Question 1

In terms of aggregate supply, the difference between the long run and the short run is that in the long run:

Accepted Answer

A)   the price level is variable.
B)   employment is variable.
C)   real output is variable.
D)   nominal wages and other input prices are variable.E) None of the above
F) A) and D)

Question 2

The economy experiences an increase in the price level and a decrease in real domestic output. Which is a likely explanation?

Accepted Answer

A)   productivity has increased
B)   input prices have increased
C)   excess capacity has decreased
D)   government regulations have been reducedE) A) and C)
F) B) and D)

Question 3

Which would be considered to be one of the factors that shift the aggregate supply curve? A change in:

Accepted Answer

A)   consumer spending.
B)   net export spending.
C)   government regulation.
D)   profit expectations on investment projects.E) None of the above
F) B) and C)

Question 4

The recession that began in 2008 dispelled the idea of The Great Moderation.

Accepted Answer

A) True 
 B)False

Question 5

If the dollar price of foreign currencies falls (that is, the dollar appreciates) , we would expect:

Accepted Answer

A)   aggregate demand to decrease and aggregate supply to increase.
B)   both aggregate demand and aggregate supply to decrease.
C)   both aggregate demand and aggregate supply to increase.
D)   aggregate demand to increase and aggregate supply to decrease.E) A) and B)
F) None of the above

Question 6

Refer to the diagram below. A shift in the aggregate demand curve from AD1 to AD0 might be caused by a(n) : 1 to AD0 might be caused by a(n) :   A)  decrease in aggregate supply. B)  decrease in the amount of output supplied. C)  increase in investment spending. D)  decrease in net export spending." class="answers-bank-image d-inline" rel="preload" >

Accepted Answer

A)   decrease in aggregate supply.
B)   decrease in the amount of output supplied.
C)   increase in investment spending.
D)   decrease in net export spending.E) All of the above
F) C) and D)

Question 7

Which of the following is true of aggregate supply in the long run?

Accepted Answer

A)   Nominal wages and output prices are both fixed.
B)   Nominal wages are fixed but output prices can vary.
C)   Output prices are fixed.
D)   Nominal wages are fully responsive to changes in the price level.E) B) and D)
F) None of the above

Question 8

An increase in investment spending can be expected to shift the:

Accepted Answer

A)   aggregate expenditures curve downward and the aggregate demand curve leftward.
B)   aggregate expenditures curve upward and the aggregate demand curve leftward.
C)   aggregate expenditures curve downward and the aggregate demand curve rightward.
D)   aggregate expenditures curve upward and the aggregate demand curve rightward.E) None of the above
F) A) and B)

Question 9

An increase in business taxes will shift the aggregate supply curve leftward.

Accepted Answer

A) True 
 B)False

Question 10

The Great Moderation refers to:

Accepted Answer

A)   the period from 1982 to 2008 when business cycles were longer and relatively mild.
B)   the recession that began in 2008 and continued through to 2009.
C)   the fact that businesses and governments cannot smooth out the business cycle.
D)   the period from 1982 to 2008 when cycles were shorter.E) A) and B)
F) C) and D)

Question 11

2 to AE1 resulting from the wealth, interest rate, and foreign trade effects would be depicted as: A)  a movement from A to B along aggregate demand curve AD1. B)  a movement from B to A along aggregate demand curve AD1. C)  a shift of aggregate demand from AD1 to AD2. D)  a shift of aggregate demand from AD2 to AD1." class="answers-bank-image d-inline" rel="preload" >
-Refer to the above diagrams. A decline in aggregate expenditures from AE2 to AE1 resulting from the wealth, interest rate, and foreign trade effects would be depicted as:

Accepted Answer

A)   a movement from A to B along aggregate demand curve AD1.
B)   a movement from B to A along aggregate demand curve AD1.
C)   a shift of aggregate demand from AD1 to AD2.
D)   a shift of aggregate demand from AD2 to AD1.E) A) and B)
F) A) and D)

Question 12

A decrease in aggregate demand is most likely to be caused by:

Accepted Answer

A)   an increase in the wealth of consumers.
B)   an increase in consumer confidence.
C)   an increase in interest rates for home mortgages.
D)   a decrease in tax rates on household income.E) A) and C)
F) C) and D)

Question 13

The following aggregate demand and supply schedules are for a hypothetical economy:
 
-Refer to the above data. If the amount of real output demanded at each price level falls by $200, the equilibrium price level and equilibrium level of real domestic output will fall to:

Accepted Answer

A)   250 and $200, respectively.
B)   200 and $300, respectively.
C)   150 and $300, respectively.
D)   150 and $200, respectively.E) B) and C)
F) B) and D)

Question 14

1 and AS1 represent the original aggregate supply and demand curves and AD2 and AS2 show the new aggregate demand and supply curves. The changes in aggregate demand and supply in the above diagram produce: A)  a higher price level. B)  an expansion of real output and a stable price level. C)  an expansion of real output and a higher price level. D)  a decline in real output and a stable price level." class="answers-bank-image d-inline" rel="preload" >
-In the above figure AD1 and AS1 represent the original aggregate supply and demand curves and AD2 and AS2 show the new aggregate demand and supply curves. The changes in aggregate demand and supply in the above diagram produce:

Accepted Answer

A)   a higher price level.
B)   an expansion of real output and a stable price level.
C)   an expansion of real output and a higher price level.
D)   a decline in real output and a stable price level.E) A) and B)
F) A) and C)

Question 15

The aggregate demand curve shows the:

Accepted Answer

A)   inverse relationship between the price level and real GDP purchased.
B)   direct relationship between the price level and real GDP produced.
C)   inverse relationship between interest rates and real GDP produced.
D)   direct relationship between real-balances and real GDP purchased.E) B) and D)
F) All of the above

Question 16

All else equal, an increase in imports will shift the aggregate expenditures curve:

Accepted Answer

A)   upward and the aggregate demand curve rightward.
B)   upward and the aggregate demand curve leftward.
C)   downward and the aggregate demand curve rightward.
D)   downward and the aggregate demand curve leftward.E) A) and B)
F) All of the above

Question 17

1 and aggregate demand is AD0, then: A)  at any price level above G a shortage of real output would occur. B)  F represents a price level which would result in a surplus of real output of AC. C)  a surplus of real output of GH would occur. D)  F represents a price level which would result in a shortage of real output of AC." class="answers-bank-image d-inline" rel="preload" >
-Refer to the above diagram. If aggregate supply is AS1 and aggregate demand is AD0, then:

Accepted Answer

A)   at any price level above G a shortage of real output would occur.
B)   F represents a price level which would result in a surplus of real output of AC.
C)   a surplus of real output of GH would occur.
D)   F represents a price level which would result in a shortage of real output of AC.E) None of the above
F) A) and B)

Question 18

The foreign trade effect suggests that a decrease in the Canadian price level relative to other countries will:

Accepted Answer

A)   shift the aggregate demand curve leftward.
B)   shift the aggregate supply curve leftward.
C)   decrease Canadian exports and increase Canadian imports.
D)   increase Canadian exports and decrease Canadian imports.E) C) and D)
F) A) and C)

Question 19

A rightward shift in the aggregate supply curve might best be explained by:

Accepted Answer

A)   an increase in business taxes.
B)   a decrease in productivity.
C)   an increase in nominal wages.
D)   a decrease in the price of imported resources.E) B) and D)
F) A) and C)

Question 20

1, then: A)  aggregate demand is AD2. B)  the equilibrium output level is Q3. C)  the equilibrium output level is Q2. D)  producers will supply output level Q1." class="answers-bank-image d-inline" rel="preload" >
-Refer to the above diagram. If the equilibrium price level is P1, then:

Accepted Answer

A)   aggregate demand is AD2.
B)   the equilibrium output level is Q3.
C)   the equilibrium output level is Q2.
D)   producers will supply output level Q1.E) B) and C)
F) A) and B)

Exam 10: Aggregate Demand and Aggregate Supply

-Refer to the above diagram. If the equilibrium price level is P1, then:

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A rightward shift in the aggregate supply curve might best be explained by:

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Which of the following is true of aggregate supply in the long run?

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The economy experiences an increase in the price level and a decrease in real domestic output. Which is a likely explanation?

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The recession that began in 2008 dispelled the idea of The Great Moderation.

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The foreign trade effect suggests that a decrease in the Canadian price level relative to other countries will:

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In terms of aggregate supply, the difference between the long run and the short run is that in the long run:

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The following aggregate demand and supply schedules are for a hypothetical economy: -Refer to the above data. If the amount of real output demanded at each price level falls by $200, the equilibrium price level and equilibrium level of real domestic output will fall to:

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-Refer to the above diagram. If aggregate supply is AS1 and aggregate demand is AD0, then:

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All else equal, an increase in imports will shift the aggregate expenditures curve:

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If the dollar price of foreign currencies falls (that is, the dollar appreciates) , we would expect:

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Which would be considered to be one of the factors that shift the aggregate supply curve? A change in:

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Refer to the diagram below. A shift in the aggregate demand curve from AD1 to AD0 might be caused by a(n) :

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-Refer to the above diagrams. A decline in aggregate expenditures from AE2 to AE1 resulting from the wealth, interest rate, and foreign trade effects would be depicted as:

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An increase in investment spending can be expected to shift the:

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A decrease in aggregate demand is most likely to be caused by:

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The aggregate demand curve shows the:

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The Great Moderation refers to:

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An increase in business taxes will shift the aggregate supply curve leftward.

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-In the above figure AD1 and AS1 represent the original aggregate supply and demand curves and AD2 and AS2 show the new aggregate demand and supply curves. The changes in aggregate demand and supply in the above diagram produce:

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-Refer to the above diagram. If the equilibrium price level is P₁, then:

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-Refer to the above diagram. If aggregate supply is AS₁ and aggregate demand is AD₀, then:

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Refer to the diagram below. A shift in the aggregate demand curve from AD₁ to AD₀ might be caused by a(n) :

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-Refer to the above diagrams. A decline in aggregate expenditures from AE₂ to AE₁ resulting from the wealth, interest rate, and foreign trade effects would be depicted as:

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-In the above figure AD₁ and AS₁ represent the original aggregate supply and demand curves and AD₂ and AS₂ show the new aggregate demand and supply curves. The changes in aggregate demand and supply in the above diagram produce:

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