Question 1

When the economy is producing at a quantity greater than its long-run aggregate supply:

Accepted Answer

A)  it is pushing some of its resources to operate beyond capacity.
B)  the economy is experiencing greater economic growth.
C)  it causes a bubble to form in one of its major sectors.
D)  It is not possible to produce beyond the long-run aggregate supply curve.E) A) and B)
F) B) and C)

Question 2

The aggregate demand curve slopes downward can be explained in part through:

Accepted Answer

A)  The wealth effect.
B)  The negative relationship between the price level and government spending.
C)  The positive relationship between the price level and net exports.
D)  All of these are true.E) B) and C)
F) A) and B)

Question 3

An economy in which output has decreased and prices have decreased would suggest a:

Accepted Answer

A)  decrease in aggregate demand.
B)  increase in aggregate demand.
C)  decrease in short-run aggregate supply.
D)  increase in short-run aggregate supply.E) All of the above
F) A) and C)

Question 4

Which of the following would likely cause aggregate demand to shift to the left?

Accepted Answer

A)  Higher interest rates discouraging borrowing
B)  Higher tariffs on all imports into the United States
C)  Greater consumer confidence about the future
D)  All of these would likely cause aggregate demand to shift to the left.E) C) and D)
F) A) and D)

Question 5

If U.S.prices increase relative to the rest of the world,we would expect:

Accepted Answer

A)  net exports to increase.
B)  net exports to decrease.
C)  net exports to be unaffected.
D)  government spending to increase.E) A) and D)
F) All of the above

Question 6

If a hurricane were to wipe out the majority of the eastern seaboard in the United States:

Accepted Answer

A)  only the long-run aggregate supply curve would shift left.
B)  the long-run and short-run aggregate supply curves would both shift left.
C)  only the short-run aggregate supply curve would shift left.
D)  neither the short-run nor long-run aggregate supply curves would be affected.E) B) and D)
F) C) and D)

Question 7

If U.S.prices increase relative to the rest of the world,we would expect:

Accepted Answer

A)  imports and net exports to increase.
B)  exports and net exports to decrease.
C)  imports to increase and net exports to decrease.
D)  exports to decrease and net exports to increase.E) C) and D)
F) B) and C)

Question 8

The slope of the short-run aggregate supply curve shows that:

Accepted Answer

A)  as overall price levels increase,firms are willing to produce more.
B)  as overall price levels decrease,firms are willing to produce more.
C)  firms are constrained to a certain level of output in the short run,regardless of the price.
D)  firms are constrained to a certain price in the short run,regardless of level of output.E) All of the above
F) B) and C)

Question 9

Because the price level shares a negative relationship with aggregate expenditures on GDP,the aggregate demand curve is:

Accepted Answer

A)  downward sloping.
B)  upward sloping.
C)  perfectly elastic.
D)  perfectly inelastic.E) B) and C)
F) A) and B)

Question 10

If the economy is in a recession,in an effort to move the economy to the long-run equilibrium,the government could:

Accepted Answer

A)  increase spending to increase aggregate demand.
B)  decrease spending to decrease aggregate demand.
C)  increase spending to decrease aggregate demand.
D)  decrease spending to increase aggregate demand.E) A) and B)
F) A) and C)

Question 11

In macroeconomics,the long run refers to:

Accepted Answer

A)  how long it takes for prices of inputs to fully adjust to changes in economic conditions.
B)  the time period when sticky wages are in place.
C)  how long it takes for output decisions to adjust to changes in economic conditions.
D)  None of these is true.E) A) and D)
F) C) and D)

Question 12

When the economy is creating less output than its potential,it means:

Accepted Answer

A)  there are some resources that are unemployed.
B)  the economy is in an economic boom.
C)  contractionary policy needs to be enacted.
D)  governments are likely to reduce their spending.E) All of the above
F) B) and C)

Question 13

When the U.S.price level decreases relative to the rest of the world:

Accepted Answer

A)  exports and net exports will increase.
B)  imports and net exports will increase.
C)  exports will increase and net exports will decrease.
D)  exports will decrease and net exports will increase.E) All of the above
F) A) and B)

Question 14

If the government were to decrease corporate income tax,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) A) and D)
F) C) and D)

Question 15

Assuming an economy starts in long-run equilibrium,if the aggregate demand curve were to decrease:

Accepted Answer

A)  prices in the economy would increase.
B)  output in the economy would increase.
C)  the short-run aggregate supply curve would shift left.
D)  the long-run effect would be a lower price level.E) A) and B)
F) A) and C)

Question 16

If prices increase only in the United States,then:

Accepted Answer

A)  U.S.goods become relatively more expensive than goods from other countries.
B)  U.S.goods become relatively less expensive than goods from other countries.
C)  the prices of foreign goods must rise.
D)  None of these is true.E) None of the above
F) All of the above

Question 17

As the U.S.price level decreases,expenditures by which of the following will increase?

Accepted Answer

A)  Consumers
B)  Businesses
C)  The rest of the world
D)  All of these will increase their expenditures.E) B) and C)
F) A) and D)

Question 18

Higher interest rates make it:

Accepted Answer

A)  more expensive to borrow.
B)  harder to get a loan typically.
C)  easier to get a loan typically.
D)  None of these is true.E) B) and C)
F) All of the above

Question 19

In the long run,if the prices of goods and services are higher than before:

Accepted Answer

A)  the aggregate quantity supplied will be higher.
B)  the aggregate quantity demanded will be lower.
C)  the aggregate quantity supplied will not change.
D)  the aggregate quantity demanded will be higher.E) A) and B)
F) A) and C)

Question 20

Higher interest rates motivate:

Accepted Answer

A)  firms to invest less in new factories and working capital.
B)  firms to invest more in new factories and working capital.
C)  individuals to spend more on consumption goods.
D)  individuals to spend more on capital goods.E) None of the above
F) All of the above

Exam 28: Aggregate Demand and Aggregate Supply

In the long run,if the prices of goods and services are higher than before:

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An economy in which output has decreased and prices have decreased would suggest a:

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If prices increase only in the United States,then:

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Assuming an economy starts in long-run equilibrium,if the aggregate demand curve were to decrease:

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As the U.S.price level decreases,expenditures by which of the following will increase?

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Because the price level shares a negative relationship with aggregate expenditures on GDP,the aggregate demand curve is:

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When the economy is producing at a quantity greater than its long-run aggregate supply:

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If U.S.prices increase relative to the rest of the world,we would expect:

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In macroeconomics,the long run refers to:

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Higher interest rates motivate:

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Higher interest rates make it:

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If a hurricane were to wipe out the majority of the eastern seaboard in the United States:

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The slope of the short-run aggregate supply curve shows that:

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When the economy is creating less output than its potential,it means:

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When the U.S.price level decreases relative to the rest of the world:

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Which of the following would likely cause aggregate demand to shift to the left?

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If the economy is in a recession,in an effort to move the economy to the long-run equilibrium,the government could:

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The aggregate demand curve slopes downward can be explained in part through:

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If the government were to decrease corporate income tax,we would predict:

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If U.S.prices increase relative to the rest of the world,we would expect:

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