Question 1

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) B) and C)
F) None of the above

Question 2

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) A) and B)
F) C) and D)

Question 3

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 B)
F) A) and C)

Question 4

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) B) and D)
F) All of the above

Question 5

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) A) and B)
F) A) and C)

Question 6

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) A) and B)
F) All of the above

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

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) A) and C)

Question 9

(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) B) and C)
F) C) and D)

Question 10

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) All of the above
F) A) and B)

Question 11

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) B) and D)
F) A) and C)

Question 12

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 B)
F) A) and C)

Question 13

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) A) and B)
F) A) and C)

Question 14

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) A) and D)
F) B) and C)

Question 15

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

Question 16

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) A) and B)
F) B) and C)

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

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

Question 19

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) B) and D)
F) B) and C)

Question 20

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) A) and D)
F) None of the above

Exam 32: Aggregate Demand and Aggregate Supply

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Other things equal, an improvement in productivity will

Correct AnswerverifiedShow Answer

A decrease in government spending will cause a(n)

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Prices and wages tend to be

Correct AnswerverifiedShow Answer

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

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If the dollar appreciates in value relative to foreign currencies,

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

When the price level decreases,

Correct AnswerverifiedShow Answer

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