Question 1

Suppose higher taxes on businesses cause a decrease in spending on plant and equipment.How will this affect the aggregate expenditure (AE)  and the aggregate demand (AD)  schedules?

Accepted Answer

A)  AE shifts up; AD shifts to the left
B)  AE shifts down; AD shifts to the left
C)  AE shifts up; AD shifts to the right
D)  AE shifts down; AD shifts to the rightE) A) and B)
F) A) and C)

Question 2

An increase in aggregate expenditures resulting from a decrease in the price level is equivalent to a:

Accepted Answer

A)  rightward shift of the aggregate demand curve.
B)  leftward shift of the aggregate demand curve.
C)  movement downward along a fixed aggregate demand curve.
D)  decrease in aggregate supply.E) B) and C)
F) A) and B)

Question 3

The following aggregate demand and supply schedules are for a hypothetical economy:  Refer to the above data.If the price level is 150 and producers supply $300 of real output:

Accepted Answer

A)  a shortage of real output of $200 will occur.
B)  a shortage of real output of $100 will occur.
C)  a surplus of real output of $300 will occur.
D)  neither a shortage nor a surplus of real output will occur.E) All of the above
F) None of the above

Question 4

An increase in household borrowing for consumption will:

Accepted Answer

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

Question 5

Which of the above diagrams best portrays the effects of declines in the prices of imported resources?

Accepted Answer

A)  A
B)  B
C)  C
D)  DE) C) and D)
F) A) and B)

Question 6

Other things equal, an increase in productivity will shift the aggregate supply curve rightward.

Accepted Answer

A) True 
 B)False

Question 7

Income and substitution effects what portions, if any, of aggregate supply and/or aggregate demand?

Accepted Answer

A)  Aggregate demand and aggregate supply
B)  Aggregate demand only
C)  Aggregate supply only
D)  NeitherE) None of the above
F) A) and D)

Question 8

Collective bargaining agreements that prohibit wage cuts for the duration of the contract contribute to:

Accepted Answer

A)  a wealth effect.
B)  a multiplier effect.
C)  an increase in aggregate supply.
D)  a price level that is inflexible downward.E) None of the above
F) All of the above

Question 9

Productivity measures:

Accepted Answer

A)  real output per unit of input.
B)  per unit production costs.
C)  the changes in real wealth caused by price level changes.
D)  the amount of capital goods used per worker.E) C) and D)
F) B) and D)

Question 10

Which of the following is incorrect?

Accepted Answer

A)  As the Canadian price level rises, Canadian goods become relatively more expensive so that its exports fall and its imports rise.
B)  As the price level falls, the demand for money declines, the interest rate declines, and interest rate-sensitive spending increases.
C)  When the price level increases, real balances increase, businesses and households find themselves wealthier and therefore increase their spending.
D)  Given aggregate demand, an increase in aggregate supply increases real output and, assuming downward flexible prices, reduces the price level.E) B) and D)
F) All of the above

Question 11

When the excess capacity of business rises, aggregate:

Accepted Answer

A)  demand increases.
B)  demand decreases.
C)  supply increases.
D)  supply decreases.E) B) and D)
F) A) and B)

Question 12

Refer to the above diagram.At the equilibrium price and quantity:

Accepted Answer

A)  aggregate demand exceeds aggregate supply.
B)  the amount of real output demanded and supplied are equal.
C)  aggregate demand equals aggregate supply.
D)  aggregate supply exceeds aggregate demand.E) A) and B)
F) A) and D)

Question 13

The aggregate demand curve can be derived from the aggregate expenditures model as indicated by the fact that:

Accepted Answer

A)  a decrease in the price level shifts the aggregate expenditures schedule downward and decreases real GDP.
B)  a decrease in the price level shifts the aggregate expenditures schedule upward and decreases real GDP.
C)  an increase in the price level shifts the aggregate expenditures schedule upward and increases real GDP.
D)  an increase in the price level shifts the aggregate expenditures schedule downward and decreases real GDP.E) A) and B)
F) A) and C)

Question 14

Which of the above diagrams best portrays the effects of declines in the incomes of other major nations with whom we trade?

Accepted Answer

A)  A
B)  B
C)  C
D)  DE) B) and C)
F) A) and B)

Question 15

Refer to the diagram below.If the initial aggregate demand and supply curves are AD0 and AS0, the equilibrium price level and level of real domestic output will be: 0 and AS0, the equilibrium price level and level of real domestic output will be:   A) F and C, respectively. B) G and B, respectively. C) F and A, respectively. D) E and B, respectively." class="answers-bank-image d-inline" rel="preload" >

Accepted Answer

A)  F and C, respectively.
B)  G and B, respectively.
C)  F and A, respectively.
D)  E and B, respectively.E) None of the above
F) B) and C)

Question 16

The aggregate expenditures model and the aggregate demand curve can be reconciled because, other things equal, in the aggregate expenditures model:

Accepted Answer

A)  changes in the price level have no effect on the equilibrium level of GDP.
B)  an increase in the price level increases the real value of wealth.
C)  the level of aggregate expenditures and therefore the level of real GDP vary inversely with the price level.
D)  the level of aggregate expenditures and therefore the level of real GDP vary directly with the price level.E) A) and B)
F) A) and C)

Question 17

Cost-push inflation arises from:

Accepted Answer

A)  a decrease in aggregate demand.
B)  a decrease in aggregate supply.
C)  an increase in aggregate demand.
D)  an increase in aggregate supply.E) A) and B)
F) A) and C)

Question 18

Refer to the diagram given below. 1 to AS2. B) shift of the aggregate supply curve from AS1 to AS3. C) shift of the aggregate supply curve from AS2 to AS3. D) movement along the aggregate demand curve from e1 to e3." class="answers-bank-image d-inline" rel="preload" > Cost-push inflation can be illustrated by a:

Accepted Answer

A)  shift of the aggregate supply curve from AS1 to AS2.
B)  shift of the aggregate supply curve from AS1 to AS3.
C)  shift of the aggregate supply curve from AS2 to AS3.
D)  movement along the aggregate demand curve from e1 to e3.E) B) and C)
F) A) and B)

Question 19

Other things being equal, the higher the price level, the lower the level of domestic output purchased.This occurs because of:

Accepted Answer

A)  the real-balances effect.
B)  consumer spending on capital goods.
C)  the full-employment-unemployment rate.
D)  the sensitivity to demand-pull inflation.E) B) and D)
F) B) and C)

Question 20

Other things equal, if world oil prices increased by 70 percent then the most likely effect would be to:

Accepted Answer

A)  shift the aggregate demand curve right.
B)  shift the aggregate supply curve right.
C)  shift the aggregate supply curve left.
D)  shift the aggregate demand curve right and the aggregate supply curve left.E) A) and D)
F) A) and C)

Exam 12: B: Aggregate Demand and Aggregate Supply

An increase in aggregate expenditures resulting from a decrease in the price level is equivalent to a:

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Which of the above diagrams best portrays the effects of declines in the prices of imported resources?

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Collective bargaining agreements that prohibit wage cuts for the duration of the contract contribute to:

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Which of the following is incorrect?

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When the excess capacity of business rises, aggregate:

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The following aggregate demand and supply schedules are for a hypothetical economy: Refer to the above data.If the price level is 150 and producers supply $300 of real output:

Correct AnswerverifiedShow Answer

Which of the above diagrams best portrays the effects of declines in the incomes of other major nations with whom we trade?

Correct AnswerverifiedShow Answer

Cost-push inflation arises from:

Correct AnswerverifiedShow Answer

Other things equal, if world oil prices increased by 70 percent then the most likely effect would be to:

Correct AnswerverifiedShow Answer

The aggregate expenditures model and the aggregate demand curve can be reconciled because, other things equal, in the aggregate expenditures model:

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Refer to the above diagram.At the equilibrium price and quantity:

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Refer to the diagram given below. Cost-push inflation can be illustrated by a:

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An increase in household borrowing for consumption will:

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Income and substitution effects what portions, if any, of aggregate supply and/or aggregate demand?

Correct AnswerverifiedShow Answer

Productivity measures:

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Suppose higher taxes on businesses cause a decrease in spending on plant and equipment.How will this affect the aggregate expenditure (AE) and the aggregate demand (AD) schedules?

Correct AnswerverifiedShow Answer

Other things being equal, the higher the price level, the lower the level of domestic output purchased.This occurs because of:

Correct AnswerverifiedShow Answer

Refer to the diagram below.If the initial aggregate demand and supply curves are AD0 and AS0, the equilibrium price level and level of real domestic output will be:

Correct AnswerverifiedShow Answer

The aggregate demand curve can be derived from the aggregate expenditures model as indicated by the fact that:

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Other things equal, an increase in productivity will shift the aggregate supply curve rightward.

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Refer to the diagram below.If the initial aggregate demand and supply curves are AD₀ and AS₀, the equilibrium price level and level of real domestic output will be:

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