correct AnswerverifiedShow Answer

A decrease in the U.S.price level will:

Correct AnswerverifiedShow Answer

During the 1970s,U.S.prices generally rose faster than prices in other parts of the world.Which of the following changes would the open economy effect predict took place in response to these price level changes?

Correct AnswerverifiedShow Answer

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If the demand for consumption goods decr...
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Classical economists believe that prices are and that recessions will be relatively .

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The SRAS is ; the LRAS is .

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Firms have an incentive to increase real...
View Answer

In an open economy as the price level decreases,a(n) in demand for domestic goods relative to foreign goods results in a(n) in the quantity of RGDP demanded.

Correct Answer
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