QUESTION 1

1. Exhibit 14-8 Aggregate demand and supply
   
   
   In Exhibit 14-8, if aggregate demand shifts from AD ₃ to AD ₄, real GDP will:

   	a.	not change, and the price level will rise from 120 to 140.
   	b.	rise from $7.0 to $8.0, and the price level will rise from 100 to 140.
   	c.	rise from $7.0 to $8.0, and the price level will rise from 120 to 140.
   	d.	rise from $4.0 to $8.0, and the price level will rise from 120 to 140.
   	e.	rise from $7.0 to $8.0, and the price level will rise from 120 to 170.

1 points

QUESTION 2

1. A change in which of the following would shift the aggregate demand curve?

   	a.	Consumption (C)
   	b.	Investment (I)
   	c.	Government spending (G)
   	d.	Net Exports (NX)
   	e.	All of the above

1 points

QUESTION 3

1. Exhibit 14-5 Aggregate demand curves
   
   
   In Exhibit 14-5, which one of the following could cause the U.S. aggregate demand curve to move from AD ₃ to AD₂?

   	a.	An expectation that future income will rise.
   	b.	A recession in Japan.
   	c.	Greater resource availability.
   	d.	Nonfluctuating resource availability.
   	e.	An increase in government grants for AIDS awareness programs.

1 points

QUESTION 4

1. Cost-push inflation is caused by a leftward shift of the aggregate demand curve.

   True False

1 points

QUESTION 5

1. An increase in input prices will cause the aggregate supply curve to shift rightward.

   True False

1 points

QUESTION 6

1. Suppose workers become pessimistic about their future employment, which causes them to save more and spend less. If the economy is on the intermediate range of the aggregate supply curve, then:

   	a.	both real GDP and the price level will fall.
   	b.	real GDP will rise and the price level will fall.
   	c.	real GDP will fall and the price level will rise.
   	d.	both real GDP and the price level will rise.

1 points

QUESTION 7

1. Which of the following is true, other things equal?

   	a.	A reduction in prices will lead to a decline in net exports.
   	b.	A reduction in prices will increase the real wealth of those holding a fixed quantity of money.
   	c.	A reduction in prices will increase profit margins and, thereby, stimulate additional investment.
   	d.	A reduction in prices will increase the scarcity of money, raise the real interest rate, and, thereby, encourage investment and consumption.

1 points

QUESTION 8

1. Aggregate supply increases when:

   	a.	there are increased inflationary expectations of labor.
   	b.	there are fewer workers.
   	c.	there is less capital and the price level remains unchanged.
   	d.	wage rates or interest rates decrease while the economy’s price level remains unchanged.
   	e.	resource availability is reduced.

1 points

QUESTION 9

1. The aggregate demand curve is drawn downward-sloping, because increases in the price level cause decreases in:

   	a.	the value of the dollar.
   	b.	unemployment.
   	c.	total spending (real GDP).
   	d.	households’ savings.

1 points

QUESTION 10

1. In the United States during the 1960s, government spending dramatically increased to fight the Vietnam War, which resulted in:

   	a.	demand-pull inflation.
   	b.	cost-push inflation.
   	c.	stagflation.
   	d.	a disinflationary recession.

1 points

QUESTION 11

1. Which of the following could be expected to shift the aggregate demand curve?

   	a.	An increase in government spending.
   	b.	Consumption spending decreases.
   	c.	Net exports fall.
   	d.	All of the above.

1 points

QUESTION 12

1. The aggregate supply curve:

   	a.	shows the level of real GDP produced in the economy at different possible price levels during a period of time.
   	b.	is horizontal in the Keynesian range.
   	c.	is vertical in the classical range.
   	d.	all of the above.

1 points

QUESTION 13

1. Exhibit 14-8 Aggregate demand and supply
   
   
   In Exhibit 14-8, if aggregate demand shifts from AD ₅ to AD ₄, real GDP will:

   	a.	fall from $8.0 to $6.0, and the price level will not change.
   	b.	not change, and the price level will fall from 170 to 140.
   	c.	not change, and the price level will fall from 140 to 100.
   	d.	not change, and the price level will fall from 170 to 100.
   	e.	fall from $8.0 to $6.0, and the price level will fall from 140 to 120.

1 points

QUESTION 14

1. Cost-push inflation occurs when the:

   	a.	aggregate supply curve shifts rightward.
   	b.	aggregate demand curve shifts rightward while the aggregate supply curve is fixed.
   	c.	aggregate supply curve shifts leftward while the aggregate demand curve is fixed.
   	d.	aggregate demand curve shifts leftward while the aggregate supply curve is fixed.

1 points

QUESTION 15

1. When price level in the United States rises,

   	a.	the French, Canadians, and Japanese would find our exports more attractive.
   	b.	to replenish the value of your real wealth, you would save less and consume more.
   	c.	there is a increased demand for borrowed money.
   	d.	Americans tend to buy more foreign goods and services.
   	e.	producers’ demand for new machinery increases, contributing to an increase in aggregate demand.

1 points

QUESTION 16

1. The aggregate supply curve reflects the relationship between the price:

   	a.	level and the quantity supplied of all goods in the economy.
   	b.	level and the quantity of all goods purchased in the economy.
   	c.	of a particular good and the quantity supplied by the aggregate economy.
   	d.	of a particular good and the quantity supplied by all firms producing that good.

1 points

QUESTION 17

1. When prices rise, consumers and businesses hold larger money balances. This reduces the supply of loanable funds, increases the interest rate, and discourages both consumption and investment. This process is called the:

   	a.	disinvestment effect.
   	b.	investment effect.
   	c.	interest-rate effect.
   	d.	real balance effect.

1 points

QUESTION 18

1. Which one of the following factors will most likely cause an increase in aggregate demand?

   	a.	An increase in net exports.
   	b.	A technological development that decreases the cost of producing computer chips.
   	c.	A decrease in net exports due to falling incomes abroad.
   	d.	An increase in the real interest rate.

1 points

QUESTION 19

1. Which of the following will most likely increase aggregate demand?

   	a.	A decrease in real GDP.
   	b.	A decrease in the expected inflation rate.
   	c.	An increase in business investment spending.
   	d.	A decrease in stock market prices.

1 points

QUESTION 20

1. Exhibit 14-1 Aggregate supply curve
   
   
   In Exhibit 14-1, there are plenty of idle resources and no upward pressure on prices in:

   	a.	the segment labeled ab.
   	b.	the segment labeled bc.
   	c.	the segment labeled cd.
   	d.	both segment bc and segment cd.
   	e.	the entire curve.

1 points

QUESTION 21

1. Exhibit 14-1 Aggregate supply curve
   
   
   In Exhibit 14-1, resources are fully employed, and competition among producers for resources will lead to a higher price level in:

   	a.	both segment bc and segment cd.
   	b.	the segment labeled ab.
   	c.	the entire curve.
   	d.	the segment labeled cd.
   	e.	the segment labeled bc.

1 points

QUESTION 22

1. According to the net exports effect, as the price level falls relative to the rest of the world,

   	a.	the supply of U.S.-made goods increases.
   	b.	foreigners buy more U.S. goods.
   	c.	the aggregate demand curve shifts to the left.
   	d.	foreigners buy fewer goods.
   	e.	the aggregate demand curve shifts to the right.

1 points

QUESTION 23

1. The real balances effect occurs because a higher price level will reduce the real value of people’s:

   	a.	unpaid debt.
   	b.	physical investments.
   	c.	financial assets.
   	d.	wages.

1 points

QUESTION 24

1. The real balances effect is the impact on real GDP caused by the ____ relationship between the price level and the real value of financial assets.

   	a.	inverse
   	b.	direct
   	c.	independent
   	d.	linear

1 points

QUESTION 25

1. The real balances effect predicts that higher prices:

   	a.	increase borrowing, leading to higher interest rates and less investment.
   	b.	make people worse off by reducing the value of their wealth, leading them to save less and spend more.
   	c.	make people worse off by reducing the value of their wealth, leading them to save more and spend less.
   	d.	make domestic goods relatively more expensive, increasing the demand for domestic goods and decreasing the demand for foreign goods.
   	e.	make people better off by increasing the value of their wealth, leading them to save less and spend more.

1 points

QUESTION 26

1. Exhibit 14-6 Aggregate supply curve
   
   
   In Exhibit 14-6, where the GDP = $1,200 billion,

   	a.	the economy has reached full employment.
   	b.	further increases in the price level must generate lower levels of employment.
   	c.	GDP can increase to $1,100 billion without triggering an increase in the price level.
   	d.	everyone willing to work at the current wage is employed.
   	e.	no further increases in the price level can generate more real GDP.

1 points

QUESTION 27

1. A reduction in regulation will shift the aggregate:

   	a.	demand curve rightward.
   	b.	demand curve leftward.
   	c.	supply curve leftward.
   	d.	supply curve rightward.

1 points

QUESTION 28

1. Exhibit 14-7 Aggregate supply and demand curves
   
   
   In Exhibit 14-7, if aggregate demand increases from AD ₁ to AD ₂,

   	a.	output alone will increase.
   	b.	output and prices will decrease.
   	c.	prices alone will increase.
   	d.	prices alone will decrease.
   	e.	output and prices will increase.

1 points

QUESTION 29

1. The Keynesian range of the aggregate supply curve applies when the economy is at or near full employment.

   True False

1 points

QUESTION 30

1. Which of the following is not a component of the aggregate demand curve?

   	a.	Consumption (C).
   	b.	Investment (I).
   	c.	Government spending (G).
   	d.	Net exports (X-M).
   	e.	All of the above are components.