Question 1

Suppose a booming stock market encourages consumption spending to rise dramatically.What would be the most likely long-run impact?

Accepted Answer

A)   Prices fall.
B)   GDP first rises,and then falls back to long-run equilibrium.
C)   A recession occurs.
D)   The impact cannot be determined from the information given.E) B) and D)
F) C) and D)

Question 2

The idea that new spending creates more new spending is known as:

Accepted Answer

A)   the crowding-out effect.
B)   the multiplier effect.
C)   the wealth effect.
D)   the interest rate effect.E) B) and C)
F) None of the above

Question 3

The short-run aggregate supply curve is positively sloped because:

Accepted Answer

A)   a short-run increase in GDP usually is accompanied by an increased rise in the price level.
B)   many input prices are slow to change in the short run.
C)   all variables are fixed in the short run.
D)   a short-run increase in GDP usually is accompanied by a slower rise in the price level.E) None of the above
F) All of the above

Question 4

(Figure: Determining SRAS Shifts 3)   Which of the following might be a cause of the change in short-run aggregate supply?

Accepted Answer

A)   Unions successfully negotiate higher wages.
B)   Subsidies to firms increase.
C)   Consumer incomes drop.
D)   Workers and firms believe that inflation is going to decrease.E) A) and B)
F) None of the above

Question 5

Which of the following events causes an increase in aggregate demand?

Accepted Answer

A)   decreasing wealth
B)   falling interest rates
C)   decrease in government spending
D)   rising importsE) A) and C)
F) C) and D)

Question 6

The difference between the Keynesian model and the aggregate demand/aggregate supply (AD/AS) model is that the:

Accepted Answer

A)   Keynesian model assumes that prices are constant.
B)   AD/AS model assumes that prices are constant.
C)   Keynesian model assumes full employment.
D)   AD/AS model assumes that equilibrium always occurs at less than full employment.E) C) and D)
F) A) and D)

Question 7

If the amount of regulation in an economy increases,the aggregate supply curve shifts _____ and output supplied will be _____.

Accepted Answer

A)   left;increased
B)   left;reduced
C)   right;increased
D)   right;reducedE) A) and D)
F) A) and C)

Question 8

A decrease in foreign income will cause aggregate demand to shift to the left.

Accepted Answer

A) True 
 B)False

Question 9

One reason the price level did not rise after the 2008-2009 stimulus policy actions is that it may not have shifted aggregate demand to the right.

Accepted Answer

A) True 
 B)False

Question 10

Assume initially the economy is at full employment.If aggregate demand increases,the aggregate price level and costs will ______,and ultimately,the short run aggregate supply curve shifts to the _______.

Accepted Answer

A)   rise;right
B)   rise;left
C)   fall;right
D)   fall;leftE) A) and B)
F) None of the above

Question 11

Which is a determinant of aggregate supply?

Accepted Answer

A)   interest rates
B)   productivity
C)   prices of substitutes
D)   household expectationsE) A) and B)
F) A) and C)

Question 12

A breakthrough in solar energy research that halves the cost of electricity will:

Accepted Answer

A)   have no effect on the aggregate supply curve.
B)   shift the aggregate supply curve to the right.
C)   shift the aggregate supply curve to the left.
D)   cause the aggregate supply curve to become vertical.E) A) and B)
F) A) and C)

Question 13

Aggregate supply increases when:

Accepted Answer

A)   input prices rise.
B)   subsidies are reduced.
C)   there is a decrease in firms' market power.
D)   business expectations tend toward the negative.E) C) and D)
F) A) and C)

Question 14

Cost-push inflation occurs when aggregate demand expands so much that equilibrium output exceeds full employment output.

Accepted Answer

A) True 
 B)False

Question 15

A(n) _______ in oil prices and a(n) _______ in taxes will shift short-run aggregate supply to the left.

Accepted Answer

A)   increase;increase
B)   increase;reduction
C)   reduction;increase
D)   reduction;reductionE) B) and C)
F) C) and D)

Question 16

(Figure: Determining SRAS Shifts 2)   Which of the following might be a cause of the change in short-run aggregate supply?

Accepted Answer

A)   Unions successfully negotiated higher wages.
B)   Businesses are increasingly optimistic about the future.
C)   Consumer incomes dropped.
D)   Taxes on businesses are raised.E) B) and D)
F) A) and D)

Question 17

Which are determinants of short-run aggregate supply?

Accepted Answer

A)   changes in government spending,taxes,and business and inflationary expectations
B)   changes in input prices,taxes,and business and inflationary expectations
C)   changes in education,taxes,and business and inflationary expectations
D)   changes in input prices,taxes,and technologyE) C) and D)
F) A) and B)

Question 18

If the prices of U.S.goods decrease overall,those goods become less competitive in the foreign market.

Accepted Answer

A) True 
 B)False

Question 19

Analyze the aggregate supply curve and differentiate between the short run and long run.Support your response with a graph.

Accepted Answer

The aggregate supply curve shows the rea...

Question 20

Which of the following events will NOT cause the aggregate demand curve to shift?

Accepted Answer

A)   Businesses are optimistic about the economy,investing heavily in new equipment.
B)   Consumers' wealth drops because of a drop in the stock market.
C)   A rise in the aggregate price level causes a drop in exports.
D)   Governments increase spending on national security in the wake of terrorist attacks.E) A) and D)
F) C) and D)

Exam 9: Aggregate Demand and Supply

If the amount of regulation in an economy increases,the aggregate supply curve shifts _____ and output supplied will be _____.

Correct AnswerverifiedShow Answer

A breakthrough in solar energy research that halves the cost of electricity will:

Correct AnswerverifiedShow Answer

If the prices of U.S.goods decrease overall,those goods become less competitive in the foreign market.

Correct AnswerverifiedShow Answer

Analyze the aggregate supply curve and differentiate between the short run and long run.Support your response with a graph.

Correct AnswerverifiedThe aggregate supply curve shows the rea...View AnswerShow Answer

Which of the following events causes an increase in aggregate demand?

Correct AnswerverifiedShow Answer

Which are determinants of short-run aggregate supply?

Correct AnswerverifiedShow Answer

Which is a determinant of aggregate supply?

Correct AnswerverifiedShow Answer

(Figure: Determining SRAS Shifts 3) Which of the following might be a cause of the change in short-run aggregate supply?

Correct AnswerverifiedShow Answer

A(n) _______ in oil prices and a(n) _______ in taxes will shift short-run aggregate supply to the left.

Correct AnswerverifiedShow Answer

The idea that new spending creates more new spending is known as:

Correct AnswerverifiedShow Answer

Cost-push inflation occurs when aggregate demand expands so much that equilibrium output exceeds full employment output.

Correct AnswerverifiedShow Answer

A decrease in foreign income will cause aggregate demand to shift to the left.

Correct AnswerverifiedShow Answer

Which of the following events will NOT cause the aggregate demand curve to shift?

Correct AnswerverifiedShow Answer

Suppose a booming stock market encourages consumption spending to rise dramatically.What would be the most likely long-run impact?

Correct AnswerverifiedShow Answer

Assume initially the economy is at full employment.If aggregate demand increases,the aggregate price level and costs will ______,and ultimately,the short run aggregate supply curve shifts to the _______.

Correct AnswerverifiedShow Answer

(Figure: Determining SRAS Shifts 2) Which of the following might be a cause of the change in short-run aggregate supply?

Correct AnswerverifiedShow Answer

The difference between the Keynesian model and the aggregate demand/aggregate supply (AD/AS) model is that the:

Correct AnswerverifiedShow Answer

The short-run aggregate supply curve is positively sloped because:

Correct AnswerverifiedShow Answer

Aggregate supply increases when:

Correct AnswerverifiedShow Answer

One reason the price level did not rise after the 2008-2009 stimulus policy actions is that it may not have shifted aggregate demand to the right.

Correct AnswerverifiedShow Answer

If the amount of regulation in an economy increases,the aggregate supply curve shifts _ and output supplied will be _.

Correct Answer
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The aggregate supply curve shows the rea...
View Answer

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A(n) _ in oil prices and a(n) _ in taxes will shift short-run aggregate supply to the left.

Correct Answer
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Assume initially the economy is at full employment.If aggregate demand increases,the aggregate price level and costs will ,and ultimately,the short run aggregate supply curve shifts to the _.

Correct Answer
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