1. The total quantity of goods and services demanded by households, firms, forei
ID: 1176877 • Letter: 1
Question
1. The total quantity of goods and services demanded by households, firms, foreigners, and government at varying price levels is:
a. gross domestic product.
b. aggregate demand.
c. aggregate expenditure.
d. total demand.
e. total expenditure.
2. The aggregate demand curve is drawn downward-sloping because increases in the price level cause decreases in:
a. unemployment.
b. total spending (real GDP).
c. households%u2019 savings.
d. the value of the dollar.
3. Aggregate demand curve%u2019s downward-sloping character reflects what three principle influences? List and explain how each contribute to the downward slope.
4. The net exports effect is the direct relationship between net exports and the price level of an economy. a. True.
b. False.
5. The idea that higher prices reduce the purchasing power of financial assets and lead to less consumption and more saving is known as the:
a. real wealth or balances effect.
b. interest rate effect.
c. foreign purchases effect.
d. income effect.
e. aggregate demand effect.
6. According to the interest rate effect, as the price level:
a. rises, people feel poorer and buy less.
b. rises, United States products become more expensive and foreigners buy less US goods. c. rises, interest rates fall, and people buy less.
d. rises, interest rates rise, and people buy less.
e. falls, interest rates fall, and people buy less.
7. 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 (X-M).
e. All of the above.
8. A cut in government spending, a decrease in income abroad, an increase in taxes, or an expectation that future consumer income will fall will all cause aggregate: a. demand to shift outward.
b. demand to shift inward.
c. supply to shift outward.
d. supply to shift inward.
e. supply and aggregate demand to both shift equally inward.
9. The aggregate supply curve is defined as:
a. net national product.
b. the sum of wages, rent , interest, and profits.
c. the real GDP produced at different price levels.
d. the total dollar value of household expenditures.
10. The aggregate supply curve relating the price level to real GDP has three distinguishing segments. Which of the following indicates the segments?
a. The horizontal segment reflects the increasing pressure on the price level as firms bid for resources. The upward-sloping segment reflects the availability of unused resources. The vertical segment reflects the full employment of all resources.
b. The horizontal segment reflects the availability of unused resources. The upward-sloping segment reflects the full employment of all resources. The vertical segment reelects the increasing pressure on the price level as firms bid for resources.
c. The horizontal segment reflects the full employment of all resources. The upward-sloping segment reflects the increasing pressure on the price level as firms bid for resources. The vertical segment reflects the availability of unused resources.
d. The horizontal segment reflects the availability of unused resources. The downward-sloping segment reflects decreasing pressure on the price level as firms bid for resources. The vertical segment reflects the full employment of all resources.
e. The horizontal segment reflects the availability of unused resources. The upward-sloping segment reflects increasing pressure on the price level as firms bid for resources. The vertical segment reflects the full employment of all resources.
Which of the three segments reflects the Keynesian view of aggregate supply?
11. In the horizontal segment of the aggregate supply curve, when GDP:
a. increases, the price level rises.
b. decreases, the price level falls.
c. increases, the price level does not change.
d. increases, the price level falls.
e. increases, the price level first rises and then falls.
12. Suppose the economy is on the intermediate range of the aggregate supply curve. Which of the following would reduce both real GDP and the price level? a. A decrease in aggregate supply.
b. An increase in aggregate supply.
c. A decrease in aggregate demand.
d. An increase in aggregate demand.
13. In the vertical segment of the aggregate supply curve,
a. different levels of GDP correspond with high employment.
b. competition among producers for already-employed resources can succeed only in lowering the economy%u2019s price level.
c. full employment is achieved.
d. producers are able to hire more workers at lower wages.
e. increases in GDP are due solely to production gains.
14. Along the Keynesian range of the aggregate supply curve, an increase in the aggregate demand curve will increase:
a. both the price level and real GDP.
b. only real GDP.
c. only the price level.
d. real GDP and reduce the price level.
15. Along the intermediate range of the aggregate supply curve, an increase in the aggregate demand curve will increase __________. (Pick your answers from the choices listed in Question14.)
16. Along the classical or vertical range of the aggregate supply curve, an increase in the aggregate demand curve will increase __________. (Pick your answer from the choices listed in Question 14.)
17. In the aggregate demand and aggregate supply model,
a. the factors that cause the demand curves in both models to slope downward are the same.
b. the factors that cause the supply curves in both models to slope upward are the same.
c. the upward-sloping aggregate demand curve intersects the downward-sloping aggregate supply curve to determine the economy's price level and GDP.
d. the upward-sloping aggregate supply curve intesects the downward-sloping aggregate demand curve to determine the economy%u2019s price level and GDP.
e. the price level never changes even with shifts in aggregate demand and aggregate supply.
18. Which of the following events is the most likely to create stagflation?
a. An increase in the the money supply.
b. A reduction in the amount spent on national defense.
c. A doubling of oil prices.
d. A decrease in investment spending.
19. Cost-push inflation occurs when the:
a. aggregate demand curve shifts leftward while the aggregate supply curve is fixed.
b. aggregate supply curve shifts leftward while the aggregate demand curve is fixed.
c. aggregate demand curve shifts rightward while the aggregate supply curve is fixed.
d. aggregate supply curve shifts rightward.
20. An increase in the price level caused by a rightward shift of the aggregate demand curve is called: a. cost-push inflation.
b. supply shock inflation.
c. demand shock inflation.
d. demand-pull inflation.
Explanation / Answer
1-a
2-b
3-Aggregate demand%u2019s downward-sloping character reflects three principal influences People%u2019s desire to maintain real wealth holdings, the interest rate, and international trade.
The aggregate demand curve would be little affected by a technological advancement
a. Government spending (G).
b. Investment (I).
c. Consumption (C).
d. Net exports (X M).
4 true
5-c
6-d
7-b
8-e
9-a
10-c
11-b
12-e
13-d
14-b
15-a
16-b
17-d
18-e
19-a
20-b
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