Question 1

If the government were to increase income taxes,we would predict:

Accepted Answer

A)  a downward movement along the aggregate demand curve.
B)  a shift in aggregate demand to the right.
C)  a shift in aggregate demand to the left.
D)  a shift straight down of aggregate demand.E) B) and C)
F) A) and D)

Question 2

As prices rise,people:

Accepted Answer

A)  feel less wealthy.
B)  want to spend less.
C)  demand a smaller quantity of goods and services in the aggregate.
D)  All of these are true.E) All of the above
F) A) and B)

Question 3

Changes in expectations about future price levels:

Accepted Answer

A)  affect only the short-run aggregate supply curve.
B)  affect only the long-run aggregate supply curve.
C)  affect both the long-run aggregate supply curve and the short-run aggregate supply curve.
D)  do not affect either the long-run aggregate supply or the short-run aggregate supply curve.E) A) and D)
F) None of the above

Question 4

An asset-price bubble is caused by:

Accepted Answer

A)  people buying assets because they believed prices would keep going up and they'd be able to sell for a profit.
B)  fads that make owning a certain asset fashionable.
C)  severe inflation within a short period of time.
D)  the increase in the value of durable goods when the economy is experiencing low inflation.E) All of the above
F) A) and C)

Question 5

Aggregate supply is:

Accepted Answer

A)  total quantity of the production of all the households in the economy.
B)  total quantity of goods and services demanded in the economy.
C)  market value of the total quantity of goods and services demanded in the economy.
D)  market value of the total quantity of goods and services supplied in the economy.E) None of the above
F) A) and B)

Question 6

Sticky prices refers to:

Accepted Answer

A)  the prices of some inputs taking longer to adjust to the price level than the output it creates.
B)  the prices of some output taking longer to adjust to the price level than the inputs used to create it.
C)  the price of more durable goods "sticking," and not adjusting to the price level.
D)  the price of consumer goods not adjusting to the price level.E) A) and B)
F) B) and C)

Question 7

The aggregate supply and aggregate demand model describes the interaction of which macroeconomic variables?

Accepted Answer

A)  Output and the price level
B)  Employment and immigration
C)  Prices and immigration
D)  Output and number of sellersE) A) and B)
F) A) and C)

Question 8

If the economy is in a recession,and the government increases its spending to bring the economy back to its long-run equilibrium,the long-run level of output will:

Accepted Answer

A)  return,with higher prices.
B)  return,as well as original price level.
C)  return,with lower prices.
D)  increase,with higher prices.E) B) and C)
F) A) and B)

Question 9

A basic factor of production that is used to produce output is:

Accepted Answer

A)  technology.
B)  labor.
C)  capital.
D)  All of these are considered factor inputs.E) None of the above
F) All of the above

Question 10

When the price level increases people:

Accepted Answer

A)  feel less wealthy.
B)  feel more wealthy.
C)  have the same real value of assets,regardless of the change in the price level.
D)  experience a bubble forming in the economy overall.E) None of the above
F) All of the above

Question 11

When the housing bubble popped,the effect of the negative demand side shock and the negative supply side shock were the same on:

Accepted Answer

A)  output,causing it to definitely decrease.
B)  output causing it to definitely increase.
C)  prices,causing them to definitely rise.
D)  prices,causing them to definitely fall.E) A) and D)
F) B) and C)

Question 12

Sticky wages cause:

Accepted Answer

A)  the short-run aggregate supply curve to slope upward.
B)  the short-run aggregate supply curve to slope downward.
C)  the long-run aggregate supply curve to slope upward.
D)  the long-run aggregate supply curve to slope downward.E) A) and B)
F) All of the above

Question 13

If a positive permanent supply shock were to occur,the resulting equilibrium would be:

Accepted Answer

A)  a higher level of output and prices.
B)  a lower level of output and prices.
C)  a higher level of output at lower prices.
D)  a lower level of output at higher prices.E) C) and D)
F) None of the above

Question 14

One reason stagflation is difficult to recover from is because:

Accepted Answer

A)  wages are sticky downward.
B)  input prices increase with output prices.
C)  less output requires less inputs to be hired.
D)  prices tend to adjust more quickly downward than upward.E) A) and B)
F) A) and D)

Question 15

Consumption spending:

Accepted Answer

A)  is negatively related to the overall price level.
B)  is positively related to the overall price level.
C)  is equal to the overall price level.
D)  is not correlated with the overall price level.E) All of the above
F) None of the above

Question 16

The long-run result of government intervention in responding to a recession is:

Accepted Answer

A)  the same level of output at higher prices.
B)  higher level of output at higher prices.
C)  higher level of output at lower prices.
D)  lower level of output at the same prices.E) None of the above
F) All of the above

Question 17

Which of the following is a component of aggregate demand?

Accepted Answer

A)  Consumption
B)  Income
C)  Taxes
D)  All of these are components of aggregate demand.E) A) and C)
F) None of the above

Question 18

When the economy experiences a permanent supply side shock that shifts the long-run aggregate supply to the right,the short run aggregate supply curve:

Accepted Answer

A)  will instantly shift right with the long-run aggregate supply to the new long-run equilibrium.
B)  will begin by shifting left initially,and then be pulled right by the long-run aggregate supply over time.
C)  will gradually shift right until it reaches long-run aggregate supply and the new long-run equilibrium.
D)  None of these is true.E) B) and D)
F) All of the above

Question 19

Higher interest rates caused by an increase in the price level creates:

Accepted Answer

A)  an indirect negative relationship between the price level and investment spending.
B)  an indirect positive relationship between the price level and investment spending.
C)  the incentive for firms to invest more in new factories.
D)  the incentive for individuals to spend more on consumption goods.E) B) and C)
F) A) and D)

Question 20

An aggregate supply curve that slopes upward must be:

Accepted Answer

A)  a short-run curve.
B)  a long-run curve.
C)  an individual firm's supply curve.
D)  an individual industry's supply curve.E) A) and D)
F) A) and B)

Exam 28: Aggregate Demand and Aggregate Supply

If the economy is in a recession,and the government increases its spending to bring the economy back to its long-run equilibrium,the long-run level of output will:

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A basic factor of production that is used to produce output is:

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If the government were to increase income taxes,we would predict:

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One reason stagflation is difficult to recover from is because:

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An asset-price bubble is caused by:

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An aggregate supply curve that slopes upward must be:

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Changes in expectations about future price levels:

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When the housing bubble popped,the effect of the negative demand side shock and the negative supply side shock were the same on:

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Consumption spending:

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Aggregate supply is:

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Higher interest rates caused by an increase in the price level creates:

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When the economy experiences a permanent supply side shock that shifts the long-run aggregate supply to the right,the short run aggregate supply curve:

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Which of the following is a component of aggregate demand?

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Sticky prices refers to:

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When the price level increases people:

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The aggregate supply and aggregate demand model describes the interaction of which macroeconomic variables?

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As prices rise,people:

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The long-run result of government intervention in responding to a recession is:

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If a positive permanent supply shock were to occur,the resulting equilibrium would be:

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Sticky wages cause:

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